TaxTMI Updates e-Newsletter
Apr 10,2023

Penalty for wrongful availment of input tax credit under Section 74 of the CGST Act, 2017 - penalty under Clause (a) of sub section (1) of Section 129 of the CGST Act, 2017 - contradictory orders between adjudicating authority and appellate authority - remand for fresh decision in accordance with law

Penalty for wrongful availment of input tax credit under Section 74 of the CGST Act, 2017 - penalty under Clause (a) of sub section (1) of Section 129 of the CGST Act, 2017 - Validity of the orders of the adjudicating authority and the appellate authority imposing/justifying penalty relating to alleged excess claim of input tax credit. - HELD THAT: - The Court found a clear contradiction between the adjudicating authority's order and the appellate order. On the material before it, no case was made out in the show cause notice or the impugned orders to sustain proceedings under Section 74 of the CGST Act, 2017. In view of that contradiction and absence of a proper case under Section 74, the Court held that Section 74 was inapplicable to the facts as presented and that the impugned orders could not stand. The Court therefore set aside and quashed both the adjudicating authority's order and the appellate order insofar as they imposed or justified penalty.

Impugned orders imposing/justifying penalty quashed; Section 74 held not applicable on the material before the Court.

Contradictory orders between adjudicating authority and appellate authority - remand for fresh decision in accordance with law - Further course of action following quashing of the impugned orders. - HELD THAT: - Having set aside the impugned orders, the Court remanded the matter to the concerned departmental authority for fresh consideration and decision in accordance with law. The remand requires the authority to reassess the matter on merits, without being influenced by the quashed orders, and to proceed in accordance with applicable statutory provisions and principles of natural justice.

Matter remanded to the respondents' authority for fresh decision in accordance with law.

Final Conclusion: Writ petition allowed; the impugned orders dated 06.01.2021 and 30.03.2022 are set aside and quashed, and the matter is remanded to the departmental authority for fresh decision in accordance with law.

Entertainment of writ petition where statutory appellate forum is non-existent - pre-appeal recovery under proviso to Section 78 of the CGST/WBGST Act - limitation on recovery during pendency of appeal - twenty per cent threshold - requirement of notice and opportunity prior to debiting electronic credit/cash ledger - interim refund of amounts recovered in excess of statutory threshold on furnishing bond

Entertainment of writ petition where statutory appellate forum is non-existent - limitation on recovery during pendency of appeal - twenty per cent threshold - Writ petition was maintainable because no further statutory appellate forum (Tribunal) was available and the recovery made exceeded twenty per cent of the disputed tax. - HELD THAT: - The Court found it to be an admitted position that the statutory Tribunal for appellate relief has not been established and therefore the petitioner had no alternative forum for redress. In addition, the amount recovered exceeded twenty per cent of the disputed tax, which weighed in favour of entertaining the writ. The contention that the Assessing Officer could proceed under the proviso to Section 78 was considered, but the factual basis relied upon for expedited recovery (non existence of the petitioner at its registered place) was not supported by the show cause notice or by findings in the appellate order. Having regard to absence of the appellate forum and the quantum of recovery, the Court held that the petitioner had made out a case for relief by way of writ.

Writ petition entertained on merits because the Tribunal is not available and recovery exceeded twenty per cent of the disputed tax; allegation of non existence at registered place lacked prima facie support.

Requirement of notice and opportunity prior to debiting electronic credit/cash ledger - pre-appeal recovery under proviso to Section 78 of the CGST/WBGST Act - The mode and timing of recovery by debiting the petitioner's electronic ledgers without notice or opportunity required further scrutiny and could not be sustained on the basis urged without adjudication. - HELD THAT: - Petitioner alleged that recovery was effected by debiting its electronic credit ledger and cash ledger within 24 hours of the appellate order without providing notice or opportunity, and without allowing statutory timelines for filing further appeal. The Court observed that the justification relied upon by respondents (non existence at registered place and transaction mismatch) was not established in the show cause notice or the appellate order. Consequently, the legality of the impugned recovery, including compliance with the proviso to Section 78 and requirements of notice/opportunity, must be examined on affidavit and adjudicated at final hearing.

Directed respondents to justify the recovery by affidavit; legality of debiting electronic ledgers withheld for consideration at final hearing.

Interim refund of amounts recovered in excess of twenty per cent during pendency - interim protective order on furnishing of bond - Respondent authority was directed to refund amounts collected in excess of twenty per cent of the disputed tax within seven days, conditional on the petitioner executing a bond for the balance. - HELD THAT: - Balancing the absence of an appellate forum and the petitioner's inability to obtain timely redress, the Court granted interim relief limited to refund of amounts collected in excess of twenty per cent of the disputed tax. The refund was ordered to be made within seven days from communication of the order, on condition that the petitioner execute a bond in favour of the respondent for the remaining eighty per cent of the disputed tax, preserving the rights of both parties in the writ proceeding. This measure was intended as a protective interim arrangement pending final adjudication after filing of affidavits and hearing.

Ordered interim refund of amounts exceeding twenty per cent of disputed tax within seven days, subject to the petitioner furnishing a bond for the balance; rights reserved.

Call for affidavits and adjudication on merits - The substantive legality of the impugned order and recovery was directed to be addressed after the respondents file affidavits and the matter is listed for final hearing. - HELD THAT: - The Court held that the issues require adjudication on evidence and directed respondents to file affidavit in opposition within four weeks and the petitioner to file replies within two weeks thereafter. The matter was listed for final hearing in the monthly list of June, 2023. Thus, the merits of the demand and the propriety of recovery under Section 78 were remitted for fresh consideration and final decision after exchange of affidavits and hearing.

Respondents to file affidavits within four weeks, petitioner to reply within two weeks; final hearing listed for June, 2023 to decide merits.

Final Conclusion: Writ petition entertained because no statutory Tribunal exists and recovery exceeded twenty per cent of the disputed tax; respondents directed to file affidavits and the matter listed for final hearing. As interim relief, respondents must refund amounts collected in excess of twenty per cent of the disputed tax within seven days, subject to the petitioner executing a bond for the remaining eighty per cent, without prejudice to the rights of the parties.

Detention of goods under Section 129(3) SGST Act - principles of natural justice - opportunity of hearing - application of CGST/SGST versus IGST - de novo adjudication

Opportunity of hearing - principles of natural justice - detention of goods under Section 129(3) SGST Act - Impugned detention orders were passed without granting hearing on the revised notice dated 24.03.2023 and thereby breached principles of natural justice. - HELD THAT: - The court examined the record and found that the personal hearing recorded on 24.03.2023 related only to an earlier notice dated 18.03.2023 under the IGST Act. A subsequent revised notice dated 24.03.2023, invoking CGST/SGST provisions, was issued on the same date but the petitioner was not afforded any opportunity to respond to that revised notice and was not heard before passing the impugned detention orders. On this basis the court concluded that the proceedings were concluded contrary to the requirements of natural justice and set aside the impugned orders. [Paras 3, 4, 5, 6]

Impugned orders Nos.889/2022-23/ADJ, 892/2022-23/ADJ and 890/2022-23/ADJ dated 24.03.2023 are set aside for want of hearing.

Hearing on revised notice - de novo adjudication - Whether the matter should be remanded for fresh hearing and adjudication in respect of the notice dated 24.03.2023 invoking CGST/SGST provisions. - HELD THAT: - The court directed that the petitioner be permitted to appear before the first respondent on 05.04.2023 at 10:30 a.m. with a reply to the revised notice dated 24.03.2023, without requiring any further notice. The respondents were directed to hear the petitioner, consider the reply, and pass fresh orders de novo within one week from 05.04.2023. The order therefore remands the matter for fresh consideration on merits limited to the procedure and adjudication under the CGST/SGST provisions as set out in the revised notice. [Paras 6, 7]

Petitioner permitted to appear on 05.04.2023; respondents to hear and pass de novo orders within one week from that date.

Final Conclusion: Writ petitions allowed: impugned detention orders set aside for breach of natural justice; matter remanded for fresh hearing on the revised notice dated 24.03.2023 with directions to hear the petitioner on 05.04.2023 and to pass de novo orders within one week thereafter.

Cancellation of GST registration - Limitation for filing appeal under Section 107 of the CGST Act - Condonation of delay in filing appeal - Constitution of GST Appellate Tribunal under Section 109 of the CGST Act - Remand for reconsideration

Cancellation of GST registration - Limitation for filing appeal under Section 107 of the CGST Act - Condonation of delay in filing appeal - Constitution of GST Appellate Tribunal under Section 109 of the CGST Act - Remand for reconsideration - Remand of the petitioner's challenge to cancellation of GST registration to the authority which passed the cancellation order for fresh consideration and appropriate order. - HELD THAT: - The court noted that the first appellate authority under Section 107(1) held the appeal to be beyond the period of extended limitation and dismissed it. The petitioner did not approach the GST Appellate Tribunal because no Tribunal has been constituted under Section 109 of the CGST Act. While the appellate authority may be correct that condonation beyond the statutory extension cannot be granted, the absence of a constituted Tribunal would leave the petitioner without a remedy if the appeal is treated as time-barred. In view of these circumstances, and without expressing any opinion on the merits of the cancellation, the court found it just and proper to remit the matter to the respondent who cancelled the registration so that the grievance may be reconsidered and an order passed in accordance with law. The court expressly permitted the petitioner to submit returns before the authority during the remand proceedings. [Paras 6, 7, 8, 9]

Matter remanded to respondent No.1 to reconsider the petitioner's grievance against cancellation of GST registration and thereafter pass appropriate order in accordance with law; petitioner permitted to submit returns; writ petition disposed of.

Final Conclusion: The writ petition is disposed of by remanding the challenge to cancellation of GST registration to the authority which passed the cancellation order for fresh consideration and appropriate orders in accordance with law; no opinion expressed on the merits and the petitioner is at liberty to submit returns during the remand; no order as to costs.

Detention, seizure and release of goods and conveyances in transit - Right to be heard under Section 129(4) of the CGST Act - Prohibition on determination of tax or penalty without opportunity of hearing - Compliance with judicial directions - Validity of e-way bill and transit expiry

Right to be heard under Section 129(4) of the CGST Act - Prohibition on determination of tax or penalty without opportunity of hearing - Detention, seizure and release of goods and conveyances in transit - Validity of the order dated 01.04.2022 and demand dated 02.04.2022 insofar as tax and penalty were imposed without affording opportunity of hearing and without complying with statutory and judicial requirements - HELD THAT: - The Court found that Section 129(3) requires the proper officer who detains or seizes goods to issue a notice specifying the tax and penalty payable and thereafter to pass an order, and Section 129(4) prohibits determination of tax or penalty without giving the person concerned an opportunity of being heard. The record showed that respondent no. 3, despite a prayer by the seller to be allowed to file a reply and despite this Court's prior direction in WP(C) No. 285 of 2022 for release on undertaking and intimating the assessing officer, issued an order on 01.04.2022 imposing tax and penalty upon the driver without giving the requisite opportunity of hearing. The respondent no. 4 subsequently issued a demand on 02.04.2022. The impugned action thus violated the statutory requirement of hearing under Section 129 and also disobeyed the specific directions of this Court which contemplated release on undertaking and communication to assessing officers before initiation of action. For these reasons the orders imposing penalty and the consequent demand were held to be unsustainable. [Paras 7, 9, 10, 11]

The impugned order dated 01.04.2022 and the demand dated 02.04.2022 are quashed and set aside for non-compliance with the statutory requirement of hearing and for contravening this Court's directions.

