TaxTMI Updates e-Newsletter
Apr 01,2022

Grant of regular bail - Reliance on disclosure statement - Non-recovery in pursuance of disclosure - Lengthy pre-trial custody - Completion of investigation - Trial progress and examination of witnesses - No comment on merits - Offences under criminal law and tax statutes

Grant of regular bail - Lengthy pre-trial custody - Completion of investigation - Trial progress and examination of witnesses - Reliance on disclosure statement - Non-recovery in pursuance of disclosure - No comment on merits - Whether the petitioner should be released on regular bail. - HELD THAT: - The Court noted that the petitioner had been in custody for an extended period, investigation qua him was complete and only one out of about forty prosecution witnesses had been examined, indicating that conclusion of trial would take time. The State conceded that the primary evidence against the petitioner was his own disclosure statement and that nothing incriminating had been recovered pursuant to that disclosure. The Court, without expressing any view on the merits of the allegations (including offences under criminal and tax statutes), placed weight on the long pre-trial custody, the stage of trial and the absence of recovery tied to the disclosure. Applying these considerations, the Court allowed bail while leaving the trial court to deal with the merits in due course.

Petition allowed; petitioner directed to be released on regular bail subject to furnishing bail bonds and two sureties to the satisfaction of the trial Court/Illaqa Magistrate/Duty Magistrate.

Final Conclusion: Considering the prolonged custody, completion of investigation against the petitioner, limited progress of trial and that the primary incriminating material was the petitioner's disclosure without attendant recovery, the High Court granted regular bail subject to bonds and sureties, without adjudicating the merits of the allegations.

Habeas corpus - application of D.K. Basu guidelines to arrest and detention by non police enforcement agencies - arrest memo - transparency and accountability in arrest and detention - rights under Article 21 - protections under Article 22 - arrest under the CGST regime - right to inform family and access to legal assistance

Habeas corpus - arrest under the CGST regime - arrest memo - application of D.K. Basu guidelines to arrest and detention by non police enforcement agencies - Petition for issuance of writ of habeas corpus admitted and interim directions issued requiring production of the detained person and disclosure of compliance with arrest safeguards. - HELD THAT: - The Court entertained the habeas corpus petition alleging illegal confinement of the petitioner's brother by GST officials and observed that the safeguards laid down in D.K. Basu, which include the requirement to prepare an arrest memo and other measures promoting transparency and accountability, apply to officers of the GST department. Emphasising that these safeguards flow from Articles 21 and 22, the Court directed Respondent No.2 to present himself before the Court along with the corpus and to produce detailed compliance with the D.K. Basu guidelines and the decision of this Court applying those guidelines to the GST department. The Court issued notice returnable on the listed date and permitted direct service on certain respondents. [Paras 4, 6]

Notice issued; Respondent No.2 directed to produce the detained person and to bring details of compliance with the D.K. Basu guidelines and the Gujarat High Court authority; direct service on Respondent Nos.2-5 permitted.

Final Conclusion: Writ petition admitted; interim direction that Respondent No.2 shall appear before the Court with the detained person and furnish detailed compliance with the arrest safeguards (D.K. Basu and the High Court's ruling applying those safeguards to GST officers); matter listed on the returnable date and service permitted.

Jurisdiction of proper officer - assignment of taxpayers for administrative convenience - submission to jurisdiction / waiver of objection - inherent lack of jurisdiction v. jurisdictional error - cross-empowerment and single interface under GST - intimation and non-duplication of proceedings between CGST and SGST/UPGST authorities

Jurisdiction of proper officer - assignment of taxpayers for administrative convenience - cross-empowerment and single interface under GST - Validity of show cause notice and assessment order issued by State officer where the taxpayer had been administratively assigned to a Central officer - HELD THAT: - Section 2(91) and Section 6 of the CGST Act/UPGST Act confer that officers under both Central and State Acts are "proper officers" within their territorial jurisdiction, while the GST Council's division of taxpayers and the State-level order No. 04/2018 effect administrative assignment of cases for convenience. That administrative assignment does not strip a State proper officer of inherent jurisdiction within his territory; it only prescribes which officer should normally take up a case. Consequently, an assessment proceeded by a State officer in respect of an assessee territorially within his jurisdiction is not rendered void for want of inherent jurisdiction merely because the assessee had been administratively allotted to a Central officer. The Court therefore held that the impugned show cause notice and assessment order do not suffer from inherent lack of jurisdiction, though they arose from an error in administrative allotment. [Paras 16, 18, 19, 30]

Impugned proceedings by the State officer are not void for inherent lack of jurisdiction despite administrative assignment of the assessee to a Central officer.

Submission to jurisdiction / waiver of objection - inherent lack of jurisdiction v. jurisdictional error - Effect of the petitioner's participation in proceedings and failure to object to jurisdiction before the assessing State officer - HELD THAT: - The Court distinguished between inherent lack of jurisdiction (which renders an order a nullity) and an error in exercise or administrative allotment of jurisdiction. By participating in the proceedings and not informing or objecting that the case had been allotted to a Central officer, the petitioner submitted to the jurisdiction of the State officer. Citing authorities on submission to jurisdiction and the distinction between absence of jurisdiction and jurisdictional error, the Court concluded that the conduct of the petitioner amounted to contributory error and estopped him from successfully assailing the assessment in writ proceedings on the ground of mere administrative mis-allotment. [Paras 21, 22, 24, 30, 31]

Petitioner's failure to raise jurisdictional objection during proceedings and his participation amounted to submission to the assessing officer's jurisdiction; challenge in writ petition accordingly fails.

Intimation and non-duplication of proceedings between CGST and SGST/UPGST authorities - assignment of taxpayers for administrative convenience - Whether administrative allotment requires quashing of assessment where the assessing officer continued proceedings and the Central officer indicated that proceedings should be completed by initiating officer - HELD THAT: - The statutory scheme contemplates intimation between officers and a prohibition on duplicate proceedings, but also permits officers to act within territorial jurisdiction. After the State officer completed assessment, correspondence from the Central officer indicated that proceedings should be completed by the officer who initiated them. Given the statutory framework and the factual matrix of non-objection by the assessee, the Court found no ground to quash the assessment on the basis of administrative allotment alone. The proper remedy for the assessee lies in appellate jurisdiction under the Act. [Paras 12, 15, 16, 31, 32]

Administrative allotment and intimation mechanisms do not mandate invalidation of the assessment; assessee may challenge the order in appeal under section 107 of the CGST/UPGST Act.

Final Conclusion: Writ petition dismissed: the State officer's show cause notice and assessment order do not suffer from inherent lack of jurisdiction but arose from an administrative error of allotment to which the petitioner submitted by participating in proceedings; the petitioner is left free to assail the assessment in the statutory appeal forum under section 107 of the CGST/UPGST Act.

Input Tax Credit - goods or services used for personal consumption - goods disposed of by way of gift or free samples - non-obstante clause in Section 17(5) - course or furtherance of business

Input Tax Credit - goods or services used for personal consumption - course or furtherance of business - Whether input tax credit is available in respect of goods or services procured as rewards under the 'Buy n Fly' scheme where such goods or services are ultimately used for personal consumption by retailers. - HELD THAT: - The Appellate Authority analysed Section 16 read with the non-obstante clause in Section 17(5) and observed that clause (g) bars credit where goods or services are "used for personal consumption." The Authority held that the legislative language does not confine the test of personal consumption to any particular stage and therefore denial applies where the goods or services procured by the taxpayer are ultimately consumed by retailers. The Authority rejected the appellant's contention that the usage test must be applied only at the stage of procurement and not at the last leg of consumption, explaining that if retailers ultimately consume the rewards the appellant becomes the effective consumer for those goods/services under the scheme and is disentitled to credit. The Authority also noted absence of documentary substantiation to show that the costs of the rewards were factored into product pricing and that MRP remained unchanged, pointing to lack of evidence that the expenditure formed part of the assessed cost of final products. The Authority therefore concluded that clause (g) operates to deny ITC in the facts of this case. [Paras 8]

Input tax credit is not available under Section 17(5)(g) for goods or services procured as rewards under the 'Buy n Fly' scheme which are used for personal consumption by retailers.

Input Tax Credit - goods disposed of by way of gift or free samples - non-obstante clause in Section 17(5) - Whether input tax credit is available in respect of goods procured as rewards when such goods are characterised as gifts or free samples under Section 17(5)(h). - HELD THAT: - The Authority examined clause (h) which denies credit for goods "lost, stolen, destroyed, written off or disposed of by way of gift or free samples." It found that clause (h) applies exclusively to goods and that the facts demonstrate distribution of goods and services to retailers as rewards under a pre announced scheme. The Authority observed that the appellant failed to substantiate that the promotional cost was built into assessed product pricing and that the scheme documents did not establish a contractual pricing quid pro quo sufficient to take the distributions outside the scope of clause (h). The Authority also distinguished the appellant's reliance on legacy law and various tribunal decisions, holding that the non obstante clause in Section 17(5) of the GST Act is explicit and restricts credit in the present circumstances. Consequently, the Authority held that credit cannot be availed under clause (h). [Paras 8, 9]

Input tax credit is not available under Section 17(5)(h) for goods procured as rewards under the scheme which are disposed of as gifts or free samples to retailers.

Final Conclusion: The appeal is dismissed; the Appellate Authority affirms the Advance Ruling that input tax credit on goods and services procured for the 'Buy n Fly' reward scheme is not admissible under Section 17(5)(g) and (h) of the CGST/TNGST Act.

Composite supply - principal supply - intermediary - supply of service

Composite supply - principal supply - intermediary - supply of service - Characterisation of the activity of design and development of patterns and tools used for manufacture of camshafts - whether it is a composite supply with principal supply being supply of services or otherwise, and the legal character of the transaction. - HELD THAT: - The Authority examined the contractual and operational matrix whereby the overseas OEMs/Machinists engage the applicant to (a) assist in designing and process planning, (b) identify and appoint third party vendors to manufacture patterns/tools, and (c) coordinate with such vendors for manufacture as per specifications. The Authority found that no proprietary supply of goods by the applicant to the overseas customer is envisaged; ownership of tools remains with the overseas principals and tools are manufactured by third party vendors and delivered to the applicant on behalf of those principals. The applicant functions by arranging, facilitating and closely engaging third party vendors as per instructions of the overseas principals and supplies designs/drawings and facilitation services on behalf of those principals. Applying the statutory definitions and indicators, the Authority held that these facts satisfy the conditions of an intermediary under the IGST Act - three parties are involved, there is a main supply between the two principals (the tools/patterns manufactured by the third party for the overseas principal) and an ancillary identifiable supply by the applicant (facilitating/arranging and providing designs). Consequently, the activity is not a composite supply with a separate principal goods element supplied by the applicant; rather the activity is a supply of service in the nature of an intermediary service. [Paras 5, 6]

The activity is a supply of service in the form of intermediary services.

Final Conclusion: The Authority rules that the design and development of patterns and tools undertaken by the applicant for overseas OEMs/Machinists constitutes a supply of service - specifically intermediary service - and is not to be characterised as a composite supply with goods as the principal supply.

Place of supply under the IGST Act - jurisdiction of the Advance Ruling Authority under Section 96 of the CGST Act - maintainability of an application for advance ruling

Place of supply under the IGST Act - jurisdiction of the Advance Ruling Authority under Section 96 of the CGST Act - maintainability of an application for advance ruling - Application for advance ruling rejected as the AAR, Telangana is not the appropriate forum. - HELD THAT: - The Authority found from the material submitted that the place of supply of the services, determined under Section 12(2) of the IGST Act, is in the State of Maharashtra. Because the place of supply lies outside Telangana, the Advance Ruling Authority, Telangana does not have jurisdiction to adjudicate the application under Section 96 of the CGST Act. The application therefore is not maintainable before this AAR and must be rejected for want of appropriate forum. [Paras 7]

Application rejected for lack of jurisdiction as the place of supply is in Maharashtra.

Final Conclusion: The Advance Ruling Authority, Telangana rejected the application under Section 98(4) as the place of supply is in Maharashtra and the Telangana AAR is not the appropriate forum under Section 96 of the CGST Act.

