TaxTMI Updates e-Newsletter
Apr 05,2019

Classification of goods under the Customs Tariff / HSN - Application of Section and Chapter Notes for tariff interpretation - Material composition as determinative for chapter classification - Ejusdem generis rule in tariff interpretation - Advance Ruling binding effect and appellate review

Classification of goods under the Customs Tariff / HSN - Chapter 82 limited to articles of base metal - Material composition as determinative for chapter classification - Ejusdem generis rule in tariff interpretation - Whether 'Agricultural seedling trays' made of plastic are classifiable under Chapter 8201 as hand tools used in agriculture and thus exempt from GST. - HELD THAT: - Classification is governed by the First Schedule to the Customs Tariff Act and the rules for its interpretation, including Section and Chapter Notes and the HSN Explanatory Notes, which the Authority applied. Section Notes to Section XV and Chapter Notes to Chapter 82 limit Chapter 82 to articles whose working part is of a specified list of base metals (or metal carbides, cermets, certain stones on a base-metal support, or abrasive materials on a base-metal support). The HSN Explanatory Notes confirm that tools do not fall in Chapter 82 unless the blade, working edge, working surface or other working part is of base metal or the specified materials, and that where the working part is of another material the article is classified according to that constituent material. The ejusdem generis principle applies to the residual description in tariff item 8201: the general phrase "other tools of a kind used in agriculture" takes its character from the specific enumerated examples, which are tools with metallic working parts. The seedling trays before the Authority are made of plastic (polypropylene), lack a metal working edge or working part, and are therefore not within Chapter 82. The Advance Ruling's classification of the trays as articles of plastics (CTH 39269099) and not as hand tools under 8201 was therefore correct; no reason was found to interfere with that conclusion. [Paras 6, 7]

Appeal dismissed; the Advance Ruling holding that the plastic seedling trays are not classifiable under Chapter 8201 but as articles of plastics is upheld.

Final Conclusion: The Appellate Authority affirms the Advance Ruling: plastic agricultural seedling trays are not hand tools under Chapter 8201 (which covers tools with base-metal working parts) and the AAR's classification of the trays as articles of plastics is maintained; the appeal is disposed of accordingly.

Tariff classification under the First Schedule to the Customs Tariff Act and rules for interpretation - Application of Section and Chapter Notes in classification - Classification as other articles of plastics (CTH 39269099) - Exemption limited to goods classifiable under CTH 8201 - Articles of plastics not being agricultural implements of Chapter 82 - Taxability under Schedule III entry for other articles of plastics - Availability of input tax credit subject to Section 16 and Section 17 conditions

Tariff classification under the First Schedule to the Customs Tariff Act and rules for interpretation - Application of Section and Chapter Notes in classification - Classification as other articles of plastics (CTH 39269099) - Articles of plastics not being agricultural implements of Chapter 82 - Classification of Agricultural Seedling Trays manufactured of polypropylene. - HELD THAT: - The Authority applied the rules for interpretation of the First Schedule including Section and Chapter Notes. Chapter 82 (heading 8201) and Section XV require articles to be of or have working parts of base metal; 'base metals' do not include plastics. The trays are made wholly of polypropylene, have no blade, working edge or other working part of base metal, and are not parts or accessories essential to agricultural machinery. The trays therefore do not fall under Chapter 82/CTH 8201. Chapter 39 (Plastics and articles thereof) and heading 3926 cover other articles of plastics not elsewhere specified; on the product description and brochure the trays are appropriately classifiable under CTH 39269099 as other articles of plastics. [Paras 5, 8]

Agricultural Seedling Trays made of polypropylene are classifiable under CTH 39269099.

Exemption limited to goods classifiable under CTH 8201 - Taxability under Schedule III entry for other articles of plastics - Applicability of the exemption notification to the product and the applicable tax rate. - HELD THAT: - The exemption at the cited entry applies only to goods classifiable under CTH 8201. Since the trays are classifiable under CTH 3926/39269099 and not under CTH 8201, the exemption does not apply. The Authority identified the relevant Schedule entry covering 'Other articles of plastics and articles of other materials of headings 3901 to 3914' and held that the trays are taxable under that entry at the prescribed rates. [Paras 6, 8]

The exemption for goods under CTH 8201 is not available; the trays are taxable under Schedule III entry (SL No. 111) and attract 9% CGST and 9% SGST.

Availability of input tax credit subject to Section 16 and Section 17 conditions - Admissibility of input tax credit on the supply of Agricultural Seedling Trays. - HELD THAT: - The applicant did not seek determination of specific facts concerning credit admissibility. Having ruled that the supply is taxable, the Authority held that input tax credit on tax paid is available subject to compliance with the conditions and restrictions set out in Section 16 and Section 17 of the CGST/TNGST Act and the relevant rules governing input tax credit. [Paras 7, 8]

Input tax credit is available subject to fulfilment of the conditions under Section 16 and Section 17 of the CGST/TNGST Act, 2017 and relevant rules.

Final Conclusion: The Authority ruled that the polypropylene Agricultural Seedling Trays are classifiable under CTH 39269099, are not eligible for the exemption reserved for goods under CTH 8201, attract 9% CGST and 9% SGST under the specified Schedule entry, and that input tax credit is available subject to statutory conditions.

Summary order. The application for advance ruling is dismissed as withdrawn.

Input Tax Credit - further supply - taxable supply - availability of ITC on motor vehicles - commercial registration of vehicles - reversal of ITC on cessation of taxable use - notification 11/2017-Central Tax (Rate) - Rule 42 (apportionment/reversal of common credit)

Input Tax Credit - further supply - taxable supply - Entitlement to input tax credit on motor vehicles (cars) purchased and supplied on lease rent. - HELD THAT: - The Authority construed the exception in Section 17(5)(a)/(a)(i)(A) by examining the terms "supply" and the adverb "further" prefixed to it. Since "supply" under Section 7 includes lease or rental, the applicant's activity of providing GST-paid cars on monthly lease against consideration in the course or furtherance of business amounts to a "taxable supply" and falls within the exception of "further supply of such vehicles or conveyances." Consequently, the purchase-tax paid on such motor vehicles is eligible as input tax credit subject to other statutory conditions. [Paras 7]

The Applicant is entitled to avail ITC on cars supplied on lease rent as these constitute a "further supply"/taxable supply for the purposes of Section 17(5).

Commercial registration of vehicles - reversal of ITC on cessation of taxable use - Conditions and limitations on claiming ITC on such vehicles, including commercial registration and reversal where vehicles cease to be leased. - HELD THAT: - The Authority held that eligibility is subject to the vehicles being registered for commercial use with the transport authority and not being used by the applicant for their own private use. Further, if at termination of the lease the vehicle is not further leased to the same or another customer, the applicant must reverse the ITC so availed in accordance with law. These conditions are integral to maintaining the nexus between the input and its taxable use. [Paras 7]

ITC is admissible only if vehicles are registered for commercial use and actually employed for leasing; ITC must be reversed if the vehicle stops being so used.

Notification 11/2017-Central Tax (Rate) - Rule 42 (apportionment/reversal of common credit) - Applicability of statutory notifications and procedural rules to the availment of ITC on leased vehicles. - HELD THAT: - The Authority clarified that the availment of ITC on such supplies is subject to conditions prescribed in notification number 11/2017-Central Tax (Rate) (as amended) and corresponding State notifications. It further observed that Rule 42, governing apportionment/reversal of common credit where inputs are used partly for taxable and partly for exempt supplies, shall apply if required to determine or adjust the credit admissible.

Notification 11/2017 and the corresponding State notifications apply; Rule 42 is applicable where apportionment or reversal of credit is necessary.

Final Conclusion: Advance Ruling: ITC on motor vehicles (cars) purchased and leased out is admissible as the vehicles are used for a "further" taxable supply (lease) provided they are registered for commercial use, not used for the applicant's own private purposes, and subject to conditions in notification 11/2017 (and State notifications); Rule 42 applies where apportionment/reversal is required and ITC must be reversed if the vehicle ceases to be so leased.

Healthcare services - Clinical establishment - Exemption under Notification No. 12/2017 - Central Tax (Rate) (Sl. No. 74) - Service-specific and service-provider-specific exemption - Subcontracting versus independent clinical establishment

Exemption under Notification No. 12/2017 - Central Tax (Rate) (Sl. No. 74) - Healthcare services - Service-specific and service-provider-specific exemption - Applicability of the exemption under Sr. No. 74 of Notification No. 12/2017 - Central Tax (Rate) to the applicant's services - HELD THAT: - The Authority examined whether the services rendered by the applicant fall within the exemption which is both service-specific and provider-specific. Although the applicant's activities relate to genetic testing, counselling and provision of genomic information that may constitute healthcare services, the exemption cannot be granted on the basis of the nature of service alone. The exemption requires that the service be provided by an eligible service provider that qualifies as a clinical establishment. In absence of any proof that the applicant itself possesses accreditation or authority to carry out and certify tests independently, and given the applicant's admitted collaborations with NABL/DSIR-accredited diagnostic companies, the Authority concluded that the applicant functions effectively as an ancillary or subcontractor to accredited laboratories rather than as the independent provider contemplated by the notification. Consequently, the applicant does not satisfy the dual condition necessary for the exemption and is not entitled to its benefit. [Paras 7, 8]

The applicant is not entitled to the exemption under Sr. No. 74 of Notification No. 12/2017-Central Tax (Rate).

Clinical establishment - Subcontracting versus independent clinical establishment - Whether the applicant qualifies as a "Clinical Establishment" under clause 2(s) of the Notification - HELD THAT: - Qualification as a "Clinical Establishment" under the notification requires that the establishment itself offers services or facilities requiring diagnosis or treatment and possess the authority to carry out diagnostic or investigative services. The Authority found that the applicant neither produced evidence of NABL accreditation nor disclosed the identities or documentary proof of the accredited entities with which it claimed collaboration. The factual matrix indicates that diagnostic tests are conducted and certified by NABL/DSIR-accredited laboratories, with the applicant playing a coordinating, testing-subcontractor and consultancy role. Mere involvement in sophisticated testing and facilitation of diagnosis, without independent accreditation or authority to certify tests, is insufficient to establish the legal status of a clinical establishment under the Notification. Therefore, on the material before it the Authority held that the applicant does not qualify as a clinical establishment. [Paras 7]

The applicant does not qualify as a "Clinical Establishment" under clause 2(s) of Notification No. 12/2017-Central Tax (Rate).

Final Conclusion: The Authority held that the applicant, being an ancillary or subcontractor to NABL/DSIR-accredited diagnostic companies and having failed to establish independent accreditation or authority to certify tests, does not qualify as a "Clinical Establishment" and is accordingly not entitled to the exemption under Sr. No. 74 of Notification No. 12/2017-Central Tax (Rate).

Revision of declaration in FORM GST TRAN-1 - transitional arrangements for input tax credit - limited one-time revision under Rule 120A - power to remove difficulties under Section 172 - IT grievance redressal mechanism and Nodal Officer procedure

Revision of declaration in FORM GST TRAN-1 - limited one-time revision under Rule 120A - Legal effect and scope of Rule 120A permitting revision of FORM GST TRAN-1. - HELD THAT: - Rule 120A permits a registered person who has submitted FORM GST TRAN-1 to revise such declaration, but the provision expressly contemplates revision only once. A plain reading of Rule 120A and its context within the transitional provisions shows that the statutory scheme envisages a single opportunity to revise the TRAN-1, not multiple or perpetual revisions. The Court therefore interprets Rule 120A as authorising only one revision of the declaration in FORM GST TRAN-1. [Paras 16]

Revision of FORM GST TRAN-1 is permissible under Rule 120A only once.

Transitional arrangements for input tax credit - power to remove difficulties under Section 172 - IT grievance redressal mechanism and Nodal Officer procedure - Appropriate remedy for claims of non-transition of eligible credit due to technical/clerical errors and the role of Section 172 and the Nodal Officer process. - HELD THAT: - Section 172 confers power to the Government to remove difficulties in implementing the Act and can be invoked to address correction/rectification of TRAN-1 on a general or special basis where necessary for effective implementation of Section 140. The Government and CBIC have issued circular instructions providing an IT grievance redressal mechanism and appointment of Nodal Officers to address portal-related or technical difficulties. In line with precedents and the circular framework, the Court held that grievances of the kind raised by the petitioner-inadvertent omission or portal/ERP-related errors-should be considered by the designated Nodal Officer and, where appropriate, remedial action taken after due verification of bona fides. [Paras 18, 21, 22]

Petitioner's grievance regarding non-transition of eligible credit due to error/portal issue is to be considered by the jurisdictional Nodal Officer under the circular and Section 172 framework; the Court directs expeditious consideration and opportunity of hearing.

Final Conclusion: The Court held that Rule 120A permits only a single revision of FORM GST TRAN-1; however, issues of non-transition of eligible credit arising from inadvertent error or technical/portal difficulties fall within the remedial scope of the Section 172/circular framework and are to be examined by the jurisdictional Nodal Officer, who shall consider the petitioner's grievance and decide expeditiously after providing an opportunity of hearing.

Transitional arrangements for input tax credit - Revision of declaration in FORM GST TRAN-1 - Extension of time by Commissioner under Rule 117 - Technical glitches on GST common portal and nodal officer redressal - Power for removal of difficulties

Revision of declaration in FORM GST TRAN-1 - Extension of time by Commissioner under Rule 117 - Transitional arrangements for input tax credit - Petitioner's entitlement to revise the declaration in FORM GST TRAN-1 under Rule 120A and the scope for extension of time by the Commissioner. - HELD THAT: - A harmonious reading of Section 140, Rule 117 and Rule 120A shows that Rule 117 prescribes filing TRAN-1 within ninety days of the appointed day with a limited extension by the Commissioner. Rule 120A (inserted subsequently) permits a registered person who submitted TRAN-1 within the time specified to revise that declaration once, and such revision must be made within the time prescribed by the relevant rules or such further period as may be extended by the Commissioner. The subsequent insertion of sub-rule (1A) to Rule 117 permitted an extended filing period in respect of registered persons who could not file due to technical difficulties on the common portal, up to 31.03.2019 on Council recommendation. Section 172 contemplates removal of difficulties and supports remedial measures where implementation difficulties (such as IT glitches) impede the exercise of transitional credits. Applying these provisions, the court held that where the petitioner seeks to revise TRAN-1 for the first time and the inability to revise is attributable to technical defects on the portal, the petitioner is entitled to have its request for revision considered under Rule 120A and by exercise of the extension power under Rule 117/its sub-rule (1A), subject to statutory limits and conditions. [Paras 11, 12, 14, 15]

Petitioner is entitled to seek revision of FORM GST TRAN-1 under Rule 120A and the respondent authorities ought to consider its request, having regard to the extension power of the Commissioner under Rule 117 and the remedial scope of Section 172.

Technical glitches on GST common portal and nodal officer redressal - Power for removal of difficulties - Appropriate remedy and forum for addressing the petitioner's inability to revise TRAN-1 due to alleged technical glitches. - HELD THAT: - The record shows the petitioner reported inability to file the revised TRAN-1 on account of portal technical problems and made representations to authorities without resolution. The Government issued circulars providing an IT grievance redressal mechanism and appointment of Nodal Officers to address portal-related difficulties. Given the factual claim of portal failure, the court directed the petitioner to approach the jurisdictional Nodal Officer under the circular and required the Nodal Officer to consider the grievance in light of the statutory provisions and observations made by the court, provide an opportunity of hearing and act expeditiously. [Paras 13, 16]

Petitioner to approach the jurisdictional Nodal Officer; Nodal Officer to consider and decide the grievance in accordance with law after hearing the petitioner, expeditiously and not later than four weeks from certified copy of the order.

Final Conclusion: Writ petition disposed of by directing the petitioner to seek relief from the jurisdictional Nodal Officer for portal-related inability to revise FORM GST TRAN-1; the Nodal Officer is directed to consider the petitioner's grievance in accordance with law, after hearing, and decide expeditiously within four weeks.

Scope of supply under GST - definition of business including provision of facilities or benefits to members - supply by unincorporated association to its members - charitable activities - statutory definition under notification - sale of souvenirs as supply of goods - determination of nature of miscellaneous receipts

Scope of supply under GST - definition of business including provision of facilities or benefits to members - supply by unincorporated association to its members - Whether the activities of the Association, and the membership/subscription fees received, constitute a "supply" in the course or furtherance of "business" under the GST law. - HELD THAT: - The Appellate Authority examined the statutory scheme: Section 7's inclusive definition of "supply", the extended definition of "business" in section 2(17) which expressly includes provision by a club or association of facilities or benefits to members for a subscription or other consideration, and Schedule II which treats supplies by unincorporated associations to members as supplies. The Authority considered the applicant's submissions and the balance sheets produced (noting the absence of a trial balance for the applicant and that the accounts produced related to a district chapter). The Authority found no firm basis for the appellant's asserted primary charitable activity, observing limited evidence of regular social work and lack of a segregated fund for charitable purposes. It further found that membership of the Inner Wheel Club is availed on payment of annual fees and that members are granted facilities/benefits (such as attendance at conventions/meetings) not available to non members. Applying the statutory definitions and Schedule II, the Authority concluded that the receipt of membership/subscription fees in these circumstances falls within the scope of "supply" and "business" under the GST law. [Paras 11, 12, 13]

The activities and membership/subscription fees constitute a supply in the course or furtherance of business under the GST Act; no infirmity found in the AAR ruling on this point.

Charitable activities - statutory definition under notification - determination of nature of miscellaneous receipts - Whether the Association's activities qualify as "charitable activities" under the notified definition, so as to support the appellant's contention that subscription receipts are not taxable supplies. - HELD THAT: - The Authority considered the notified definition of "charitable activities" and the appellant's claim that subscription/membership fees are utilised for charitable work. The balance sheets submitted showed only limited evidence of relief expenditure (a 'Relief Fund for Cyclone' entry) and did not demonstrate regular social activity or a segregated charitable fund; the Authority found the appellant had not categorically established that its activities fall within the statutory definition of charitable activities. With insufficient evidence to characterise the activities as falling under the notified charitable categories, the contention that subscription receipts should be excluded on that ground was rejected. The Authority also noted that the precise nature of miscellaneous income must be determined by reference to the nature of the service, as indicated by the AAR. [Paras 9, 10, 11, 13]

The appellant failed to establish that its activities fall within the statutory definition of "charitable activities"; therefore the claim that subscriptions are not supplies on that basis is not accepted.