Final Conclusion: Writ petition allowed; impugned order of 01.04.2022 and demand of 02.04.2022 quashed and set aside for violation of the right to be heard and non-compliance with this Court's directions; respondents remain free to proceed in accordance with law.

Cancellation of GST registration - opportunity to be heard - arbitrariness in administrative action - revocation of cancellation subject to compliance - filing of returns as condition for revocation - penal proceedings for issuance of invoices without actual supply

Cancellation of GST registration - opportunity to be heard - arbitrariness in administrative action - The impugned cancellation of the petitioner's GST registration was arbitrary and made without affording a real opportunity to be heard. - HELD THAT: - The Court found that the cancellation order records that the petitioner's reply was considered though, on the facts, the petitioner was in custody during the period when the Show Cause Notice was purportedly issued and could not have responded. The reasons recorded in the cancellation order therefore amounted to a stereotyped or unsubstantiated conclusion. In these circumstances the cancellation, being founded on an impossibility of having received or furnished a response, violated the requirement of fair opportunity and was arbitrary, warranting interference by the Court.

Impugned cancellation set aside on grounds of arbitrariness and lack of opportunity to be heard.

Revocation of cancellation subject to compliance - filing of returns as condition for revocation - Relief granted was conditional revocation of the cancellation subject to the petitioner filing outstanding returns within a specified period and consequent exercise of power by the Superintendent to pass appropriate orders. - HELD THAT: - The Court directed that the second respondent may pass suitable orders for revocation of the registration if the petitioner files the returns for the relevant periods. The petitioner was given four weeks from receipt of certified copy of the order to file the returns, and upon such filing the Superintendent is directed to pass suitable orders within two weeks. The direction preserves the authority of the tax officer to examine compliance and take consequential administrative action while providing the petitioner a fair opportunity to regularise returns before final action.

Petitioner permitted to file outstanding returns within four weeks; on filing, Superintendent to consider revocation and pass orders within two weeks.

Final Conclusion: Writ petition allowed: cancellation of GST registration set aside as arbitrary and made without real opportunity to be heard; petitioner permitted four weeks to file outstanding returns and, upon filing, the Superintendent of Central Tax to pass appropriate orders on revocation within two weeks.

Exemption under Notification No.12/2017 - Entry No.3 - Pure services - Scope of the expression "in relation to" in exemption entries - Application of Entry No.66 to educational institutions - Binding effect of an Advance Ruling

Exemption under Notification No.12/2017 - Entry No.3 - Pure services - Scope of the expression "in relation to" in exemption entries - Whether manpower supply services provided by the appellant to various Government departments and institutions are exempt under Entry No.3 to Notification No.12/2017-Central Tax (Rate) dated 28.06.2017. - HELD THAT: - Entry No.3 confers exemption only upon three concomitant conditions: (i) the supply must be of pure services; (ii) the recipient must be the Central Government, State Government, Union territory or local authority; and (iii) the services must be provided by way of any activity "in relation to" a function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W. The GAAR examined the appellant's contracts and did not find adverse findings on the first two conditions, but held that the services in question (housekeeping, cleaning, security, data-entry operators) were not in relation to any activity carrying out the functions entrusted under Articles 243G/243W by the respective service recipients. The Appellate Authority agreed: if the legislature had intended to exempt all services to government recipients it would not have qualified the exemption by the requirement that services be "in relation to" functions under Articles 243G/243W. The manpower services were consumed within the premises of government offices and were not shown to be related to the statutory functions enumerated in the Eleventh/Twelfth Schedules; consequently the condition in Entry No.3 was not satisfied. Reliance upon other orders (including A.B. Enterprise) or judicial decisions was held not determinative: prior advance rulings bind only the appellant and the jurisdictional officer under Section 103, and earlier decisions depended on differing facts. The Appellate Authority therefore upheld the GAAR's conclusion that the services are not eligible for exemption under Entry No.3.

Manpower supply services to the Government departments and institutions listed are not exempt under Entry No.3 to Notification No.12/2017; the condition that services be by way of any activity "in relation to" functions entrusted under Articles 243G/243W is not satisfied.

Final Conclusion: The appeal is dismissed; the Advance Ruling No. GUJ/GAAR/R/51/2021 dated 06.09.2021 is upheld and the appellant's manpower supply services to the listed Government entities are not eligible for exemption under Entry No.3 of Notification No.12/2017-Central Tax (Rate).

Concessional rate for composite supply of works contract - sub-contractor versus sub sub contractor - nexus and direct contract with Governmental authority - strict interpretation of exemption/concession notifications - binding effect of an advance ruling on the applicant

Concessional rate for composite supply of works contract - sub-contractor versus sub sub contractor - nexus and direct contract with Governmental authority - strict interpretation of exemption/concession notifications - Whether the appellant, being a second tier subcontractor (sub contractor of a sub contractor), is eligible for the concessional 12% GST rate under the notifications relied upon. - HELD THAT: - The authority examined the contractual chain and found that the original contract was awarded by the Irrigation Department to the main contractor, which engaged a sub contractor who in turn engaged the appellant; there was no work order from the Government to the appellant nor any direct contractual nexus between the appellant and the Governmental authority. The concessional entries operate only where the supplier fulfills both the nature of supply to the specified Governmental authority and the supplier's status as the main contractor or a direct sub contractor of the main contractor. The appellant admitted its case may not fall within the entry and produced no evidence that the main contractor consented to further sub contracting as required by the sub contract agreement. Notifications conferring concessional rates must be strictly construed and their conditions strictly satisfied; second tier subcontracting does not attract the reduced rate. Consequently the appellant does not meet the statutory conditions for the 12% concessional rate. [Paras 7]

The appellant is not eligible for the concessional 12% GST rate under the cited notifications as it is a sub contractor of a sub contractor and lacks the requisite direct nexus with the Governmental authority.

Applicability of higher rate (standard rate) under relevant notification - binding effect of an advance ruling on the applicant - The correct rate of tax payable by the appellant and the fate of the impugned advance ruling. - HELD THAT: - On applying the relevant entries, since the appellant did not qualify for the concessional entries, the supply falls under the general entry for works contract services attractable to standard GST. The Appellate Authority agreed with the Gujarat Authority for Advance Ruling that the supply by the appellant is not covered under the concessional entries and is liable to tax at CGST@9% and GGST@9% under the specified entry of Notification No.11/2017 CT(R) as amended. The ruling of the GAAR is binding only on the applicant, and on the facts and documentary record the Appellate Authority upheld the GAAR's decision. [Paras 7, 11, 12]

The impugned advance ruling is upheld; the appellant is liable to tax at CGST@9% and GGST@9% (aggregate 18%) under the applicable notification entry.

Computation of limitation and exclusion by supreme court order - Whether the appeal was time barred and whether delay was to be condoned. - HELD THAT: - The appeal was filed beyond the ordinary 30 day period computed from communication of the ruling, but the period from 15.03.2020 to 28.02.2022 was excluded in computing limitation pursuant to the Supreme Court order; further, a 90 day period from 01.03.2022 was available. Applying that exclusion, the Appellate Authority considered the appeal to be within the prescribed time and proceeded to decide it on merits. [Paras 6]

Delay in filing the appeal is condoned on account of the exclusion furnished by the Supreme Court order; the appeal is entertained on merits.

Final Conclusion: The appeal is rejected on merits: the appellant, being a sub contractor of a sub contractor without direct contractual nexus with the Governmental authority, is not entitled to the concessional 12% rate and the Gujarat Authority for Advance Ruling is upheld; the appellant is liable to tax at CGST@9% and GGST@9% as held by the authorities.

Scope of advance ruling limited to matters specified under the statute - requirement that the applicant be the person registered or desirous of registration and the person undertaking or proposing the supply - requirement of prescribed fee for filing an advance ruling application - binding nature of an advance ruling only on the applicant and the jurisdictional officer in respect of that applicant - rejection of advance ruling application filed by an unauthorized person or filed without requisite fee

Scope of advance ruling limited to matters specified under the statute - requirement that the applicant be the person registered or desirous of registration and the person undertaking or proposing the supply - requirement of prescribed fee for filing an advance ruling application - binding nature of an advance ruling only on the applicant and the jurisdictional officer in respect of that applicant - rejection of advance ruling application filed by an unauthorized person or filed without requisite fee - Whether the advance ruling application is maintainable when filed by a Chartered Accountant in his own name instead of the actual supplier and without payment of the prescribed fee, and the consequent order. - HELD THAT: - The Authority examined the statutory framework defining "advance ruling", the limited categories of questions on which a ruling may be sought and the persons who qualify as applicants. The statutory scheme contemplates an applicant who is the person registered or desirous of registration and who is undertaking or proposing the supply; an advance ruling is binding only on that applicant and the concerned jurisdictional officer. The application before the Authority was filed by the Chartered Accountant in his personal name whereas M/s. Khanepe Hungermall LLP is the entity that proposes to undertake the supply. The applicant admitted at the personal hearing that he was not the actual service provider. Further, the application was not accompanied by the requisite fee as required by the rules. In view of these defects - (i) lack of locus of the person who filed the application to seek a ruling on behalf of the supplier and (ii) non-payment of the prescribed fee - the Authority held that the application was not maintainable and could not result in a binding advance ruling for the actual supplier. [Paras 11, 12]

The application filed by the Chartered Accountant in his own name, and filed without the requisite fee, is rejected; no advance ruling is accorded to the actual supplier.

Final Conclusion: Application for advance ruling stands rejected because it was filed by a person who is not the supplier entitled to seek the ruling and was not accompanied by the prescribed fee; consequently no binding advance ruling is issued in favour of the actual supplier.

One-time lease premium taxable as supply under section 7 - lease of land or building as supply of services under Schedule II - sale of land and sale of building excluded from supply under Schedule III - distinction between lease and sale for GST purposes - classification under SAC 9972 and applicability of notification No. 11/2017 CT(Rate)

One-time lease premium taxable as supply under section 7 - lease of land or building as supply of services under Schedule II - distinction between lease and sale for GST purposes - Whether the one time premium received by the applicant on allotment of completed commercial units constitutes a taxable supply under the CGST/GGST Acts - HELD THAT: - The Authority examined the deed of assignment and the lease deed and concluded that the transaction is a lease and not a sale. The lease instrument grants leasehold rights for 90 years while ownership of the land remains with GSRTC, contains periodic/annual rent obligations and restrictive covenants, and provides for reversion of the rights to GSRTC on expiry-characteristics inconsistent with an absolute sale. The Transfer of Property Act definition of lease and the definition of "renting in relation to immovable property" under the relevant notification were applied to hold that the arrangement falls within the ambit of leasing/letting and thus within the inclusive definition of "supply" in section 7 read with Schedule II which treats lease/letting of land and buildings as supply of services. The Authority rejected the applicant's reliance on Schedule III (sale of land/sale of building) and on notifications concerning construction services, finding that the agreements do not evidence a transfer of ownership or a construction contract that would attract those provisions. The Authority also noted supporting reasoning in judicial decisions recognising one time lease premium as consideration for leasing activity chargeable to GST. Consequently the activity is a supply liable to GST. [Paras 21, 22, 23, 24, 28]

The one time premium received on allotment of the completed commercial units is a taxable supply under section 7 read with Schedule II of the CGST/GGST Acts.