Place of supply of services relating to immovable property under Sub section 3 of Section 12 of the IGST Act - Jurisdiction of Advance Ruling Authority under Section 96 of the CGST Act - Inapplicability of AAR where place of supply lies outside the forum's territorial jurisdiction

Place of supply of services relating to immovable property under Sub section 3 of Section 12 of the IGST Act - Jurisdiction of Advance Ruling Authority under Section 96 of the CGST Act - Application to the Advance Ruling Authority, Telangana rejected on territorial jurisdiction grounds as the place of supply is located outside Telangana. - HELD THAT: - The Authority examined the factual claim that the applicant, registered in Telangana, provides renting of immovable property situated in Maharashtra. Under Sub section 3 of Section 12 of the IGST Act, the place of supply of services related to immovable property is the location of the immovable property. Given that the place of supply is in Maharashtra, the Advance Ruling Authority in Telangana is not the appropriate forum to decide the question under Section 96 of the CGST Act. The application therefore cannot be entertained by this Authority and must be rejected on that jurisdictional basis. [Paras 7]

Application rejected as the AAR, Telangana lacks jurisdiction because the place of supply is in Maharashtra under Sub section 3 of Section 12 of the IGST Act.

Final Conclusion: The application for advance ruling is rejected for want of territorial jurisdiction of the Advance Ruling Authority, Telangana, since the place of supply of the service is the State where the immovable property is located.

Interest as part of consideration for supply - value of supply includes interest or late fee or penalty for delayed payment of any consideration - taxability of interest on delayed payment

Interest as part of consideration for supply - taxability of interest on delayed payment - Interest included in equated yearly instalments paid under the annuities model forms part of the consideration for the supply and is includible in the taxable value. - HELD THAT: - The Authority relied on clause (d) of sub section (2) of Section 15 of the GST Act which provides that the value of supply shall include interest or late fee or penalty for delayed payment of any consideration for any supply. Applying that principle to the payments made by the applicant under the annuities model, the interest component charged on delayed or staggered payments constitutes part of the consideration for the works contract services and must be included in the taxable value under the CGST/TGST law. Accordingly, the interest is liable to tax as part of the consideration for the supply. [Paras 7]

Interest forming part of the equated yearly instalment is includible in the value of supply and is taxable.

Value of supply includes interest or late fee or penalty for delayed payment of any consideration - Applicability of Entry No. 3 of Notification No. 12/2017 Central Tax (Rate) to the interest component does not arise once interest is held to be part of the taxable consideration. - HELD THAT: - Having determined that the interest component is part of the consideration and must be included in the taxable value under Section 15(2)(d), the question of treating the interest as a separate supply or as falling under Entry No. 3 of Notification No. 12/2017 does not arise. Since there is no separate classification for the interest apart from being part of the consideration for the works contract supply, the notification entry is not applicable in the manner suggested by the applicant. [Paras 7, 8]

The question of applicability of Entry No. 3 of Notification No. 12/2017 does not arise.

Final Conclusion: The Authority ruled that the interest component included in equated yearly instalments under the annuities model is part of the consideration for the supply and is includible in the taxable value under the GST law; consequently no separate classification for the interest is recognised and the suggested applicability of Entry No. 3 of Notification No. 12/2017 does not arise.

Prepared foods obtained by the swelling or roasting of cereals or cereal products - Classification - specific entry preferred over residual entry - Tariff heading 1904 - Residuary entry for food preparations

Prepared foods obtained by the swelling or roasting of cereals or cereal products - Tariff heading 1904 - Classification - specific entry preferred over residual entry - Residuary entry for food preparations - Classification of Ready to Eat (RTE) popcorn for HSN and GST rate - HELD THAT: - The Authority applied the factual finding that the product is prepared by swelling maize by heating and is flavoured variably (salt, caramel, strawberry, chocolate or unflavoured). On the textual scope of the competing entries it observed that tariff heading 1904 expressly covers "prepared foods obtained by the swelling or roasting of cereals or cereal products" and that the competing heading 2008 pertains to preparations of fruits, nuts and other parts of plants and is therefore not applicable to a cereal-derived product. The Authority relied on the settled classificatory principle that a specific tariff entry prevails over a residuary or general entry, noting precedents of the Supreme Court to that effect (Indian Metals & Ferrous alloys Vs CCE ; State of Karnataka Vs Durga projects ; Dunlop India Ltd. & Madras Rubber Factory Ltd. Vs. Union of India ). Applying that principle, the Authority concluded that RTE popcorn, being properly encompassed by the specific description in heading 1904, cannot be relegated to the residuary heading for food preparations and must be classified under tariff heading 1904. The Authority therefore determined the HSN classification and the applicable GST rate accordingly. [Paras 7, 8]

RTE popcorn is classifiable under tariff heading 1904 and is taxable at 9% SGST and 9% CGST.

Final Conclusion: The Advance Ruling holds that Ready to Eat popcorn produced by swelling maize is classifiable under tariff heading 1904 and is liable to GST at the rate of 9% SGST and 9% CGST.

Eligibility of applicant for advance ruling under Section 95 - Maintainability of advance ruling in relation to supply of goods or services - Advance Ruling

Eligibility of applicant for advance ruling under Section 95 - Supply of goods or services - Maintainability of advance ruling - Application for advance ruling is not maintainable because the applicant does not qualify as an applicant under Section 95 and is not making or proposing to make any supply of goods or services. - HELD THAT: - The Authority examined the statutory scope of advance rulings and the definition of an applicant under Section 95. An advance ruling is a decision in relation to supplies of goods or services undertaken or proposed to be undertaken by the applicant. The person who sought the advance ruling in this case is an unregistered purchaser of land and neither qualifies as an applicant under Section 95(c) nor is making or proposing any supply of goods or services. Given these facts, the matter falls outside the jurisdiction of the Advance Ruling Authority, and the Authority cannot pronounce on the substantive GST question raised by the applicant. [Paras 7]

Application rejected; advance ruling cannot be given for want of eligibility and absence of proposed or undertaken supply.

Final Conclusion: The Authority dismissed the application for advance ruling on the ground that the applicant does not qualify under the statutory definition of an applicant and is not proposing or undertaking any supply of goods or services; consequently, the Authority lacks jurisdiction to decide the substantive GST question.

Reopening of assessment under Section 148 of the Income Tax Act - Reason to believe - Prima facie material for reopening - Change of opinion - Reliance on information received from investigation/other officer

Reopening of assessment under Section 148 of the Income Tax Act - Prima facie material for reopening - Reason to believe - Validity of the notice issued under Section 148 for assessment year 2015-16 on the ground whether there was prima facie material to reopen the assessment. - HELD THAT: - Applying the settled test that at the notice stage the court is to examine only whether there was prima facie some material enabling the Department to reopen the case, the Court examined the reasons recorded by the Assessing Officer. The AO, after considering the report of the Assistant Director (Inv.) and conducting an investigation of the assessee's return and related documents, recorded that the assessee was a beneficiary of bogus accommodation entries and that income amounting to Rs. 6,94,540/- had escaped assessment. The court held that sufficiency or correctness of the material is not to be evaluated at this stage and that the material on record furnished a live link to the AO's recorded belief, thereby furnishing prima facie material to issue the notice under Section 148. [Paras 26]

Notice under Section 148 was validly issued because prima facie material existed to reopen assessment.

Change of opinion - Whether the re-opening amounted to an impermissible mere change of opinion. - HELD THAT: - The Court noted that there was no prior formulation of opinion by the Assessing Officer on the matters which formed the basis for reassessment; the earlier inquiry under Section 133(6) related to a different assessment year and did not address the reasons relied upon for reopening AY 2015-16. Thus the reopening could not be characterised as a mere change of opinion arising from an earlier-formed view; the AO had not earlier expressed an opinion on the same matters which would attract the change-of-opinion bar. [Paras 22]

Reopening did not constitute a mere change of opinion and the objection on that ground failed.

Reliance on information received from investigation/other officer - Reason to believe - Whether the AO could validly record reasons to believe based on a report/ information received from the Assistant Director of Income Tax (Inv.), Unit-3(3), Kolkata. - HELD THAT: - The Court examined the reasons recorded and observed that the AO, upon receipt of information from the investigative authority, conducted his own scrutiny of the assessee's return and documents and thereafter recorded his reason to believe that income had escaped assessment. The Court held that where the AO acts on information received but independently investigates and forms a reasoned belief after considering that material, the reliance on such information does not vitiate the necessity that the AO have a recorded reason to believe. [Paras 24]

The AO validly acted on information from the investigative unit after conducting inquiry and recording his own reason to believe; the reliance on such information did not invalidate the notice.

Final Conclusion: Writ petition dismissed; the order rejecting objections to the reassessment notice did not suffer from illegality as the Assessing Officer had prima facie material and validly recorded reasons to believe, and the reopening was not a mere change of opinion; parties to bear their own costs.

Benefit under Section 80-IC - separate and distinct industrial unit - reconstruction/formation of new unit - perversity and misreading of evidence

Benefit under Section 80-IC - separate and distinct industrial unit - reconstruction/formation of new unit - Whether Unit-III of the assessee-company qualified as a separate and distinct unit entitling the assessee to claim deduction under Section 80-IC. - HELD THAT: - The Tribunal's factual findings, upheld by the High Court, record that Unit-II and Unit-III were operated from different buildings (approximately 7 kms apart), maintained separate audited books of accounts, had separate employees and clienteles, distinct sales-tax and service-tax registrations and independent registration with the District Industries Centre, and that investment in computers for Unit-III were entirely new purchases with no transfers from Unit-II. The Assessing Officer's conclusion that Unit-III was not an independent unit because it operated from the registered office and no rent was paid ignored that the premises had earlier been let out, was thereafter vacated and the registered office was shifted before Unit-III commenced operations. Applying the established principles in the authorities relied upon by the parties - which require examination of whether there is a new and identifiable undertaking having separate physical and commercial identity and whether the undertaking was formed by reconstruction or by transfer of plant/machinery from the old unit - the Court found on the material placed before the Tribunal that Unit-III was not a reconstruction or mere continuation of Unit-II. The Tribunal correctly treated Unit-III as a separate and distinct unit for the purposes of Section 80-IC. [Paras 14, 15, 16]

Tribunal's finding that Unit-III is a separate and distinct unit and that the assessee is entitled to deduction under Section 80-IC is correct and not perverse.

Final Conclusion: Appeals dismissed; the Tribunal rightly held that Unit-III qualified as a separate and distinct unit and the assessee was entitled to claim benefit under Section 80-IC for the periods in question.

Computation of gross profit from month-wise trading account - negative stock in month-wise accounts - rejection of books of account under section 145(3) - application of net profit rate based on subsequent assessment years - estimation of income having regard to assessee's past history and nature of business

Computation of gross profit from month-wise trading account - negative stock in month-wise accounts - Sustainability of addition made by the Assessing Officer on account of enhancement of gross profit by preparing month-wise/quarter-wise trading accounts and treating claimed month-wise closing stocks as an afterthought. - HELD THAT: - The Assessing Officer reconstructed month-wise trading accounts, treated the month-wise closing stock submitted by the assessee as self-contradictory and an afterthought, and computed an inflated gross profit rate leading to a large addition. The authorities below examined the books, vouchers, sales and purchase records and found no unrecorded purchases or sales outside the books. The Tribunal correctly observed that the nature of the assessee's multi-level marketing business, with goods received throughout the year across warehouses and payments made in lumpsum, made month-wise uniform gross profit computation and the finding of negative stock unsuitable and liable to give distorted results. Having accepted opening stock, purchases and sales, the AO's month-wise trading account methodology and resultant addition based on negative stock could not be sustained. The Tribunal therefore upheld the view that the AO's exercise was impermissible and that book results are to be drawn on an annual basis or otherwise rejected under appropriate provisions rather than enhanced by artificial month-wise computation.

Addition based on month-wise trading account and negative stock held unsustainable; AO's enhancement of gross profit rejected.

Rejection of books of account under section 145(3) - application of net profit rate based on subsequent assessment years - estimation of income having regard to assessee's past history and nature of business - Whether CIT(A)'s application of an average net profit rate drawn from subsequent assessment years for computing taxable income was justified after rejection/ non-acceptance of month-wise computation by the AO. - HELD THAT: - The CIT(A) declined to accept the AO's month-wise enhancement and, applying the principle of estimation where books are not reliable, adopted an average net profit rate based on the assessee's assessed net profit in subsequent assessment years which involved the same mode of business and for which returns had been accepted by revenue (net profit rates of 2.53% and 2.99%). The Tribunal relied on settled authority that estimation must be fair and take into account history and prior returns of the assessee, and held that applying the average net profit from subsequent years was a fair method of estimation in the facts of the case. The Tribunal found no material or precedent placed by the AO to justify the extreme GP rate adopted and held that the CIT(A)'s approach was reasonable and correctly applied.