Sale of souvenirs as supply of goods - Characterisation of sale/distribution of souvenirs in the accounts. - HELD THAT: - The Authority accepted the AAR's conclusion that the sale of souvenirs is to be treated as a supply of goods. Where souvenirs are distributed free, the nature of such transactions would depend on the facts; the AAR had observed that the nature of miscellaneous receipts is to be ascertained by reference to the underlying nature of service or transaction. [Paras 3, 13]

Sale of souvenirs is a supply of goods; distribution free of cost requires factual determination of the nature of such receipts.

Final Conclusion: The Appellate Authority for Advance Ruling upheld the West Bengal AAR: the Association's membership/subscription receipts constitute taxable supplies in the course or furtherance of business under the GST Act; the appellant did not establish that its activities qualified as "charitable activities" under the notified definition; the AAR's characterisation of sale of souvenirs as supply of goods stands. The appeal is dismissed.

Payments for use of software not taxable as royalty - definition of royalty under DTAA prevails over amended domestic definition - no liability to deduct tax at source under section 195 - payments for database access/portal subscriptions not royalty - purchase of hardware not to be treated as royalty - consultancy fees not exigible as Fees for Technical Services for TDS - assessment under section 201(1) and interest under section 201(1A) - grossing up under section 195A - Revenue appeal dismissed as not maintainable

Payments for use of software not taxable as royalty - definition of royalty under DTAA prevails over amended domestic definition - assessment under section 201(1) and interest under section 201(1A) - Whether payments made by the assessee for use of software are taxable as royalty and whether non-deduction of tax resulted in liability under section 201(1) and interest under section 201(1A) of the Act. - HELD THAT: - Applying the Tribunal's earlier detailed reasoning in John Deere India Pvt. Ltd. Vs DDIT (ITA Nos.905 to 908/PUN/2015), the Tribunal held that purchase or payment for use of software characterised as a copyrighted article does not fall within the definition of "royalty" under the DTAA, and the amended domestic definition cannot be extended to alter the DTAA meaning where the treaty definition remains unchanged. Consequently, where the DTAA definition is more beneficial and overrides the domestic law, there is no obligation to deduct tax at source; hence the assessee cannot be treated as in default for non-deduction and the demand under section 201(1) and interest under section 201(1A) must be cancelled. The Tribunal applied that proposition to the facts of the present appeal and set aside the demand relating to payments for use of software. [Paras 12, 13]

Payments for use of software are not taxable as royalty under the DTAA and the resulting demand under section 201(1) and interest under section 201(1A) is cancelled.

Payments for database access/portal subscriptions not royalty - no liability to deduct tax at source under section 195 - purchase of hardware not to be treated as royalty - Whether subscription charges/fees for access to databases or portals and payments for purchase of hardware are taxable as royalty attracting TDS liability. - HELD THAT: - On the same reasoning that the DTAA's definition of "royalty" has not been amended and remains the applicable and overriding standard, the Tribunal held that subscription or access fees for databases/portals do not constitute "royalty". Similarly, payments for purchase of hardware cannot be treated as royalty merely because of a finding on software. Therefore, the assessee had no obligation to deduct tax at source on such payments and the demands raised and interest charged under section 201(1) and section 201(1A) are unsustainable. [Paras 14]

Subscription/database access charges and purchase of hardware are not royalty and the demand and interest under section 201(1)/201(1A) are cancelled.

Consultancy fees not exigible as Fees for Technical Services for TDS - no liability to deduct tax at source under section 195 - Whether payments described as consultancy fees are taxable as Fees for Technical Services (FTS) attracting TDS under the Income-tax Act and DTAA. - HELD THAT: - Relying on the Tribunal's previous analysis (para 103 of the cited earlier order) and applying the same parity of reasoning, the Tribunal held that the payments classified as consultancy fees did not attract taxation as FTS for the purpose of TDS. Consequently, there was no requirement to deduct tax at source from those payments and the related TDS demand cannot be sustained. [Paras 16]

Consultancy fees are not exigible as FTS for TDS and the related demand is disallowed.

Order under section 201(1)/201(1A) time-barred not adjudicated - Whether the order passed under section 201(1)/201(1A) after expiry of four years from the end of the relevant financial year was time barred. - HELD THAT: - The Tribunal expressly did not decide the time-bar ground because the substantive issues were decided in favour of the assessee on merits. The Tribunal recorded that since the merits dispose of the controversy in the assessee's favour, it refrained from adjudicating the limitation question. [Paras 15]

Time-bar ground left undecided; not adjudicated by the Tribunal.

Grossing up under section 195A - Revenue appeal dismissed as not maintainable - Maintainability of Revenue's appeal against the Commissioner (Appeals)'s deletion of additions on account of grossing up under section 195A. - HELD THAT: - The parties accepted that the tax effect involved in the Revenue's appeal falls below the monetary threshold prescribed by the CBDT Circular No.3/2018 for filing appeals before the Tribunal. In view of that administrative limit, the Tribunal held the Revenue's appeal not maintainable and dismissed it. [Paras 17, 18]

Revenue's appeal against deletion of grossing up is dismissed as not maintainable under the CBDT monetary limits.

Final Conclusion: Assessee's appeal is allowed: demands under section 201(1) and interest under section 201(1A) in respect of payments for use of software, database access/subscription charges, purchase of hardware and consultancy fees are cancelled for AY 2007-08. Revenue's cross-appeal on grossing up is dismissed as not maintainable under the prescribed monetary limits.

Reopening of assessment - reason to believe - income escaping assessment - change of opinion - reasons for initiation of reassessment - Section 147/148 of the Income Tax Act - assessment under Section 68

Reopening of assessment - reason to believe - income escaping assessment - Section 147/148 of the Income Tax Act - change of opinion - Reopening of assessment for AY 1986-87 under Section 147/148 was invalid for want of information specific to that year enabling formation of a 'reason to believe' that income had escaped assessment. - HELD THAT: - The Court examined the requirement under Section 147(b) as it stood for the year in question and reiterated that the Assessing Officer must have some information in his possession, specific to the relevant assessment year, which bears a rational connection to the formation of the belief that income has escaped assessment. A mere change of opinion or reliance solely on the assessment order for a subsequent year does not furnish the requisite information. The reasons recorded for reopening made no reference to any information specific to AY 1986-87 and were based only on additions sought in AY 1987-88; given that those additions ultimately did not stand, the basis for reopening was demonstrably lacking. The Court relied on the principle, as explained in Lakhmani Mewal Das, that the AO's reasons must have a relevant bearing on the belief and be more than a pretence, and concluded that the jurisdictional requirement for reopening was not fulfilled. [Paras 14, 16, 17]

Reopening of the assessment for AY 1986-87 under Section 147/148 set aside for want of information specific to that year; question answered in favour of the assessee.

Assessment under Section 68 - reasons for initiation of reassessment - income escaping assessment - The additions made in reassessment (including the assessment under Section 68) were set aside because the reassessment itself was invalid; the merits of those additions were not gone into. - HELD THAT: - Having concluded that the reopening of assessment was without jurisdiction, the Court held that it need not adjudicate the substantive correctness of the additions made in the reassessment. The ITAT's order upholding the additions was set aside on the ground that the reassessment proceedings which produced those additions were invalid from the outset. [Paras 15, 18]

Additions made in the reassessment (including the Section 68 assessment) are set aside as the reassessment was invalid; question answered in favour of the assessee.

Final Conclusion: The appeal is allowed; the impugned ITAT order is set aside, the reassessment for AY 1986-87 and the additions made thereunder are quashed, and no order as to costs is made.

Liability of the State to deduct tax at source on salary payments - State liable to deduct income tax at source under Section 192 of the Income Tax Act, 1961 - Salary paid under contract of employment - Non-application of Canon Law to relieve statutory tax-deduction obligations - Prospective application of a declaratory judgment to avoid retrospective disruption

Liability of the State to deduct tax at source on salary payments - State liable to deduct income tax at source under Section 192 of the Income Tax Act, 1961 - Salary paid under contract of employment - Non-application of Canon Law to relieve statutory tax-deduction obligations - State authorities are required to deduct income tax at source under the Income Tax Act while paying salaries from Grant-in-Aid to teachers who are Nuns, Sisters or Missionaries, and Canon Law or the religious character of the institution does not exempt the State from that statutory obligation. - HELD THAT: - The Court followed the reasoning in W.A.No.319 of 2019 and concluded that the salary in question is paid by the State to the teachers under the contract of employment and is not shown to have been diverted by an overriding title in favour of the religious institution. The State, as payer, cannot be governed by Canon Law and is bound to comply with income-tax statutes; failure to deduct tax at source would render the State liable to statutory consequences including penalty or prosecution. The Single Judge's reliance on Canon Law to negate statutory tax-deduction obligations was rejected as impermissible, and the appeals were allowed on this legal basis. [Paras 49, 50, 51]

The appeals are allowed and the State must deduct tax at source on such salary payments; the Single Judge's contrary conclusion is set aside.

Prospective application of a declaratory judgment to avoid retrospective disruption - The declaration that the State is liable to deduct tax at source is to be applied prospectively to avoid practical complications for institutions, teachers, the State and the Income Tax Department. - HELD THAT: - Recognising the practical consequences of reversing earlier orders, the Court directed that the judgment be applied prospectively rather than retrospectively. This measure was taken to prevent disruption to educational institutions and affected teachers while enforcing the legal position going forward. [Paras 3, 52]

The rule announced shall operate prospectively; the writ appeals are disposed of on that basis.

Final Conclusion: The Division Bench's decision that the State is obliged to deduct income tax at source on salaries paid from Grant-in-Aid to teachers who are Nuns, Sisters or Missionaries is affirmed; the obligation is not displaced by Canon Law and the declaration is directed to operate prospectively.

Quashing of criminal complaint - sanction for prosecution - prosecution under Section 276-C(1) read with Section 277 of the Income Tax Act, 1961 - CBDT circular limiting prosecution where evaded income is less than Rs. 25,000 - penalty as bar to prosecution

Quashing of criminal complaint - sanction for prosecution - CBDT circular limiting prosecution where evaded income is less than Rs. 25,000 - penalty as bar to prosecution - Validity of continued criminal proceedings under Section 276-C(1) read with Section 277 of the Income Tax Act, 1961 against the petitioner. - HELD THAT: - This Court had earlier quashed the sanction order dated 21.3.2006 under Section 279(1) permitting prosecution; once the sanction was quashed the criminal complaint based on that sanction did not survive. Further, the CBDT circular dated 7.2.1991 directs that prosecution under Section 276-C(1) should not be initiated where the income alleged to have been evaded is less than Rs. 25,000. On remand by the Tribunal the assessing officer recomputed and imposed a penalty of Rs. 4,000 under the Act, which the petitioner paid; that amount falls below the threshold in the CBDT circular. In view of the quashing of the sanction and the fact that the assessed/penalised amount is below the prosecution threshold set by CBDT, continuation of the criminal proceedings is not justified and the complaint must be quashed.

Criminal proceedings under Section 276-C(1) read with Section 277 of the Income Tax Act, 1961 are quashed as the sanction for prosecution was earlier quashed and the amount involved is below the threshold in the CBDT circular.

Final Conclusion: The petition under Section 482 Cr.P.C. is allowed and Complaint Case No.990 of 2006 pending before the Special Chief Judicial Magistrate (Economic Offence), Lucknow, filed under Section 276-C(1) read with Section 277 of the Income Tax Act, 1961, is quashed.

Penalty under Section 271(1)(c) for concealment of income - Liability of assessee-firm for unproved cash credits - Appellate Tribunal's factual finding and perversity standard - Accepting addition by assessee does not preclude penalty

Penalty under Section 271(1)(c) for concealment of income - Liability of assessee-firm for unproved cash credits - Validity of the Appellate Tribunal's upholding of penalty under Section 271(1)(c) in respect of two alleged loans shown as cash credits - HELD THAT: - The Court held that the Tribunal's conclusion that the entries amounted to falsification of records and unproved cash credits was a factual finding and not perverse. The Tribunal had recorded enquiries showing that the purported creditors lacked funds and that amounts originated from a partner's bank account, and therefore sustained imposition of penalty though restricted to the minimum. The High Court found no legal error in holding the assessee-firm liable to penalty for the unproved cash credits and declined to interfere with the Tribunal's factual appraisal. [Paras 6]

Tribunal's upholding of penalty under Section 271(1)(c) was affirmed as a non-perverse factual finding.

Appellate Tribunal's factual finding and perversity standard - Accepting addition by assessee does not preclude penalty - Whether acceptance by the assessee of additions or the Commissioner of Income Tax (Appeals) having cancelled penalty precluded the Tribunal from restoring penalty - HELD THAT: - The Court held that acceptance by the assessee of an addition is a matter of fact and does not automatically bar imposition of penalty; similarly, the Tribunal was entitled to reverse the CIT(A)'s order cancelling penalty after independent consideration. The High Court emphasised that these were fact-finding conclusions by the Tribunal and, absent perversity, did not give rise to any substantial question of law. The Tribunal's decision to moderate the penalty to the minimum showed exercise of discretion within permissible bounds. [Paras 6, 7]

No substantial question of law in the Tribunal's reversal of the CIT(A) and restoration of penalty; the appeal was dismissed.

Final Conclusion: The High Court dismissed the assessee's appeal, holding that the Tribunal's factual findings sustaining penalty under Section 271(1)(c) (limited to the minimum) were not perverse and did not raise any substantial question of law warranting interference.

Claim of club expenses as business deduction - treatment of foreign exchange variation under Section 43A - disallowance under Section 14A - distinction between questions of fact and substantial question of law under Section 260A

Claim of club expenses as business deduction - distinction between questions of fact and substantial question of law under Section 260A - The assessment-year contention regarding disallowance of club expenses - HELD THAT: - The High Court noted that the question whether club expenses are personal and hence not deductible had already been addressed against the Revenue in earlier judgments relating to connected assessment years. The Court observed that the issue stands covered by those decisions and therefore the Department's contention for the assessment year 1997-98 could not be entertained afresh. Consequently the point no longer presents a substantial question of law warranting admission of the appeal under the statutory provision governing filing of appeals to this Court. [Paras 5]

Issue answered against the Revenue and in favour of the assessee; no substantial question of law for admission.

Treatment of foreign exchange variation under Section 43A - distinction between questions of fact and substantial question of law under Section 260A - Allowability of depreciation on increased cost of equipment due to foreign exchange fluctuations - HELD THAT: - The Court recorded that the contention attacking allowance of depreciation (by invoking the principle embodied in Section 43A) had been considered in earlier, similar appeals and adverse decisions for the Department were rendered. Relying on those precedents and the Tribunal's approach in the connected matters, the High Court concluded that the question is covered against the Revenue and does not raise a fresh substantial question of law for admission of the present appeal. [Paras 6, 7]

Question resolved against the Revenue; no sustainable ground for admission of the appeal.

Disallowance under Section 14A - distinction between questions of fact and substantial question of law under Section 260A - Whether the Tribunal was justified in substituting the words "such expenditure" with "such investment" in its order on disallowance under Section 14A - HELD THAT: - The Court examined the Tribunal's correction recorded in its Annexure B order, noting that the Tribunal itself stated the change was made "on appreciation of the facts" and described the substitution as correcting a mistake pointed out by the assessee. The High Court treated this alteration as a factual correction rather than a question raising a substantial legal principle. Since the amendment was factual and no other substantial question of law was pressed, the Court found no basis to entertain the appeal under the statutory threshold for admission. [Paras 8, 9]

Alteration regarded as a factual correction; not a substantial question of law - appeal not admitted on this ground.

Final Conclusion: The Department's appeal was not admitted as no substantial question of law was shown: earlier decisions disposed of the club-expense and foreign-exchange depreciation issues against the Revenue, and the Tribunal's amendment under Section 14A was treated as a factual correction. The appeal is dismissed.

Characterisation of capital loss versus business loss - treatment of trading in shares and securities as an eligible business - precedential application of Apollo Tyres Ltd. decision - application of Section 40A(9) to Employees' Welfare Trust contributions - scope of Section 43A adjustment for foreign exchange fluctuation - remand for consideration of depreciation proviso omitted w.e.f. 01.04.1996 - question of fact versus substantial question of law under Section 260A

Characterisation of capital loss versus business loss - treatment of trading in shares and securities as an eligible business - precedential application of Apollo Tyres Ltd. decision - Loss on sale of IRFC bonds was held to be part of business (trading in securities) and not a capital loss; Tribunal's reliance on the Apex Court decision in Appolo Tyres Ltd. was upheld. - HELD THAT: - The Tribunal examined the facts and concluded that the IRFC bonds formed part of the assessee's business of trading in shares and securities, and therefore the loss on their sale represented a business loss. The Tribunal placed reliance on the Apex Court's reasoning in Appolo Tyres Ltd. which recognised buying and selling of units/securities as business activities of the assessee where such dealings are in the course of and intertwined with its business. The High Court found this conclusion to fall within the four walls of law and not to involve any substantial question of law warranting interference. [Paras 6, 10]

Tribunal's finding that the loss on sale of IRFC bonds is a business loss (eligible business activity) is upheld and does not raise a substantial question of law.

Application of Section 40A(9) to Employees' Welfare Trust contributions - question of fact versus substantial question of law under Section 260A - Contribution to Employees' Welfare Trust for employee transportation was held to be allowable as part of transportation expenses; Section 40A(9) disallowance was not attracted on the facts. - HELD THAT: - The Tribunal reviewed the facts and accepted the assessee's case that the amounts paid to the Welfare Trust were for employees' transportation which the assessee would otherwise have to provide. The Tribunal held that the contribution was akin to actual transportation expense and, on the factual matrix, not a diversion of income nor outside the scope of allowable expenditure under the relevant provisions. The High Court treated this as a question of fact and found no substantial question of law for interference. [Paras 6, 11]

Tribunal's allowance of the contribution to the Employees' Welfare Trust as allowable transportation expense is sustained; no substantial question of law arises.

Question of fact versus substantial question of law under Section 260A - Limitation of disallowance of interest and other expenses to 0.5% of total interest and expenditure (as directed by the Tribunal) was treated as a question of fact and not a substantial question of law. - HELD THAT: - The Department sought to challenge the Tribunal's restriction of disallowance to 0.5% by raising an additional ground. The High Court observed that the matter concerned factual computation and the Tribunal's factual finding would not give rise to a substantial question of law under Section 260A. Consequently, allowing the additional ground would not alter the legal position or justify interference. [Paras 9]

The Tribunal's treatment of the interest/expenditure disallowance as limited to 0.5% is a factual determination and does not involve a substantial question of law.