Classification under SAC 9972 and applicability of notification No. 11/2017 CT(Rate) - rate of tax for real estate/lease services - If taxable, what is the applicable GST classification and rate on the one time premium - HELD THAT: - Applying the scheme of classification in notification No. 11/2017 CT(Rate) and the annexed service headings, the Authority classified the applicant's supply under SAC/Heading 9972 (real estate services involving owned or leased property). On that classification the applicable rate as per the notification is 9% CGST and 9% SGST, i.e., an aggregate rate of 18%. The Authority therefore concluded that the consideration (one time premium and attendant annual lease rent) is leviable to tax at the stated rate. [Paras 27, 28]

The supply is classifiable under SAC 9972 and is taxable at 18% (9% CGST and 9% SGST) in terms of notification No. 11/2017 CT(Rate).

Final Conclusion: The Authority ruled that the one time premium received for allotment of the 90 year lease of commercial units is a taxable supply (lease/letting) under section 7 read with Schedule II and is classifiable under SAC 9972, leviable to GST at the rate of 18% (9% CGST + 9% SGST).

Advance ruling - locus standi of applicant - scope of questions under section 97(2) - binding nature of advance ruling - rejection of application under section 98(2)

Advance ruling - locus standi of applicant - scope of questions under section 97(2) - rejection of application under section 98(2) - Applicant, being a recipient and not a supplier or a person seeking registration, is not entitled to seek an advance ruling on the taxability of supplies made by the developer. - HELD THAT: - The Authority examined the statutory scheme defining an advance ruling, the class of persons entitled to apply, and the limited subjects on which rulings may be sought. An advance ruling is a decision to an applicant in respect of matters specified in section 97(2) in relation to supplies being undertaken or proposed to be undertaken by the applicant; an applicant is a person registered or desirous of registration. The questions in section 97(2) are confined to matters such as classification, applicability of notifications, time and value of supply, admissibility of input tax credit, liability to pay tax, requirement of registration and whether an activity amounts to a supply. The present applicant is neither the supplier of the service nor seeking input tax credit; he is merely a recipient disputing the developer's demand to charge GST. Since the applicant does not fall within the class of persons entitled to seek the ruling in respect of supplies undertaken by another, he lacks locus to seek the advance ruling sought. Consequent to this lack of locus, the application cannot be admitted and is liable to be rejected under the procedural provision permitting rejection after examination and hearing. [Paras 11, 12, 13, 14]

Application rejected under section 98(2) read with the definitions and provisions governing advance ruling; applicant has no locus to seek the ruling.

Final Conclusion: The Authority rejected the advance ruling application because the applicant, being a recipient and not the supplier or a person seeking registration, lacked locus to seek a ruling on the developer's liability to charge GST; the application was therefore rejected under the procedural provision permitting such rejection.

Classification of subsidised employer provided canteen charges as "supply" under section 7 - perquisites provided by employer to employee under contractual terms not constituting supply - availability of input tax credit where employer is statutorily obliged to provide goods or services to employees (proviso to section 17(5)(b)) - obligatory employer provision of canteen under Factories Act and Shops and Establishment law

Classification of subsidised employer provided canteen charges as "supply" under section 7 - perquisites provided by employer to employee under contractual terms not constituting supply - subsidised deduction recovered from employees for canteen/food supplied at factory and corporate office is a 'supply' under section 7 of the CGST Act - HELD THAT: - The Authority examined whether amounts deducted from employees' salaries for subsidised meals amount to a taxable supply. The applicant provides demarcated canteen premises and has a cafeteria/canteen policy; the facility is provided because the employer is statutorily obliged to maintain a canteen under section 46 of the Factories Act (factory) and section 23 of the Gujarat Shops and Establishment Act (corporate office). Having regard to the CBIC press release and Circular No. 172/04/2022 GST, perquisites provided by an employer to employees in terms of the contractual relationship between employer and employee are not subject to GST. On the facts, the Authority found no dispute that the canteen is provided pursuant to statutory obligation and that a cafeteria/canteen policy exists; the employer pays the canteen service provider and recovers a subsidised portion from employees for administrative convenience. Applying the clarification that employer provided perquisites under contract/statutory obligation do not constitute supply, the Authority held that the subsidised deductions from employees in the present arrangements do not constitute a 'supply' under section 7. [Paras 16, 17, 18, 19]

The subsidised deduction made from employees for canteen meals at both the factory and the corporate office is not a 'supply' under section 7 of the CGST Act.

Availability of input tax credit where employer is statutorily obliged to provide goods or services to employees (proviso to section 17(5)(b)) - Input Tax Credit restricted to cost borne by employer - whether Input Tax Credit (ITC) on GST charged by the canteen service provider is available to the applicant - HELD THAT: - The Authority considered the amended clause (b) of section 17(5) and Circular No. 172/04/2022 GST which clarifies that the proviso permitting ITC applies to the entire clause (b) where goods or services are obligatory for an employer to provide under any law. The canteen is mandatory under the Factories Act 1948 (and the Gujarat Shops and Establishment Act for the corporate office) for full time/permanent employees. On these facts, ITC is therefore available in respect of food and beverages procured for the obligatory canteen facility. The Authority, however, limited the credit to the extent of cost actually borne by the applicant and disallowed proportionate credit attributable to the amounts recovered from employees (i.e., embedded credit in the portion charged back to employees is not allowable to the employer). The conclusion is supported by earlier appellate AAR reasoning relied upon by the Authority. [Paras 21, 22, 23]

ITC on GST charged by the canteen service provider is available to the applicant for canteen services provided to direct employees, but only to the extent of the cost borne by the applicant; proportionate credit attributable to amounts recovered from employees is disallowed.

Final Conclusion: The Authority ruled that the subsidised salary deductions for employee canteen meals at both factory and corporate office do not constitute a 'supply' under section 7, rendering questions on GST liability of those deductions infructuous; separately, ITC is available for the employer in respect of canteen supplies mandated by law, restricted to the employer's share of cost and excluding proportionate credit embedded in amounts recovered from employees.

Scope of supply under section 7: supply vis-a -vis employer-employee perquisites - perquisites provided by employer to employee in terms of contract not being subject to GST - application of proviso to clause (b) of sub section (5) of section 17 to the whole of clause (b) - eligibility of input tax credit where supply is obligatory under law - ITC restricted to extent of cost borne by the employer

Scope of supply under section 7: supply vis-a -vis employer-employee perquisites - perquisites provided by employer to employee in terms of contract not being subject to GST - Subsidised deductions recovered from employees for canteen charges paid to the canteen service provider on their behalf constitute a 'supply' under section 7 or not. - HELD THAT: - The Authority examined whether the employer's recovery of employees' share for canteen services constitutes a supply under section 7. The factual matrix showed canteen provision mandated by section 46 of the Factories Act, set out in the employment terms and HR policy, and the applicant acting merely as administrator by collecting employees' portion and paying the CSP. Relying on CBIC press release and Circular No. 172/04/2022 GST which treat perquisites provided by an employer in terms of the employment contract as not subject to GST, and on the contract/HR policy evidence that the canteen is part of employment benefits, the Authority held that the recovery of the employees' portion is not a supply within section 7 and therefore not leviable to GST. [Paras 13, 14]

The amount representing the employee's portion of canteen charges collected by the applicant and paid to the CSP on their behalf is not a supply under section 7 and GST is not leviable on that amount.

Application of proviso to clause (b) of sub section (5) of section 17 to the whole of clause (b) - eligibility of input tax credit where supply is obligatory under law - ITC restricted to extent of cost borne by the employer - Whether input tax credit is available for GST charged by the canteen service provider for canteen services which are mandatory under the Factories Act and Gujarat Rules. - HELD THAT: - The Authority considered the amended text of section 17(5)(b), the CBIC Circular clarifying that the proviso (making ITC available where supply is obligatory under law) applies to the whole of clause (b), and the statutory obligation under section 46 of the Factories Act read with Gujarat Rules to provide canteen facilities for factories employing the requisite number of workers. On these bases the Authority held that ITC is available to the employer for canteen food and beverages supplied for direct/full time employees where provision of the canteen is obligatory under law. The Authority qualified the entitlement by limiting ITC to the extent of the cost actually borne by the applicant and disallowing proportionate credit to the extent that cost is recovered from employees. [Paras 15, 16, 17]

ITC is available on GST charged by the CSP for canteen services supplied to direct employees where canteen provision is obligatory under the Factories Act and Rules, but ITC is restricted to the portion of cost borne by the employer and excludes proportionate credit embedded in amounts recovered from employees.

Final Conclusion: The Authority ruled that (i) amounts recovered from employees as their share of canteen charges and remitted to the canteen service provider on their behalf do not constitute a taxable supply under section 7 and are not subject to GST; and (ii) the applicant is entitled to claim ITC on GST charged by the canteen service provider for canteen services provided to its direct employees because the canteen is obligatory under the Factories Act and Gujarat Rules, subject to the limitation that ITC is available only to the extent of the cost borne by the employer (excluding the portion recovered from employees).

Deemed rent under section 23(4) of the Income-tax Act - classification of income as business income versus income from house property - exclusion from house property income where unsold flats are stock-in-trade occupied for the purposes of business

Deemed rent under section 23(4) of the Income-tax Act - exclusion from house property income where unsold flats are stock-in-trade occupied for the purposes of business - classification of income as business income versus income from house property - Whether deemed rent under section 23(4) is leviable on unsold flats held as stock-in-trade and not let out - HELD THAT: - The Tribunal found that the assessee, engaged in property development, treated 15 unsold flats as closing stock and there was no letting or receipt of rental income. The AO invoked deemed rent under section 23(4), which the CIT(A) confirmed. The Tribunal distinguished the Bombay High Court decision in Gundecha Builders on facts, observing that in that case rental income was actually received and letting was not the assessee's business; therefore that authority was not applicable. The Bench relied on the coordinate decision in Sai Spacecon India Pvt. Ltd., which applied the exclusion from house property in cases where the property is occupied by the assessee as owner for the purposes of business and profits of that business are chargeable to tax. Applying that reasoning, the Tribunal held that where unsold flats are stock-in-trade, occupied for the purposes of the developer's business and profits from that business are chargeable to tax, the flats fall within the exclusion from income from house property and no deemed rent under section 23(4) can be levied. On this basis the additions made by the AO and confirmed by the CIT(A) were held not justified. [Paras 8, 9]

Deemed rent under section 23(4) not leviable on the unsold flats held as stock-in-trade and occupied for the purposes of the assessee's business; grounds allowed.

Final Conclusion: The appeal is allowed: the addition of deemed rent under section 23(4) on unsold flats treated as stock-in-trade is set aside.

Applicability of statutory amendment - Section 153C - substitution amendment - "belongs or belong to" versus "pertains or pertain to" - retrospective operation - machinery provision - deeming fiction (reference to date of receipt) - vested rights

Section 153C - substitution amendment - "belongs or belong to" versus "pertains or pertain to" - machinery provision - deeming fiction (reference to date of receipt) - retrospective operation - vested rights - Whether the amendment to Section 153C introduced by the Finance Act, 2015 (substituting "belongs or belong to" with "pertains or pertain to") is applicable to searches under Section 132 conducted before 01.06.2015. - HELD THAT: - The Court examined the legislative purpose of the 2015 substitution which was enacted to remedy the restrictive interpretation given to "belongs or belong to" (notably in Pepsico) so as to permit proceedings where seized books or documents "pertain to" a person other than the searched person. The proviso to Section 153C (inserted earlier) creates a deeming fiction by treating the relevant date as the date on which the Assessing Officer of the non-searched person receives the seized material; therefore, where receipt occurred after 01.06.2015 the amended text governed the consequent proceedings. The Court applied established principles: an amendment by substitution operates to replace the earlier provision (Shamrao V. Parulekar [1952 (5) TMI 12 - SUPREME COURT]; Zile Singh[2004 (10) TMI 553 - SUPREME COURT]); machinery provisions in taxing statutes are to be given a construction that effectuates their object; and legislative intent to cure a judicially identified mischief supports application of the substituted provision. The appellants' contention that the amendment affected vested substantive rights and so must be prospective was rejected: Section 153C in both its unamended and amended forms addresses assessment of persons other than the searched person, and the amendment remedied a constriction that would otherwise frustrate the statutory object. Consequently the amended Section 153C applies to the facts where the satisfaction and onward receipt of seized material by the Assessing Officer of the non-searched person occurred after 01.06.2015, and the issuance of notices after amendment is governed by the amended provision. [Paras 10, 11]

The amendment to Section 153C effected by the Finance Act, 2015 is applicable to searches conducted before 01.06.2015 where the seized books/documents were received by the Assessing Officer of the non-searched person after the amendment; the High Court order quashing such notices is set aside.