CIT(A)'s application of average net profit from subsequent assessment years upheld as a fair estimate; consequent reduction of the AO's addition sustained.

Final Conclusion: The High Court finds no perversity in the Tribunal's conclusions: the Assessing Officer's month-wise enhancement of gross profit and resultant addition is unsustainable, and the CIT(A)'s method of estimating profit by applying average net profit from subsequent assessed years is justified; departmental appeal dismissed.

Retention of seized documents beyond 30 days - communication of approval and recorded reasons - section 132(8) of the Income Tax Act - proceedings under this Act - appeal as continuation of original proceedings - Special Leave Petition under Article 136 - return of seized title deeds

Retention of seized documents beyond 30 days - communication of approval and recorded reasons - section 132(8) of the Income Tax Act - Validity of continued retention of documents seized during search beyond 30 days from the order of assessment where reasons and approval are not shown to have been recorded and communicated to the assessee. - HELD THAT: - Section 132(8) forbids retention of books or other documents seized under search beyond 30 days from the date of the assessment order under section 153A or clause (c) of section 158BC unless reasons for retention are recorded in writing and approval of one of the specified senior officers is obtained. The statutory proviso further bars authorisation to retain beyond 30 days after completion of all proceedings under the Act. The Department bears the burden of establishing that reasons were recorded and approval granted, and that such orders were communicated to the assessee. Precedent requires communication of the recorded reasons and the approving authority's order to the person concerned; absence of such communication prevents the retention order from becoming effective. The respondents produced only vague statements and a tabular reference to earlier orders without authenticated copies, modes of dispatch, or acknowledgements; consequently they failed to prove lawful continued retention of the title deeds beyond the statutory 30-day period, rendering such retention illegal. [Paras 12, 16, 17, 18, 19]

Retention of the seized title deeds beyond 30 days without recorded reasons, valid approval and communication is illegal and unsustainable.

Proceedings under this Act - appeal as continuation of original proceedings - Special Leave Petition under Article 136 - Whether the pendency of a Special Leave Petition in the Supreme Court amounts to 'proceedings under this Act' enabling continued authorisation to retain seized documents beyond the period permitted by section 132(8). - HELD THAT: - The word 'proceedings' in section 132(8) must be read in the context of the Income Tax Act and includes assessment, appellate and revisional proceedings instituted under the statute, since an appeal is a continuation of original statutory proceedings. However, a Special Leave Petition under Article 136 of the Constitution is not a statutory proceeding under the Income Tax Act; it is a constitutional remedy outside the Act's statutory regime. Given that the appellate proceedings under the Act concluded by disposal of the High Court appeals (Ext.P4), the statutory 'proceedings under this Act' came to an end and thereafter the officers no longer possessed authority under section 132(8) to authorise further retention. [Paras 20, 21, 22]

Pendency of a Special Leave Petition before the Supreme Court is not a 'proceeding under this Act' and does not authorise continued retention under section 132(8) once statutory proceedings are completed.

Return of seized title deeds - section 132(8) of the Income Tax Act - Relief to be granted where continued retention of specific title deeds is found unlawful. - HELD THAT: - Having found that the respondents failed to establish lawful retention beyond the statutory period and that no statutory proceedings subsisted which could lawfully extend retention, the appropriate remedy is to quash the impugned authorisation and direct return of the originals. The Court identifies the seven specified documents executed before the Sub-Registrar's Office, Ernakulam and orders their prompt restitution to the petitioner within a fixed time-frame. [Paras 23]

Ext.P13 is quashed and the respondents are directed to return the originals of the seven specified title deeds to the petitioner expeditiously, in any event within 30 days of receipt of the judgment.

Final Conclusion: The writ petition is allowed: authorisation for continued retention (Ext.P13) is quashed; retention of the seized title deeds beyond the statutory period without recorded reasons, valid approval and communication is illegal; a Special Leave Petition does not qualify as 'proceedings under this Act' for this purpose; the seven identified original title deeds shall be returned to the petitioner within 30 days of receipt of this judgment.

Availability of alternative remedy under Section 246A - relegation to appellate remedy - maintainability of writ under Article 226 - jurisdictional error - mixed question of fact and law - faceless assessment procedure under Section 144B - transfer of assessment under Section 144B(8) - service of notice - consideration of appeal on merits despite limitation

Availability of alternative remedy under Section 246A - maintainability of writ under Article 226 - relegation to appellate remedy - Writ petition was not the appropriate remedy and the appellants were to be relegated to the alternative remedy of appeal before the Commissioner (Appeals). - HELD THAT: - The Court held that the challenge to the assessment order could not be entertained in writ jurisdiction because the appellants had an efficacious statutory remedy under Section 246A. The Court found that the complaint of jurisdictional error was not a pure point of law but a mixed question of fact and law requiring factual examination, re-appreciation of material and examination of the procedure adopted by the assessing officer - tasks more appropriately performed by the appellate authority. The Court distinguished the decision relied upon by the appellants (Gurgaon Realtech Ltd.) on the facts, noting that the Revenue had explained the procedural history, transfer of the file and the show-cause process in the present case. The Court therefore declined to entertain the writ petition and directed relegation to appeal, while granting liberty to file the appeal within 30 days and directing the appellate authority to decide the appeal on merits without rejecting it on the ground of limitation.

Writ petition dismissed; appellants directed to file appeal before the Commissioner (Appeals) within 30 days and the appellate authority to decide the matter on merits without being influenced by the Court's observations and without rejecting on limitation grounds.

Faceless assessment procedure under Section 144B - service of notice - jurisdictional error - transfer of assessment under Section 144B(8) - Allegations as to invalidity of the assessment under the procedure laid down in Section 144B and related service/transfer issues were not decided on merits and were left to be raised and examined before the appellate authority. - HELD THAT: - The Court recorded the appellants' contention that the assessment under Section 147 read with Section 144 was in violation of Section 144B and applicable notifications, and that service/notice procedures were not followed. However, the Court refrained from adjudicating those contentions on merits, observing that such questions involve factual inquiries (including the chronology of notices, whether procedural steps were followed, and whether transfer under Section 144B(8) occurred) and thus are fit for consideration by the appellate forum. The Court expressly permitted the appellants to raise all such issues before the Commissioner (Appeals) and directed that the appellate authority consider them on merits and in accordance with law, uninfluenced by the court's interim observations.

The procedural and jurisdictional objections to the assessment under Section 144B and related notice/transfer issues were left for the appellate authority to consider; the court did not decide these matters on merits.

Final Conclusion: The intra-court appeal is dismissed; the High Court held that the appellants must pursue the statutory appellate remedy before the Commissioner (Appeals), permitted them to file the appeal within 30 days, and directed the appellate authority to decide all issues on merits and without rejecting the appeal on limitation grounds.

Voluntary Disclosure of Income Scheme (VDIS) - non refundability of tax paid under VDIS - separate character of VDIS tax and income tax under the Income tax Act - exclusion of voluntarily disclosed income from total income - no adjustment or set off of TDS/advance tax against VDIS tax - finality of completed assessment and bar on reopening after VDIS

Voluntary Disclosure of Income Scheme (VDIS) - non refundability of tax paid under VDIS - exclusion of voluntarily disclosed income from total income - separate character of VDIS tax and income tax under the Income tax Act - Validity of Commissioner's rejection of the petitioner's claim to exclude VDIS disclosed income from total income and to obtain refund of tax on the basis that tax paid under VDIS is not refundable and VDIS income is not includible for assessment under the Income tax Act. - HELD THAT: - The court examined the scheme created by the Finance Act, 1997 and noted that Sections 68, 69 and 70 read together establish that (a) voluntarily disclosed income, once the declarant complies with the prescribed conditions, shall not be included in the declarant's total income for assessment under the Income tax Act, (b) the declaration does not permit reopening of completed assessments in respect of that income, and (c) tax paid under the VDIS is not refundable under any circumstances. The petitioner had availed VDIS, paid the tax due thereon and received the certificate under Section 68(2). Thereafter he filed belated returns and sought to deduct the amounts disclosed under VDIS from his regular returns and claim refunds of TDS/advance tax. The court held that the VDIS tax is of a different character than tax payable under the Income tax Act, and the statutory scheme expressly forbids refund of tax paid under VDIS or treating it as an ordinary credit against tax liabilities under the Income tax Act. The court further observed that because the petitioner had not disclosed all income within the VDIS period and thereafter sought to split disclosures between VDIS and belated returns, such a course was contrary to the scheme's purpose and statutory mandate. The court therefore upheld the Commissioner's conclusion that the petitioner was not entitled to the refund claimed by excluding VDIS disclosed amounts from his regular returns. [Paras 12, 13, 14]

Commissioner's rejection of the petitioner's claim for exclusion of VDIS disclosed income and for refund was upheld; tax paid under VDIS is not refundable and cannot be treated as a credit against regular income tax liability.

No adjustment or set off of TDS/advance tax against VDIS tax - finality of completed assessment and bar on reopening after VDIS - Permissibility of adjusting or claiming refund of TDS/advance tax in respect of belated returns after availing VDIS and the correctness of reliance on departmental query (Query No.25) and rejection under Section 143(1)(4). - HELD THAT: - The court accepted the reasoning that tax deducted or paid under the Income tax Act (by TDS or advance tax) cannot be appropriated so as to reduce or refund the tax paid under the separate VDIS scheme. The Commissioner's reliance on the departmental query and his finding that the sources and nature of the amounts disclosed under VDIS differed from the sources declared in the belated returns were held to be sustainable. Given the statutory bar on refund of VDIS tax and the distinction between VDIS tax and income tax liability under the Act, the Assessing Officer and Commissioner were justified in refusing the refunds sought under Section 143(1) and in dismissing the revision under Section 264. [Paras 5, 14]

Adjustment or refund of TDS/advance tax claimed after availing VDIS is not permissible; Commissioner's application of Query No.25 and dismissal of the revisions was sustained.

Final Conclusion: Writ petition dismissed; the order dated 29.03.2001 of the Commissioner of Income tax rejecting the revisions for AY 1996 97 and 1997 98 is upheld, the VDIS tax remains non refundable and cannot be set off or adjusted against tax under the Income tax Act.

Registration under section 12AA - charitable purpose versus commercial activity - application of income for charitable purposes and utilization of surplus - requirement of satisfactory documentary evidence for grant of registration - separate books of account for commercial activity incidental to charitable objects - continuous monitoring of charitable institutions by assessing authorities - remand for fresh consideration and verification of documents

Registration under section 12AA - charitable purpose versus commercial activity - requirement of satisfactory documentary evidence for grant of registration - application of income for charitable purposes and utilization of surplus - continuous monitoring of charitable institutions by assessing authorities - Whether the Tribunal was correct in directing grant of registration under section 12AA without proper verification of materials when the trust carried on educational activity with receipt of substantial fees and had not produced requisite documents - HELD THAT: - The Commissioner rejected the trust's application for registration on the ground that the trust had not furnished satisfactory materials: the accounts did not demonstrate the basic element of charity, the receipts indicated educational activity with substantial fees of a commercial character, separate books for incidental commercial activities were not maintained, and surplus funds did not show application towards charitable purposes. The ITAT allowed the appeal by relying primarily on the objects of the trust and treating construction and infrastructure expenditure as permissible plough-back for educational purposes. The High Court held that the Tribunal's reasoning was unsustainable because it did not properly verify the documents and materials placed before the CIT. Citing the principle that assessing authorities must continuously monitor whether institutions apply and invest their funds in accordance with law, and that genuineness of activities must be scrutinised, the Court set aside the Tribunal's order and remanded the matter for fresh consideration. The respondent trust was permitted to furnish all requisite documentary evidence to substantiate its claim within two weeks, and the Tribunal was directed to decide the matter afresh on merits after affording an opportunity of hearing, within six weeks, applying the tests and standards of scrutiny established by higher authority. [Paras 9, 10, 11]

Tribunal's order directing grant of registration set aside; matter remanded for fresh consideration after verification of documents and on merits in accordance with law, with timelines for submission and decision.

Final Conclusion: The High Court set aside the ITAT order granting registration and remitted the matter for fresh consideration; the trust may submit requisite documentary evidence within two weeks and the Tribunal shall decide the registration application afresh on merits and in accordance with law within six weeks.