Scope of Section 43A adjustment for foreign exchange fluctuation - Claim for deduction on account of foreign exchange fluctuation under Section 43A was answered against the Department relying on existing Apex Court precedent. - HELD THAT: - The Court referred to an earlier Apex Court judgment (not reproduced here) and held that the question on adjustment under Section 43A had been answered in favour of the assessee in connected proceedings. On that basis, the High Court treated the point as resolved against the Department and not involving a new substantial question of law. [Paras 14]

Question regarding deduction for foreign exchange fluctuation under Section 43A is answered against the Department; no substantial question of law is made out.

Remand for consideration of depreciation proviso omitted w.e.f. 01.04.1996 - Remand to the Assessing Officer to consider the implications of the omission of the first proviso to clause (ii) of sub section (1) of Section 32 (100% depreciation) was held to be permissible and not a ground for interference by the High Court. - HELD THAT: - The Department contended that the remand ordered by the Tribunal was bad because the proviso providing 100% depreciation was omitted with effect from 01.04.1996. The High Court observed that the Assessing Officer can consider the legal effect of the omission on remand and that there is no estoppel against reconsideration. The Court therefore declined to interfere with the remand, treating it as within the tribunal's remit and not a matter raising a substantial question of law for this Court's intervention. [Paras 15]

Remand to the Assessing Officer to consider the depreciation proviso issue is permissible; no interference is warranted.

Final Conclusion: The appeals are dismissed; the Tribunal's findings on classification of the IRFC bond loss as business loss, allowance of Employees' Welfare Trust contributions, treatment under Section 43A, and the remand concerning the depreciation proviso do not raise substantial questions of law under Section 260A and require no interference.

Acceptance of loan in cash in contravention of Section 269SS - penalty under Section 271D - reasonable cause defence under Section 273B - repayment of cash loans by account-payee cheque - induction of black money and tax evasion as relevant to penalty

Acceptance of loan in cash in contravention of Section 269SS - reasonable cause defence under Section 273B - penalty under Section 271D - Whether the assessee established a reasonable cause under Section 273B for accepting loans in cash in contravention of Section 269SS so as to escape penalty under Section 271D - HELD THAT: - Section 269SS bars acceptance of loans of Rs.20,000 or more otherwise than by an account-payee cheque or bank draft. Contravention attracts penalty under Section 271D equal to the amount received unless the assessee proves a reasonable cause under Section 273B. The assessee had admitted receipt of cash loans from seven persons between 9.4.2008 and 6.2.2009, credited them to his bank accounts and repaid the lenders on the same day by account-payee cheques; there was no allegation of tax evasion or induction of black money. The authorities below differed on whether those facts constituted a "reasonable cause." This Court examined precedents which establish that the burden lies on the assessee to show why cash was received and why it was not feasible to receive the amount by cheque or draft. Prior decisions confirm that mere restitution to lenders, absence of tax-evasion, or proving the source does not ipso facto constitute a reasonable cause unless specific, compelling and acceptable reasons are shown for not complying with Section 269SS. Applying that principle to the undisputed facts, the Court found that repayment by cheque and lack of tax-evasion are not a compelling justification for violating the statutory requirement to accept loans by crossed cheque or demand draft; the appellant failed to demonstrate any bonafide, particularised constraint that prevented receipt by cheque or draft. Consequently, the facts did not come within the scope of "reasonable cause" under Section 273B to avoid penalty under Section 271D. [Paras 7, 8, 14]

The appellant failed to prove reasonable cause under Section 273B and is liable to penalty under Section 271D for accepting cash loans contrary to Section 269SS.

Final Conclusion: The substantial question of law was answered against the assessee; the appeal is dismissed.

Validity of reassessment proceedings under Section 147 - Raising jurisdictional objection for the first time on appeal - Availability of deduction under Section 80HHC in respect of interest on bank deposits - Interest on bank deposits treated as business income - Remand for fresh consideration in view of later decisions of the High Court

Validity of reassessment proceedings under Section 147 - Raising jurisdictional objection for the first time on appeal - Assessee cannot be permitted to raise, as an after thought at this stage, the objection to jurisdiction of reassessment under Section 147 which was not raised clearly before the authorities below. - HELD THAT: - The Court examined the course of proceedings and the orders of the authorities below and found that the assessee did not challenge the jurisdiction for reassessment under Section 147 in clear terms before the CIT(A) or otherwise during earlier stages. Having not raised the question of jurisdiction before the lower authorities, the contention sought to be advanced before this Court is disallowed as an after thought. The appellate question framed is therefore answered against the assessee and in favour of the Revenue. [Paras 5]

Rejected; the jurisdictional objection under Section 147 cannot be permitted to be raised at this stage.

Availability of deduction under Section 80HHC in respect of interest on bank deposits - Interest on bank deposits treated as business income - Remand for fresh consideration in view of later decisions of the High Court - The question whether interest on bank deposits qualifies for deduction under Section 80HHC is to be reconsidered by the Tribunal in the light of later decisions of this Court holding that interest earned in the ordinary course of business may be taxable as business income. - HELD THAT: - Although the Tribunal had followed earlier precedent declining Section 80HHC relief for interest on bank deposits, this Court noted subsequent decisions of the High Court which treat interest on bank deposits earned in the ordinary course of business as business income and not as 'Income from Other Sources'. In view of these later rulings, the matter is remitted to the Tribunal for fresh adjudication on the merits of the Section 80HHC claim in respect of the interest income, applying the legal principles laid down by this Court. [Paras 6]

Remitted to the Tribunal to decide afresh on merits in view of later decisions of this Court.

Final Conclusion: Appeals disposed: the plea challenging jurisdiction for reassessment under Section 147 is rejected as not having been raised below; the claim for deduction under Section 80HHC in respect of interest on bank deposits is remitted to the Tribunal for fresh consideration in light of subsequent High Court decisions.

Reopening of assessment under section 148/147 - Reason to believe - Notice validity based on reasons recorded - Accumulation under section 11(2) - Section 11(3)(d) - deemed application on credit or payment to specified institutions - Double exemption concern when payments made to exempt institutions

Section 11(3)(d) - deemed application on credit or payment to specified institutions - Accumulation under section 11(2) - Whether payment made to CIMS Hospital Pvt. Ltd. attracts the deeming provision of section 11(3)(d) and thereby negates accumulation under section 11(2). - HELD THAT: - The court examined clause (d) of section 11(3) and the linked sub-clauses of clause (23C) of section 10 and observed that clause (d) only applies where the accumulated income is credited or paid to (i) a trust or institution registered under section 12AA or (ii) to a fund, institution, trust, university, educational or hospital institution that falls within the specified sub-clauses of clause (23C). It was an admitted fact that CIMS Hospital Pvt. Ltd. is not registered under section 12AA nor does it fall within the sub-clauses of clause (23C). The court held that, therefore, section 11(3)(d) is not attracted to the payment made to CIMS Hospital Pvt. Ltd. and the Assessing Officer's reliance on that clause to treat the payment as deemed application (or to deny the benefit of accumulation) was misplaced. The court further noted that the Assessing Officer's allegation of contravention of section 11(2) was pleaded as consequent upon the asserted applicability of section 11(3)(d), and absent the applicability of clause (d) that consequential finding could not stand on the recorded reasons alone. [Paras 11, 13, 14, 16]

Section 11(3)(d) does not apply to the payment to CIMS Hospital Pvt. Ltd.; the Assessing Officer had no basis on the recorded reasons to treat the payment as deemed income under section 11(3)(d) or to sustain the alleged breach of section 11(2).

Reopening of assessment under section 148/147 - Reason to believe - Notice validity based on reasons recorded - Whether the notice under section 148 could be sustained on the basis of the reasons recorded by the Assessing Officer. - HELD THAT: - The court applied the settled principle that a reopening notice must be sustained on the basis of the reasons actually recorded by the assessing officer and that the AO must have relevant material to form a "reason to believe" that income chargeable to tax has escaped assessment. The reasons recorded in this case consciously invoked section 11(3)(d) as the basis for asserting escapement, but, as held, that provision did not apply to the payment in issue. The other general allegations of breach of sections 11 to 13 were not particularised or supported on the face of the reasons. Consequently, the court found that the assessing officer could not, on the recorded reasons, have formed the requisite belief that income chargeable to tax had escaped assessment, and the notice under section 148 lacked validity. [Paras 15, 16, 18, 19]

The notice issued under section 148 is invalid and cannot be sustained because the reasons recorded did not provide material on which a reasonable belief of escapement of income could be formed.

Final Conclusion: The petition is allowed; the notice dated 17.05.2018 under section 148 reopening assessment for AY 2016-17 is quashed and set aside as the Assessing Officer's reasons relied upon section 11(3)(d) which did not apply and thus did not furnish requisite material to form a reason to believe that income had escaped assessment.

Reasonableness and excessiveness of related party remuneration under Section 40A(2)(a) - fair market value and arm's length payments - onus on the assessee to place material justifying payments - objective examination by the Assessing Officer of benefit derived by the assessee - treatment of prior low remuneration in start up companies when assessing current fairness of pay

Reasonableness and excessiveness of related party remuneration under Section 40A(2)(a) - fair market value and arm's length payments - treatment of prior low remuneration in start up companies when assessing current fairness of pay - Whether the Tribunal erred in upholding disallowance under Section 40A(2)(a) in respect of increased payments to three director recipients for AY 2011 2012. - HELD THAT: - The Court held that the Tribunal wrongly based disallowance solely on the percentage increase in payments to the directors without applying the test of a prudent and reasonable businessman to determine whether payments were excessive or unreasonable. The statutory test under Section 40A(2)(a) requires an objective assessment of fair market value, legitimate needs of the business and benefit derived by the assessee; arms length evidence and the qualifications, experience and nature of services rendered are relevant factors. The Commissioner (Appeals) had recorded material showing the directors' qualifications, prior market remunerations (as evidenced by TDS certificates while employed elsewhere), the start up nature of the company and the fact that recipients were taxed at the maximum slab, and concluded that earlier low remuneration was not a valid benchmark to characterise later market rate payments as excessive. The Tribunal ignored these findings and erred in treating historical low pay as decisive without appreciating contemporaneous market evidence and other relevant factors. Reliance on narrow percentage increase analysis was therefore unsustainable. [Paras 6, 7, 8, 9]

Tribunal's upholding of the disallowance was set aside; the addition under Section 40A(2)(a) was deleted and the appeal allowed.

Final Conclusion: The substantial question of law is answered in favour of the assessee; the Tribunal erred in upholding the disallowance under Section 40A(2)(a) based merely on percentage increases, and the addition is deleted for assessment year 2011 2012.

Transactional Net Margin Method - arm's length price - comparability analysis - working capital adjustment - functions assets and risks (FAR) analysis - profit level indicator (OP/TC) - related party transactions filter

Comparability analysis - related party transactions filter - functions assets and risks (FAR) analysis - Exclusion or inclusion of specific comparable companies from the final set of comparables used for benchmarking software maintenance and support services. - HELD THAT: - The Tribunal examined the factual material in the annual reports and the TPO's reasoning for inclusion of Sonata Software Ltd, E Infochips Bangalore Ltd, Infinite Data Systems Pvt Ltd and Infosys Ltd in the final comparable set. For Sonata Software Ltd the Tribunal found related party transactions exceeding 50% of sales and directed the TPO to exclude it as it failed the related party transactions filter. For E Infochips Bangalore Ltd the Tribunal, following coordinate-bench reasoning, observed absence of reliable segmental data and that the company derived material income from consultancy/ITES and subcontracting which rendered its FAR different from the assessee's captive software service operations; it directed exclusion. For Infinite Data Systems Pvt Ltd the Tribunal accepted that the company's service mix, reliance on a single customer and functional profile differed from a captive service provider and directed exclusion. For Infosys Ltd the Tribunal found lack of segmental information, significant product revenue, brand and scale differences making it functionally dissimilar and directed exclusion. The Tribunal noted that coordinated-bench decisions for the same assessment year dealing with software development services were relevant and followed them in excluding these comparables.

Sonata Software Ltd, E Infochips Bangalore Ltd, Infinite Data Systems Pvt Ltd and Infosys Ltd are to be excluded from the final set of comparables; the TPO/AO is directed to revise the comparability analysis accordingly.

Working capital adjustment - comparability analysis - Whether working capital adjustment should be granted for comparability purposes. - HELD THAT: - The DRP had directed grant of working capital adjustment but the TPO had rejected it on the ground that such adjustment is not relevant for service industry. The Tribunal held that working capital adjustment is necessary for better comparability and directed the AO/TPO to grant the working capital adjustment on the final set of comparables determined after exclusions.

Working capital adjustment is to be allowed and the AO/TPO is directed to grant it on the revised final set of comparables.

Transactional Net Margin Method - arm's length price - profit level indicator (OP/TC) - Validity of the transfer pricing adjustment made by TPO/AO/DRP in respect of international transactions for software maintenance and support services (quantum of adjustment reflected in AO's order). - HELD THAT: - The TPO had arrived at an ALP based on a final set of comparables giving a higher mean margin and disallowed working capital and risk adjustments, which led to an upward TP adjustment incorporated in the assessment. The Tribunal's directions to exclude four major comparables and to allow the working capital adjustment materially alter the comparable-set and adjustments applied. The Tribunal observed that, consequent to the exclusions and grant of working capital adjustment, the TP adjustment determined by the lower authorities stands deleted for the purpose of the appeal.

The transfer pricing adjustment upheld by the AO/TPO/DRP is set aside in consequence of the directed exclusions and working capital adjustment; the appeal is partly allowed.

Functions assets and risks (FAR) analysis - comparability analysis - Claim for risk adjustment and its adjudication in the present appeal. - HELD THAT: - The assessee sought risk adjustment; the Revenue contended that robust data for risk adjustment was not available and that rule-based limits apply. The Tribunal observed that the issue of risk adjustment had been rendered academic because the TP adjustment would be deleted after exclusion of the four comparables and grant of working capital adjustment. The Tribunal therefore declined to pronounce any finding on risk adjustment in this appeal.

No adjudication on risk adjustment; the Tribunal did not return any finding on this issue in the present appeal.

Final Conclusion: The Tribunal directed exclusion of Sonata Software Ltd, E Infochips Bangalore Ltd, Infinite Data Systems Pvt Ltd and Infosys Ltd from the final comparable set, directed grant of working capital adjustment on the revised comparables, and consequently set aside the transfer pricing adjustment reflected in the assessment for AY 2010-11; the appeal is partly allowed, with no adjudication made on risk adjustment.

Date of acquisition for capital gains - allotment letter as date of acquisition - long-term versus short-term capital gains - holding period - deduction under section 54F - purchase within prescribed period - CBDT circulars clarifying allotment treatment

Date of acquisition for capital gains - allotment letter as date of acquisition - long-term versus short-term capital gains - holding period - CBDT circulars clarifying allotment treatment - The gains arising on transfer of the duplex flat were long-term capital gains as the assessee acquired rights on issuance of the allotment letter dated 26/02/2008. - HELD THAT: - The Tribunal found that the allotment letter specifically earmarked a particular duplex (with layout plan and car parks) and was not conditional or liable to cancellation; full consideration was paid by 24/07/2008. The subsequently executed registered agreement of sale (25/03/2010) was held to be a contractual consolidation or improvement of existing rights rather than the date when rights first accrued. The Tribunal applied the CBDT clarifications (Circular Nos. 471 and 672) holding that, in schemes similar to DDA or co operative allotments, the date of allotment is the relevant date of acquisition for capital gains purposes. The Tribunal also followed the ratio in PCIT v. Vembu Vaidyanathan (Bombay High Court) and distinguished Gulshan Malik on its facts, concluding that the authorities relied on by revenue were inapplicable to the factual matrix before it. [Paras 5]

Resultant gains treated as Long Term Capital Gains.

Deduction under section 54F - purchase within prescribed period - allotment letter as date of acquisition - The assessee was eligible to claim deduction under section 54F in respect of investment made in a new residential property within the prescribed time. - HELD THAT: - The Tribunal recorded that the assessee made payment and obtained allotment in the new property within the time limit prescribed by section 54F; the factual prerequisites for claiming the deduction were satisfied. Applying CBDT Circular No. 471 and the cited authorities, the Tribunal held that the investment constituted requisite purchase/construction for section 54F purposes and that denial of the claim by the Assessing Officer was not warranted. [Paras 5]

Claim for deduction under section 54F allowed.

Final Conclusion: The revenue appeal is dismissed: the Tribunal upheld the CIT(A)'s findings that the allotment letter constituted date of acquisition rendering the gains long term, and that the assessee satisfied conditions for deduction under section 54F.

Admission of additional legal ground - Completed assessments interfered with under section 153A only on the basis of incriminating material - Re-adjudication on merits - Disallowance under section 14A where no exempt income - Genuineness of advertisement expenses - Remand for fresh decision with reasonable opportunity of hearing

Admission of additional legal ground - Completed assessments interfered with under section 153A only on the basis of incriminating material - Additional legal ground raised by the assessee for the first time before the Tribunal admitted and restored to the file of the Ld. CIT(A) for decision. - HELD THAT: - The Tribunal held that the additional ground was purely legal in nature and did not require fresh factual investigation. Reliance was placed on the principle that completed assessments can be reopened under the post-search assessment provision only if supported by incriminating material unearthed during the search which was not previously disclosed. In view of settled law and the absence of necessity for fresh fact-finding, the additional ground was admitted and directed to be decided by the Ld. CIT(A) after giving reasonable and sufficient opportunity of hearing to the assessee and the A.O. [Paras 12]

Additional ground admitted and remitted to the Ld. CIT(A) for adjudication with opportunity to parties.

Genuineness of advertisement expenses - Re-adjudication on merits - Deletion of additions on account of advertisement expenses set aside and remitted to the Ld. CIT(A) for fresh adjudication on merits. - HELD THAT: - The Tribunal observed that the Ld. CIT(A) had merely followed his order for an earlier assessment year without considering the A.O.'s findings. Because the earlier departmental appeal in that year was dismissed on account of low tax effect and did not constitute an adjudication on merits, the issue requires fresh consideration. The matter was therefore restored to the Ld. CIT(A) with a direction to redecide the ground on merits, giving reasons and affording reasonable, sufficient opportunity of hearing to the assessee and the A.O. [Paras 13]

Orders deleting advertisement-expense additions set aside and remitted to the Ld. CIT(A) for fresh decision on merits.