Final Conclusion: The appeals are allowed: the substituted/amended Section 153C (Finance Act, 2015) applies where the Assessing Officer of the non-searched person received seized books/documents after 01.06.2015; the High Court judgment quashing notices under Section 153C is quashed and set aside, with liberty granted to assessees to challenge assessment orders on other grounds before the appellate authority.

Revisional jurisdiction under Section 263 - prejudicial to the interests of the Revenue - cost of improvement - long term capital gains - two views doctrine

Whether the Commissioner was justified in invoking revisional jurisdiction under Section 263 and setting aside the assessment order which allowed payments to shareholders as deduction in computing long term capital gains? - HELD THAT: - The Court applied the twin conditions from Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT] that to exercise jurisdiction under Section 263 the Commissioner must be satisfied that the assessing officer's order is (i) erroneous and (ii) prejudicial to the interests of the Revenue. While recognizing that where two views are possible an assessing officer's plausible view is not revisable, the Court examined the assessment and the revisional order and concluded that the AO's allowance of the payments as 'cost of improvement' was not sustainable in law and resulted in loss of tax. The Court held that this was not a case of merely differing views; the assessment was both erroneous and prejudicial to revenue and therefore within the scope of the Commissioner's revisional powers. On that basis the High Court's order setting aside the Commissioner's exercise of jurisdiction was held to be in error and was quashed, and the Commissioner's order under Section 263 was restored. [Paras 7, 8]

The Commissioner rightly invoked and exercised revisional jurisdiction under Section 263; the assessment order was erroneous and prejudicial to the interests of the Revenue and is set aside.

Final Conclusion: The appeal is allowed; the High Court judgment is quashed and set aside and the order passed by the Commissioner in exercise of powers under Section 263 of the Income Tax Act is restored. No order as to costs.

Ex-parte adjudication - opportunity to be heard / principles of natural justice - allowability of interest deduction under section 57 - assessment under section 44AD - remand for fresh adjudication

Ex-parte adjudication - opportunity to be heard / principles of natural justice - remand for fresh adjudication - Whether the appellate order passed ex-parte by NFAC should be sustained or the matter should be restored to the Assessing Officer for fresh consideration after affording the assessee an opportunity to be heard. - HELD THAT: - The Tribunal noted that both the assessment and the first appellate order were passed ex-parte because the assessee did not respond to notices and earlier adjournment requests. Despite the assessee's past non-cooperation, the Tribunal exercised its discretion to afford the assessee an opportunity to substantiate the claim of deduction. The Tribunal recorded that the assessee gave an undertaking to cooperate if granted an opportunity. Balancing the assessee's conduct against the prospective duty to adjudicate on merits, the Tribunal restored the file to the Assessing Officer for fresh decision after giving adequate opportunity to the assessee to explain and produce evidence. The Tribunal cautioned that if the assessee again fails to cooperate, the Assessing Officer may proceed ex-parte and decide the issue on merits in accordance with law. [Paras 3, 7]

The NFAC's ex-parte appellate order is set aside to the extent that the matter is remanded to the Assessing Officer for fresh adjudication after affording the assessee an opportunity to be heard; failure to cooperate may permit ex-parte proceedings.

Allowability of interest deduction under section 57 - assessment under section 44AD - remand for fresh adjudication - Whether the interest amount of Rs.16,61,550/- claimed as deduction is allowable and should be adjudicated afresh by the Assessing Officer. - HELD THAT: - The Tribunal did not decide the substantive question on the merits. Instead, observing that the assessee had not earlier substantiated the claim, the Tribunal directed that the Assessing Officer shall reconsider the allowability of the interest deduction under section 57, and, where relevant, the interplay with the presumptive taxation regime under section 44AD, after giving the assessee adequate opportunity to explain and produce supporting evidence. The Tribunal thereby remitted the factual and legal adjudication of the deduction to the Assessing Officer for fresh consideration. [Paras 2, 7]

The question of allowability of the claimed interest deduction is remitted to the Assessing Officer for fresh consideration after affording the assessee an opportunity to substantiate the claim; no substantive adjudication on merits was made by the Tribunal.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes, set aside the ex-parte appellate order, and remitted the matter to the Assessing Officer to decide the allowability of the claimed interest deduction afresh after affording the assessee adequate opportunity to be heard; the Assessing Officer may proceed ex-parte if the assessee again fails to cooperate.

Allowability of rent under section 30 of the Act - service tax on renting of immovable property - indirect tax collected by supplier and borne by recipient - proof of tenancy and user of premises for business - remand to Assessing Officer for verification and fresh adjudication

Service tax on renting of immovable property - allowability of rent under section 30 of the Act - indirect tax collected by supplier and borne by recipient - remand to Assessing Officer for verification and fresh adjudication - Whether the amount paid by the assessee towards accumulated service tax on rent is admissible as business expenditure and whether the claim is to be admitted without further verification. - HELD THAT: - The Tribunal noted that the assessee had entered into a lease and had claimed the service-tax component of rent as part of business expenditure under section 30. While observing that service tax on renting is an indirect tax typically collected by the supplier but borne by the recipient and that such tax may form part of the rent, the Tribunal found that factual materials and documentary evidence produced before the authorities required closer scrutiny. The assessee produced challans and other documents showing payments made by the landlords and identified amounts said to relate to the assessee. Given the factual nature of the dispute about whose liability the arrears related to and the documentation produced, the Tribunal considered it appropriate to remit the matter to the Assessing Officer to examine the submissions and documents and pass an order in accordance with law after affording the assessee an opportunity of being heard. [Paras 10]

Remanded to the Assessing Officer for examination of the assessee's submissions and documents and for fresh adjudication after providing opportunity of hearing; ground allowed for statistical purposes.

Proof of tenancy and user of premises for business - oral tenancy proof and burden of proof - remand to Assessing Officer for verification and fresh adjudication - Whether the rent paid to a landlord for premises without a contemporaneous written lease for the year under appeal is allowable as business expenditure by proving tenancy and use for business. - HELD THAT: - The Tribunal recorded that the assessee relied on an initial written lease dated 01.02.2009 and subsequent oral renewals for the premises, and that the Assessing Officer and CIT(A) had disallowed the rent for lack of a written agreement and proof of user. Recognising that tenancy may be oral but that the assessee bears the burden to substantiate tenancy and business use, the Tribunal concluded that the factual controversy required fresh inquiry. Accordingly, the matter was remitted to the Assessing Officer with a direction to permit the assessee to prove oral tenancy and use of the premises for business and to decide the claim afresh after affording adequate opportunity of hearing. [Paras 13]

Remanded to the Assessing Officer to allow the assessee to prove oral tenancy and business use and to decide the claim afresh after providing opportunity of hearing; ground allowed for statistical purposes.

Final Conclusion: The appeal is partly allowed for statistical purposes by remanding both disputes-the admissibility of accumulated service tax on rent and the rent paid under an oral renewal-to the Assessing Officer for fresh examination of evidence and adjudication after affording the assessee an opportunity of being heard.

Assessment under Section 153A - Completed assessments and reassessment under Section 153A - Incriminating material requirement for additions post-search - Nexus between seized material and additions - Reiteration of completed assessment versus fresh assessment

Assessment under Section 153A - Incriminating material requirement for additions post-search - Nexus between seized material and additions - Whether additions made in completed assessments under Section 153A in absence of any incriminating material found during search are sustainable. - HELD THAT: - The Tribunal found that all four assessment years before the Tribunal were completed assessments on the date of the search and that the impugned additions were not based on any incriminating material discovered during the search; instead the additions were derived from documents and bank statements produced by the assessee during assessment proceedings. Applying the legal principle laid down by the Hon'ble Delhi High Court in Kabul Chawla, the Tribunal held that while Section 153A empowers the Assessing Officer to compute total income for the six years on the basis of search findings and other material relatable to those findings, it does not permit arbitrary additions unconnected to seized material. In absence of any nexus between seized/incriminating material and the additions, completed assessments cannot be disturbed merely by making additions de hors the incriminating material unearthed in the search. The Tribunal also noted consistent treatment in a coordinate Bench order in the assessee's son's case and that Revenue did not dispute the absence of incriminating material; accordingly the additions were set aside. [Paras 10, 11, 12]

Impugned additions in all four assessment years, being made without any incriminating material found during search and lacking nexus with seized material, are deleted.

Final Conclusion: All four appeals are allowed and the additions made under the assessments completed prior to the search are deleted for AY 2011-12, AY 2013-14, AY 2014-15 and AY 2015-16.

Exemption under section 54F - Computation of exempt capital gain under section 54F(1)(b) - One to one correlation between sale proceeds and investment - Admissibility and evidentiary value of statements recorded during survey under section 133A - Confessions during survey and requirement of credible evidence - Retraction of extra judicial statement and its probative significance

Exemption under section 54F - Computation of exempt capital gain under section 54F(1)(b) - One to one correlation between sale proceeds and investment - Claim for exemption under section 54F allowed in part where new residential property was purchased in the name of the assessee though payments were made by family members; exempt amount computed under section 54F(1)(b). - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that section 54F requires the new residential asset to be purchased in the name of the assessee but does not mandate that the entire cost must be met exclusively out of the sale proceeds of the old asset. Reliance was placed on precedent holding that there is no statutory requirement of one to one correlation between sale proceeds and amounts used for purchase. The assessee produced bank evidence showing that family members (husband, HUF and son) paid portions of the purchase price and the new property stands in the assessee's name. As the cost of the new asset was less than the net consideration from sale of the old asset, section 54F(1)(b) applies and the exempt portion of the long term capital gain was computed proportionately, resulting in restriction of the disallowance to the balance taxable amount. The Revenue's ground challenging allowance on the basis that payments were not solely made by the assessee was rejected. [Paras 6, 9]

Exemption under section 54F allowed in part; exempt capital gain computed under section 54F(1)(b) and Revenue's ground dismissed.

Admissibility and evidentiary value of statements recorded during survey under section 133A - Confessions during survey and requirement of credible evidence - Retraction of extra judicial statement and its probative significance - Addition of income based on surrender by the assessee's son during survey deleted because the survey confession lacked independent credible evidence and was recorded in the assessee's absence; retraction and surrounding circumstances supported deletion. - HELD THAT: - The Tribunal concurred with the CIT(A)'s finding that the surrender made by the son during survey could not be treated as reliable evidence for making an addition. The assessee was absent and hospitalised when the statement was recorded; medical records and other facts were placed before the authorities. The alleged difference related only to valuation methodology (market valuation by approved valuer versus accounting valuation) rather than excess quantity of stock, and supporting bills for stock were produced. Reliance was placed on CBDT circulars directing that admissions in searches/surveys must be free from coercion and backed by credible evidence and on the principle that statements recorded under section 133A do not have the same evidentiary value as sworn statements. In these circumstances, and having regard to the explanations and documentary material, the addition of the surrendered amount was deleted. [Paras 7, 11, 12]

Addition based on the son's surrender during survey deleted; Revenue's ground rejected.