Limitation for issuance of notice under section 158BD - block assessment time bar under section 158BE - interrelation of sections 158BC, 158BD and 158BE - satisfaction of the Assessing Officer for issuing notice to third parties - reasonable period doctrine

Limitation for issuance of notice under section 158BD - block assessment time bar under section 158BE - interrelation of sections 158BC, 158BD and 158BE - Validity of notice under section 158BD issued after more than two years from the date of search and after completion of block assessment. - HELD THAT: - The Tribunal's finding that the notice dated 17.02.2005 was barred by limitation was upheld. The court observed that proceedings under Section 158BD (notice to persons other than the searched person) are intertwined with block assessment proceedings under Section 158BC and the time-limit in Section 158BE must be read as applying to initiation of proceedings against third parties as well. Where the notice is issued after the two-year period provided under Section 158BE (or otherwise beyond a reasonable period), it is barred by limitation. The court relied on the settled principle that in absence of an express limitation a power must be exercised within a reasonable period and on prior decisions which held that the Assessing Officer's jurisdiction and satisfaction to issue notices to third parties are subject to the time fetters of Section 158BE. Applying these principles to the facts (search on 12.12.2002; notice on 17.02.2005), the notice was held time-barred and the Tribunal was right in allowing the appeal. [Paras 5, 7]

Notice under section 158BD issued on 17.02.2005 was barred by limitation and thus invalid; the Tribunal's order allowing the appeal on this ground is sustained.

Satisfaction of the Assessing Officer for issuing notice to third parties - reasonable period doctrine - Whether there was requisite satisfaction on the part of the Assessing Officer when issuing the notice under section 158BD and the legal effect of any lapse in recording such satisfaction beyond the prescribed/appropriate time. - HELD THAT: - The court noted that the requirement of recording satisfaction by the Assessing Officer in relation to notices to third parties must be understood in the context of the time limits applicable to block assessment. The judgment relied on earlier authority holding that the Assessing Officer who conducts the block assessment of the searched person must record satisfaction and act within the period prescribed under Section 158BE; otherwise the power to initiate proceedings against third parties would be left uncontrolled. Given that the impugned notice was issued after the two-year period and after completion of the block assessment, the court treated the defect as falling afoul of the time constraint and did not entertain a separate denial of satisfaction where the overarching limitation objection was dispositive. [Paras 6, 7]

Requirement of satisfaction is subject to the temporal fetters of Section 158BE; where issuance occurs beyond the permissible period the notice cannot be sustained and absence or defect in recording satisfaction is immaterial to save a time-barred notice.

Final Conclusion: Appeal dismissed; the Income Tax Appellate Tribunal was correct in holding the notice under section 158BD issued on 17.02.2005 time-barred and invalid, and no substantial question of law arises for further consideration in respect of the block assessment period 01.04.1996 to 12.12.2002.

Re-opening of assessment after four years - escapement of income by failure to disclose truly and fully - retrospective amendment and its effect on reassessment - distinction between developer and contractor for deduction under Section 80-IB(10)

Re-opening of assessment after four years - escapement of income by failure to disclose truly and fully - Validity of notices under Section 148/147 issued after four years where no tangible new material or failure to disclose is shown - HELD THAT: - The High Court affirmed the learned Judge's conclusion that reassessment proceedings issued beyond four years were unsustainable because the Revenue did not demonstrate that the assessee had failed to disclose truly and fully all material facts or that there was any new tangible material establishing escapement of income. The Court relied on the principle that mere re-examination of a claim already scrutinised and accepted in the original assessment does not justify reopening in the absence of proof of non-disclosure or fresh material warranting exercise of the reassessment jurisdiction. The learned Judge's finding that the Assessing Officer was not in possession of tangible material to initiate reassessment was held to be proper and not to be interfered with. [Paras 11, 13]

Reopening of the assessments after four years was invalid and the writ petitions challenging the notices and rejection orders were rightly allowed.

Retrospective amendment and its effect on reassessment - Whether a retrospective statutory amendment to the scope of Section 80-IB(10) permits reopening of a concluded assessment beyond four years - HELD THAT: - The Court held that retrospective amendment to the provision (by way of explanation) cannot, by itself, furnish a ground to reopen assessments beyond the four-year period where there is no evidence of failure to disclose material facts or fresh material showing escapement. Reliance was placed on the ratio in the Division Bench decision of the Gujarat High Court, which held that retrospective statutory changes do not automatically empower the Assessing Officer to disturb claims accepted after scrutiny unless requisite conditions for reassessment (such as failure to disclose) are shown. [Paras 12, 13]

The retrospective amendment to Section 80-IB(10) did not validate reassessment proceedings initiated after the four-year period in the absence of tangible new material.

Distinction between developer and contractor for deduction under Section 80-IB(10) - Whether post-assessment contentions that the assessee acted as contractor (based on development permission entries or TDS by societies) justify reopening the assessment - HELD THAT: - The Court rejected the Revenue's contention that such contentions could support reopening beyond four years. It observed that issues like the name in development permission or TDS by societies, which were susceptible to examination at the time of original scrutiny, do not constitute new tangible material justifying reassessment. The Court noted that if the Assessing Officer believed an error was made in allowing the deduction, alternative remedies existed but reopening the assessment beyond four years was not permissible on those bases without evidence of non-disclosure. [Paras 12, 13]

Contentions that the assessee was a contractor rather than a developer, absent fresh tangible material showing non-disclosure, do not warrant reopening the assessment after four years.

Final Conclusion: The High Court confirmed the orders dated 27.04.2012 allowing the writ petitions; the reassessment proceedings initiated after the four-year period were held invalid for want of tangible new material or failure to disclose, and the writ appeals are dismissed.

Obligation to grant personal hearing on request under the faceless assessment procedure - Standard Operating Procedure for video-conference personal hearing under Faceless Assessment Scheme - interpretation of 'may' as 'shall' when statutory scheme and SOP mandate hearing

Obligation to grant personal hearing on request under the faceless assessment procedure - Section 144B(7)(vii & viii) - consideration of request for personal hearing - Denial of personal hearing in a faceless assessment where the assessee requested a video-conference hearing was contrary to law and procedure. - HELD THAT: - The Court examined the procedure prescribed under the faceless assessment provisions and concluded that when an assessee requests personal hearing in response to a show-cause notice proposing variations, that request must be considered and, if requirements are met, a personal hearing through video-conferencing provided. The Court relied on the statutory scheme as set out in the relevant provisions and on the Ministry's Standard Operating Procedure for video-conference hearings which clarifies the mechanism for granting such hearings. Consistent with earlier High Court authority, the Court held that the use of the word 'may' in the statutory provision must be read as 'shall' where the procedural preconditions in the SOP are satisfied, so as to give effect to the assessee's statutory right to be heard when a request is properly made. [Paras 10, 11, 12]

The Authority's contention that there is no provision for personal hearing under the faceless scheme is rejected and the assessee's request for personal hearing must be provided in accordance with the SOP and statutory scheme.

Standard Operating Procedure for video-conference personal hearing under Faceless Assessment Scheme - remand for giving personal hearing and fresh disposal - Validity of the assessment order, computation sheet and demand notice where the request for personal hearing was not honoured. - HELD THAT: - Applying the conclusion that a requested video-conference personal hearing must be provided, the Court found the impugned assessment order, computation sheet and demand notice to be vitiated by the failure to afford the requested hearing. The Court therefore set aside those orders and remitted the matter to the assessing authority with directions to afford an opportunity of personal hearing through video-conferencing, taking note of and following the further process detailed in the SOP, and thereafter to dispose of the proceedings afresh. [Paras 13]

The assessment order, computation sheet and demand notice dated 09.09.2021 are set aside and the matter is remitted for grant of video-conference personal hearing and fresh disposal in accordance with the SOP.

Final Conclusion: The High Court set aside the assessment order, computation sheet and demand notice for AY 2018-2019 and remitted the matter to the assessing authority with a direction to provide the assessee an opportunity of personal hearing through video-conference in accordance with the Standard Operating Procedure and statutory scheme, and to thereafter dispose of the matter afresh.

Substitution of statutory provisions and non-survival of repealed provisions - application of newly substituted reassessment scheme to notices issued after commencement - reopening of assessment and procedure under Section 148A (reassessment enquiry) - temporal limitation on invocation of extended limitation period for past assessment years - validity of delegated legislation and limits of subordinate explanatory notifications - notifications exceeding delegated power (ultra vires)

Substitution of statutory provisions and non-survival of repealed provisions - application of newly substituted reassessment scheme to notices issued after commencement - reopening of assessment and procedure under Section 148A (reassessment enquiry) - Validity of notices under Section 148 issued after 01.04.2021 for assessment years prior to 01.04.2021 in light of the substituted provisions introduced by the Finance Act, 2021. - HELD THAT: - The Court held that upon substitution the earlier provisions stood repealed and did not survive; the substituted reassessment scheme enacted by the Finance Act, 2021 (effective 01.04.2021) governs any notice issued after that date. The new scheme materially alters reassessment procedure, notably by introducing Section 148A inquiry and changing limitation rules, and contains no indication that the pre-existing provisions would continue to apply to notices issued after commencement. The first proviso to the substituted limitation provision confirms that notices issued after 01.04.2021 cannot resurrect as valid those notices which had become time-barred under the pre-amendment law. Consequently, notices issued after 01.04.2021 without following the procedure in Section 148A are invalid and bad in law. [Paras 36, 37]

Notices under Section 148 issued after 01.04.2021 which did not comply with the reassessment procedure introduced by the Finance Act, 2021 (including Section 148A) are invalid and quashed.

Validity of delegated legislation and limits of subordinate explanatory notifications - notifications exceeding delegated power (ultra vires) - Validity of the CBDT notifications dated 31.03.2021 and 27.04.2021 insofar as they sought to explain or preserve application of pre-amendment reassessment provisions for notices issued after 01.04.2021. - HELD THAT: - The Court held that the Relaxation Act, 2020 empowered the Central Government only to extend time-limits by notification and did not authorise issuing explanations that alter the legal effect of provisions of the Income Tax Act. The CBDT's explanatory notifications, by attempting to hold that pre-amendment provisions continued to apply to issuance of notices after 01.04.2021, travelled beyond the delegated power and effectively attempted to amend or deflect the parent statute. Such subordinate legislation cannot change the clear statutory scheme and is therefore unconstitutional and invalid. The presumption of constitutionality of subordinate legislation does not save an explanation that is inconsistent with the statute under which it is made. [Paras 40, 41]

The explanatory notifications of the CBDT dated 31.03.2021 and 27.04.2021 are ultra vires and declared invalid.

Final Conclusion: All impugned notices issued after 01.04.2021 were held invalid for non-compliance with the reassessment regime introduced by the Finance Act, 2021; the CBDT notifications attempting to preserve pre-amendment provisions were held ultra vires and ineffective; the writ petitions were allowed and the revenue's appeals dismissed.

Deduction under section 80P(2)(d) - cooperative society - interest on investments - eligibility of exemption

Deduction under section 80P(2)(d) - cooperative society - interest on investments - eligibility of exemption - Allowability of exemption under section 80P(2)(d) in respect of interest earned on deposits with a cooperative bank. - HELD THAT: - The Tribunal examined whether interest income earned by the assessee cooperative society on deposits made with Saraswat Cooperative Bank Ltd. qualified for exemption under section 80P(2)(d). The court observed that the statutory test under section 80P(2)(d) requires that the income be derived by a cooperative society from investments held with another cooperative society. The reasoning of the lower authorities, which denied exemption on the ground that the payer was a cooperative bank and not a cooperative society, was rejected because a cooperative bank falls within the ambit of a cooperative society. The Tribunal relied upon the view expressed by the Karnataka High Court and precedent of the Tribunal benches which have treated interest from cooperative banks as falling within section 80P(2)(d). Applying that legal position to the facts, the Tribunal held that the assessee had received interest from another cooperative society and therefore the income was exempt under section 80P(2)(d). [Paras 10, 11, 13, 14, 15]

The deduction under section 80P(2)(d) is allowable in respect of the interest earned on deposits with the cooperative bank; the appeals are allowed.

Final Conclusion: Appeals allowed. The Tribunal held that interest earned by the assessee cooperative society on deposits with a cooperative bank is exempt under section 80P(2)(d); the orders of the lower authorities denying the exemption were set aside for A.Y. 2012-13, 2013-14 and 2014-15.