Disallowance under section 14A where no exempt income - Remand for fresh decision with reasonable opportunity of hearing - Deletion of disallowance under section 14A set aside and remitted to the Ld. CIT(A) for reconsideration, including inquiry whether any exempt income was earned. - HELD THAT: - The Tribunal noted that the Ld. CIT(A) recorded no finding of fact on the assessee's contention that no exempt income was earned and had simply followed his earlier order. As it is settled that no disallowance under section 14A can be made if no exempt income is earned, the issue requires fresh examination. The Tribunal directed the Ld. CIT(A) to decide the issue after adjudicating the admitted additional legal ground (which may affect assessment of income) and to give the parties adequate opportunity to be heard. [Paras 14]

Deletion of section 14A disallowance set aside and remitted to the Ld. CIT(A) for fresh adjudication, to be preceded by decision on the admitted legal ground.

Final Conclusion: All Departmental Appeals and Cross Objections are allowed for statistical purposes and the matters are remitted to the Ld. CIT(A) for fresh decisions on the admitted legal ground and on the merits of the advertisement-expense additions and section 14A disallowances, after affording reasonable and sufficient opportunity of hearing to the assessee and the assessing officer.

Principles of natural justice - ex-parte order - non-speaking order - remand for fresh adjudication - disallowance under the Rule 8D method for computing expenditure relating to exempt income (section 14A) - consequences of non-deduction of tax at source and disallowance under section 40(a)(i) - genuineness and admissibility of claimed business expenditure

Principles of natural justice - ex-parte order - non-speaking order - Validity of the order passed by the Commissioner of Income Tax (Appeals) which was ex parte and non speaking. - HELD THAT: - The Tribunal found that the CIT(A)'s order was rendered ex parte and did not take cognisance of the relevant evidence produced during the assessment proceedings. The order was described as non speaking and lacking proper consideration of material on record. For these reasons the Tribunal held that the principles of natural justice were not complied with and that the CIT(A)'s order could not stand. [Paras 7]

The CIT(A)'s order is set aside for breach of natural justice and being non speaking; the order is remanded for fresh decision after affording the assessee an opportunity of hearing.

Disallowance under the Rule 8D method for computing expenditure relating to exempt income (section 14A) - Disallowance made under section 14A read with Rule 8D was not adjudicated on merits by the CIT(A) and is remanded for fresh consideration. - HELD THAT: - Because the CIT(A) did not consider the material placed on record and passed a non speaking ex parte order, the Tribunal did not decide the contention on merits. The matter is remitted to the file of the CIT(A) for fresh adjudication on merits with opportunity to the assessee to produce and rely upon evidence. [Paras 7]

Disallowance under section 14A/Rule 8D remanded to CIT(A) for fresh decision on merits after hearing the assessee.

Consequences of non-deduction of tax at source and disallowance under section 40(a)(i) - application of provisions governing tax deduction at source including section 195 - Addition on account of alleged failure to deduct TDS and consequent disallowance under section 40(a)(i) was not finally adjudicated and is remanded. - HELD THAT: - The Tribunal recorded that the CIT(A) had not examined the relevant materials and passed an ex parte non speaking order; therefore the question whether the assessee was liable to deduct tax at source and whether disallowance under section 40(a)(i) was sustainable must be considered afresh by the CIT(A) after hearing the assessee. [Paras 7]

Addition and disallowance relating to non deduction of TDS and applicability of section 195/section 40(a)(i) remanded to CIT(A) for fresh adjudication.

Genuineness and admissibility of claimed business expenditure - Additions made in respect of domain rent/royalty and claimed expenses in transactions with Global Energy Pvt. Ltd. were not finally decided and are remanded. - HELD THAT: - The Tribunal noted that the CIT(A) did not consider the evidentiary material and reached a non speaking ex parte conclusion. Consequently, the factual and legal questions relating to the genuineness of the claimed domain rent/royalty and other disputed expenses require fresh examination by the CIT(A) on merits with opportunity to the assessee. [Paras 7]

Additions concerning domain rent/royalty and disputed expenses (including transactions with Global Energy Pvt. Ltd.) remanded to CIT(A) for reconsideration on merits.

Remand for fresh adjudication - Procedural remedy and direction on remand: assessment issues to be decided on merits by CIT(A) with opportunity of hearing. - HELD THAT: - The Tribunal directed that all issues be sent back to the CIT(A) for fresh decision on merits because the earlier appellate order failed to address the material on record and was ex parte. The assessee must be afforded a reasonable opportunity of hearing in accordance with the principles of natural justice when the CIT(A) reopens the appeals. [Paras 7]

All issues remanded to CIT(A) for fresh adjudication on merits and the assessee to be given opportunity of hearing.

Final Conclusion: The CIT(A)'s ex parte, non speaking order is set aside and all contested issues relating to Assessment Year 2011 12 are remitted to the CIT(A) for fresh decision on merits after affording the assessee a hearing; the appeal is partly allowed for statistical purposes.

Natural justice and right to cross-examination in departmental adjudication - summoning of witnesses under Section 138-B of the Customs Act, 1962 - validity of adjudication order in absence of cross-examination - availability of alternative remedy before the Customs, Excise & Service Tax Appellate Tribunal

Natural justice and right to cross-examination in departmental adjudication - validity of adjudication order in absence of cross-examination - summoning of witnesses under Section 138-B of the Customs Act, 1962 - Whether denial of opportunity to summon and cross-examine informant witnesses under Section 138-B rendered the adjudication order void for breach of natural justice. - HELD THAT: - The Court held that the proceedings complied with principles of natural justice. The show-cause notice set out the material relied upon and the petitioner was given opportunity to be heard and did appear before authorities. Reliance was placed on the decision in M/s. Kanungo & Company which holds that natural justice does not ordinarily require production of all persons who furnished information or permitting their cross-examination in departmental adjudications. The Court noted that the Commissioner gave cogent reasons for refusing to summon the very large number of witnesses sought (263 persons) and that such refusal was justifiable in the circumstances. Prior contrary High Court decisions and remand in specific cases were noted, but the Kanungo principle was held to remain binding and applicable. In view of these findings the contention that the order is void ab initio for non-application of Section 138-B was rejected. [Paras 15, 16, 17, 18, 19]

Petitioner's challenge that denial of cross-examination and non-summoning of witnesses vitiated the order was rejected and the adjudication was held not to suffer from breach of natural justice.

Availability of alternative remedy before the Customs, Excise & Service Tax Appellate Tribunal - Whether the writ petition should be entertained despite the availability of an alternative statutory remedy of appeal. - HELD THAT: - The Court observed that the order impugned was passed by an authority competent under the statute after hearing the petitioner in detail. As an alternative and equally efficacious remedy exists in the form of an appeal to the Customs, Excise & Service Tax Appellate Tribunal, the High Court declined to exercise writ jurisdiction and dismissed the petition on that ground. The Court further clarified that observations made in the writ petition would not impede the petitioner's right to file and prosecute an appeal, which the appellate Tribunal is free to decide on merits. [Paras 20, 21]

Writ petition dismissed for non-interference as an alternative statutory remedy is available; petitioner free to prefer appeal before the appellate Tribunal.

Final Conclusion: Writ petition dismissed: the High Court found no breach of natural justice in refusing to summon and permit cross-examination of the numerous informant witnesses, and, in any event, declined to interfere because an alternative remedy by appeal to the Customs, Excise & Service Tax Appellate Tribunal is available.

Opportunity of cross-examination - reliance on statements without cross-examination - efficacious alternative remedy before appellate tribunal - remand for recording cross-examination - relaxation of pre-deposit requirement by appellate tribunal

Opportunity of cross-examination - reliance on statements without cross-examination - Refusal by the adjudicating Commissioner to afford the petitioner an opportunity to cross-examine witnesses whose statements were relied upon in the order-in-original. - HELD THAT: - The Court recorded that the petitioner had expressly disputed the statements of certain individuals in replies to the show cause notices and had contended that those statements could not be relied upon without affording cross-examination. The writ petition challenged the adjudicating authority's omission to provide that opportunity. Rather than decide the grievance on merits, the Court directed that, if an appeal is filed before the CESTAT, the matter be remanded for the limited purpose of providing the petitioner an appropriate opportunity to cross-examine the concerned witnesses and for recording of such cross-examination, after which the CESTAT will proceed to hear the appeal on merits in accordance with law. [Paras 3, 4, 6]

The Court remanded the issue to the CESTAT for providing and recording the opportunity of cross-examination, leaving merits open for the appellate forum to decide thereafter.

Efficacious alternative remedy before appellate tribunal - relaxation of pre-deposit requirement by appellate tribunal - Maintainability of the writ petition in presence of an alternative remedy and interim directions regarding the statutory pre-deposit for filing appeals before the CESTAT. - HELD THAT: - The Court observed that the petitioner had an efficacious alternative remedy before the CESTAT and thus may invoke that remedy. In recognition of practical difficulty caused by the statute's pre-deposit requirement, and to enable adjudication on merits including the remand for cross-examination, the Court directed that the CESTAT shall entertain and adjudicate the appeal provided the petitioner deposits 1% of the penalty amount levied in each case within the time stipulated by the CESTAT. Thereafter, upon receiving a report about the cross-examination proceedings before the Commissioner, the CESTAT shall proceed to decide the appeal on merits in accordance with law. All other rights and contentions were kept open. [Paras 5, 6, 7]

Petitioner permitted to pursue the alternative remedy before the CESTAT; CESTAT to admit and adjudicate the appeal on merits subject to deposit of 1% of the penalty in each case and to implement the remand for cross-examination.

Final Conclusion: Writ petitions disposed of by directing the petitioner to file appeals before the CESTAT, which shall remit the matters to the Commissioner for recording cross-examination of specified witnesses and shall proceed to decide the appeals on merits; admission of appeals is subject to deposit of 1% of the penalty amount in each case, with all rights and contentions kept open.

Service of notice on clearing agent versus importer - notice for short levy - time-bar under Section 28 of the Customs Act, 1962 - authority of clearing agent to receive statutory notices - exemption under Notification No. 4/2006-CE in respect of CTH 68022190

Service of notice on clearing agent versus importer - notice for short levy - time-bar under Section 28 of the Customs Act, 1962 - authority of clearing agent to receive statutory notices - Validity of service of less-charge (short-levy) demand notices served on the clearing and forwarding agent (CHA) and whether the notices are time-barred under Section 28 of the Customs Act, 1962. - HELD THAT: - The Tribunal found as an undisputed fact that the less-charge demand notices were not served on the importer but were served on the appellant's CHA. Under Section 28 the notice must be given to the person liable to pay duty - the importer - unless another person has been specifically authorised to receive notices. The CHA's functions ordinarily conclude upon clearance and delivery of imported goods; absent specific authorisation by the importer to receive statutory short-levy notices, service on the CHA is not a valid service on the importer. Relying on the principle in CC, Cochin v. Trivandrum Rubber Works Limited (as cited), where service on the clearing agent after clearance was held not to be valid service on the importer, the Tribunal observed that the goods here were cleared in May-July 2007 and the CHA's role had ended before issuance of the notices dated 0.9.2007. The appellant purportedly received the notices from the CHA only on 23.08.2008, well beyond the six-month limitation under Section 28. In consequence, service was invalid and the demands are time-barred.

Service of the less-charge demand notices on the CHA without specific authorisation was not valid service on the appellant; the notices are time-barred and the impugned orders are set aside on limitation.

Final Conclusion: The appeals are allowed on the ground of invalid service and limitation; the Tribunal set aside the impugned orders without adjudicating the merit of entitlement under Notification No. 4/2006-CE for CTH 68022190.

Validity of notice for extension of detention under Section 110(2) of the Customs Act - Time limit of six months for issuance of notice of extension - Evidentiary value of the Mahazar - Release of seized goods on payment of applicable Customs duty - Sustainment of penalty under Section 112A of the Customs Act

Evidentiary value of the Mahazar - Whether the Mahazar produced by the Revenue is a reliable piece of evidence - HELD THAT: - The Tribunal found material discrepancies in the Mahazar: the document records events of 03.10.2016 but refers to a valuation certificate dated 04.10.2016 and signatures that create a mismatch in dates and sequencing of events. Because the Mahazar was the primary piece of evidence relied upon by the Revenue and these inconsistencies undermine its credibility, the Tribunal held that the evidentiary value of the Mahazar cannot be sustained. [Paras 5]

The Mahazar's evidentiary value is not sustained due to serious date/matching discrepancies.

Validity of notice for extension of detention under Section 110(2) of the Customs Act - Time limit of six months for issuance of notice of extension - Whether the show cause notice/notice of proposed extension complies with the statutory time limit and is valid - HELD THAT: - Applying the binding Constitution Bench precedent in I.J. Rao v. Bibhuti Bhusan Bagh, the Tribunal emphasised that notice of a proposal to extend the original six month detention must be sent to the person from whose possession the goods were seized before the expiry of the initial six month period. In the present case the notice was issued to the appellant on 04.09.2017, which is after the expiry of six months from the date of seizure. There was no contention that delay in service was attributable to the appellant. In view of the authority and the statutory requirement, the notice issued after the six month period was held to be legally deficient. [Paras 6, 7]

The notice was issued after the statutory six month period and is therefore invalid; the impugned order based on that notice cannot be sustained.

Release of seized goods on payment of applicable Customs duty - Sustainment of penalty under Section 112A of the Customs Act - Remedial consequence and fate of penalties following setting aside of the impugned order - HELD THAT: - Having held the impugned order unsustainable on the procedural ground of invalid notice, the Tribunal set aside the order. The Tribunal directed that the seized items may be released by the Revenue on payment of applicable Customs duty and related formalities. However, the Tribunal declined to interfere with the penalty imposed under Section 112A, observing that the appeal was allowed on a technical ground and therefore the penalty under Section 112A is sustained. [Paras 8]

Impugned order set aside; seized items to be released on payment of applicable Customs duty; penalty under Section 112A sustained.

Final Conclusion: Appeal allowed in part: the order under challenge is set aside because the notice for extension was issued after the six month period and cannot be sustained; the seized items are to be released on payment of applicable Customs duty; the penalty under Section 112A is upheld.

Moratorium on institution or continuation of suits upon insolvency commencement date - operational creditor and operational debt - resolution plan binding on corporate debtor and stakeholders - treatment of sub judice claims under a resolution plan - Operational Creditors Settlement Amount earmarked in a resolution plan - extinguishment and waiver clause in a resolution plan - Civil Court jurisdiction vis-a -vis NCLT/NCLAT (bar under the insolvency code) - overriding effect of the Insolvency and Bankruptcy Code

Treatment of sub judice claims under a resolution plan - Operational Creditors Settlement Amount earmarked in a resolution plan - resolution plan binding on corporate debtor and stakeholders - Whether a pending civil suit by an operational creditor is extinguished or liable to be dismissed on account of initiation and final approval of the corporate insolvency resolution process and resolution plan. - HELD THAT: - The Court held that the resolution plan in this case expressly recognised sub judice claims, including the petitioner's suit, by listing respondent No.1 as an operational creditor with an admitted notional amount and by earmarking an aggregate Operational Creditors Settlement Amount to satisfy operational creditors. The moratorium under the IBC suspends institution or continuation of proceedings during CIRP but ceases on approval of the resolution plan; it does not effect automatic dismissal of pending suits. Clause 8.2.3 and 8.2.4 of the resolution plan treat claims under verification and sub judice claims as 'claims' and note their liquidation value as NIL while preserving the mechanism for crystallisation of amounts. Clause 8.6.13 prevents operational creditors from taking enforcement steps pending the Closing Date but does not extinguish the underlying legal proceedings. Clause 8.7.3(i) confirms that only obligations listed in the annexures are within the resolution applicant's knowledge and those listed are not extinguished. Consequently, the civil suit remains relevant to determine and crystallise the amount payable to respondent No.1 out of the identified settlement corpus; dismissal of the suit was not warranted. [Paras 22, 24, 25, 26, 29]

The civil suit pending before the Trial Court is not extinguished by the CIRP or the approved resolution plan and may continue to determine the crystallised amount recoverable from the Operational Creditors Settlement Amount.

Moratorium on institution or continuation of suits upon insolvency commencement date - Civil Court jurisdiction vis-a -vis NCLT/NCLAT (bar under the insolvency code) - overriding effect of the Insolvency and Bankruptcy Code - Whether reliance on the moratorium and the code's non obstante and jurisdictional provisions (sections analogous to sections 63 and 238) justified dismissal of the suit or prevented the Civil Court from adjudicating on the disputed claim. - HELD THAT: - The Court accepted that the IBC's moratorium prohibits institution or continuation of suits during CIRP, and that the Code has an overriding effect where matters fall within the exclusive jurisdiction of the adjudicating authorities. However, those jurisdictional and overriding principles operate in the context of CIRP and resolution of insolvency-related matters by the NCLT/NCLAT. They do not, in the circumstances of this case, extinguish a recognised sub judice operational creditor's pending suit which the resolution plan itself preserves for crystallisation of liability. The trial court's rejection of the petitioner's application to dismiss the suit was therefore correct because the resolution plan envisages payment to operational creditors subject to the outcome of pending proceedings and prohibits enforcement steps without nullifying the underlying adjudicatory process. [Paras 14, 27, 28, 31]

The moratorium and the Code's overriding/jurisdictional provisions do not justify dismissal of the pending civil suit in these facts; the Trial Court correctly refused to dismiss the suit.

Final Conclusion: Writ petition dismissed; Trial Court rightly rejected petitioner's application to dismiss the civil suit because the approved resolution plan recognises and preserves sub judice claims of operational creditors and earmarks an operational creditors settlement amount from which any crystallised liability will be paid.