Final Conclusion: The Revenue's appeal is dismissed: the Tribunal upheld partial allowance of exemption under section 54F with computation under section 54F(1)(b) and confirmed deletion of the addition based on the survey surrender for lack of credible evidence and admissible proof.

Non-compete fee as a capital receipt - restrictive covenant / negative covenant - profits and gains of business or profession - prospective taxability of non-compete fees relating to profession w.e.f. AY 2017-18 - look at the document / not to 'look through' bona fide agreements - procedural fairness - change of head of income without confronting the assessee - principle of consistency

Non-compete fee as a capital receipt - restrictive covenant / negative covenant - prospective taxability of non-compete fees relating to profession w.e.f. AY 2017-18 - look at the document / not to 'look through' bona fide agreements - principle of consistency - Characterisation and taxability of the Rs. 3.20 crore received under the service agreement for exclusive engagement and goodwill in Assessment Year 2014-15. - HELD THAT: - The Tribunal examined the service agreement and the surrounding facts and held that the payments were consideration for undertaking a restrictive (non-compete) covenant and for associated goodwill of the assessee's professional practice. Prior to the amendment extending the chargeability of non-compete receipts in respect of 'profession' (effective from AY 2017-18), amounts received under a negative covenant not to carry on a profession were treated as capital receipts and not taxable as profits and gains of business or profession. The Tribunal applied the established principle that revenue must normally 'look at' the terms of a bona fide agreement and should not 'look through' or disregard the legal character of an agreement without proper reasoning; the AO's and CIT(A)'s conclusions that the receipts were professional income were not supported by adequate analysis. The Tribunal also relied on consistency in treatment across other assessment years where the same receipts were accepted as capital receipts by the revenue. Applying these legal principles and precedents, and noting that the legislative amendment rendering non-compete receipts from profession taxable was only prospective w.e.f. AY 2017-18, the Tribunal concluded that the impugned sum for AY 2014-15 was a capital receipt (non-compete fee) and not chargeable as business/professional income for that year.

The addition of Rs.3.20 crore is deleted as the receipt is a capital non-compete fee not taxable in AY 2014-15; assessment and the CIT(A)'s re-characterisation are set aside.

Procedural fairness - change of head of income without confronting the assessee - Validity of the CIT(A)'s change in the head of income from section 28(va) to section 28(1) without affording the assessee an opportunity of being confronted with the change. - HELD THAT: - The Tribunal found that the CIT(A) altered the basis of taxation by substituting the head of income to profits and gains of business or profession without confronting the assessee with this change during appellate proceedings. The Tribunal treated this procedural omission as a fatal infirmity rendering the CIT(A)'s re-characterisation unsustainable. The absence of proper reasoning to discard the contractual characterization, and the failure to afford the assessee an opportunity to meet the changed case, contributed to setting aside the CIT(A)'s order.

The CIT(A)'s order changing the head of income without confronting the assessee is unsustainable and is set aside.

Final Conclusion: The appeal is allowed: the Tribunal deletes the addition of Rs.3.20 crore for AY 2014-15 holding it to be a capital non-compete receipt (not taxable for that year) and sets aside the orders of the AO and the CIT(A), including the CIT(A)'s change of head without confronting the assessee.

Condonation of delay for filing appeal - revision under Section 263 of the Income Tax Act - assessment order erroneous and prejudicial to the interest of Revenue - initiation of penalty proceedings under Section 270A - limited scrutiny/CASS scope and its effect on AO's enquiry - verification of source of interest income from bank FDs

Condonation of delay for filing appeal - Condonation of delay of 275 days in filing the appeal before the Tribunal. - HELD THAT: - The Tribunal examined the affidavit and explanation that the assessee, acting bona fide, believed no appeal was necessary until the PCIT passed an order under Section 263. The delay was held to be neither intentional nor to secure undue benefit and therefore, in exercise of discretionary powers and in the interest of substantial justice, the delay was condoned and the appeal admitted for adjudication. [Paras 2]

Delay of 275 days condoned and the appeal admitted.

Revision under Section 263 of the Income Tax Act - initiation of penalty proceedings under Section 270A - assessment order erroneous and prejudicial to the interest of Revenue - Whether the PCIT rightly exercised revisionary powers under Section 263 by holding the assessment erroneous and prejudicial to the Revenue for alleged failure to record satisfaction before initiating penalty under Section 270A. - HELD THAT: - The Tribunal analysed the record and noted that the Assessing Officer had issued a notice under Section 274 read with Section 270A calling for explanation as to why penalty should not be levied, which demonstrates that the AO had satisfied himself to the extent required for initiation of penalty proceedings. On this basis the Tribunal concluded that the PCIT erred in holding that the AO had not initiated penalty proceedings with proper satisfaction. The PCIT's exercise of jurisdiction under Section 263 on this ground therefore failed. [Paras 10]

PCIT's revision under Section 263 quashed insofar as it rests on alleged non-initiation/absence of satisfaction for penalty proceedings under Section 270A.

Revision under Section 263 of the Income Tax Act - verification of source of interest income from bank FDs - limited scrutiny/CASS scope and its effect on AO's enquiry - assessment order erroneous and prejudicial to the interest of Revenue - Whether the PCIT was justified in setting aside the assessment under Section 263 on the ground that the AO failed to verify sources of deposits/FDs that generated interest income. - HELD THAT: - The Tribunal observed that the case was selected for limited scrutiny and the AO verified interest reported in Form 26AS, made additions in respect of interest income from the two banks and considered the assessee's explanation that the deposits represented sale proceeds held in a representative capacity. The AO accepted the explanation to the extent reflected in the assessment (making addition only to interest and not to source), indicating the AO had knowledge of and examined the FD-related receipts. Consequently, the Tribunal held that the PCIT's conclusion that the AO failed to verify sources was incorrect and the assumption of jurisdiction by the PCIT on this ground failed. [Paras 11]

PCIT's revision under Section 263 quashed insofar as it rests on alleged non-verification of sources for the bank FDs.

Final Conclusion: The Tribunal condoned the delay, admitted the appeal, and after examining the merits quashed the PCIT's exercise of jurisdiction under Section 263 - holding that the assessment order was neither erroneous nor prejudicial to the Revenue on the grounds advanced - and allowed the appeal.

Disallowance of belated employees' contribution to PF and ESI - processing of returns and adjustments under section 143(1)(a) - interpretation of section 36(1)(va) read with section 2(24)(x) and section 43B - deduction under section 80JJAA - applicability of Chapter VI A deductions in processing under sub clause (v) of section 143(1)(a) - condition of timely filing of return under section 80AC

Disallowance of belated employees' contribution to PF and ESI - processing of returns and adjustments under section 143(1)(a) - interpretation of section 36(1)(va) read with section 2(24)(x) and section 43B - Validity of disallowance of belated remittance of employees' contribution to PF and ESI made while processing the return under section 143(1)(a). - HELD THAT: - The Tribunal examined whether the CPC/AO could disallow the claimed deduction for belated remittances of employees' contribution to PF and ESI while processing the return under section 143(1)(a). The assessee contended that such amounts did not fall within the scope of adjustments permissible under sub clause (iv) of section 143(1)(a). The Tribunal, following and applying the decision of the Hon'ble Supreme Court in Checkmate Services P Ltd v. CIT, held that belated remittance of employees' contributions cannot be allowed as a deduction by virtue of section 36(1)(va) read with section 2(24)(x) and section 43B. Where the tax auditor has reported belated remittances, the incorrect claim is apparent from information in the return and is therefore amenable to adjustment under sub clause (ii) of section 143(1). The Tribunal rejected the assessee's submission that the disallowance was beyond CPC's powers and upheld the disallowance made by processing of the return. [Paras 4, 6, 7, 8]

Disallowance of belated employees' contribution to PF and ESI upheld; grounds on this point rejected.

Deduction under section 80JJAA - applicability of Chapter VI A deductions in processing under sub clause (v) of section 143(1)(a) - condition of timely filing of return under section 80AC - Whether the AO could disallow deduction claimed under section 80JJAA while processing the return under section 143(1)(a) for assessment year 2018-19 on account of belated filing of the return. - HELD THAT: - The Tribunal considered whether Chapter VI A deductions falling under head 'C - deductions in respect of certain income' (including section 80JJAA) could be adjusted during processing of returns under section 143(1)(a) for the assessment year in question. The Finance Act, 2021 amended sub clause (v) of section 143(1)(a) to expressly permit adjustments of Chapter VI A deductions w.e.f. 01.04.2021; prior to that amendment (i.e., for assessment years up to 2020 21) no provision existed in section 143(1)(a) for making such adjustments at processing stage. Section 80AC provides that Chapter VI A(C) deductions are not allowable if the return is not filed on or before the due date. However, because the processing adjustment power under sub clause (v) was introduced only from AY 2021 22 onwards, the AO lacked power to disallow a Chapter VI A(C) deduction at processing stage for AY 2018 19. Applying this temporal and textual distinction, the Tribunal found that the disallowance of deduction under section 80JJAA made while processing the return for AY 2018 19 was erroneous and directed deletion of that addition. [Paras 9, 11, 12]

Addition disallowing deduction under section 80JJAA while processing the return for AY 2018 19 deleted; appeal on this point allowed.

Final Conclusion: The appeal is partly allowed: the disallowance of belated PF and ESI contributions made at processing stage is sustained, while the disallowance of deduction under section 80JJAA made during processing for AY 2018 19 is deleted; consequential adjustments (tax, surcharge, cess, and interest) to follow as per the directions in the order.

Deduction under section 80IA - directory versus mandatory nature of Form No.10CCB - filing of Form No.10CCB before completion of assessment - return filed under section 139(1) and revised return under section 139(5) - precondition of section 80AC relating to filing return on or before due date - intimation under section 143(1) is not a final assessment where supporting certificate is filed before completion

Deduction under section 80IA - directory versus mandatory nature of Form No.10CCB - filing of Form No.10CCB before completion of assessment - intimation under section 143(1) is not a final assessment where supporting certificate is filed before completion - Whether denial of deduction under section 80IA on the ground that Form No.10CCB was not filed along with the return is justified when the Form No.10CCB was filed before completion of assessment proceedings. - HELD THAT: - The Tribunal found as an admitted fact that the assessee filed the return on or before the due date under section 139(1) and that Form No.10CCB was electronically filed on 18.05.2018, well before the Assessing Officer completed assessment by issuing intimation under section 143(1) on 09.03.2019. Relying on the decisions of the Supreme Court in CIT vs. GM Knitting Industries Pvt. Ltd. and the Madras High Court in CIT vs. Ramani Realtors P. Ltd., and following coordinate Tribunal precedents, the Bench held that filing of the certificate in Form No.10CCB is directory in nature and where that certificate is made available to the Assessing Officer before completion of assessment, the claim for deduction under section 80IA cannot be denied solely for non-filing with the original return. Consequently the AO ought to have considered the audit certificate and allowed the deduction claimed. [Paras 7, 9]

Assessee entitled to deduction under section 80IA because Form No.10CCB was filed before completion of assessment; disallowance set aside and AO directed to allow the deduction.