Computation of long term capital gains - connection of payment to the transferred property - deduction for payment to co-owners - exemption under section 54F - residential house requirement for section 54F - stamp valuation under section 50C

Deduction for payment to co-owners - connection of payment to the transferred property - computation of long term capital gains - Disallowance of claim for deduction of Rs. 25.00 lakh paid to other co-owners in computing capital gain - HELD THAT: - The Tribunal found that the alleged payment of Rs. 25.00 lakh by the assessee related to Gut No.222/13 while the transfer giving rise to the capital gain pertained to Gut Nos.222/1 to 222/6. The compromise deed expressly records that the sum was given towards ownership, possession and rights in Gut No.222/13 and the contemporaneous transactions show that the payment facilitated acquisition/settlement in respect of Gut No.222/13 (including subsequent sale by the co-owner in favour of the assessee's sons) rather than adjustment of consideration for the property transferred to the purchaser. Because the payment had no nexus with the full value of consideration for the asset actually transferred and formed no part of the transaction that produced the capital gain under consideration, the Tribunal sustained the disallowance and declined to treat the payment as deductible from the consideration for computation of long term capital gain. [Paras 7]

Claim for deduction of Rs. 25.00 lakh disallowed as not connected with the property transferred; no deduction in computation of capital gain.

Exemption under section 54F - residential house requirement for section 54F - computation of long term capital gains - Rejection of exemption under section 54F on the ground that the asset purchased was an office premises and not a residential house - HELD THAT: - Section 54F provides exemption for capital gain arising from transfer of a long term capital asset if the assessee purchases or constructs one residential house in India. The Tribunal observed that the asset acquired by the assessee was an 'office premises' and not a 'residential premises'. Given the statutory requirement that the new asset must be a residential house to attract the exemption, the authorities below were held to be correct in denying exemption under section 54F. [Paras 8]

Exemption under section 54F denied because the acquired property was an office premises and did not qualify as a residential house.

Final Conclusion: Both grounds challenged in the appeal were negatived: the claimed deduction for payment to co-owners was disallowed for lack of connection with the transferred property, and the exemption under section 54F was refused because the acquired asset was an office premises and not a residential house; the appeal is dismissed.

Exemption under section 54 on purchase of new residential property - Ownership requirement for claiming capital gains exemption - Purchase of new property in the name of another (son) - Binding effect of jurisdictional High Court decisions - Conflict of High Court decisions - follow jurisdictional High Court

Exemption under section 54 on purchase of new residential property - Purchase of new property in the name of another (son) - Binding effect of jurisdictional High Court decisions - Whether the assessee is entitled to exemption under section 54 when the new property was purchased in the name of her son - HELD THAT: - The Tribunal examined competing High Court decisions: some High Courts have allowed exemption where the new property was purchased in joint name or in the name of the son, while the Bombay High Court in Prakash v. ITO has held that exemption is not available where the new property is not purchased in the name of the transferor and the son becomes full owner. The Tribunal noted that where High Courts differ, authorities and tribunals are bound to follow the decision of their own jurisdictional High Court. No subsequent decision of the Bombay High Court favourable to the assessee was pointed out. Applying the principle that an inferior authority must follow the binding view of its jurisdictional High Court, the Tribunal held that the authorities below were justified in denying the exemption since the new property was purchased in the son's name. [Paras 4, 7]

Exemption under section 54 is not allowable to the assessee where the new property was purchased in the son's name and the Tribunal is bound to follow the Bombay High Court decision.

Final Conclusion: Appeal dismissed; the denial of exemption under section 54 was upheld because the new property was purchased in the son's name and the Tribunal was bound to follow the jurisdictional High Court precedent.

Deductibility of employee's contribution to PF/ESI under Section 36(1)(va) - deposit before due date of filing return under Section 139(1) suffices for claiming deduction - prima facie adjustments under section 143(1)(a)(iv) - effect of Finance Act, 2021 amendment to Section 36(1)(va) and Section 43B - prospective application from 1.4.2021 - binding precedential effect of jurisdictional High Court decisions

Deductibility of employee's contribution to PF/ESI under Section 36(1)(va) - deposit before due date of filing return under Section 139(1) suffices for claiming deduction - binding precedential effect of jurisdictional High Court decisions - Whether employees' contributions to PF/ESI, though deposited after the statutory due dates under respective enactments but before the due date for filing the return under Section 139(1), are allowable as deduction under Section 36(1)(va) for the impugned assessment year. - HELD THAT: - The Tribunal found that the employees' contributions collected by the assessee were deposited before the due date for filing the return under Section 139(1). Relying on the line of decisions of the jurisdictional Hon'ble Rajasthan High Court and followed by coordinate Benches of the Tribunal, the Tribunal held that where such contributions are paid before filing the return under Section 139(1), they cannot be disallowed under Section 36(1)(va) read with Section 43B. The Tribunal observed that these decisions are binding on authorities within the Rajasthan jurisdiction and are determinative of the issue. The argument based on the amendment introduced by the Finance Act, 2021 was rejected insofar as it was sought to be applied to the impugned assessment year because the explanatory memorandum to that Finance Act expressly provides that the amendments take effect from 1.4.2021 and apply to assessment year 2021-22 and subsequent years; hence they are not applicable to the assessment year under consideration. Applying these principles, the Tribunal concluded that the prima facie adjustment made by CPC under Section 143(1) in respect of delayed deposit cannot be sustained where deposit occurred before the return filing due date. [Paras 5, 6, 7]

The addition made by way of adjustment under section 143(1) in respect of employees' contribution to ESI/PF is deleted as the contributions were deposited before the due date of filing the return under Section 139(1).

Final Conclusion: The appeal is allowed and the addition of employees' contribution towards ESI/PF made while processing the return is directed to be deleted; the Finance Act, 2021 amendment is prospective (effective from 1.4.2021) and does not apply to the impugned assessment year.

Construction of roads - interpretation of exemption notification - strict construction of exemption - entitlement at the threshold and post-import utilisation - deployment for upgradation and micro surfacing as part of road construction

Construction of roads - interpretation of exemption notification - deployment for upgradation and micro surfacing as part of road construction - entitlement at the threshold and post-import utilisation - strict construction of exemption - Whether the expression 'construction of roads' in the exemption notification excludes use of the imported slurry seal machine for micro surfacing, repair or upgradation of existing roads thereby disentitling the importer from the notification at the stage of clearance. - HELD THAT: - The Tribunal held that the eligibility for exemption at the time of import (threshold entitlement) was not in dispute and must be determined by reference to the terms of the notification and the contract relied upon by the importer rather than speculative inquiries into post import use. The Tribunal rejected Revenue's contention that 'construction of roads' should be confined to 'greenfield' works, observing that government road programmes routinely include upgradation, widening and technological improvement of existing roads and that such activities fall within the policy objective of the notification. The decision emphasised that strict construction of an exemption is required but that strictness does not permit Customs to pre emptively deny entitlement on the basis of apprehended misuse unsupported by evidence of actual deployment; any alleged post import misuse is to be addressed by enforcement of the undertakings after clearance. The Tribunal found nothing on record to show that the imported equipment was restricted to repairs only or that the project was not a permissible upgradation; reliance on extraneous materials not before the assessing authority was also unavailing. Applying these principles, the Tribunal concluded that micro surfacing and related upgradation works are within the scope of 'construction of roads' for the purposes of the notification and that the importer satisfied the conditions for exemption at the stage of clearance. [Paras 4, 8, 10, 12, 13]

The denial of exemption was set aside and the importer was entitled to the benefit of the notification; Revenue's appeal is dismissed.

Final Conclusion: Appeal dismissed. The Tribunal upheld the first appellate authority's allowance of exemption, holding that 'construction of roads' under the notification includes upgradation and micro surfacing of existing roads and that entitlement at import cannot be negated by speculative apprehensions of post import misuse.

Provisional release under section 110A - Seizure under section 110 - Classification dispute between Customs Tariff entries - Exclusive regulatory domain of Food Safety and Standards Authority of India - Reliability of Central Revenue Control Laboratory reports - Right to re-export and mitigation of commercial detriment

Provisional release under section 110A - Seizure under section 110 - Classification dispute between Customs Tariff entries - Exclusive regulatory domain of Food Safety and Standards Authority of India - Reliability of Central Revenue Control Laboratory reports - Legality of refusal to grant provisional release of imported goods under section 110A where refusal was premised on reports of being 'unfit for human consumption' and where classification dispute existed - HELD THAT: - The Tribunal held that refusal to grant provisional release under section 110A cannot rest upon a ground that is unconnected with the seizure or be based on unexplained reliance on a laboratory report that intrudes into the regulatory domain of another statutory authority. The dispute arose from rival classification entries in the Customs Tariff and did not, in the ordinary course, justify denial of conditional release where adequate security could protect revenue. Certification of edibles as 'unfit for human consumption' falls within the exclusive regulatory competence of the Food Safety and Standards Authority of India under the Food Safety and Standards Act, 2006, and customs authorities and their technical support (including CRCL) do not possess a general mandate to appropriate that statutory function. The Tribunal observed that although CRCL has recognised expertise in classification, that expertise does not extend to prescriptive food-safety certification; conflicting laboratory reports warranted drawal and testing of fresh samples, which were carried out under the Tribunal's direction. In light of the test report obtained pursuant to the Tribunal's direction and in the absence of any discrediting by FSSAI, the Commissioner was directed to review the denial of provisional release under section 110A forthwith and, in any event, within ten days of receipt of the order, applying the legal framework stated by the Tribunal.

Impugned refusal set aside; respondent-Commissioner directed to reconsider application for provisional release under section 110A in light of the tribunal-ordered test report and the legal principles that FSSAI has exclusive competence over food-safety certification.

Right to re-export and mitigation of commercial detriment - Provisional release under section 110A - Whether relief in the form of permission to re-export and issuance of a detention certificate (enabling waiver of demurrage) should be granted where provisional release is denied and goods risk commercial deterioration - HELD THAT: - The Tribunal recognised the commercial prejudice caused by denial of access to imported goods and observed that where Indian regulatory standards cannot be imposed extraterritorially, re-export (return to sender) is an appropriate option to minimise commercial detriment when clearance for home consumption is refused or withheld. The Tribunal found it equitable to permit such measures prior to further deterioration of the goods and directed issuance of a detention certificate to enable waiver of demurrage so as to facilitate re-export.

Prayer for issuance of a detention certificate and facilitation of re-export granted; respondent directed to allow re-export option and waive demurrage to mitigate commercial detriment.

Final Conclusion: The impugned order refusing provisional release is set aside; the Commissioner of Customs is directed to apply section 110A in accordance with the tribunal-ordered test report and the legal framework that food-safety certification is the exclusive remit of FSSAI, and to permit re-export and issue a detention certificate to mitigate commercial detriment.

Pre-deposit under Section 129E of the Customs Act, 1962 - refund of pre-deposit - provisional export under Let Export Order - valuation dispute affecting drawback - time-bar for refund claims - interest on delayed refund

Pre-deposit under Section 129E of the Customs Act, 1962 - provisional export under Let Export Order - valuation dispute affecting drawback - refund of pre-deposit - Respondent entitled to refund of the amount deposited in July 2013 as a pre-deposit in view of the existing valuation dispute and provisional export. - HELD THAT: - The Tribunal found that at the time the amount was deposited (July 2013) there existed a live dispute concerning the valuation of the exported goods which directly affected calculation of drawback, and the export had been permitted under a provisional "Let Export Order". Given the deposit was made while the valuation dispute was sub judice, it must be treated as a pre-deposit subject to the outcome of adjudication rather than an unconditional duty payment. A pre-deposit made in the course of a contested provisional export does not become time-barred and is refundable once the appellate body accepted the declared value and directed consequential relief. The Tribunal therefore upheld the Commissioner (Appeals)'s conclusion that the deposit was in the nature of pre-deposit and that the assessee was entitled to consequential refund. [Paras 5, 8]

Refund directed to be paid forthwith of the amount deposited in July 2013 as it constituted a pre-deposit made during a pending valuation dispute.