Existence of a dispute under Section 8 of the Insolvency and Bankruptcy Code - admission or rejection of an application under Section 9 of the Insolvency and Bankruptcy Code - pre-existing dispute prior to issuance of demand notice - plausible contention versus spurious defence (Mobilox test) - requirement to reject Section 9 petition where a dispute objectively exists

Pre-existing dispute prior to issuance of demand notice - existence of a dispute under Section 8 of the Insolvency and Bankruptcy Code - admission or rejection of an application under Section 9 of the Insolvency and Bankruptcy Code - Corporate insolvency petition under Section 9 dismissed on ground that a dispute regarding quality of goods existed prior to the demand notice. - HELD THAT: - The Tribunal found that the Corporate Debtor had, by emails dated 27.9.2016 and 30.11.2016, raised quality complaints about the Elastic Rail Clips before the Operational Creditor issued the demand notice dated 13.1.2018. Applying the principle in Mobilox Innovations and the subsequent K. Kishan decision, the adjudicating authority is required to reject a Section 9 application if there is a pre-existing dispute or a record of a pending suit/arbitration that discloses a plausible contention and is not a spurious or illusory defence. The Tribunal held that the communications asserting defects amounted to an existing dispute for the purposes of Section 8(2)(a), and therefore the Section 9 petition could not be admitted and had to be dismissed. [Paras 15, 16, 17]

The petition under Section 9 of the Insolvency and Bankruptcy Code is dismissed as a dispute existed prior to the demand notice.

Final Conclusion: The Tribunal dismissed the Section 9 petition because the Corporate Debtor had raised a genuine dispute about the quality of supplied goods before the Operational Creditor's demand notice, rendering the application inadmissible under the tests laid down in Mobilox Innovations and K. Kishan.

Approval of resolution plan under section 31 of the Insolvency and Bankruptcy Code - compliance with section 30(2) of the Insolvency and Bankruptcy Code and CIRP regulations - feasibility and viability of the resolution plan as approved by the committee of creditors - effect of committee of creditors' approval (voting threshold) on adjudicating authority's scope of interference - waiver of statutory liabilities limited to crystallised liabilities as on insolvency commencement date - cessation of moratorium on approval of resolution plan - obligation to forward CIRP records to the Insolvency and Bankruptcy Board of India

Approval of resolution plan under section 31 of the Insolvency and Bankruptcy Code - effect of committee of creditors' approval (voting threshold) on adjudicating authority's scope of interference - Resolution Plan submitted by the Resolution Applicant is approved by the Adjudicating Authority. - HELD THAT: - The Resolution Professional placed before the Tribunal the Resolution Plan approved by the Committee of Creditors (CoC) by requisite voting share; the procedural steps of CIRP including invitation of EoIs, circulation of information memorandum, valuation and consideration by CoC are recorded. In light of the decision in K. Shashidhar (as noted by the Bench), where a resolution plan approved by the requisite threshold of the CoC is to be accepted by the Adjudicating Authority, the Tribunal finds that the procedure prescribed under the Code and regulations has been followed and the Resolution Plan must be approved. [Paras 7, 14, 18]

The resolution plan as approved by the CoC is sanctioned by the Tribunal under section 31 of the IBC.

Compliance with section 30(2) of the Insolvency and Bankruptcy Code and CIRP regulations - feasibility and viability of the resolution plan as approved by the committee of creditors - The Resolution Plan meets the mandatory requirements of section 30(2) and relevant CIRP regulations and is feasible and viable as reported by the Resolution Professional and CoC. - HELD THAT: - The Resolution Professional submitted compliance particulars in Form H demonstrating that the plan provides for CIRP costs, payment to operational creditors, management and implementation arrangements, identification of funding sources and treatment of stakeholders as required by Regulations 38/38(1A) and related provisions. The CoC recorded that the plan is feasible and viable and approved it by the requisite voting share; the Tribunal records these findings and accepts the stated compliance. [Paras 13, 14]

The Tribunal accepts the RP's report that the resolution plan complies with section 30(2) and the CIRP regulations and is feasible and viable.

Waiver of statutory liabilities limited to crystallised liabilities as on insolvency commencement date - Waiver of statutory liabilities in the Resolution Plan is confined to liabilities crystallised and ascertained as on the commencement of CIRP; broader waivers are noted with caution but do not prevent approval. - HELD THAT: - The Resolution Plan contains provisions seeking waiver/settlement of various statutory liabilities. The Tribunal records that such waivers should be restricted to government liabilities that are ascertained and crystallised as on the insolvency commencement date. The Bench observed the nexus between the resolution applicant and the corporate debtor and noted that reliance on coordinate-bench decisions granting waivers requires careful consideration; notwithstanding these observations, the Tribunal proceeded to approve the plan subject to the stated limitation on waiver to crystallised liabilities. [Paras 16, 17]

Waiver provisions are accepted only to the extent of liabilities crystallised as on commencement of CIRP; other claims remain subject to law and admissibility.

Cessation of moratorium on approval of resolution plan - obligation to forward CIRP records to the Insolvency and Bankruptcy Board of India - On approval of the Resolution Plan, the moratorium ceases to have effect and the Resolution Professional must forward all CIRP records and the Resolution Plan to the IBBI database. - HELD THAT: - The Tribunal directs that with approval of the Resolution Plan the moratorium order under section 14 will cease to operate. Further, the Resolution Professional is directed to transmit the records of the CIRP and the sanctioned Resolution Plan to the Insolvency and Bankruptcy Board of India for entry in its database, ensuring statutory compliance and record-keeping. [Paras 19]

Moratorium ceases to have effect; RP to forward CIRP record and the Resolution Plan to IBBI.

Final Conclusion: The Tribunal approves and sanctions the Resolution Plan submitted by the successful Resolution Applicant after finding procedural compliance and feasibility; waiver of statutory liabilities is restricted to those crystallised as on the commencement of CIRP; the moratorium ceases on approval and the Resolution Professional is directed to forward CIRP records and the sanctioned plan to the Insolvency and Bankruptcy Board of India.

Provisional attachment - proceeds of crime - confiscation - attachment of alternative or equivalent value property - presumptions under PMLA (Sections 23 and 24) - bona fide third party claimant - due diligence of secured creditor - overriding effect of PMLA - co existence and harmonious construction of PMLA with SARFAESI, RDBA and Insolvency Code

Overriding effect of PMLA - co existence and harmonious construction of PMLA with SARFAESI, RDBA and Insolvency Code - Whether SARFAESI Act, RDBA (RDDBFI Act) or the Insolvency and Bankruptcy Code prevail over PMLA in matters of attachment and confiscation - HELD THAT: - The court rejected the submission that the SARFAESI Act, RDBA or the Insolvency Code prevail over PMLA. Having examined objects and scheme of the statutes and the amendments of 2016, the court held that the purposes of PMLA (to deprive offenders of proceeds of crime) are distinct from the purposes of the other enactments (recovery and enforcement of security interest; insolvency resolution). Section 71 of PMLA declares its overriding effect in relation to money laundering and proceeds of crime; consequently the three enactments must co exist and be construed harmoniously so that none defeats the object of the others. The court observed that government action under PMLA is not analogous to a creditor's claim and that proceeds of crime are not to be equated with "revenues, taxes or cesses". The Insolvency Code's moratorium and the priority provisions in SARFAESI/RDBA cannot be read so as to open an escape route for proceeds of crime or to render PMLA ineffective. [Paras 126, 127, 141, 146, 171]

The argument that SARFAESI Act, RDBA or Insolvency Code override PMLA is rejected; PMLA has overriding effect in matters of money laundering and the statutes must be construed to co exist harmoniously.

Provisional attachment - proceeds of crime - attachment of alternative or equivalent value property - confiscation - Nature, scope and purpose of attachment and confiscation under PMLA and the categories of property that may be attached - HELD THAT: - The court held that attachment (and eventual confiscation) under PMLA is a civil sanction directed at depriving offenders of illicit gains and runs in parallel with criminal prosecution. PMLA empowers enforcement officers to provisionally attach property where there is a recorded reason to believe, on available material, that the property is proceeds of crime or that non attachment will frustrate confiscation. The definition of "proceeds of crime" comprises three limbs: property derived or obtained from scheduled offence (tainted property); the value of such property; and, where property is held abroad, property of equivalent value. Where tainted property cannot be traced or reached, the enforcement officer may attach other assets of the accused of equivalent or near equivalent value (alternative or deemed tainted property), but an assessment (even if tentative) of the value of proceeds is required and the eventual confiscation must be restricted to the illicit gains. The provisional attachment is subject to confirmation by the adjudicating authority and further safeguards (including adjudicatory and appellate review) apply. [Paras 92, 103, 105, 110, 171]

Attachment under PMLA is a civil measure; both tainted property and alternative property of equivalent value may be attached subject to recorded reasons, tentative assessment of value, adjudicatory confirmation and restriction of ultimate confiscation to illicit gains.

Bona fide third party claimant - presumptions under PMLA (Sections 23 and 24) - due diligence of secured creditor - Rights and burdens of a bona fide third party (including secured creditors) whose interest is affected by attachment under PMLA - HELD THAT: - The court recognised the legitimate interest of bona fide third parties and recorded the statutory scheme that affords them opportunities to be heard before the adjudicating authority, appellate tribunal and special court. A third party asserting a lawful interest must show cogent evidence that it acquired the interest lawfully and for adequate consideration and was not complicit in money laundering; where acquisition is at or after the period of the criminal activity the claimant must additionally prove due diligence (all reasonable precautions). The statutory presumptions in Sections 23 and 24 (that may be drawn against suspect transactions or holders) shift the burden to the claimant to rebut. If a third party's interest vested prior to the commission of the predicate criminal activity, that interest will be protected to the extent of the claimant's subsisting charge or encumbrance and PMLA attachment will be restricted to the value in excess of such claim; conversely, charges created to defeat PMLA can be declared void. [Paras 161, 162, 163, 164, 171]

A bona fide third party must prove lawful acquisition, adequate consideration and absence of complicity; if acquired before the predicate offence the third party's interest is protected to the extent of its claim, while acquisitions after require proof of due diligence; statutory presumptions operate against the claimant until rebutted.

Provisional attachment - adjudicatory review and appellate scrutiny - Whether the impugned appellate tribunal orders should be sustained and what process should follow - HELD THAT: - The court concluded that the appellate tribunal's decisions setting aside the attachment orders could not stand in law in the light of the principles laid down, but that further factual scrutiny was necessary in each case to determine (inter alia) the value of proceeds, chronology of acquisition, the extent of secured claims and bonafides of third parties. Accordingly, the court set aside the tribunal's orders and restored the appeals before the appellate tribunal directing it to call for further responses and reconsider the claims and attachments in light of the legal principles articulated in the judgment. The court specified that where an order confirming attachment attains finality or confiscation is ordered or trial commences, claims of third parties must be adjudicated by the special court. [Paras 172, 173, 174, 175, 176]

Impugned tribunal orders set aside; matters remitted to the appellate tribunal for fresh factual consideration of third party claims and valuation consistent with the legal principles stated; special court to adjudicate claims where PMLA trial/confiscation or final orders have occurred.

Final Conclusion: The court held that attachment/confiscation under PMLA is a civil measure directed at proceeds of crime and may extend to alternative property of equivalent value; statutory presumptions operate but bona fide third parties (including secured creditors) have protective remedies provided they prove lawful acquisition and, where relevant, due diligence; SARFAESI, RDBA and Insolvency Code do not override PMLA and must co exist harmoniously. The appellate tribunal's orders are set aside and the matters are remitted to the appellate tribunal for fresh factual consideration in accordance with the principles laid down.

Search and seizure - reason to believe - retention of records - retention of property - obligation to forward reasons and material to the Adjudicating Authority - statutory outer limit of 180 days for retention/continuation - continuation of retention subject to prosecution complaint within 90 days - prohibition of roving and fishing enquiries

Search and seizure - reason to believe - obligation to forward reasons and material to the Adjudicating Authority - prohibition of roving and fishing enquiries - Validity of the search and seizure and compliance with the requirement to record 'reason to believe' and forward reasons/material to the Adjudicating Authority - HELD THAT: - The Court held that Section 17(1) mandates that an authorised officer must record in writing the 'reason to believe' and the basis of information in his possession before conducting search and seizure, and must forward the recorded reasons and material to the Adjudicating Authority in a sealed cover immediately after the action. The judgment reiterates the settled principle that statutory steps required to be taken in a particular manner must be complied with. The Appellate Tribunal found that in the present case the prerequisites in Section 17 - including recording of reasons and forwarding material to the Adjudicating Authority - were not complied with, and that the ED's inquiries amounted to an impermissible roving and fishing exercise beyond the scope of summons issued under Section 50. Consequently the search/seizure process and the attendant retention could not be sustained on the basis on record before the Tribunal. [Paras 12, 13, 14, 15, 16]

Search and seizure and the consequent retention were held invalid for failure to record and forward the requisite reasons and material and for impermissible roving/fishing inquiries.

Retention of records - retention of property - statutory outer limit of 180 days for retention/continuation - continuation of retention subject to prosecution complaint within 90 days - Whether statutory requirements and time-limits for retention/continuation under Sections 20 and 21 were complied with and whether continued retention could be sustained in the absence of a prosecution complaint - HELD THAT: - The Tribunal noted that Sections 20 and 21 allow retention or freezing of seized property/records only for specified periods (outer limit of 180 days) and that attachment/retention during investigation is further limited to 90 days unless statutory conditions are met and appropriate orders obtained. The authorised officer must record reasons for retention and forward the order and material to the Adjudicating Authority; on expiry the property/records must be returned unless Adjudicating Authority permits further retention. In the present case those statutory obligations under Sections 20(1), 20(2), 20(4) and 21(4) were not complied with, the statutory periods had elapsed, and no prosecution complaint had been filed within the prescribed period. Therefore continued retention beyond the statutory periods was unlawful and the records must be returned forthwith. [Paras 16, 19, 20, 21, 22]

Retention beyond the statutory periods was unlawful; the impugned retention order was set aside and the seized documents/records were ordered returned to the appellant forthwith.

Final Conclusion: The appeal is allowed; the impugned order dated 21.11.2018 is set aside insofar as it pertains to the appellant, the respondent's application for retention under Section 17(4) is dismissed, and the seized documents/records are to be returned to the appellant forthwith.

Summary order. Appeal disposed of in terms of the signed order; delay condoned; pending interlocutory applications, if any, disposed of.

Cross-examination - natural justice - statements recorded by the adjudicating authority - adjudicating authority - cenvat credit utilization - show cause notice - opportunity to adduce evidence

Cross-examination - statements recorded by the adjudicating authority - adjudicating authority - Permissibility of directing cross-examination of (a) the Managing Director whose statements were recorded and (b) the Superintendent who is the adjudicating authority. - HELD THAT: - The Court held that the Managing Director of the company (petitioner No.2), whose statements were recorded by the authorities, cannot seek cross-examination of himself. Likewise, the Superintendent who has recorded statements and functions as the adjudicating authority discharging statutory functions cannot be made the subject of cross-examination in the manner sought. The Court relied on distinguishing precedents where third party witnesses (transporters, buyers, drivers) were cross examined because their statements contradicted other evidence; those decisions turned on testing the veracity of independent witnesses. By contrast, where the person whose statement is relied upon is the representative of the assessee, or where the officer is the adjudicating authority, permitting the specific cross examinations sought here was inappropriate. [Paras 10, 11, 12]

Request for cross examination of petitioner No.2 (the Managing Director) and of the adjudicating Superintendent is not acceded to.

Natural justice - show cause notice - opportunity to adduce evidence - cenvat credit utilization - Whether denial of the specific cross examination sought necessitates quashing the proceedings or requires directions for further proceedings. - HELD THAT: - Although the particular requests for cross examination were inappropriate, the Court observed that the petitioners must be afforded a fair opportunity to present their case. Considering the circumstances - including the dispute over utilisation of Cenvat credit and the issuance of show cause notice - the Court declined to quash the proceedings but directed that the matter be restored to the Commissioner for fresh consideration. The petitioners were granted two weeks from receipt of the certified copy of this order to file objections/reply and to adduce any evidence. The Commissioner is required to consider the materials, permit hearing, and pass appropriate orders in accordance with law, preferably within eight weeks of receipt of the reply/objections. This course preserves principles of natural justice by allowing the assessee to place evidence before the adjudicator while recognising limits on cross examination of the specific persons identified. [Paras 13]

Proceedings restored to the Commissioner; petitioners permitted to file objections/reply and adduce evidence within two weeks; Commissioner to re consider and pass orders after hearing, preferably within eight weeks.

Final Conclusion: The writ petitions are disposed of by refusing the specific relief to permit cross examination of the Managing Director and the adjudicating Superintendent, while restoring the proceedings to the Commissioner with directions to permit the petitioners to file objections/reply and adduce evidence within two weeks and to decide the matter after hearing, preferably within eight weeks.

Interpretation of contract terms regarding allocation of tax liabilities - service tax liability consequent to amendment with effect from July 1, 2012 - effect of 'rates inclusive of all applicable taxes' clause - obligation to invoke agreed arbitration clause / alternative dispute resolution - unsuitability of writ of mandamus to vary contractual terms or impose reimbursement absent prior adjudication

Interpretation of contract terms regarding allocation of tax liabilities - effect of 'rates inclusive of all applicable taxes' clause - service tax liability consequent to amendment with effect from July 1, 2012 - Whether the respondent-railway is liable under the existing contract to reimburse the petitioner-contractor for service tax becoming exigible after the 2012 amendment - HELD THAT: - The contract and price bid expressly provided that the quoted rates were inclusive of all applicable taxes and levies and clause 44 required statutory tax liabilities to be borne by the contractor and deducted from monthly bills. The court held that, on the terms of the existing contract, there is no ex facie basis for directing the respondent to bear the additional service tax liability introduced by the amendment effective July 1, 2012. The factual and contractual matrix here differs from the decision relied upon from the Delhi High Court, and that decision was not held to be applicable. Absent an express contractual admission that the awarder would bear the later-imposed tax, the court will not vary the contract or impose reimbursement by writ. [Paras 8, 11]

The claim for reimbursement of service tax under the existing contract is not maintainable before this court on the present record; the respondent is not directed to reimburse the service tax.

Obligation to invoke agreed arbitration clause / alternative dispute resolution - unsuitability of writ of mandamus to vary contractual terms or impose reimbursement absent prior adjudication - Whether the High Court should grant mandamus in respect of the contractual dispute when the contract contains an arbitration clause and no prior adjudication has been sought - HELD THAT: - The agreement contains an arbitration provision for disputes to be referred to the Chief Commercial Manager and the existence of that clause is admitted; no steps were taken to refer the matter to arbitration and there has been no adjudication by railway authorities or the tax department. The court considered the dispute to be essentially contractual and unsuitable for determination by writ at this stage. Accordingly, the court declined to exercise its writ jurisdiction to vary contractual terms or mandate reimbursement in the absence of arbitration or other competent adjudication. [Paras 6, 9]

The petition seeking mandamus to compel reimbursement is dismissed as premature and inappropriate; the parties should pursue the agreed forum or obtain adjudication.