Return filed under section 139(1) and revised return under section 139(5) - precondition of section 80AC relating to filing return on or before due date - Whether the assessee's filing of the original return within the due date and subsequent submission of the audit certificate before completion of assessment satisfies the preconditions of section 80AC so as to entitle the assessee to the deduction under section 80IA. - HELD THAT: - The Tribunal recorded that the original return was filed within the due date under section 139(1) and that the audit certificate was made available to the department before completion of assessment. It adopted the reasoning of coordinate decisions which interpret section 80AC as requiring the return to be filed on or before the due date but not mandating that every supporting claim or certificate must accompany the original return so long as the certificate is filed before completion of assessment (and where a revised return within the statutory window is available, it may be treated as having the effect of an original return for the purpose). On that basis, the conditions of section 80AC were held to be satisfied and the deduction under section 80IA could not be denied. [Paras 7, 8]

Conditions of section 80AC are satisfied by the original return filed on time and by making the audit certificate available before completion of assessment; deduction under section 80IA must be allowed.

Final Conclusion: Appeal allowed: the Tribunal set aside the disallowance of the deduction under section 80IA for Assessment year 2017-18 and directed the Assessing Officer to allow the claim, holding that Form No.10CCB filed before completion of assessment satisfies the statutory requirement.

Penalty under section 271(1)(c) - furnishing inaccurate particulars of income - penalty proceedings independent of assessment proceedings - requirement of mens rea / conscious concealment - Explanation 4 - amount of tax sought to be evaded - reopening under section 147 and notice under section 148

Penalty under section 271(1)(c) - penalty proceedings independent of assessment proceedings - furnishing inaccurate particulars of income - Explanation 4 - amount of tax sought to be evaded - requirement of mens rea / conscious concealment - Whether the penalty imposed under section 271(1)(c) on the assessee for Assessment Year 2013-14 was justified - HELD THAT: - The Tribunal held that penalty proceedings under section 271(1)(c) are distinct from assessment/quantum proceedings and the fact of an addition in assessment does not ipso facto sustain a penalty; the revenue must prove, by cogent material, that the amount assessed represents income concealed or that inaccurate particulars were furnished and that there was animus or conscious concealment. Applying the principles in Reliance Petroproducts and the Gujarat High Court's exposition in National Textiles, and relying on the coordinate bench reasoning in DCIT v. Kulwant Sing concerning Explanation 4, the Tribunal observed that Explanation 4 focuses the computation of penalty on the tax on the resultant addition to taxable income (the "tax sought to be evaded"). Where the assessee, in response to reopening under section 148, treated previously claimed exempt capital gains as income, paid the resultant tax and the assessment under section 143(3) r.w.s. 147 was completed accepting the returned income without further additions, there was no material to infer conscious concealment or that tax was sought to be evaded. Consequently, the AO could not sustain penalty merely because an amount was assessed; absent positive material showing concealment or falsity of explanation, penalty could not be levied. On these grounds the Tribunal set aside the CIT(A)'s confirmation and directed deletion of the penalty. [Paras 10]

Penalty under section 271(1)(c) deleted and the assessee's appeal allowed.

Final Conclusion: The Tribunal set aside the confirmation of penalty under section 271(1)(c) for AY 2013-14, directed deletion of the penalty, and allowed the assessee's appeal.

Penalty for concealment of income or furnishing inaccurate particulars - Requirement to record satisfaction before initiating penalty proceedings - Validity of show cause notice for levy of penalty - Exercise of jurisdictional power in imposing penalty under Section 271(1)(c)

Penalty for concealment of income or furnishing inaccurate particulars - Requirement to record satisfaction before initiating penalty proceedings - Validity of show cause notice for levy of penalty - Validity of penalty imposed under Section 271(1)(c) where AO did not record satisfaction as to whether income was concealed or whether inaccurate particulars were furnished and the show cause notice did not specify the charge. - HELD THAT: - The assessment order recorded an addition but did not record the AO's satisfaction as to which limb of Section 271(1)(c) was attracted; the AO referred to initiation of penalty proceedings under both clauses but the penalty order proceeded on the basis of concealment of income. The Tribunal noted the settled legal requirement that the Assessing Officer must record satisfaction while completing the assessment as to whether the assessee concealed income or furnished inaccurate particulars, and only thereafter issue a proper show cause notice and levy penalty under the appropriate limb. Reliance was placed on the principle in Samson Perinchery that initiation and levy must correspond and that absence of a proper show cause notice pointing to the specific charge vitiates the penalty. Applying these principles to the facts, the Tribunal held that the basic condition for levy of penalty was not fulfilled, the penalty proceedings suffered from non-exercise of jurisdictional power, and the conditions of Section 271(1)(c) were not attracted. [Paras 7, 8]

Penalty under Section 271(1)(c) deleted.

Final Conclusion: The appeal is allowed; the penalty levied under Section 271(1)(c) is set aside for failure to record requisite satisfaction and for defective initiation/notice, and the addition/penalty order is deleted.

Arm's length principle - Price penetration adjustment - Transfer pricing adjustment - Ad-hoc determination of arm's length price - second proviso to section 92C(2) - tolerance band - Jurisdictional limits on Transfer Pricing Officer's power under Section 92C(1)

Price penetration adjustment - Ad-hoc determination of arm's length price - Arm's length principle - Transfer pricing adjustment - second proviso to section 92C(2) - tolerance band - Jurisdictional limits on Transfer Pricing Officer's power under Section 92C(1) - Validity of the ad-hoc addition of Rs. 17,10,15,208 made by the TPO/AO by treating the assessee's price penetration adjustment as income - HELD THAT: - The Tribunal found no dispute as to the method and margins used for benchmarking; the sole contention related to the ad-hoc treatment of the assessee's price penetration adjustment as taxable income. The assessee's benchmarking table demonstrated that its margins, without the price penetration adjustment, fell within the prescribed tolerance band under the second proviso to section 92C(2) and were therefore at arm's length. The Revenue did not controvert the table or produce material to rebut that showing. Relying on established precedents that an ad-hoc determination of arm's length price by the TPO de hors the mandate of section 92C(1) is unsustainable, the Tribunal held that the TPO/AO exceeded its jurisdiction in making the ad-hoc addition. In consequence, the transfer pricing adjustment made by the TPO in respect of the price penetration adjustment was deleted. As the deletion disposes of the main dispute, other grounds became infructuous and were not adjudicated on merits. [Paras 10, 11, 12]

The ad-hoc transfer pricing addition treating the price penetration adjustment as income is deleted and the addition of Rs. 17,10,15,208 is set aside.

Final Conclusion: The appeal is allowed; the transfer pricing addition arising from the price penetration adjustment is deleted and the assessment is altered accordingly, rendering the remaining grounds infructuous.

Weighted deduction under section 35(2AB) - recognition/approval by Department of Scientific and Industrial Research (DSIR) - relevance of cut-off/validity date in DSIR approval to entitlement for weighted deduction - effect of date of application for DSIR recognition on availability of deduction for the relevant previous year - evidentiary sufficiency for claiming deduction under section 35(2AB) - disallowance for late deposit of employees' contribution (EPF) under section 36(1)(va)

Weighted deduction under section 35(2AB) - recognition/approval by Department of Scientific and Industrial Research (DSIR) - relevance of cut-off/validity date in DSIR approval to entitlement for weighted deduction - effect of date of application for DSIR recognition on availability of deduction for the relevant previous year - evidentiary sufficiency for claiming deduction under section 35(2AB) - Assessee entitled to weighted deduction under section 35(2AB) for F Y 2011-12 (AY 2012-13) despite DSIR approval mentioning a cut-off date, and the assessing officer's adverse finding on lack of evidence is not sustained. - HELD THAT: - The Tribunal followed precedents of the jurisdictional High Court and other High Courts holding that for the purpose of section 35(2AB) the mere existence of DSIR tax approval (Form 3CM) is the relevant compliance and the cut-off/validity date stated in the approval does not preclude claim for weighted deduction for the previous year in which the application was filed. On the facts the assessee applied for DSIR approval on 29.03.2012 and the Form 3CM records approval effective from 16.03.2012; the Tribunal held that the approval relates back to the beginning of the financial year in which the application was filed and therefore weighted deduction is allowable for F Y 2011-12. The Tribunal further examined the assessing officer's conclusion that the assessee had not produced supporting ledger/vouchers and accepted the appellate record (including submissions of 22.03.2016 and ledgers produced earlier) as sufficient to satisfy the other statutory conditions and evidentiary requirements for claiming the deduction, concluding there was no error in the CIT(A)'s factual findings warranting interference. [Paras 3, 9, 10, 11]

Weighted deduction under section 35(2AB) allowed for F Y 2011-12 (AY 2012-13); the assessing officer's disallowance is set aside.

Disallowance for late deposit of employees' contribution (EPF) under section 36(1)(va) - Deletion of addition made on account of late deposit of employees' contribution to Provident Fund was considered in the light of binding higher court authority. - HELD THAT: - The respondent conceded that the issue on late deposit of employees' contribution is governed by the subsequent Supreme Court authority and is no longer open in favour of the assessee. The Tribunal noted the concession and the applicable precedent and recorded the outcome accordingly. [Paras 6, 12]

The addition on account of late deposit of employees' contribution was addressed in accordance with the cited higher authority and the related appellate conclusion recorded.

Final Conclusion: The Revenue's appeal is allowed partly: the Tribunal upholds the CIT(A)'s allowance of weighted deduction under section 35(2AB) for F Y 2011-12 (AY 2012-13) and records the outcome on the issue of late PF deposit in accordance with the applicable higher court authority.

Requirement of import licence from DGFT for mutilated or unserviceable textile waste not in continuous running length - scope of Board Circular No. 20/2011 Cus. dated 15.4.2011 (exemption limited to trim/fabric waste in continuous running length with maximum width restriction) - classification of mutilated textile waste under CTH 63109020 - re determination of assessable value under Rule 5 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - confiscation with option of redemption and imposition/reduction of fine and penalty

Requirement of import licence from DGFT for mutilated or unserviceable textile waste not in continuous running length - scope of Board Circular No. 20/2011 Cus. dated 15.4.2011 (exemption limited to trim/fabric waste in continuous running length with maximum width restriction) - classification of mutilated textile waste under CTH 63109020 - Imported cut fabric/mutilated worn-out garments which are not in continuous running length and are unserviceable fall outside the benefit of Board Circular No. 20/2011 Cus. and require an import licence from DGFT; such goods are classifiable under CTH 63109020. - HELD THAT: - On examination the goods in the two Bills of Entry were found to be cutting waste/mutilated woven worn out garments not completely in running length and cut into small pieces which could not be used for manufacture of chindi rugs or for pulling of fabrics. Circular No. 20/2011 Cus. exempts trim cutting waste or fabric trims of continuous running length subject to a maximum width restriction of ten inches. Goods not in continuous running length and which are totally unserviceable and beyond repair therefore do not fall within that circular and must be imported under licence from DGFT. The Tribunal followed earlier authority in Anisha Impex v. Commissioner of Customs, Tuticorin (Tri. Chennai) holding similarly, and applied that reasoning to the factual findings on record to conclude that the goods are classifiable as unserviceable/mutilated textile waste under CTH 63109020 and are restricted imports. [Paras 7]

Benefit of Circular No. 20/2011 Cus. not available; import licence required and classification under CTH 63109020 upheld.