Interest on delayed refund - refund of pre-deposit - Respondent entitled to interest on the refunded pre-deposit from date of deposit until date of refund. - HELD THAT: - Relying on precedents cited (Sandvik Asia Ltd. and Tribunal Division Bench in Parle Agro Ltd.), the Tribunal held that where a pre-deposit is refundable, the refund must carry interest for the period from the date of deposit to the date of refund. Applying that principle, interest at 12% per annum was directed to be paid from the date of deposit until the date of disbursement. [Paras 8]

Interest to be paid at 12% per annum from date of deposit until date of refund alongside the refundable pre-deposit.

Final Conclusion: The Revenue's appeal is dismissed. The Commissioner (Appeals) order directing refund of the deposited amount (Rs. 18,68,000) is upheld and the Revenue is directed to disburse the refundable pre-deposit forthwith within four weeks, with interest at 12% per annum from date of deposit until refund.

Anticipatory bail in relation to offences under the PMLA - limitations under Section 45 of the PMLA concerning grant of bail - money laundering as a special enactment with overriding effect - economic offences: bail is the exception, jail is the rule

Anticipatory bail under Section 438 Cr.P.C. - limitations under Section 45 of the PMLA - special enactment with overriding effect - economic offences - bail exceptional - Application for anticipatory bail filed by the applicant in proceedings under the PMLA was dismissed. - HELD THAT: - The Court examined the anticipatory bail plea in the context of the Prevention of Money Laundering Act, noting that the PMLA is a special enactment with overriding effect and that Section 45 prescribes mandatory conditions which must be satisfied before bail can be granted. Reliance was placed on precedents and statutory scheme emphasising that the two conditions in Section 45 - opportunity to the prosecutor to oppose bail and satisfaction that there are reasonable grounds to believe the accused is not guilty and not likely to commit an offence while on bail - are mandatory. The Court observed that economic offences constitute a distinct class where custodial measures assume greater importance and that anticipatory bail is an extraordinary remedy to be granted sparingly. On a prima facie appraisal of the material on record and having regard to the gravity of the allegations and the parameters of Section 45(1) of the PMLA, the Court was not satisfied that the twin conditions were met and therefore declined to enlarge the applicant on anticipatory bail. The Court clarified that its observations are confined to the anticipatory bail application and do not preclude consideration of regular bail at the appropriate stage. [Paras 30, 31]

Anticipatory bail application dismissed for failure to satisfy the mandatory conditions under Section 45(1) of the PMLA.

Final Conclusion: The anticipatory bail application is dismissed on prima facie consideration of the material and in view of the mandatory limitations under Section 45 of the PMLA; the observations are confined to this stage and do not affect any regular bail application or trial.

Challenge to show cause notice - maintainability of writ petition against pre-adjudication notices - jurisdiction to levy tax - recovery of service tax in terms of Section 73(1) of the Finance Act, 1994 - service tax on royalty in mining operations - binding precedent and reference to a larger bench - stay of recovery pending reference to a larger bench - risk of loss of evidence from blanket stays

Challenge to show cause notice - maintainability of writ petition against pre-adjudication notices - jurisdiction to levy tax - Maintainability of the writ petition challenging the show cause notice issued prior to completion of adjudication where no jurisdictional defect is shown. - HELD THAT: - The petition was filed against a show cause notice issued under Section 73(1) of the Finance Act, 1994 seeking recovery of alleged service tax. The Court reiterated that it will entertain a writ against a show cause notice only where the issuing authority lacks jurisdiction to levy the tax. In the present case no jurisdictional defect was made out; instead, the merits on liability were contested. As adjudication is ongoing and the petitioner relied on contested legal propositions rather than a lack of jurisdiction, the Court declined to exercise writ relief at the pre-adjudication stage. The Court relied on existing decisions of this Court and the Supreme Court which, as of now, are against the petitioner's contention and therefore do not warrant restraining the adjudication process.

Writ petition against the show cause notice is not maintainable in the absence of a demonstrated jurisdictional defect; the petition is dismissed.

Service tax on royalty in mining operations - binding precedent and reference to a larger bench - stay of recovery pending reference to a larger bench - risk of loss of evidence from blanket stays - Whether recovery or adjudication should be stayed pending determination of the legal question by a larger bench of the Supreme Court. - HELD THAT: - The petitioner sought a stay of recovery on the basis that the correctness of earlier Supreme Court decisions (notably the five-judge view) has been doubted and the issue referred to a nine-judge bench. The Court observed that existing binding precedents, including a Division Bench decision of this Court against the petitioner on the question of service tax on royalty, remain operative until the larger bench alters them. The Court refused to grant a blanket stay of adjudication or recovery merely because a reference to a larger bench exists, emphasising the practical prejudice of staying all proceedings - notably the risk of loss of evidence and materials - and stating that pending reference does not automatically entitle assessees to stay of departmental action.

No stay of adjudication or recovery pending the larger bench reference; department may proceed with adjudication and recovery.

Final Conclusion: Petition dismissed; writ relief denied where no jurisdictional defect is shown and the department is not stayed from carrying out adjudication or recovery pending the larger bench reference, having regard to existing binding precedents and the risk of loss of evidence.

Refund under Section 11B - Voluntary Compliance Encouragement Scheme (VCES) - non-refundability under Section 109 of the VCES - voluntary scheme excludes general refund provisions

Refund under Section 11B - Voluntary Compliance Encouragement Scheme (VCES) - non-refundability under Section 109 of the VCES - voluntary scheme excludes general refund provisions - benefits of VCES (interest reduction/penalty waiver) - Whether the appellant was entitled to refund of amounts paid under the VCES notwithstanding the bar on refund under the Scheme and whether Section 11B applied to permit refund. - HELD THAT: - The Tribunal held that the claim was not a plain refund under Section 11B but arose from an amount paid pursuant to a voluntary declaration under the VCES. Section 109 of the Scheme expressly provides that any amount paid in pursuance of a declaration under the VCES shall not be refundable. The Scheme confers specific benefits (such as reduction in interest or waiver of penalty) and was optional; having voluntarily availed the Scheme, the taxpayer is bound by its special enactment which excludes the applicability of the general refund provisions. Decisions relied upon by the appellant concerning Section 11B were therefore inapplicable to a payment made under the VCES. The Tribunal also noted precedent support for this approach and found no ground to override the statutory non refundability contained in Section 109. [Paras 6, 7]

The refund claim was correctly rejected as amounts paid under the VCES are not refundable and Section 11B does not entitle the appellant to a refund.

Final Conclusion: Appeal dismissed; refund claim rejected because the VCES (Section 109) bars any refund of amounts paid under declarations made under the Scheme, and the general refund provision (Section 11B) does not apply to payments made under the voluntary Scheme.

Support services of business or commerce - taxable service in relation to business support services - Association of Persons / joint venture - principal-to-principal basis - revenue sharing arrangement - infrastructural support services - quid pro quo / consideration requirement for taxable service - administrative Circulars of the CBEC and their applicability

Support services of business or commerce - Association of Persons / joint venture - principal-to-principal basis - revenue sharing arrangement - quid pro quo / consideration requirement for taxable service - administrative Circulars of the CBEC and their applicability - Whether the payments made under the exhibitor-distributor agreements for screening films during October 2009 to March 2012 are exigible to service tax as support services of business or commerce. - HELD THAT: - The Tribunal examined the licence agreements and found that distributors granted non exclusive theatrical exploitation rights to the exhibitor, who alone controlled exhibition decisions (screens, shows, timings, ticket pricing) and, in consideration, the exhibitor paid a share of box office receipts to the distributor. The agreements did not show any flow of consideration from distributors to the exhibitor as quid pro quo for services; rather the exhibitor paid for screening rights. A mere revenue sharing arrangement does not, by itself, establish a service provider-service recipient relationship necessary for a taxable service. The Tribunal applied the Supreme Court test in Faqir Chand Gulati and the Tribunal's reasoning in Mormugao Port Trust that where parties participate in a joint enterprise sharing profits and risks, activities undertaken for the venture are not services rendered by one partner to the joint venture. The CBEC Circular dated 23.02.2009 was held to support the conclusion that screening is an independent activity and not a business support service; the later Circular dated 13.12.2011 could not be invoked to sustain demands for periods prior to its issuance. Subsequent appellate authority (Inox Leisure Ltd.) and the Supreme Court's dismissal of the Department's appeal reinforced the view that such agreements do not attract BSS levy. Applying these principles, the Tribunal concluded that no BSS based service tax liability arises on the appellant for the stated period.

The demand of service tax, interest and penalty confirmed by the Commissioner for October 2009 to March 2012 is not sustainable and is set aside.

Final Conclusion: The appeal is allowed; the Commissioner's order dated 17.12.2018 confirming service tax demand, interest and penalty for October 2009 to March 2012 is set aside.

Classification as works contract services - distinction between supply of goods and provision of taxable service - exemption of services provided to non commercial / government / local authorities - sub contractor entitling to benefit of contractor's exemption - remand for quantification and verification of taxable portion

Classification as works contract services - distinction between supply of goods and provision of taxable service - Whether the services rendered by the appellant fall under works contract or supply of goods activity and are therefore not exigible to service tax under the categories of erection, installation, commissioning, management, maintenance or repair services - HELD THAT: - The Tribunal found from the work orders and material on record that in most cases the appellant provided services along with supply of material and in several instances the activity was in the nature of sale of goods / trading. Applying the principle that services rendered together with supply of goods which amount to works contract are classifiable as works contract services, the Tribunal held that such transactions cannot be treated as taxable erection/installation/management/repair services. The Tribunal further observed that where the element of supply of goods predominates, service tax is not leviable. These findings are recorded after considering the appellants' contention and the factual matrix in the work orders. [Paras 9, 10]

Findings in favour of the appellant that many of the transactions are classifiable as works contract or sale of goods and are not exigible to service tax under the challenged service categories

Exemption of services provided to non commercial / government / local authorities - sub contractor entitling to benefit of contractor's exemption - remand for quantification and verification of taxable portion - Whether services supplied to institutions such as IIT Kanpur, HRI Allahabad and other government/local authority entities are exempt and whether remaining issues should be remitted for determination of taxable portion and applicability of exemptions - HELD THAT: - The Tribunal held that services provided to the named institutions are covered by the applicable exemption notifications/circulars and thus not taxable. The Tribunal noted the applicability of circulars and notifications which exclude services to certain non commercial or government entities and observed that sub contractors are eligible for exemption benefits where the principal contractor's supplies are exempt. However, the Tribunal did not quantify or determine the precise taxable amount in respect of services provided without material. For that reason the matter was remitted to the adjudicating authority to ascertain the service tax payable (if any) only on services actually provided without material, and to examine and decide the applicability of relevant exemptions and the sub contractor position in accordance with law, before passing a fresh order. [Paras 10, 11]

Services to the specified institutions/local authorities held to be exempt; remand directed for determination of tax only on services provided without material and for examination of exemption claims

Final Conclusion: Impugned demand set aside insofar as transactions are found to be works contract/sale of goods or exempt as services to specified institutions; matter remitted to the adjudicating authority to determine service tax, if any, on services rendered without supply of material and to verify and decide on exemption claims in accordance with law.

Admissibility of electronic records under Section 65B of the Evidence Act - relevancy and use of statements recorded under Section 132(4) of the Income Tax Act - need for independent departmental inquiry before acting on third party/Income tax material - requirement of corroborative evidence for clandestine/unaccounted receipts - scope and limitation of show cause notice - tribunal confined to charges in SCN - classification of activity as 'Works Contract Service' versus sale of vacant plots - point of taxation and taxability of consideration not received - limitation period under Section 73 including five year exception for fraud, collusion, etc.

Admissibility of electronic records under Section 65B of the Evidence Act - need for certificate under Section 65B(4) - Whether the .xls worksheets and computer printouts seized and relied upon by Revenue were admissible evidence - HELD THAT: - The Tribunal held that the Revenue relied heavily on .xls worksheets and computer printouts supplied by the Income tax authorities but failed to follow the safeguards prescribed under Section 65B and the guidance of the Supreme Court in Anwar P.V. v. P.K. Basheer. The conditions in Section 65B(2) and the requirement of a certificate under Section 65B(4) to establish source and authenticity were not satisfied; moreover, no independent enquiry was conducted by Revenue to verify the contents, the author of the files was not examined, and the purported authorship/admissions were not established in admissible evidence. In those circumstances the electronic material lost evidentiary value and could not sustain the demand. [Paras 24, 25]

Electronic records (.xls sheets) not admitted as evidence for sustaining demand in absence of compliance with Section 65B and independent verification.