Final Conclusion: Writ petitions dismissed; the challenge to recover service tax imposed after July 1, 2012 was held to be a contractual dispute unsuitable for determination by writ in the absence of prior arbitration or adjudication, and the court declined to direct reimbursement under the existing contract.

Delegation and non-delegation of adjudicatory power - scope of "The Central Excise Officer" in adjudication - reverse charge mechanism - temporal applicability - export of services and taxability of consideration in foreign currency - cum-duty (inclusive of service tax) computation - invocation of extended period of limitation - penalty under Sections 76, 77 and 78 of the Finance Act, 1994

Delegation and non-delegation of adjudicatory power - scope of "The Central Excise Officer" in adjudication - Validity of issuance of SCN by ADG, DGCEI and adjudication by Commissioner of Central Excise under Sections 73(1) and 73(2). - HELD THAT: - The Tribunal held that the expression "The Central Excise Officer" in the cited provisions does not require that the identical officer who issues the show-cause notice must also adjudicate the matter. It is sufficient that an officer vested with the character of a Central Excise Officer exercises the powers. Transfers and routine bureaucratic changes make rigid requirement impracticable. The Tribunal observed that the controversy is settled by precedent accepting issuance by ADG, DGCEI and adjudication by Commissioner, and found no infirmity in the procedure adopted in this case. [Paras 5]

No infirmity in SCN issuance by ADG, DGCEI and adjudication by Commissioner; jurisdictional objection dismissed.

Reverse charge mechanism - temporal applicability - Whether appellants were liable to pay service tax under reverse charge for services received from overseas providers for periods prior to 18.04.2006. - HELD THAT: - Relying on binding clarifications and authorities, the Tribunal held that reverse charge liability under the relevant rules commences w.e.f. 18.04.2006. Payments made after that date in respect of services actually received before 18.04.2006 are not exigible to reverse charge. Consequently the demand in respect of management consultancy services for periods prior to 18.04.2006 cannot be sustained. [Paras 5, 6]

Reverse charge not attracted for services received prior to 18.04.2006; demand in respect of taxable services under 'Management Consultancy Services' set aside for that period.

Export of services and taxability of consideration in foreign currency - cum-duty (inclusive of service tax) computation - Tax treatment of commission receipts and entitlement to exemption or cum-duty benefit for periods between 01.04.2003 and 31.03.2007, and need for recomputation. - HELD THAT: - The Tribunal accepted that commission receipts in foreign currency for services to recipients located outside India are not taxable and that Notification No.13/2003-ST exempts the period 01.04.2003 to 08.07.2004. However, where consideration was received in Indian currency (not foreign currency) for the period 09.07.2004 to 18.04.2006, the appellants' contention that such receipts amounted to export of services was not accepted. The Tribunal found appellants entitled to cum-duty benefit for Service Tax payable/paid for the period 09.07.2004 to 31.03.2007 but directed remand to the adjudicating authority for computation of cum-duty Service Tax based on data to be furnished by the appellants. [Paras 5, 6]

Commission in foreign currency treated as non-taxable/export; exemption applied for 01.04.2003 to 08.07.2004; remand for computation of cum-duty benefit and demand for period 09.07.2004 to 31.03.2007.

Invocation of extended period of limitation - penalty under Sections 76, 77 and 78 of the Finance Act, 1994 - Whether the extended period of limitation could be invoked and whether penalties under Sections 76, 77 and 78 are leviable. - HELD THAT: - The Tribunal found that appellants failed to demonstrate bona fide disclosure to the Department (for example, by disclosure in ST-3 returns), and therefore the extended period of limitation was rightly invoked by the Department. On penalties, the Tribunal concluded that penalty under Section 76 cannot be imposed and set it aside, upheld penalty under Section 77, and directed that penalty under Section 78 be restricted to the duty as computed on remand. [Paras 5, 6]

Extended period invokable; penalty under Section 76 set aside; penalty under Section 77 upheld; penalty under Section 78 restricted to duty so computed.

Final Conclusion: The appeal is partly allowed. Jurisdictional challenge to issuance and adjudication of the SCN is rejected. Reverse charge demand prior to 18.04.2006 is set aside. Commission in foreign currency treated as non-taxable/exempt for 01.04.2003 to 08.07.2004. Demand for Business Auxiliary Services for 09.07.2004 to 31.03.2007 is confirmed subject to recomputation of cum-duty benefit on remand. Extended period sustained; penalty under Section 76 set aside, Section 77 penalty upheld, and Section 78 penalty limited to duty as recomputed.

Mandap Keeper service - short-term accommodation / hotel room package - complimentary use of conference/banquet hall - club or association - mutuality and non-taxability - therapeutic massage vs. non-therapeutic massage - beauty treatment (hair cutting / dying) exemption window - dry cleaning vs. wet cleaning - internet cafe / telephone (STD/ISD) receipts - business auxiliary service - promotional/display services - bifurcation and documentary proof for taxable services - extended period of limitation and disclosure in returns - penalties under Section 76, Section 77 and Section 78

Mandap Keeper service - short-term accommodation / hotel room package - complimentary use of conference/banquet hall - bifurcation and documentary proof for taxable services - Liability for Service Tax as a Mandap Keeper in respect of corporate room bookings where conference hall use was complimentary, and liability where banquet/conference halls were let out per se. - HELD THAT: - The Tribunal found that where corporate bookings show only room charges and conference/banquet hall use is provided complimentary (no separate charge or bifurcation in invoices), the substance is rental of rooms and not Mandap Keeper service; therefore Service Tax is not leviable on such bookings. The Tribunal applied the reasoning in Dukes Retreat Ltd and held that identical invoicing and absence of bifurcation demonstrates no charge for hall use. Conversely, where the appellants have let out banquet/conference halls per se and charged for their use, such transactions attract Service Tax as Mandap Keeper services. [Paras 5, 6]

Demand as Mandap Keeper is rejected for corporate room bookings with complimentary hall use; demand sustained only where halls/banquets were let out and charged per se.

Club or association - mutuality and non-taxability - Taxability of services rendered by the appellants as a club or association. - HELD THAT: - Relying on precedent, the Tribunal held that services rendered by clubs/associations to their members, characterised by mutuality of interest and services provided among members, are not taxable. The appellants' case on this point was accepted and the demand was set aside. [Paras 5, 6]

Demand of Service Tax on Club/Association is set aside.

Therapeutic massage vs. non-therapeutic massage - beauty treatment (hair cutting / dying) exemption window - dry cleaning vs. wet cleaning - internet cafe / telephone (STD/ISD) receipts - bifurcation and documentary proof for taxable services - Liability and quantum of Service Tax in respect of Beauty Treatment & Health and Fitness Centre (including therapeutic massage and hair services), Dry Cleaning, and Internet Cafe - remand for verification and recomputation where necessary. - HELD THAT: - The Tribunal recognised that therapeutic massages provided under medical supervision are not taxable, while massages provided for general well-being are taxable. Hair cutting/dying enjoyed specific exemption during 01.08.2002-16.06.2005 and requires documentary proof/bifurcation to claim non-taxability or cum-duty benefit. Wet cleaning is outside Service Tax; dry cleaning performed for guests is taxable. For internet services, the appellants assert most receipts were for STD/ISD telephony while a small portion related to internet (taxable only from 01.05.2006); the Tribunal directed the appellants to furnish requisite bifurcation and supporting evidence. Given the factual disputes and lack of documentary break-up, the matter was remanded to the original authority to appreciate evidence and recompute liability allowing cum-duty benefit where applicable. [Paras 5, 6]

Service Tax liability in respect of Beauty Treatment & Health and Fitness Centre, Dry Cleaning and Internet Cafe is remanded for recomputation after verification of documentary bifurcation and proof; therapeutic massage under medical supervision held non-taxable where established.

Business auxiliary service - promotional/display services - bifurcation and documentary proof for taxable services - Whether the arrangements with M/s Himalaya Drug Company amounted to mere renting of premises or to Business Auxiliary Service attracting Service Tax. - HELD THAT: - The Tribunal found that the appellants did not receive a fixed rent but a percentage of sales and allowed use of premises for product display along with provision of sales personnel, packing materials and branding facilities. These activities amounted to promotion of the company's business and therefore constitute Business Auxiliary Service rather than a simple rental of premises. Consequently, Service Tax under the BAS category is tenable. [Paras 5, 6]

Service Tax on Business Auxiliary Service held to be payable.

Extended period of limitation and disclosure in returns - penalties under Section 76, Section 77 and Section 78 - Invokability of the extended limitation period and imposition of penalties under Sections 76, 77 and 78. - HELD THAT: - The Tribunal held that mere filing of returns regularly did not preclude invocation of the extended period where the appellants failed to disclose all categories of taxable services and their values; thus extended period was held invokable. In relation to penalties, the Tribunal exercised its discretion: penalty under Section 76 was set aside, penalty under Section 77 was upheld, and penalty under Section 78 was directed to be levied equal to the Service Tax liability determined in respect of the demands held sustainable or recomputed (Mandap Keeper where halls were let, Business Auxiliary Service, and the recomputed beauty/dry cleaning/internet liabilities). [Paras 5, 6]

Extended period invokable; Section 76 penalty set aside; Section 77 penalty upheld; Section 78 penalty to be levied equal to the Service Tax liability as computed.

Final Conclusion: The appeal is partly allowed and partly remanded: Service Tax on club/association stands set aside; Mandap Keeper liability is limited to cases where halls/banquets were let out and charged; Business Auxiliary Service demand is sustained; liabilities for beauty treatment/health & fitness, dry cleaning and internet cafe are remitted for verification and recomputation (therapeutic massage under medical supervision to be excluded where proved); extended period is held invokable and penalties reworked - Section 76 penalty set aside, Section 77 upheld, and Section 78 to be imposed equal to the recomputed tax liability.

Special provision for exemption in certain cases relating to management, maintenance or repair of roads (Section 97) - Works contract not liable to service tax prior to 01.06.2007 - Statute prevailing over subordinate legislation/notification where in conflict - Scope of exemption for roads vis-a -vis use by general public - Service tax liability on clearing and transportation of pond/dump materials

Special provision for exemption in certain cases relating to management, maintenance or repair of roads (Section 97) - Works contract not liable to service tax prior to 01.06.2007 - Scope of exemption for roads vis-a -vis use by general public - Statute prevailing over subordinate legislation/notification where in conflict - Construction and asphalting/parthole filling of existing roads inside plant premises for the period January 2006 to September 2006 is not liable to service tax. - HELD THAT: - The work order dated 24.12.2005 shows the activity was asphalting and parthole filling of existing roads within the KIOCL plant premises and therefore falls within the ambit of a works contract. The Hon'ble Supreme Court's decision in L&T establishes that works contracts are not liable to service tax prior to 01.06.2007. Separately, Section 97 provides a special exemption for management, maintenance or repair of roads for the period from 16.06.2005 to 26.07.2009 without requiring the roads to be for use by the general public. A later notification condition requiring use by the general public cannot override the statutory provision. Consequently, the work undertaken is either covered by the works contract principle or exempt under Section 97, and is not chargeable to service tax for the period in question. [Paras 5]

Work on roads inside the plant premises is not liable to service tax for the period January 2006 to September 2006.

Works contract not liable to service tax prior to 01.06.2007 - Service tax liability on clearing and transportation of pond/dump materials - Clearing of cooling/dump pond material and its transportation under the work order dated 04.08.2006 is not liable to service tax for the period in question. - HELD THAT: - The work order for clearing of cooling/dump pond material specified engagement of mobile equipment and transport of material to dumping pits, with consideration assessed per cubic metre. The character of the contract is that of a works contract. Applying the principle that works contracts were not subject to service tax before 01.06.2007, the activity is not chargeable to service tax for the relevant period. Consequently, ancillary contentions about classification as transportation service or payment of VAT do not alter the conclusion that service tax was not leviable. [Paras 6]

Clearing and transportation of cooling/dump pond material is not liable to service tax for the period January 2006 to September 2006.

Final Conclusion: The appeals are allowed and the demand of service tax for the works relating to road construction/maintenance and clearing of cooling/dump pond materials for January 2006 to September 2006 is set aside.

Levy of service tax on cleaning services to non-commercial premises - Interpretation of abatement Notification 1/2006 - prohibition on availing CENVAT credit for specified output services - Applicability of Rule 6(5) of CCR, 2004 for common input services where no exempted services are provided - Imposition and setting aside of penalty under Section 78/80 - requirement of suppression

Levy of service tax on cleaning services to non-commercial premises - Cleaning services rendered to Child Trust Hospital are not liable to service tax as the hospital is a non-commercial premise. - HELD THAT: - The assessee produced documentary evidence showing the hospital's charitable status and approvals under the Income Tax Act. The department failed to produce evidence that the hospital collected treatment expenses from patients; mere receipt of fees or registration does not establish commercial character. The Tribunal applied the CBEC circular dated 27.7.2005 which excludes cleaning of non-commercial buildings from the levy. In absence of proof to the contrary, the Commissioner (Appeals) rightly concluded, and the Tribunal upheld, that the cleaning services fall outside the scope of service tax. [Paras 8]

Demand of service tax on cleaning services to Child Trust Hospital quashed.

Imposition and setting aside of penalty under Section 78/80 - requirement of suppression - Penalty and extended-period demand in respect of outdoor catering service cannot be sustained where there is no finding of suppression of facts. - HELD THAT: - The Commissioner (Appeals) found no allegation of suppression apart from the claimed non-disclosure of cleaning-service tax, which the Tribunal has held not leviable. The department's case that issues surfaced only on audit did not amount to proven suppression warranting penalty or extended-period demand. On these facts, the Commissioner (Appeals)'s decision to set aside penalty and to reject extended-period demand was proper and requires no interference. [Paras 9]

Penalty set aside and extended-period demand in respect of outdoor catering service dismissed.

Interpretation of abatement Notification 1/2006 - prohibition on availing CENVAT credit for specified output services - Applicability of Rule 6(5) of CCR, 2004 for common input services where no exempted services are provided - Assessee's claim to abatement under Notification 1/2006 disallowed for the normal period because CENVAT credit was availed on input services used for the specified output service, breaching the notification's condition; Rule 6(5) CCR, 2004 is inapplicable as there were no exempted services. - HELD THAT: - Notification 1/2006 conditions prohibit availing CENVAT credit on input services used for the notified output service. The assessee admitted availing common input services (telephone, courier, security) across outdoor catering and other taxable services. Rule 6(5) CCR, 2004 applies where common inputs are used for taxable and exempted services; here no exempted services were rendered. Given the clear breach of the notification condition by availing input credit for the specified output service, the Commissioner (Appeals) rightly confirmed the demand for the normal period, and the Tribunal sustained that finding. [Paras 10]

Demand confirmed for denial of abatement under Notification 1/2006 for the normal period.

Final Conclusion: The Tribunal upheld quashing of demand for cleaning services, affirmed setting aside of penalty and of extended-period demand for outdoor catering, and sustained the confirmed demand for denial of abatement under Notification 1/2006 for the normal period; both appeals are dismissed.

Retrospective saving and validation of proceedings by saving clause - omission/substitution treated as repeal for purposes of saving provision - principles of natural justice - right to cross examination and disclosure of documents - restoration/remand for fresh adjudication after breach of natural justice

Retrospective saving and validation of proceedings by saving clause - omission/substitution treated as repeal for purposes of saving provision - Validity of the demand issued under erstwhile Rule 57I after substitution by CENVAT Rules and whether proceedings could continue in view of the saving provision inserted in the Act - HELD THAT: - The Court held that omission/substitution of the erstwhile MODVAT Rules falls within the concept of repeal and therefore Section 38A of the Act (a retrospective saving and validating provision) operates to preserve rights, liabilities and proceedings commenced under the omitted Rules. Reliance on later decisions of the Supreme Court in which omission was held to be within the meaning of repeal led to the conclusion that the show cause notice dated 17th January, 2000 issued under Rule 57I did not abate by reason of substitution with effect from 1st April, 2000, and could be continued in law. [Paras 5]

Answered in the affirmative for the Revenue; the notice under Rule 57I is saved by Section 38A and remains legally valid.

Principles of natural justice - right to cross examination and disclosure of documents - restoration/remand for fresh adjudication after breach of natural justice - Whether the order of the Commissioner was vitiated by breach of natural justice for denial of cross examination and non supply of documents and the consequent remedial step - HELD THAT: - The Court upheld the CESTAT's finding that the Commissioner had acted in breach of natural justice because statements relied upon by the Revenue (forming the circumstantial basis of the case) were not subjected to cross examination and documents relied upon were not furnished to the Respondents. The correctness of such statements could only be tested by cross examination. In view of this breach, the Court set aside the CESTAT's order insofar as it disposed of the controversy on jurisdictional grounds and restored the show cause notice to the Commissioner for fresh adjudication after affording the Respondents the opportunity required by natural justice. [Paras 6]

Answered in the affirmative for the Respondents; the finding of breach of natural justice is upheld and the matter is remitted to the Commissioner for fresh disposal.

Restoration/remand for fresh adjudication after breach of natural justice - Disposition of questions relating to disallowance/recovery of MODVAT credit, penalties and evidentiary admissibility (questions (c), (d), (e) and (f)) in light of the restoration of the show cause notice - HELD THAT: - Having restored the show cause notice for fresh adjudication in conformity with natural justice, the Court declined to decide questions (c), (d) and (e) as academic. Question (f) (penalties on officers/directors) was not adjudicated on merits and was remanded for reconsideration by the Commissioner during fresh adjudication; the Commissioner is to examine authorities relied upon by the parties and decide afresh on the facts found. Thus, issues as to substantive disallowance, evidentiary weight of statements under enquiry and imposition of penalties stand remitted for fresh consideration. [Paras 7, 8, 10]

Questions (c), (d) and (e) left unanswered as academic; question (f) and related substantive issues remitted to the Commissioner for fresh adjudication.