Re determination of assessable value under Rule 5 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - The re determination of the assessable value of the goods was justified and the lower authorities correctly re assessed the value under the Valuation Rules. - HELD THAT: - The original authority re determined the value after noting that the declared value was significantly lower than comparable clearances and the appellant did not produce evidence to show that the imported goods were dissimilar to the comparators relied upon. The appellate authority examined the matter and found no material to displace the re determination. In the absence of documents or samples from the appellant demonstrating non comparability, the Tribunal upheld the re determination of value under Rule 5 as correctly made by the authorities below. [Paras 7]

Re determination of assessable value under Rule 5 upheld.

Confiscation with option of redemption and imposition/reduction of fine and penalty - Confiscation with option of redemption and imposition of fine and penalty were upheld on merits, but the quantum of redemption fine and penalty was modified by the Tribunal. - HELD THAT: - The adjudicating and appellate authorities upheld confiscation and imposed fine and penalty in view of restricted importation and mis declaration/undervaluation. The Tribunal agreed with the merits of the impugned order but, exercising its corrective jurisdiction as to quantum, found the redemption fine and penalty excessive in the facts and circumstances and reduced them. No ground was found to set aside the confiscation or the imposition of penalty in principle. [Paras 8]

Confiscation and penalties upheld; redemption fine and penalty reduced to Rs.2,00,000 (fine) and Rs.1,00,000 (penalty) respectively.

Final Conclusion: The appeal is disposed of by upholding the impugned order in substance: the imported cut/mutilated fabrics not in continuous running length are outside Circular No. 20/2011 Cus., require DGFT licence and are classifiable under CTH 63109020; the Rule 5 re determination of value is sustained; confiscation and penalties are affirmed but the Tribunal moderates the monetary relief by reducing the redemption fine and penalty to the amounts stated.

Maintainability of Section 95 of the Insolvency and Bankruptcy Code against a personal guarantor - definition of corporate person excluding financial service provider and its modification by notification under Section 227 - scope of Notification issued under Section 227 bringing categories of financial service providers within the insolvency framework - asset size as per last audited balance sheet as the relevant jurisdictional criterion under the Notification - interpretation of 'asset size' to mean total assets as disclosed in the balance sheet (current and non-current) - jurisdictional fact and continuity of jurisdiction during pendency of proceedings - revival of dismissed company petitions and remand to the Adjudicating Authority for further proceedings

Maintainability of Section 95 of the Insolvency and Bankruptcy Code against a personal guarantor - scope of Notification issued under Section 227 bringing categories of financial service providers within the insolvency framework - asset size as per last audited balance sheet as the relevant jurisdictional criterion under the Notification - interpretation of 'asset size' to mean total assets as disclosed in the balance sheet (current and non-current) - Company Petitions filed under Section 95 against the personal guarantors were maintainable because Jumbo Finvest (India) Ltd. fell within the Notification dated 18.11.2019 when its last audited balance sheet (year ending 31.03.2020) was read correctly. - HELD THAT: - The Tribunal held that Notification dated 18.11.2019 (issued under Section 227) brings within the insolvency code non-banking financial companies only if they have an asset size of Rs.500 crore or more as per the last audited balance sheet. The Adjudicating Authority erred in confining 'asset size' to loan receivables (Note 17) and ignoring the total assets (current and non-current) disclosed under the heading 'Assets' in the audited balance sheet for year ending 31.03.2020. 'Asset size' in the Notification must be interpreted as total assets and, read thus, the last audited balance sheet showed the entity met the Rs.500 crore threshold. Consequently, the foundational basis for the Adjudicating Authority's dismissal - that JFIL was not a Corporate Debtor because it was excluded as an FSP - was incorrect, and the Section 95 petitions were properly maintainable on the date of filing. [Paras 12, 33, 34]

The Adjudicating Authority erred in restricting 'asset size' to loan receivables; the Section 95 petitions are maintainable and the Adjudicating Authority's order allowing the I.A.s is set aside.

Jurisdictional fact and continuity of jurisdiction during pendency of proceedings - jurisdictional effect of subsequent audited balance sheet reducing asset size below threshold - A subsequent reduction in asset size reflected in a later audited balance sheet does not divest the Adjudicating Authority of jurisdiction where, on the date of filing, the last audited balance sheet satisfied the Notification threshold; jurisdiction must be assessed with reference to the date when initiation was permissible. - HELD THAT: - The Tribunal examined whether a later audited balance sheet showing asset size below Rs.500 crore would strip the Adjudicating Authority of jurisdiction after proceedings had been validly initiated on the basis of an earlier audited balance sheet meeting the threshold. Citing the object of the Code (speedy resolution and preservation of value) and authorities on jurisdictional facts, the Tribunal concluded that jurisdiction for initiating insolvency under the Notification is determined by the last audited balance sheet available when the application can be filed. The natural diminution of assets during pendency cannot be allowed to defeat the insolvency process; otherwise the statutory scheme aimed at timely resolution would be frustrated. Therefore, a subsequent audited balance sheet showing a reduced asset size does not retrospectively oust jurisdiction where the threshold was satisfied at the relevant time. [Paras 15, 29]

Loss of asset size below the threshold after filing does not oust jurisdiction; the Adjudicating Authority retained jurisdiction to proceed where the last audited balance sheet at the time of filing met the Notification's threshold.

Revival of dismissed company petitions and remand to the Adjudicating Authority for further proceedings - The Company Petitions dismissed by the Adjudicating Authority were liable to be revived and remitted for adjudication in accordance with law. - HELD THAT: - Because the Adjudicating Authority's principal finding - that JFIL did not fall within the Notification's ambit - was founded on an incorrect appraisal of the audited balance sheet, the Tribunal found the dismissals unsustainable. The appropriate relief was to set aside the Adjudicating Authority's order dated 22.02.2022 and revive the Company Petitions, directing that they be proceeded with by the Adjudicating Authority in accordance with law. [Paras 34]

Order dated 22.02.2022 is set aside; the Company Petitions are revived and remitted to the Adjudicating Authority for further proceedings in accordance with law.

Final Conclusion: All Appeals are allowed. The impugned order of the Adjudicating Authority dated 22.02.2022 is set aside; the Company Petitions under Section 95 are held maintainable (having satisfied the Notification criterion on the date of filing) and are revived before the Adjudicating Authority to be proceeded with in accordance with law.

Twin conditions under Section 45 of the PMLA - proceeds of crime (as defined under Section 3 of the PMLA) - beneficial owner / effective control of a juridical person - admissibility and evidentiary weight of statements recorded under Section 50 of the PMLA - lifting the corporate veil where companies are used as a fac ade for illicit activity - continuing nature of the process or activity connected with proceeds of crime - bail discretion under Section 439 Cr.P.C. read with Section 45 PMLA - relation between predicate offence (disproportionate assets) and money laundering proceedings - Article 20(2) - double jeopardy in the context of separate offences

Twin conditions under Section 45 of the PMLA - bail discretion under Section 439 Cr.P.C. read with Section 45 PMLA - Whether the petitioners satisfy the twin conditions under Section 45 PMLA and are entitled to grant of bail. - HELD THAT: - The court applied the established test under Vijay Madanlal Choudhary to assess bail under Section 45, observing that the court must be satisfied on substantial probable cause that the accused is not guilty of the offence and is not likely to commit an offence while on bail. The judge emphasised that this requires consideration of broad probabilities and that "reasonable grounds" is something more than prima facie. After reviewing the material on record, including the pattern of accommodation entries, the role attributed to the petitioners in procuring and receiving those entries, and their conduct in custody, the court found that the petitioners failed to demonstrate broad probabilities that they are not guilty or that they would not offend if released. The court also noted that conditions under Section 439 Cr.P.C. remain relevant and that no illegality or perversity was shown in the trial court's rejection of bail. [Paras 68, 69, 70, 75, 81]

Petitioners have failed to satisfy the twin conditions under Section 45 PMLA and the conditions under Section 439 Cr.P.C.; bail is refused.

Proceeds of crime (as defined under Section 3 of the PMLA) - beneficial owner / effective control of a juridical person - lifting the corporate veil where companies are used as a fac ade for illicit activity - Whether the sums received as accommodation entries in the companies can be attributed as proceeds of crime to the petitioners by reason of de facto control / beneficial ownership. - HELD THAT: - The court analysed the statutory definition of proceeds of crime and beneficial owner and applied the principle that a juridical personality may be disregarded where the corporate form is used as a sham to conceal illicit activity. Having considered statements of witnesses, the pattern of repeated accommodation entries through the same operators, appointment of a common auditor at the petitioner's instance, the changing shareholdings and documentary material, the court concluded on broad probabilities that the companies were controlled and managed by the principal petitioner and that attribution of the accommodation entries to the petitioners was justified at this stage. The court held that physical possession of assets is not essential for money laundering and that the question of detailed probative value is for trial. [Paras 63, 74, 76, 79, 80]

On the material before it, the court found reasonable grounds to attribute the accommodation entries as proceeds of crime to the petitioners and to infer de facto control/beneficial ownership of the companies.

Admissibility and evidentiary weight of statements recorded under Section 50 of the PMLA - continuing nature of the process or activity connected with proceeds of crime - Whether statements recorded under Section 50 PMLA are admissible and what weight they may carry at the bail stage. - HELD THAT: - The court reiterated that statements under Section 50 are recorded in a judicial proceeding, are signed, and carry greater weight than statements under Section 161 Cr.P.C.; they are admissible evidence. While the court must not conduct a mini trial at the bail stage, it may examine such statements to assess broad probabilities. The court relied on multiple Section 50 statements (including those of entry operators, auditor and co accused) to support its view that the petitioners were implicated in the scheme of accommodation entries and that such material could be relied upon to refuse bail. [Paras 65, 67, 70, 74, 75]

Section 50 statements are admissible and can be relied upon at the bail stage to assess broad probabilities; they support the court's conclusion to refuse bail.

Relation between predicate offence (disproportionate assets) and money laundering proceedings - Article 20(2) - double jeopardy in the context of separate offences - Whether prosecution under PMLA for laundering proceeds allegedly derived from the predicate offence amounts to double jeopardy or is otherwise impermissible because the predicate offence was/was being prosecuted. - HELD THAT: - The court observed that money laundering under PMLA is an independent offence distinct from the scheduled/predicate offence; the overlap of facts does not automatically attract Article 20(2) protection. The petitioners' contention that they are being tried twice was held to be premature at the bail stage because no punishment under PMLA or under the PC Act had been imposed and separate prosecutions may legitimately arise from the same facts where different ingredients are involved. The court therefore rejected the double jeopardy plea as an argument for bail. [Paras 5, 77]

The plea of double jeopardy under Article 20(2) is premature and does not justify grant of bail at this stage.

Income Disclosure Scheme (IDS) and consequent findings in tax proceedings - use of ancillary administrative findings in criminal bail assessment - Whether rejection of IDS declarations and related administrative/tax findings preclude treating the declared amounts as the petitioners' funds or otherwise entitle petitioners to bail. - HELD THAT: - The court noted that the Income Tax authorities had rejected IDS declarations and such rejection had been upheld in appellate proceedings; the ED placed reliance on these findings as corroborative of the prosecution case that the amounts declared by co accused belonged to the principal petitioner. While recognising arguments about distinct forums and procedures, the court treated the tax findings and related documentary material as part of the overall material demonstrating the pattern of accommodation entries and complicity, and found that they did not favour grant of bail on broad probabilities. [Paras 39, 40, 70, 71]

Tax/IDS findings and related material were appropriately considered as part of the cumulative material; they do not support grant of bail.