Relevancy and use of statements recorded under Section 132(4) of the Income Tax Act - sequence of evidence and requirement of examination in chief under Section 138 Evidence Act - Whether statements recorded by Income tax authorities (including of employees) could be relied upon by Revenue in service tax adjudication - HELD THAT: - The Tribunal accepted the appellant's contention that statements recorded under Section 132(4) are confined to Income tax proceedings and cannot be freely used in other fora. It also held that statements recorded during investigation were not placed before the adjudicating authority in the form of examination in chief, and the authorities did not offer those witnesses for examination and cross examination in the required sequence under Section 138 of the Evidence Act. Consequently, such statements could not be treated as admissible evidence in the service tax adjudication. [Paras 21, 22, 26]

Statements recorded by Income tax authorities in search/seizure proceedings are not admissible evidence in the service tax adjudication in the absence of statutory/ procedural compliance and proper examination.

Need for independent departmental inquiry before acting on third party/Income tax material - requirement of corroborative evidence for clandestine receipts - Whether Revenue could sustain demand solely on documents and information furnished by Income tax authorities without independent inquiry or corroboration - HELD THAT: - On the facts the Tribunal found that Revenue did not undertake independent verification of the alleged cash receipts, failed to examine buyers or the author(s) of relied documents, and produced no corroborative material demonstrating that the amounts related solely to taxable service consideration. The Tribunal relied on precedent and its own analysis to hold that documents/data supplied by Income tax authorities could only be a starting point for independent inquiry and, without corroboration, lose evidentiary value. [Paras 18, 19, 27, 28]

Demand cannot be sustained where it rests solely on Income tax material without independent inquiry or corroborative evidence.

Classification of activity as 'Works Contract Service' versus sale of vacant plots - confine adjudication to the scope of the show cause notice - Whether the activity in dispute was correctly classified as 'Work Contract Service' / 'Construction of Residential/Commercial Complex Service' - HELD THAT: - The adjudicating authority analysed the nature of transactions and concluded that the transactions in question were for sale of vacant plots/plots with certain development assurances and did not satisfy the limbs of 'Works Contract' - there was no contract for construction nor transfer of property in goods during execution. The Tribunal found no infirmity in the adjudicating authority's application of law and the principle that an adjudication cannot travel beyond the specific classification alleged in the show cause notice; consequently, demands premised on an inapplicable classification could not be sustained. [Paras 25, 26, 27]

Activity not covered by 'Works Contract' or declared service; demand under that head unsustainable and adjudication confined to SCN's scope.

Point of taxation and taxability of consideration not received - limitation period under Section 73 and five year exception - Whether service tax is leviable on amounts shown as 'outstanding' (not received) and whether amounts received prior to 31.03.2014 could be demanded - HELD THAT: - The Tribunal (following the Principal Commissioner's detailed reasoning) held that 'consideration' is integral to the definition of 'service' and that amounts not received by the service provider cannot be treated as taxable consideration. It further noted that amendments and Rule 6(3) permit adjustment/credit where consideration is not received, demonstrating that tax was not intended on unreceived amounts. Separately, amounts received on or before 31.03.2014 fell beyond the five year limitation unless the five year exception applied; Revenue had not established any such exception. Accordingly parts of the computed demand relating to amounts prior to 31.03.2014 and amounts shown as outstanding were held unsustainable and required recomputation/deduction. [Paras 29]

Service tax not leviable on consideration not received; demands relating to receipts on or before 31.03.2014 are time barred absent establishment of a five year exception.

Requirement of corroborative evidence for third party documents - Whether revenue could rely on a broker's loose sheets/chits and third party documents to make additions where names and ledger/sale deed records did not corroborate those documents - HELD THAT: - The adjudicating authority found that the loose broker documents were not corroborated, were denied by the company official shown the documents, and materially conflicted with the assessee's ledgers and sale deeds. The Tribunal accepted that uncorroborated third party loose documents, contradicted by cogent company records, could not be the basis for a demand; surmises and conjectures cannot substitute positive legal proof. [Paras 29]

Demands based on uncorroborated third party documents disbelieved by company records are unsustainable.

Penalties contingent on sustainability of demand - Whether penalties imposed on co appellants survive where the underlying demand is held unsustainable - HELD THAT: - The Tribunal observed that since the substantive demand against the main appellant did not survive on the merits for the reasons given (inadmissible electronic evidence, lack of independent inquiry, misclassification, limitation and non receipt of consideration), there was no basis to sustain penalties on the co appellants. [Paras 31]

Penalties do not survive where the underlying demand is unsustainable; penalties on co appellants set aside.

Jurisdiction of DGGI to issue show cause notice - Jurisdictional competence of DGGI to issue the SCN (question raised by appellant) - HELD THAT: - The Tribunal explicitly refrained from deciding the contested jurisdictional question (reliance on Canon India), stating that the appeals were disposed on factual and evidentiary merits and the jurisdictional issue was left open for determination in appropriate proceedings. [Paras 30]

Jurisdictional issue as to DGGI's power to issue the SCN left open and not decided.

Final Conclusion: The Tribunal allowed the appeals of J.P. Iscon Pvt. Ltd. and the named co appellants, set aside the impugned portions of the adjudication to the extent the demand rested on inadmissible electronic evidence, statements recorded by Income tax authorities without procedural compliance, uncorroborated third party material, incorrect classification, and amounts not received or time barred; Revenue's appeal was dismissed and penalties on co appellants held to be unsustainable. The jurisdictional question regarding DGGI was left open.

CENVAT credit on inputs sent directly to project/site - credit not deniable solely for non receipt in factory where inputs are duty paid and used in final product - binding effect of prior orders between same assessee and department - precedential effect of Tribunal and co ordinate appellate orders on subordinate adjudicating authority - obligation to follow identical earlier decisions unless reversed by higher forum

CENVAT credit on inputs sent directly to project/site - credit not deniable solely for non receipt in factory where inputs are duty paid and used in final product - precedential effect of Tribunal and co ordinate appellate orders on subordinate adjudicating authority - Whether the petitioner was entitled to CENVAT credit on MS Platforms dispatched directly to customers' site for erection and commissioning and whether the Order in Original denying such credit could stand in face of earlier identical decisions in favour of the assessee. - HELD THAT: - The Court found that the determinative question - whether MS Platforms not received in the factory but sent directly to the customers' site could qualify for CENVAT credit - had been previously and repeatedly decided in favour of the assessee by co ordinate appellate authorities and the Tribunal. The Tribunal held that inputs not received directly in the factory but received at the site of the project are cenvatable where the inputs were duty paid and their value was included in the value of the final product on which duty was paid; denial of credit merely because goods were not brought into the factory was not sustainable. Those earlier orders dealt with the identical question in law and fact. The Revenue's contention that those orders were not challenged due to an internal instruction was examined and rejected as the demands in the earlier matters exceeded the monetary limit in the instruction, so there was no bar to challenge. In these circumstances a subordinate adjudicating authority was not free to ignore the consistent earlier findings adverse to its conclusion. Applying the principle that lower authorities must give effect to earlier orders between the same parties and the established legal position, the Court held that the Order in Original could not remain and that the petitioner was entitled to the CENVAT credit on the MS Platforms used in manufacture of weigh bridges. [Paras 9, 11, 13, 15, 16]

Order in Original dated 31.12.2019 set aside; petitioner held eligible for CENVAT credit on MS Platforms supplied directly to customers' site for the periods in dispute.

Final Conclusion: Writ petition allowed; the Order in Original refusing CENVAT credit is quashed and the petitioner is declared entitled to credit in respect of MS Platforms supplied directly to customers' site for the tax period April 2012 to February 2014 (specifically 01.04.2012 to 31.03.2013 and 01.04.2013 to 29.02.2014).

Classification of goods as parts or complete articles - application of Section and Chapter Notes in tariff classification - Rule 2(a) of the Rules for Interpretation of the Schedule - classification of SKD/CKD consignments - benefit of alternative classification/beneficial construction

Classification of goods as parts or complete articles - application of Section and Chapter Notes in tariff classification - Rule 2(a) of the Rules for Interpretation of the Schedule - classification of SKD/CKD consignments - Whether the goods cleared by the appellant are parts of colour television receivers classifiable under sub-heading 8529.00 or complete colour television receivers classifiable under sub-heading 8528.00 and liable to duty under Sl. No. 204 of Notification No. 6/2002-CE. - HELD THAT: - The Tribunal applied the established rule that classification must first be tested against the terms of the headings and the relevant Section and Chapter Notes before resorting to the Rules for Interpretation. Section Note 2 to Section XVI mandates that parts of goods included in the specified Chapters shall be classified in their respective headings. The adjudicating authority found on the facts that the appellant assembled complete television receivers in its factory, operated and tested them, and only after confirming completeness disassembled and dispatched them to satellite units. On that factual matrix the Tribunal agreed that the goods could not be treated as complete television receivers cleared in SKD condition as in M/s. Salora International Ltd., because here the manufacturing process resulted in finished goods which were subsequently disassembled for transport. The Tribunal thus held that, having regard to the Section Note and the factual finding that the goods were not ready-for-use complete TV sets when cleared, they are parts suitably used with apparatus of heading 8528 and therefore classifiable under sub-heading 8529.00. The Tribunal distinguished the Salora decision and the Panasonic AVC Network India decision on their facts, and noted that the appellant alternatively relied on Sl. No. 205 and had discharged duty at that rate; however the primary finding on classification was that the goods merit classification as parts under 8529.00. [Paras 21, 22, 23, 24, 25]

The goods are parts of colour television receivers and are classifiable under sub-heading 8529.00; the demand under sub-heading 8528.00 (Sl. No. 204) is not sustainable.

Final Conclusion: The impugned order is set aside; the appeal is allowed and the goods are held classifiable as parts under sub-heading 8529.00 with consequential relief, distinguishing earlier decisions on their facts.

Refund of unutilised Cenvat Credit on closure of factory - maintainability of refund under Central Excise Act and Cenvat Credit Rules - binding effect of a High Court decision unless stayed or set aside - sanctity of interim High Court order pending appeal to the Supreme Court

Refund of unutilised Cenvat Credit on closure of factory - binding effect of a High Court decision unless stayed or set aside - Whether the appellant is entitled to refund of unutilised Cenvat credit lying in its Cenvat Credit account on closure of the factory. - HELD THAT: - The Tribunal held that the jurisdictional High Court has already decided that on closure of the factory assessees are entitled to refund of unutilised Cenvat credit. Although the revenue has challenged the High Court's decision in appeal to the Supreme Court, no stay has been granted and the decision therefore retains its effect. The Tribunal relied on the principle that a High Court order remains binding and its sanctity continues until it is set aside, citing the approach in Principal Commissioner, Central Excise Delhi v Space Telelink Ltd. In view of the unvacated decision of the High Court in Modipon Ltd., the appellant's refund claim in respect of the unutilised Cenvat credit as on 31.3.2016 was held to be maintainable and payable. [Paras 6, 7]

Impugned order set aside and appeal allowed; appellant entitled to refund of unutilised Cenvat credit as on 31.3.2016 with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, set aside the adjudicating order and granted the appellant refund of the unutilised Cenvat credit as on 31.3.2016, relying on the unvacated decision of the High Court; consequential relief was ordered.

Clearance of unutilized/surplus raw material - liability for duty on excess clearance - adequacy of audit para and show cause notice - onus of proof and evidentiary basis for demand - interest and penalty contingent on sustained demand

Clearance of unutilized/surplus raw material - liability for duty on excess clearance - adequacy of audit para and show cause notice - onus of proof and evidentiary basis for demand - interest and penalty contingent on sustained demand - Whether the demand of duty, interest and penal consequences for alleged clearance in excess of permission is sustainable in absence of evidence showing quantity/value of excess clearance and non-payment of duty. - HELD THAT: - The Tribunal found that the appellant was debonded after the jurisdictional Assistant Commissioner certified that no Central Excise/Customs duty was pending. The audit paragraph and the show cause notice alleged excess clearance and short payment but did not state how the alleged shortfall was computed, nor did the relied upon documents show the basis for arriving at the demand. The Tribunal observed that if excess clearance and non-payment are alleged, there must be evidence establishing (a) that goods were cleared in excess of permission and (b) that no duty was paid on such clearances. Neither the audit report nor the show cause notice contained such material particulars or supporting charts; subsequent departmental replies to an RTI request likewise acknowledged absence of a detailed basis. The earlier remand by the Tribunal required fresh adjudication with particulars, but the impugned order again failed to identify the basis, calculations or documentary support for the duty demand and penalty. A demand confirmed on conjecture or on unspecified figures unsupported by relevant documents cannot be sustained; accordingly interest and penalty, being contingent on a valid demand, also fall when the demand is unsustainable. [Paras 5, 6, 7, 8, 9]

Demand of duty, interest and penalty set aside for lack of evidentiary basis; appeal allowed.