Final Conclusion: The Court held that the demand under the erstwhile Rule 57I is saved by the retrospective saving provision in the Act and is legally valid; it upheld the CESTAT's finding of breach of natural justice and restored the show cause notice to the Commissioner for fresh adjudication after complying with natural justice, leaving substantive questions and penalties to be decided afresh by the Commissioner.

Settlement under Section 32E of the Central Excise Act, 1944 - admission and conditions for disposal under Section 32F - exclusion of pure classification disputes from settlement - judicial review confined to decision making process - remand for reconsideration - one voice doctrine of the State / consistency in departmental positions

Admission and conditions for disposal under Section 32F - settlement under Section 32E of the Central Excise Act, 1944 - Validity of the Settlement Commission's rejection of the settlement applications on the ground that applicants had not fulfilled the condition of Section 32E as construed by reliance on the Superintendent's letter. - HELD THAT: - The Court found that the Settlement Commission admitted the applications without condition on 17 1 2017 and that the subsequent letter issued by the Commission's Superintendent purportedly imposing a condition went beyond the unconditional admission. Having regard to the Court's view of the Commission's earlier decisions and the proper role of the Superintendent, the Registrar/Superintendent's action in effecting an additional condition was not proper. The Court, applying its supervisory jurisdiction, concluded that the Commission's reliance on that subordinate officer's letter to reject the applications was legally unsound. The Court did not decide the merits of the underlying tax dispute but confined itself to the irregularity in the decision making process of the Commission and the impropriety of allowing a subordinate officer's communication to alter an unconditional admission. [Paras 12, 13, 14]

The Commission's ground for rejection based on the Superintendent's letter is reversed and set aside; the order of the Settlement Commission is quashed insofar as it rests on that ground.

Exclusion of pure classification disputes from settlement - one voice doctrine of the State / consistency in departmental positions - remand for reconsideration - Whether the Settlement Commission correctly held that the applications were barred because they involved classification of services (and whether the admitted duty related to the SCNs), and the appropriate remedy. - HELD THAT: - The Court noted that the Commission's reasoning emphasised the fourth proviso to sub section (1) of Section 32E (as applied) and the view that the applicants' admitted liability did not pertain to the SCNs. While the Court recorded these findings of the Commission, it did not express any opinion on the merits of the classification or the factual connection between the admitted liability and the SCNs. Instead, having found procedural impropriety in the admission process and mindful of binding precedents on the limits of judicial review, the Court directed that the Commission should reconsider the matter afresh in accordance with law and the Commission's own precedents. The Court expressly refrained from adjudicating the substantive tax issues and remitted the matter for reconsideration by the Commission, applying principles of judicial discipline and permitting the Commission to re decide after considering the parties' contentions and relevant authorities. [Paras 15, 16]

Matter remitted to the Settlement Commission to be reconsidered and decided afresh in accordance with law; no expression of opinion on the merits.

Final Conclusion: The order of the Settlement Commission is quashed to the extent it relied on the Superintendent's letter to deny settlement; the petitions are allowed, and the Settlement Commission is directed to reconsider the admitted applications afresh in accordance with law and its precedents, the Court expressing no view on the substantive merits.

Penalty under Rule 26 of the Central Excise Rules, 2002 - Liability of merchant exporters and Rule 12B manufacturers for dealing with excisable goods - Confiscation and penalty nexus between invoices/ARE 1 and physical goods - Principles of natural justice - right to cross examination - Liability of departmental officer for certifying documents - official complicity and proportionality of penalty

Penalty under Rule 26 of the Central Excise Rules, 2002 - Liability of merchant exporters and Rule 12B manufacturers for dealing with excisable goods - Confiscation and penalty nexus between invoices/ARE 1 and physical goods - Imposability of penalty under Rule 26 on merchant exporters/Rule 12B manufacturers who procured ARE 1s and invoices from Muni Group and exported goods procured locally against those documents. - HELD THAT: - The Tribunal reproduced and applied Rule 25 and Rule 26 and found that where merchant exporters/Rule 12B manufacturers procured invoices and ARE 1s from a source other than the actual manufacturers and presented those documents to obtain rebate, investigations showing that the goods were lifted from other dealers and payments did not flow to the purported supplier establish that the goods so involved were liable to confiscation under Rule 25(1)(d). The appellants' procurement and use of the fraudulent documents to claim rebate constituted dealing with excisable goods which they knew or had reason to believe were liable to confiscation; therefore penalty under Rule 26 is imposable. The Tribunal rejected the contention that invoices and goods must be considered in isolation and accepted the prosecution's holistic approach to documents plus goods, and declined to accept arguments based on hypothetical duty paid purchases or revenue neutrality where investigations showed fraudulent transactions and likely allowance of rebates but for detection. [Paras 5, 6, 8]

Penalty under Rule 26 upheld against the merchant exporter/Rule 12B manufacturer (Appeal No. E/697/2010 dismissed).

Principles of natural justice - right to cross examination - Admissibility and sufficiency of investigative material in adjudication - Whether denial of cross examination of certain witnesses amounted to violation of principles of natural justice warranting interference with the penalty order. - HELD THAT: - The Tribunal noted settled law that a request for cross examination must be considered but can be refused with reasons if the adjudicating authority finds it unwarranted on the facts. Having examined precedents addressing the need for cross examination where admissions or corroborative material exists, the Tribunal found no illegality in the Commissioner declining certain cross examinations. The Tribunal held that the available investigative material and other evidence sufficiently supported the findings of fraudulent transactions and that refusal of cross examination in the circumstances did not vitiate the adjudication. [Paras 5]

Request for cross examination having been considered and rejected for reasons, the refusal did not infringe natural justice and did not justify interference with the penalty.

Liability of departmental officer for certifying documents - official complicity - Proportionality in imposition of penalty - Penalty under Rule 26 of the Central Excise Rules, 2002 - Whether the Superintendent (Appellant 2) who certified ARE 1s and duty payment certificates could be held liable under Rule 26 and whether the penalty amount required reduction on proportionality grounds. - HELD THAT: - The Tribunal examined findings that the Superintendent certified premises and duty payment certificates, issued or authenticated ARE 1s and related documents, and in some instances the handwriting expert linked questioned ARE 1s to his signatures. The Tribunal held that such acts amounted to active participation in the scheme and that therefore penalty under Rule 26 was justified. However, having regard to the appellant's status as a Group B Central Government employee and the disproportionate magnitude of the monetary penalty imposed relative to his means, the Tribunal exercised discretion to reduce the penalty to meet the ends of justice while leaving liability intact. [Paras 5, 6]

Penalty under Rule 26 sustained against the departmental officer but quantum reduced from the amount imposed by the Commissioner to Rs. 10,00,000/ (Appeal No. E/734/2010 partially allowed).

Final Conclusion: The Tribunal upheld imposition of penalty under Rule 26 against the merchant exporter/Rule 12B manufacturer, found no breach of natural justice in refusal of certain cross examinations, and sustained penalty against the departmental officer while reducing its quantum in view of disproportionality; one appeal dismissed and the other partially allowed with reduction of penalty to Rs. 10,00,000/ .

Admissibility of CENVAT credit in central excise - entitlement to exemption under Notification No. 56/2002-CE - record-based assessment and evidentiary sufficiency in adjudication - inadmissibility of generalized conclusions based on investigation by another Commissionerate - movement of goods as corroborative evidence of manufacture

Admissibility of CENVAT credit in central excise - record-based assessment and evidentiary sufficiency in adjudication - movement of goods as corroborative evidence of manufacture - inadmissibility of generalized conclusions based on investigation by another Commissionerate - Whether denial of CENVAT credit, demand and penalties could be sustained on the basis of an investigation by the Meerut Commissionerate alleging that suppliers/farmers were non-existent and that the appellants did not manufacture the goods. - HELD THAT: - The Tribunal held that the allegation against the appellants rested solely on the investigation conducted by the Commissioner of Central Excise, Meerut-II and that the adjudication could not be founded on generalized assumptions without concrete evidence against the appellants. The appellants produced record evidence showing periodical checks by jurisdictional Central Excise officers, entries at toll barriers evidencing inward/outward movement of consignments, permissions from District Industries and Pollution Control authorities, and continued manufacturing activity during the investigation. The Tribunal placed emphasis on the record-based nature of central excise assessment and observed that generalized findings by an investigating Commissionerate, absent corroborative evidence specific to the appellants, were insufficient to displace documentary and departmental verification of manufacture and movement of goods. Having regard to prior decisions of this Tribunal on identical facts, and to the departmental verifications referred to in the record, the Tribunal held that the suppliers were manufacturers who cleared goods on payment of duty and that CENVAT credit availed by the appellants was therefore admissible. [Paras 4, 6]

Impugned orders denying CENVAT credit and imposing demands/penalties set aside; CENVAT credit upheld.

Entitlement to exemption under Notification No. 56/2002-CE - inadmissibility of generalized conclusions based on investigation by another Commissionerate - record-based assessment and evidentiary sufficiency in adjudication - Whether the appellants were entitled to the benefit of the area-based exemption under Notification No. 56/2002-CE where the department alleged non-supply of raw material by suppliers in Jammu & Kashmir. - HELD THAT: - On the material on record, including departmental periodical checks, statutory permissions obtained by the suppliers, and entries of transport movement, the Tribunal found no corroborative material to sustain the allegation that suppliers did not manufacture or supply raw material. Relying on earlier Tribunal decisions dealing with identical facts, and noting that investigations by the Meerut Commissionerate generalized the position without specific adverse findings against the appellants, the Tribunal concluded that the appellants were operating manufacturing units in Jammu & Kashmir and were entitled to the exemption. The adjudicatory process must depend on evidence placed before the authority; absent concrete adverse evidence, the benefit could not be denied. [Paras 4, 6]

Appellants entitled to exemption under Notification No. 56/2002-CE; related demands/penalties set aside.

Final Conclusion: Appeals allowed; impugned orders denying CENVAT credit and denying exemption (and imposing demands/penalties) set aside on the ground that the departmental case, based on generalized investigation by another Commissionerate, lacked concrete corroborative evidence against the appellants; appellants' CENVAT credit and entitlement to the exemption sustained with consequential relief, if any.

Clubbing of clearances - aggregate value of clearances - show cause notice - evidence of manufacturing from same premises - lease agreement - evidentiary burden

Clubbing of clearances - show cause notice - evidence of manufacturing from same premises - aggregate value of clearances - Addition of value of clearances of Navneet Industries to the appellant's aggregate clearances without issuance of a show cause notice to Navneet Industries and without independent proof that Navneet Industries continued manufacturing from the same premises is unsustainable. - HELD THAT: - The department relied on ER-1 returns to add the clearances of Navneet Industries for April 2008 to July 2008 to the appellant's turnover, treating both entities as having operated from the same premises. The SCN itself recites that the appellant began manufacturing only from 30.07.2008, yet the Annexure relied upon alleges clearances by Navneet Industries for overlapping months. No material was produced in the SCN to establish that Navneet Industries in fact continued to manufacture at the premises taken over by the appellant. Copies of the ER-1 returns of Navneet Industries relied upon were not furnished to the appellant, and there is no indication that the department carried its investigations forward to Navneet Industries to obtain irrefutable evidence of concurrent manufacture. When the value of another unit's clearances is sought to be clubbed for computing aggregate clearances, the principles requiring notice and opportunity to the other unit apply irrespective of whether the units are alleged to have operated from the same premises. In the absence of proof and without issuing a notice to the other unit, the allegation lacks legal foundation and cannot support the demand confirmed by the authorities. [Paras 5]

Impugned order confirming addition of Navneet Industries' clearances to the appellant's aggregate clearances is set aside.

Lease agreement - evidentiary burden - The contention that the lease agreement is invalid because it was not registered or not signed by both partners does not by itself render the agreement invalid absent cogent proof of forgery or concoction; the department cannot succeed on that ground without conclusive evidence. - HELD THAT: - The department argued that the lease agreement relied upon by the appellant was not valid since it was not signed by both partners and not registered. The adjudicating authority had the agreement before it during adjudication but did not examine or record a finding that the document was forged or concocted. Mere absence of signatures or registration does not conclusively establish invalidity; the onus was on the department to prove that the agreement was manufactured. In the circumstances, the Court was not persuaded to reject the lease on the basis urged by the department. [Paras 5]

The plea to invalidate the lease agreement on the said grounds is rejected; lack of signature or registration alone does not prove forgery or invalidate the agreement for the purposes of these proceedings.

Final Conclusion: The appeal is allowed; the order of confirmation of demand and penalty is set aside for lack of legally sustainable foundation in clubbing the other unit's clearances and for want of requisite proof, with consequential benefits, if any, as per law.

Treatment of purchases as from an unregistered dealer where the selling dealer has not disclosed sales - tribunal as last fact-finding authority must record specific findings before setting aside concurrent appellate orders - remand for fresh adjudication on merits - purchasing dealer bona fide - entitlement to benefit notwithstanding selling dealer's failure to deposit tax (On Quest principle)

Treatment of purchases as from an unregistered dealer where the selling dealer has not disclosed sales - tribunal as last fact-finding authority must record specific findings before setting aside concurrent appellate orders - Validity of Tribunal's order treating purchases as from unregistered dealers and setting aside the first appellate order without recording specific findings or addressing the survey-related ground. - HELD THAT: - The Tribunal allowed the departmental appeal solely on the basis that the selling dealer had not disclosed sales for April-June 2015 and treated the purchaser's acquisitions as purchases from an unregistered dealer. The High Court found this approach cursory and unsustainable because the Tribunal, being the last fact finding forum, failed to record specific findings on the departmental ground regarding the survey conducted on 23.05.2015 and did not evaluate other relevant evidence produced by the purchaser (such as tax invoices, Form 9R and gate passes). Absent explicit fact finding and consideration of the survey contentions, the Tribunal could not properly set aside the order of the first appellate authority. [Paras 6, 9, 11]

Tribunal's order is unsustainable and is set aside for lack of specific findings and failure to consider the survey ground; matter remanded for fresh decision.

Remand for fresh adjudication on merits - purchasing dealer bona fide - entitlement to benefit notwithstanding selling dealer's failure to deposit tax (On Quest principle) - Whether the matter should be remanded to the Tribunal for fresh adjudication applying the principle in On Quest Merchandising India Pvt. Ltd. - HELD THAT: - The High Court directed that the matter be remanded to the Tribunal to decide the appeal afresh on merits and record specific findings after considering all grounds taken by the department, including the survey report. The Court instructed the Tribunal to apply the legal principle from On Quest, namely that a bona fide purchasing dealer who has received a tax invoice reflecting the seller's registration should not be denied benefits merely because the selling dealer failed to deposit tax; the proper remedy is to proceed against the defaulting seller unless there is material of collusion warranting action under the relevant provision. [Paras 10, 11]

Matter remanded to the Tribunal to decide afresh on merits, applying the On Quest principle; revision partly allowed.

Final Conclusion: Tribunal's order dated 08.02.2019 is set aside and the matter is remanded to the Tribunal for fresh adjudication on merits, with directions to record specific findings and to consider and apply the legal principle laid down in On Quest Merchandising India Pvt. Ltd.; revision partly allowed.

Rectification of mistakes apparent from the record - scope of rectification under section 69 - functus officio and bar on re-adjudication - requirement of reasons / speaking order - writ jurisdiction vis-a -vis alternative statutory remedy

Rectification of mistakes apparent from the record - scope of rectification under section 69 - functus officio and bar on re-adjudication - Rectification application under section 69 could not be used to reopen concluded issues or re-adjudicate matters not amounting to a mistake apparent on the record. - HELD THAT: - The court examined section 69 and held that rectification is confined to mistakes that are patently glaring on the face of the record and cannot be discovered only by further inquiry or argument. The scope of rectification is limited and does not permit re-opening or re-examination of issues on which reasonable differences of opinion exist. Once proceedings are concluded the authority becomes functus officio and cannot revisit concluded matters in the guise of rectification; therefore the rectification jurisdiction cannot be used to disturb orders approved in suo-motu revision or otherwise to re-adjudicate matters already considered. [Paras 7]

Rectification was not available to re-open or re-adjudicate concluded issues; the application was not maintainable on that basis.

Requirement of reasons / speaking order - The impugned order rejecting the rectification application was not a non-speaking order and contained adequate reasons. - HELD THAT: - The court reviewed the reasons recorded by the respondent and found they addressed the core points: that no mistake apparent on record was discernible; that the order had been subject to suo-motu proceedings which were dropped and hence re-adjudication would exceed jurisdiction; and that the grounds in the rectification application had already been considered in earlier appeal proceedings. On this basis the court concluded that the order reflected application of mind and could not be characterized as non-speaking or void for want of reasons. [Paras 8, 9, 10]

The challenge that the order was non-speaking or void for lack of reasons was rejected.

Writ jurisdiction vis-a -vis alternative statutory remedy - The writ petitions were not maintainable because alternative and efficacious statutory remedies under the Act had not been exhausted and no exception to the rule applied. - HELD THAT: - Relying on settled principles, the court reiterated that High Court's writ jurisdiction will not ordinarily be exercised where an effective alternative remedy exists under the statute. The petitioner failed to bring the case within recognised exceptions (such as action in defiance of statutory provisions or total violation of principles of natural justice). Accordingly, the court held that entertaining the writ despite available statutory remedies was not permissible. [Paras 11, 12, 13]

Writ petitions dismissed as not maintainable for failure to exhaust statutory remedies; exceptions did not apply.

Alternative remedy and condonation of delay in appellate proceedings - Liberty was granted to the petitioner to file appeal and the appellate forum was directed to consider such appeal on merits without objecting to limitation if filed within the specified short period. - HELD THAT: - The court dismissed the writ petitions but permitted the petitioner to pursue the statutory appellate remedy, directing that if an appeal is filed within two weeks from receipt of certified copy of the order, the appellate authority shall consider the appeal on merits in accordance with law without raising limitation objections, subject to fulfillment of other procedural requirements. [Paras 13, 14]

Petitioner given liberty to appeal; appellate forum to entertain the appeal on merits if filed within two weeks, without objection on limitation.

Final Conclusion: Writ petitions dismissed as not maintainable; impugned rejection of the rectification application upheld as within the limited scope of section 69 and as a speaking order; petitioner granted liberty to prefer statutory appeal, which the appellate forum shall consider on merits if filed within two weeks of receipt of certified copy, without limitation objection subject to compliance with procedural requirements.

Concessional rate under Section 8 of the Central Sales Tax Act - Mandatory compliance of C-Form requirements - Particulars of sale consideration in the C-Form - Production of C-Forms during assessment and appellate proceedings - Inter State sale versus intra State sale for levy under Section 8(2) - Composite transaction and deferred payment not covered without prescribed declaration

Mandatory compliance of C-Form requirements - Particulars of sale consideration in the C-Form - Inter State sale versus intra State sale for levy under Section 8(2) - The Tribunal correctly affirmed levy of higher tax under Section 8(2) in respect of the portion of sale consideration for which no C-Form particulars were furnished. - HELD THAT: - The Court held that sub section (4) of Section 8 and Rule 12 require that the declaration (C Form) furnished by the purchasing registered dealer must contain the prescribed particulars, including particulars of bills or cash memo with the amount being the sale consideration. Only that portion of the bill amount appearing in the C Form is eligible for tax at concessional inter State rates under sub section (1). In the absence of any C Form (original or duplicate) covering the deferred payment portion, the assessee was not entitled to concessional treatment for that portion and levy at the higher rate under sub section (2) was justified. The Court relied on the mandatory character of the provisions as explained in Indian Agencies, Bangalore and rejected the contention that belated production at this stage could be permitted. [Paras 5, 7]

Levy of higher tax for the deferred payment portion upheld; revision rejected on this ground.

Composite transaction and deferred payment not covered without prescribed declaration - Production of C-Forms during assessment and appellate proceedings - Concessional rate under Section 8 of the Central Sales Tax Act - A C-Form purporting to relate to a composite sale cannot validate concessional treatment for a deferred payment portion unless the prescribed declaration containing the specific particulars was furnished to the prescribed authority within the statutory framework. - HELD THAT: - The Court rejected the plea that a C Form relating to the composite transaction would suffice despite the deferred payment not being included in the particulars. The statutory scheme requires strict compliance: the prescribed authority (the purchasing dealer's Assessing Officer) must be furnished with a declaration in the prescribed form containing the bill particulars and amounts. The decision noted that earlier High Court precedent disallows belated acceptance of C Forms for long past assessment years and that the assessee offered only an after thought suggestion to produce C Forms now, which indicated non furnishing earlier. Reliance was placed on Indian Agencies, Bangalore to emphasise that the provisions are mandatory and must be strictly complied with. [Paras 5, 6, 7]

The Tribunal correctly refused to treat the deferred payment as covered by Section 8(1); the claim of concessional rate for that portion fails and the revision is dismissed.

Final Conclusion: The revisions are dismissed; the concessional rate under Section 8 was not available for the deferred payment portion in the absence of prescribed C Form particulars, and the orders levying higher tax are affirmed; parties to bear their respective costs.

Binding nature of orders of a higher forum - judicial discipline of public servants in following higher forum decisions - opportunity of hearing before recording observations or strictures - expungement of adverse observations made without affording opportunity to be heard - recall of costs and disciplinary directions imposed without notice

Opportunity of hearing before recording observations or strictures - expungement of adverse observations made without affording opportunity to be heard - Adverse observations and strictures recorded against the petitioner without notice or opportunity to be heard are liable to be struck off and expunged. - HELD THAT: - The Court found that the petitioner had not been put on notice nor afforded an opportunity to explain before adverse strictures were recorded against him. Reliance was placed on the principle that courts must afford a person an opportunity of hearing before passing observations that reflect adversely on their functioning; the Court referred to the authority cited by the petitioner to support this requirement. In view of absence of any material showing that the petitioner was made aware of the sentiments expressed by the Court, those observations were held to be rendered without affording the petitioner an opportunity and therefore required to be struck off. Consequently, the observations/strictures reflected in paragraph 5 of the earlier order were expunged. [Paras 9, 10]

The adverse observations/strictures recorded against the petitioner are expunged.

Recall of costs and disciplinary directions imposed without notice - binding nature of orders of a higher forum - The direction imposing exemplary costs on the petitioner and the contingent direction for departmental disciplinary action in the event of non-payment are recalled. - HELD THAT: - The Court noted that the order imposing exemplary costs and directing departmental action was made without ensuring that the petitioner had notice of the proceedings or an opportunity to file a response. Given the petitioner's subsequent affidavit stating unawareness of the pendency and the absence of any contrary contention by respondents, the Court recalled the direction in paragraph 9 which mandated payment of costs from the petitioner's personal funds and the consequential disciplinary measure for non-compliance. The writ petition was disposed of in accordance with the law cited, and no order as to costs was made. [Paras 9, 10]

The order imposing costs on the petitioner and the consequent disciplinary direction are recalled; no order as to costs.

Final Conclusion: The Court expunged the adverse observations recorded against the petitioner and recalled the direction imposing exemplary costs and the contingent disciplinary direction; the writ petition is disposed of and there shall be no order as to costs.

Prohibition of suit in respect of property held benami - Exception for fiduciary/ trustee relationship under Section 4(3) of the Benami Transaction (Prohibition) Act, 1988 - Order VII Rule 11 CPC - rejection of plaint on demurrer - Assessment on pleadings versus adjudication on evidence

Prohibition of suit in respect of property held benami - Exception for fiduciary/ trustee relationship under Section 4(3) of the Benami Transaction (Prohibition) Act, 1988 - Order VII Rule 11 CPC - rejection of plaint on demurrer - Whether the plaint was barred under Section 4 of the Benami Transaction (Prohibition) Act, 1988 and rightly liable to be rejected under Order VII Rule 11 CPC. - HELD THAT: - The Court held that the question whether the suit is barred by Section 4 of the Act could not be finally determined on an application under Order VII Rule 11, CPC where contested factual circumstances bearing on the applicability of Section 4(3) (the fiduciary/trustee exception) exist. Reliance on this Court's decision in Marcel Martins established that where the factual matrix indicates a fiduciary/beneficial relationship or contributions to consideration, the transaction may fall within Section 4(3)(b) and thus be saved from the prohibition. The proper approach on Order VII Rule 11 is the demurrer test: the plaint must, on its face and without dispute, show the suit is barred by law before it can be rejected. Disputed questions of fact relevant to whether the defendant held the property in a fiduciary capacity require adjudication after evidence is led and cannot be resolved at the pleadings stage. Applying these principles to the averments and documents in the plaint (including the writing dated 14.03.2002), the Court found it was not plain and indisputable that the suit was barred under Section 4 and therefore the trial court erred in allowing the defendant's Order VII Rule 11 application. [Paras 10, 11, 12, 13, 14]

The application under Order VII Rule 11 CPC was dismissed; the rejection of the plaint under Section 4 was set aside and the matter remitted to trial for determination of the factual issues and merits.

Final Conclusion: Appeal allowed; the orders rejecting the plaint under Order VII Rule 11 CPC were set aside. The suit is to be proceeded with and adjudicated on merits and evidence by the trial court, which was directed to expedite disposal preferably within six months.

Deficiency of service - unfair trade practice - one-sided and unconscionable contractual terms - termination of buyer's agreement by filing a consumer complaint - refund with interest as equitable relief - application of Rule 15 of the Haryana Real Estate (Regulation and Development) Rules, 2017 for rate of interest - reasonable time for delivery of possession

Deficiency of service - reasonable time for delivery of possession - Delay in obtaining the Occupancy Certificate and handing over possession amounted to deficiency of service and entitled the flat purchaser to relief. - HELD THAT: - The Court held that the builder obtained the Occupancy Certificate and offered possession only after an inordinate delay beyond the period stipulated in the Apartment Buyer's Agreement, which constitutes a failure to hand over possession within a reasonable time. Relying on precedent that service by a builder/contractor for consideration falls within the Consumer Protection Act and that a purchaser cannot be made to wait indefinitely, the Court found a clear case of deficiency of service and that the purchaser was entitled to seek refund and compensation rather than be compelled to accept belated possession. [Paras 6, 9]

The delay amounted to deficiency of service; the purchaser could not be compelled to take possession and was entitled to the relief claimed.

Termination of buyer's agreement by filing a consumer complaint - one-sided and unconscionable contractual terms - unfair trade practice - Filing the Consumer Complaint amounted to a valid termination of the Agreement and the contractual clauses that were wholly one sided/unfair could not bind the purchaser. - HELD THAT: - The Court examined the contractual scheme and observed stark disparities in remedies available to the parties, noting clauses that permitted the builder to levy high interest, cancel allotments and forfeit sums while restricting the purchaser's remedial rights. Such ex-facie one sided terms were held to constitute unfair trade practices under the Consumer Protection Act. In the circumstances, the purchaser was justified in terminating the contract by instituting the consumer proceedings and could not be forced to accept possession offered after prolonged delay. [Paras 6, 7]

The purchaser's complaint operated as termination; the one sided contractual terms were unenforceable as unfair and constituted an unfair trade practice.

Application of Rule 15 of the Haryana Real Estate (Regulation and Development) Rules, 2017 for rate of interest - refund with interest as equitable relief - The National Commission was justified in awarding interest at the rate derived from Rule 15 of the Haryana RERA Rules, 2017 (10.7% S.I. p.a.) for the periods awarded, and in structuring the periods for which interest was payable. - HELD THAT: - The Court found the National Commission's order equitable: interest was awarded from the date of each installment till the date when the stay restraining cancellation operated, and thereafter from the date of the Commission's final order until refund. The Court rejected the builder's contention that contractual rates (6% or 9%) must limit the Commission's award, relying on authority that an allottee is entitled to refund with reasonable interest when possession is not delivered in time and approving application of Rule 15 to fix the rate of interest in the circumstances. [Paras 3, 8]

Award of interest at the rate applied by the National Commission and for the periods ordered was lawful and was upheld.

Final Conclusion: The Civil Appeals are dismissed; the National Consumer Disputes Redressal Commission's order dated 23.10.2018 is affirmed and the appellant is directed to refund the amount to the respondent within three months from the date of this judgment.

Constitutional validity of delegated legislation - manifest arbitrariness under Article 14 - excessive delegation - scope of Section 35AA - scope of Section 35AB - RBI directions to initiate insolvency proceedings - general directions versus directions in respect of a specific default - ultra vires - Section 45L of the Reserve Bank of India Act - directions to financial institutions

Manifest arbitrariness under Article 14 - excessive delegation - guidance from Preamble and Act - Constitutional validity of Sections 35AA and 35AB of the Banking Regulation Act, 1949 - HELD THAT: - The Court upheld the constitutional validity of Sections 35AA and 35AB. Economic legislation is to be given wide latitude and the test of manifest arbitrariness was not made out. The provisions are regulatory in character, confer powers in public interest and are not excessive or devoid of guiding principles. Guidance for exercise of the delegated power is available from the Statement of Objects and Reasons, the Preamble and other provisions of the Banking Regulation Act; therefore the challenge on grounds of manifest arbitrariness and absence of guidelines fails. [Paras 16, 17]

Sections 35AA and 35AB are constitutionally valid.

Ultra vires - specific default requirement of Section 35AA - general directions vs specific powers - Section 45L(3) compliance - Validity of the Reserve Bank of India circular dated 12.02.2018 (the revised framework for resolution of stressed assets) - HELD THAT: - The Court held the circular to be ultra vires Section 35AA. Section 35AA authorises the RBI, only with Central Government authorisation, to issue directions to initiate insolvency resolution in respect of 'a default' - i.e., directions must relate to specific defaults of particular debtors. Section 35AB and Section 35A operate separately for de hors IBC resolutions. The impugned circular issued broad, general directions applicable to classes of accounts (e.g., aggregate exposure thresholds and universal timelines) rather than directions in respect of specific defaults and thus exceeded the scope of Section 35AA. Further, insofar as the circular invoked Section 45L of the RBI Act to apply to financial institutions other than banks, there is no indication that the statutory requirement of due regard under Section 45L(3) was fulfilled; the inseparability of banks and NBFCs in joint lending makes severance impracticable. Consequently the circular is void ab initio and actions taken under it that triggered proceedings under the Insolvency and Bankruptcy Code are tainted at inception. [Paras 41, 45, 46]

The RBI circular dated 12.02.2018 is ultra vires Section 35AA (and invalid insofar as applied under Section 45L without requisite compliance); the circular is of no effect and actions under it that initiated IBC proceedings are non est.

Final Conclusion: Sections 35AA and 35AB of the Banking Regulation Act, 1949 are upheld as constitutionally valid; however, the RBI circular dated 12.02.2018 (the revised framework for resolution of stressed assets) is declared ultra vires and of no effect, and actions taken under that circular which triggered insolvency proceedings under the Insolvency and Bankruptcy Code are thereby vitiated.

Pre-installation requisites - restrictive unfair trade practice - deficiency in service - contractual interpretation - manufacturer communication v. contractual preconditions - requirement of online UPS for uninterrupted power supply

Pre-installation requisites - requirement of online UPS for uninterrupted power supply - Whether installation of the equipment could lawfully be made conditional on provision of a 1KVA Online UPS as a pre-installation requisite. - HELD THAT: - The quotation expressly set out pre-installation conditions requiring an efficiently air conditioned room, a 1KVA Online UPS for running the equipment, and a broadband connection for the remote diagnostics tool. The Commission and the Court treated these pre-conditions as binding part of the contractual framework governing installation. Given the dependence of the instrument's performance on continuous uninterrupted electricity supply, the insistence on an Online UPS was held to be justified and appropriate in view of prevailing electricity supply conditions in the country. The manufacturer's separate communication about suitability of an alternative UPS, even if admissible, does not override the contractual pre-installation condition specified by the respondent. [Paras 3, 4, 7, 9, 10]

Installation could not be effected without installation of a 1KVA Online UPS as part of the agreed pre-installation requirements.

Restrictive unfair trade practice - contractual interpretation - manufacturer communication v. contractual preconditions - Whether the respondent's insistence on installation of 1KVA Online UPS constituted a restrictive unfair trade practice or was arbitrary. - HELD THAT: - The appellant relied on an email from the manufacturer asserting that his existing UPS would be suitable if the instrument alone were connected. The fora and this Court found that such communication did not negate the explicit pre-installation stipulation in the respondent's quotation. The requirement for an Online UPS was a reasonable technical pre-condition aimed at ensuring proper functioning of the equipment and not an arbitrary or restrictive trade practice. [Paras 4, 8, 9, 10]

The insistence on a 1KVA Online UPS was not an arbitrary or restrictive unfair trade practice.

Deficiency in service - restrictive unfair trade practice - Whether there was deficiency in service or any manufacturing defect, and whether the respondent had committed any unfair practice by failing to supply an instrument with an on board laundry facility. - HELD THAT: - The brochure supplied with the respondent's offer listed features but did not promise an on board laundry facility. The appellant failed to produce an order copy or any commitment demonstrating that such a facility formed part of the contracted supply. The fora below therefore correctly concluded there was no deficiency of service, no manufacturing defect established, and no unfair trade practice in relation to non provision of an on board laundry facility. [Paras 6, 10, 11]

No deficiency in service or unfair practice was established in respect of the absence of an on board laundry facility; no manufacturing defect was proved.

Final Conclusion: All fora below correctly found no deficiency of service, no manufacturing defect and no restrictive unfair trade practice; the appeals are dismissed.

Equal pay for equal work - entitlement of temporary/daily wage employees to minimum of regular pay scales - continuation in service

Equal pay for equal work - entitlement of temporary/daily wage employees to minimum of regular pay scales - continuation in service - Daily rated (temporary) employees are entitled to be paid the minimum of the pay scales applicable to regular employees holding the same post while they continue in service. - HELD THAT: - The Court considered earlier decisions including Putti Lal and, in particular, the comprehensive ruling in Jagjit Singh which held that temporary employees (daily wage, ad hoc, casual, contractual and similar categories) performing the same duties as regular incumbents are entitled to wages at the minimum of the regular pay scales. The High Court's reliance on earlier contrary precedents (Tilak Raj and Surjit Singh) was rejected in light of Jagjit Singh. The Court confined its decision to the question of entitlement to the minimum of pay scales and expressly refrained from adjudicating the separate question of regularization of service. Applying the principle of parity of pay on the basis of equal pay for equal work, the Court concluded that the Appellants must be paid the minimum of the applicable pay scales while they continue in service and directed prospective payment from the date specified in the order.

Appeals allowed; High Court judgments set aside on this point and State directed to pay the minimum of the pay scales to the Appellants with effect from 1st December, 2018.

Final Conclusion: The appeals are allowed only on the question of payment of the minimum of the pay scales: the Appellants are entitled to be paid the minimum applicable to regular employees holding the same posts while they continue in service; the High Court orders are set aside on this point and the State is directed to effect payment from 1st December, 2018. The Court expresses no opinion on the claim for regularization.

Maintainability of complaint filed by Power of Attorney - right of legal heir to continue criminal prosecution after death of complainant - quashing of criminal proceedings

Maintainability of complaint filed by Power of Attorney - The initial complaint filed by the Power of Attorney holder on behalf of the complainant was maintainable in law. - HELD THAT: - Relying on the principle affirmed in A.C. Narayanan v. State of Maharashtra, the Court held that a complaint instituted by a power of attorney is not void for that reason alone. The High Court's conclusion that the complaint was invalid because it was initiated by the Power of Attorney was contrary to this binding position and therefore unsustainable. Consequently, the complaint as originally filed by the appellant on behalf of Sairabee could not be struck down on the ground that it was filed by a Power of Attorney.

The complaint filed through the Power of Attorney is maintained as valid.

Right of legal heir to continue criminal prosecution after death of complainant - quashing of criminal proceedings - The appellant, as legal heir of the deceased complainant, was entitled to continue the criminal prosecution and the High Court erred in quashing the proceedings. - HELD THAT: - After the death of Sairabee, the appellant applied to continue the prosecution in his capacity as her legal heir. The Supreme Court observed that the High Court misconstrued that application as one to continue proceedings as Power of Attorney rather than as the legal heir. The competency of a legal heir to carry on a criminal complaint is not in doubt; therefore the High Court should have permitted continuation rather than quashing the proceedings. In view of the correctness of the maintainability of the original complaint and the entitlement of the legal heir to continue prosecution, the High Court's order quashing the proceedings was set aside and the trial was directed to recommence from the stage at which it had been interdicted.

Continuance of the prosecution by the legal heir is permitted; the High Court's quashing order is set aside and trial shall recommence.

Final Conclusion: The High Court's order quashing the criminal proceedings was set aside: the complaint filed by the Power of Attorney was maintainable and the appellant, as legal heir, may continue the prosecution; the trial is directed to proceed from the stage at which it was interdicted.