Final Conclusion: The impugned order confirming duty, interest and imposing penalty is quashed for absence of any documented basis for the demand; the appeal is allowed with consequential relief to the appellant.

Procedure for entertaining an appeal (pre-deposit/prepayment condition) - proof of payment of 15% of disputed tax - procedural law versus substantive right of appeal - retrospective operation of an amendment by substitution - right of appeal as a statutory/vested right subject to conditions - Article 14 - classification and equality - power to grant stay under Rule 141 - principle of reading down

Procedure for entertaining an appeal (pre-deposit/prepayment condition) - proof of payment of 15% of disputed tax - procedural law versus substantive right of appeal - Insistence on production of proof of payment of 15% of the disputed tax as a condition for entertaining an appeal does not amount to a compulsory extraction of tax nor does it abrogate the right of appeal under Section 84(1). - HELD THAT: - The Court held that Section 84(1) confers a substantive right of appeal but the provisos to that subsection regulate the procedure for exercising the right. The substituted second proviso prescribes conditions (proof of payment of admitted amount and 15% of disputed tax) which are procedural and may legitimately be imposed by the legislature. A procedural provision is generally capable of retrospective application unless a contrary intention appears; the amendment by substitution and its cut off date demonstrate such intendment. The 15% requirement is a condition precedent for entertainment of the appeal and not a separate levy; the liability determined by assessment subsists until set aside, and the prepayment requirement merely quantifies protection for entertaining the appeal. If protection from realisation is desired, a dealer may apply for stay under the rules (Rule 141) once the appeal is entertained. The Court therefore rejected the contention that the requirement is a compulsory tax or destroys the right of appeal. [Paras 42, 46, 61, 62, 63]

The second proviso is procedural, not a compulsory extraction of tax, and does not infringe or abrogate the statutory right of appeal; Issue Nos.1 and 3 decided against the appellants.

Article 14 - classification and equality - The second proviso to Section 84(1) does not offend Article 14 by treating unequal classes alike, and is not discriminatory. - HELD THAT: - The Court examined whether the proviso illegitimately lumps different types of assessments and different categories of dealers together. It found that Section 84(1) itself confers a uniform right of appeal against provisional or other assessments on any casual dealer or dealer, so no artificial classification is required by the statute. Article 14 permits classification based on relevant legal considerations; here there is no singling out of a class similarly situated. Stray administrative orders applying the proviso mechanically do not render the provision unconstitutional. [Paras 63, 64, 65, 68, 69]

The proviso does not violate Article 14.

Right of appeal as a statutory/vested right subject to conditions - procedural law versus substantive right of appeal - The right of appeal is statutory and, while substantive, may be regulated by procedural conditions imposed by the legislature; the proviso does not impermissibly take away the right. - HELD THAT: - The Court reiterated settled principles distinguishing substantive and procedural law: substantive rights (including right of appeal) are presumptively prospective when altered, whereas procedural provisions may operate retrospectively. The proviso regulates the procedure for entertaining appeals and thereby legitimately conditions the exercise of the statutory right. Even if the right were treated as vested, an express or necessary intendment to modify it suffices; the substituted proviso contains such intendment and therefore may validly subject appeals filed on or after the specified date to the new procedure. [Paras 40, 41, 42, 47, 61]

The right of appeal remains but may be exercised subject to the procedural conditions in the second proviso.

Retrospective operation of an amendment by substitution - The substitution effected by the West Bengal Finance Act, 2015 operates retrospectively as a procedural amendment and the cut off date in the proviso (1 April 2015) is a valid legislative intendment. - HELD THAT: - The Court applied principles governing amendments by substitution and authorities on retrospective effect: a procedural amendment is presumptively retrospective unless a contrary intention appears. The Finance Act substituted the second proviso and fixed 1 April 2015 as the date from which appeals submitted on or after that date are subject to the new condition. The Court found a clear legislative intendment and rejected the contention that the substitution cannot affect pre-existing lis. [Paras 37, 44, 45, 46, 56]

The substituted proviso is retrospective in operation for procedural purposes and validly applies to appeals submitted on or after 1 April 2015.

Principle of reading down - The principle of reading down is inapplicable because the second proviso is clear, unambiguous and validly applicable retrospectively as a procedural requirement. - HELD THAT: - The Court noted that reading down is available where ambiguity or constitutional infirmity requires narrowing; here the proviso is clear, especially being a fiscal/procedural provision. Given the explicit intendment and absence of ambiguity, there is no scope to read down the provision to import additional powers (for example, an express power to relax) or contingencies not present in the statute. [Paras 60, 74, 83]

Reading down is unnecessary and not warranted; the proviso stands as enacted.

Power to grant stay under Rule 141 - Alleged hardship of a dealer is not a ground to strike down the statutory proviso; hardship, including claims of extreme difficulty, is a matter for individualized relief (e.g., writ jurisdiction) but does not invalidate the provision. - HELD THAT: - The Court observed that alleged administrative or individual hardships do not determine the constitutional validity of a legislative procedural condition that is reasonable. While genuine cases of extreme hardship may be addressed by writ jurisdiction or by discretionary relief in appropriate proceedings, such instances cannot be used to nullify a valid legislative scheme. Further, the availability of Rule 141 (stay on realisation after entertainment of the appeal) provides a statutory mechanism for protection once the procedural preconditions are met. [Paras 75, 83]

Hardship does not render the proviso void; affected dealers may seek appropriate extraordinary or statutory relief where justified.

Final Conclusion: The intra court appeals are dismissed. The constitutional validity of the substituted second proviso to Section 84(1) (requiring proof of payment of admitted amounts and 15% of disputed tax for appeals submitted on or after 1 April 2015) is upheld as a procedural condition validly imposed by the legislature; affected appellants are granted liberty to proceed (file replies to show cause notices or appeals) subject to compliance with the proviso and with directions as to timelines given in the order.

Personal liability under Section 26(4) of the TNGST Act - effectiveness of an assessing authority's intimation in lieu of a fresh Form B-6 - duty of a creditor to seek clarification on notified arrears before making payment - mode of recovery of tax from creditors of defaulting dealer

Personal liability under Section 26(4) of the TNGST Act - mode of recovery of tax from creditors of defaulting dealer - Liability of the petitioner for payments made to the defaulting dealer after receipt of statutory notice under Section 26 of the TNGST Act. - HELD THAT: - Section 26 permits the assessing authority to call upon a creditor of a defaulting dealer to make payment and provides that any payment made after receipt of such notice shall be deemed to be made under the authority of the dealer, and that the person making payment after receipt of the notice shall be personally liable to the assessing authority to the extent of the payment made or the dealer's liability, whichever is less. The petitioner received notice(s) informing him of the arrears and nevertheless effected payments to the third respondent after receipt of those communications. The Court found that having continued payments despite the statutory notice and the intimation of the dealer's arrears, the petitioner assumed the risk contemplated by Section 26(4) and thereby deprived the revenue of legitimately recoverable tax. [Paras 7, 11]

The petitioner is personally liable under Section 26(4) of the TNGST Act to the assessing authority to the extent of the payments made after receipt of the notice; the writ petition is dismissed on this ground.

Effectiveness of an assessing authority's intimation in lieu of a fresh Form B-6 - duty of a creditor to seek clarification on notified arrears before making payment - Whether the subsequent communication dated 04.05.2009 - which informed the petitioner of the dealer's arrears but did not enclose a fresh Form B-6 - was sufficient to attract liability under Section 26(4). - HELD THAT: - Section 26 allows the assessing authority to amend, revoke or extend notices and to call upon creditors from time to time. Although the original Form B-6 enclosed with the 15.04.2009 communication specified a limited amount, the later intimation dated 04.05.2009 clearly informed the petitioner of the larger arrears due from the dealer. The Court held that the Commercial Taxes Department was not obliged to issue a fresh Form B-6 so long as there was a further intimation of the dealer's arrears; upon receiving such intimation the creditor has a duty to obtain clarification before making payments if uncertain. The petitioner failed to seek clarification and continued payments, thereby attracting liability. [Paras 8, 9, 10]

The notice dated 04.05.2009, though not accompanied by a fresh Form B-6, was sufficient as an intimation of arrears and imposed on the petitioner the obligation to seek clarification; absence of a fresh Form B-6 does not absolve him of liability under Section 26.

Final Conclusion: Writ petition dismissed; petitioner held personally liable under Section 26(4) of the TNGST Act for payments made after receipt of departmental notices informing of the dealer's arrears, with liberty to recover sums from the third respondent in accordance with law.

Taxability of renewal of software licences as sale of goods - transfer of right to use goods (deemed sale) - deemed sale under Article 366(29-A) of the Constitution - mutual exclusivity of sales tax and service tax - information technology services / declared services (service tax) - aspect theory and divisibility of composite contracts

Taxability of renewal of software licences as sale of goods - transfer of right to use goods (deemed sale) - information technology services / declared services (service tax) - mutual exclusivity of sales tax and service tax - aspect theory and divisibility of composite contracts - Renewal of software licences received by the respondent is not exigible to tax under the Karnataka Value Added Tax Act, 2003. - HELD THAT: - The Court upheld the Tribunal's conclusion that amounts received towards renewal of software licences were in substance payment for services liable to service tax and not a transfer of right to use goods taxable under the KVAT Act. The Court relied on the amendment to the definition of information technology services in the Finance Act and the classification of development/upgradation/adaptation and similar activities as declared services, noting that the respondent had issued service-tax invoices and remitted service tax. Material facts showed renewals were processed by foreign vendors/distributors and routed electronically to end customers, with the respondent merely forwarding applications; the original software, once sold, did not remain the respondent's property. Applying the principle of mutual exclusivity between sales tax and service tax as explained in authoritative precedent, the Court held that treating the renewal receipts as deemed sales by invoking the aspect theory or divisibility under Article 366(29-A) was not legally sustainable where the goods were not in the respondent's possession and the transaction was in substance a service. The Tribunal's factual and legal findings on these points were not found to be perverse or illegal. [Paras 10, 11, 12, 13, 14]

The question of law is answered in favour of the assessee; the renewal receipts are not taxable under the KVAT Act.

Final Conclusion: The Sales Tax Revision Petition is dismissed; the Tribunal correctly held that renewal of software licences for the tax periods April 2009 to March 2011 is not exigible to tax under the KVAT Act.

Revised assessment based on inspection - sales suppression and equal addition - penalty under TNGST Act - inspection generated evidence - judicial discretion to reduce penalty

Revised assessment based on inspection - inspection generated evidence - sales suppression and equal addition - Validity of the revised assessment which made additions on account of sales suppression based on materials recovered during inspection. - HELD THAT: - The Court accepted the finding that the actual sales suppression was discovered only after an inspection of the assessee's business premises and that the records seized during that inspection formed the basis for the revised assessment. The appellate authorities had considered the matter and held that the suppression could be unearthed only by such inspection; accordingly, imposition of an equal addition of the suppressed sales in the revised assessment was sustained. The Court found no illegality or infirmity in the Tribunal's conclusion that the enforcement inspection justified reopening and recomputation of turnover and the resultant addition. [Paras 8]

The revised assessment making equal addition of the sales suppression based on inspection recovered records is upheld.

Penalty under TNGST Act - judicial discretion to reduce penalty - Appropriateness of the penalty levied upon the assessee and whether the balance penalty should be remitted or reduced. - HELD THAT: - While the Tribunal had upheld imposition of penalty at the statutory rate (150%), the High Court, noting that the assessee had already paid the disputed tax and a portion of the penalty, exercised its discretionary power to mitigate the remaining punitive liability. The Court considered the overall circumstances and reduced the balance penalty payable by the petitioner from 150% to 50%, confirming the assessment otherwise. [Paras 8]

Balance of the penalty reduced from 150% to 50%; remainder of the Tribunal's order is confirmed.

Final Conclusion: The writ petition is dismissed except for modification of the penalty; the Tribunal's order upholding the revised assessment and equal addition is confirmed, but the balance penalty is reduced from 150% to 50%.