Final Conclusion: After considering statutory definitions, the admitted receipt of accommodation entries through Kolkata based operators during the check period, Section 50 statements and ancillary tax findings, the court found on broad probabilities that the petitioners are implicated in the laundering of proceeds and have not satisfied the twin conditions for bail under Section 45 PMLA (and the tests under Section 439 Cr.P.C.); the bail applications are accordingly dismissed.

Search and seizure under Section 17 PMLA - Reasons to believe recorded in writing - Pre authorisation and post authorisation stages under Section 17 - Forwarding of recorded reasons and material to Adjudicating Authority under subsection (2)

Search and seizure under Section 17 PMLA - Reasons to believe recorded in writing - Pre authorisation and post authorisation stages under Section 17 - Validity of the search and seizure conducted on 17.10.2022 in the premises of M/s. Musaddilal Gems and Jewels (India) Pvt. Ltd. under Section 17 of the PMLA - HELD THAT: - The Court examined the record produced in sealed cover and the affidavit explanations filed by the Additional Director and the Deputy Director. The investigating officer prepared a detailed note dated 16.10.2022 setting out information on which reasons arose to believe that the company was in possession of proceeds of crime and related records; the Deputy Director agreed to the note and the Additional Director recorded his satisfaction on 16.10.2022. On that basis a search authorisation/warrant was issued on 17.10.2022 authorising subordinate officers to conduct search and seizure. The appellate court held that the Single Judge erred in concluding that no reasons to believe had been recorded by the Additional Director and in treating the reasons recorded by the Deputy Director as undated and operative; the record demonstrates a proper pre authorisation stage (formation and recording of reasons to believe) on 16.10.2022 and a post authorisation step (issuance of warrant) on 17.10.2022. The Court noted the requirement under Section 17 that reasons to believe must be recorded in writing before authorisation and that the authorised officer must forward the recorded reasons and material to the Adjudicating Authority; the materials (reasons, search warrant, panchanama, FIR, charge sheet and ECIR) were forwarded to the Adjudicating Authority on 21.10.2022. For these reasons the Court concluded that the search and seizure operation was carried out in conformity with the procedural requirements of Section 17 and that the Single Judge's order setting aside the action was unsustainable. [Paras 27, 31, 32]

Single Judge's conclusion that no reasons to believe were recorded by the Additional Director was misplaced; the reasons were recorded on 16.10.2022 and the search warrant issued on 17.10.2022, and the order setting aside the search and seizure is set aside.

Final Conclusion: The intra court appeal is allowed; the order of the Single Judge dated 11.01.2023 quashing the search and seizure is set aside, and there shall be no order as to costs.

Proceeds of crime - offence of money-laundering - mens rea - inherent jurisdiction under Section 482 of the Code of Criminal Procedure - abuse of process - attachment under the Prevention of Money Laundering Act - commercial outstanding arising from contractual/forex fluctuation not constituting proceeds of crime

Inherent jurisdiction under Section 482 of the Code of Criminal Procedure - abuse of process - Maintainability of the second quash petition filed after an earlier Criminal Petition was dismissed and whether the High Court may exercise inherent jurisdiction to entertain it under changed circumstances. - HELD THAT: - The Court held that the second quash petition is maintainable notwithstanding dismissal of the earlier petition. The earlier petition was dismissed while investigation was pending and did not decide the substantive question whether the alleged outstanding amounts constituted proceeds of crime. Subsequent attachment of properties by the Enforcement Directorate furnished a changed circumstance sufficient to entertain the present petition. Section 362 Cr.P.C. was held not to bar the second petition in light of the principle that inherent jurisdiction may be exercised to prevent abuse of process and to secure the ends of justice. The Court relied upon the established scope of inherent powers to quash proceedings where continuation would be an abuse of process or where real and substantial justice requires intervention. [Paras 11, 14, 30]

The second quash petition is maintainable and may be entertained under the High Court's inherent jurisdiction.

Proceeds of crime - offence of money-laundering - mens rea - commercial outstanding arising from contractual/forex fluctuation not constituting proceeds of crime - Whether an outstanding liability arising under an MOU on account of dollar rupee (forex) fluctuation amounts to proceeds of crime and thereby attracts prosecution under the offence of money laundering. - HELD THAT: - The Court held that to attract the offence of money laundering, the property must be "derived or obtained" as a result of criminal activity relating to a scheduled offence. The element of criminal activity (and ordinarily mens rea) is integral to the definition of proceeds of crime. A mere civil/commercial accrual or outstanding arising from an agreed contractual mechanism for forex fluctuation does not demonstrate that property was derived from criminal activity. In the present case the alleged outstanding resulted from agreed terms in an MOU and reflected loss due to currency devaluation; MMTC had supplied gold against payments and collected margin; there was no material to show that the petitioner obtained property as a consequence of criminal activity or that there was concealment, possession or acquisition of proceeds of crime. To treat every commercial outstanding as proceeds of crime would improperly convert civil disputes into criminal prosecutions. Absent a finding that the outstanding was generated by criminal activity, Section 3 of the PMLA could not be invoked. [Paras 17, 21, 23, 28, 29]

The outstanding arising from the MOU on account of forex fluctuation does not constitute proceeds of crime; therefore prosecution under the offence of money laundering is not sustainable on that basis.

Attachment under the Prevention of Money Laundering Act - inherent jurisdiction under Section 482 of the Code of Criminal Procedure - Whether attachment of properties by the Enforcement Directorate after institution of earlier proceedings justified entertaining the present petition and warranted quashing of the ECIR. - HELD THAT: - The Court observed that attachment under the Act requires a reasoned belief by the authority that proceeds of crime are likely to be concealed or dissipated. The subsequent attachment in this case was a material change in circumstances after the earlier petition was dismissed when investigation was pending. While acknowledging the ED's investigatory entitlement to probe suspected offences, the Court held that attachment alone does not immunise continued investigation where the foundational element of proceeds of crime is absent. Given the absence of any demonstration that the outstanding was proceeds of crime, the attachment did not preclude the High Court from exercising its inherent jurisdiction to quash the ECIR to prevent abuse of process. [Paras 10, 11, 26]

The fact of attachment by the ED rendered the present petition maintainable, but the attachment did not preclude quashing of the ECIR where the alleged outstanding is not proceeds of crime.

Inherent jurisdiction under Section 482 of the Code of Criminal Procedure - abuse of process - Whether continuation of investigation in ECIR/05/HYZO/2014 should be permitted where after full consideration the alleged accrual is civil in nature and no property has been shown to be derived from criminal activity. - HELD THAT: - Applying the principles that the Court may exercise its inherent jurisdiction to prevent abuse of process and to secure the ends of justice, and having found that no property was shown to be derived from criminal activity and that the alleged liability was a commercial loss arising from agreed forex terms, the Court concluded that continuing criminal investigation served no legitimate purpose and would amount to an abuse of process. The Court noted authorities cautioning judicial restraint at the investigatory stage but held that where investigation is groping without foundation after a long period and the essential ingredients of the PMLA are absent, dismissal/quashing is appropriate. [Paras 26, 29, 30]

Continuation of the investigation in ECIR/05/HYZO/2014 is barred as an abuse of process and the proceedings are liable to be quashed.

Final Conclusion: The High Court, exercising its inherent jurisdiction, quashed the proceedings in ECIR/05/HYZO/2014. The Court held that the alleged outstanding arising from the contractual MOU on account of forex fluctuation does not amount to proceeds of crime and that continuation of criminal investigation on that basis would be an abuse of process; the second quash petition was maintainable due to changed circumstances (attachment) and the ECIR was accordingly quashed.

Renting of immovable property - service provider - clubbing of income of co-owners - association of persons - exemption under Notification No. 6/2005 ST - threshold for exemption

Renting of immovable property - service provider - clubbing of income of co-owners - association of persons - Whether co-owners who jointly own immovable property and execute individual lease agreements with the same lessee are to be treated as separate service providers or their receipts may be clubbed as an "association of persons" for levy of service tax. - HELD THAT: - The Tribunal found that the five appellants each own distinct shares in the property and entered into lease agreements in their individual capacities with the service recipient, Reliance Industries Limited. Rent was paid by the lessee to each appellant separately. There was no legal entity such as an association of persons or body corporate on the facts. Consequently, each co-owner is an independent service provider for the taxable service of renting of immovable property, and liability (if any) must be determined in respect of each individual co-owner rather than by aggregating the receipts of all co-owners. The Tribunal relied on its earlier decisions dealing with identical facts and accepted the view that co-owners cannot be treated as a single taxable entity merely because the property is jointly owned; identification of the service provider is determinative for levy of service tax. [Paras 4]

Co-owners are separate service providers; receipts of each co-owner cannot be clubbed and treated as tax liability of a single entity.

Exemption under Notification No. 6/2005 ST - threshold for exemption - Whether the rent received by each individual co-owner falls within the exemption threshold under Notification No. 6/2005 ST and hence is not liable to service tax. - HELD THAT: - The Tribunal noted that, on the facts, the rent paid to each appellant (being their respective share) was within the exemption limit prescribed by Notification No. 6/2005 ST for the relevant period. Applying the principle that each co-owner is a separate service provider, the Tribunal held that if an individual co-owner's receipts fall below the exemption threshold, no service tax liability arises for that individual. The Tribunal also observed that earlier decisions on identical facts had applied the Notification in favour of co-owners whose individual receipts were below the prescribed limit. [Paras 4, 5]

Each appellant's share of rent is within the exemption threshold under Notification No. 6/2005 ST; therefore, no service tax liability arises on the appellants.

Final Conclusion: The impugned orders demanding service tax by clubbing the rent of jointly owned property are set aside; the appeals are allowed on the ground that each co owner is a separate service provider and, on the facts, the individual receipts fall within the exemption under Notification No. 6/2005 ST.

Taxable value of coaching services - exclusion of study material / abatement under exemption notification - imposition of penalty under Section 78 of the Finance Act, 1994 - benefit of Section 80 of the Finance Act - reasonable cause defence - registration under Section 69 and Rule 4 of the Service Tax Rules - deemed registration on non-issuance within seven days

Taxable value of coaching services - exclusion of study material / abatement under exemption notification - Value of study material supplied by the coaching centre is not includible in the taxable value of coaching service and the assessee is entitled to abatement under Notification No. 12/2003-ST. - HELD THAT: - The Tribunal noted that the question of excluding the cost of study material from the taxable value of coaching services has been authoritatively decided by earlier precedents, including decisions of the Tribunal and the Supreme Court in respect of the same legal point. Applying those precedents, the Tribunal held that the Commissioner (Appeals) was correct in extending the benefit of abatement available under Notification No. 12/2003-ST and accordingly dismissed the Department's appeal on this issue. [Paras 11]

Demand insofar as it related to inclusion of value of study material in taxable value of coaching service is set aside; benefit of abatement under the Notification allowed.

Imposition of penalty under Section 78 of the Finance Act, 1994 - benefit of Section 80 of the Finance Act - reasonable cause defence - registration under Section 69 and Rule 4 of the Service Tax Rules - deemed registration on non-issuance within seven days - Penalty under Section 78 was rightly imposed and the assessee is not entitled to relief under Section 80 as there was no reasonable cause for non-deposit of collected service tax. - HELD THAT: - The Tribunal examined the assessee's attempts to obtain registration and the statutory scheme under Section 69 and Rule 4 (including the deeming provision that registration is deemed granted if not issued within seven days). The Tribunal found that after the initial application the assessee did not pursue follow-up for more than a year, continued to collect service tax, and did not file ST-3 returns; urgency to regularize registration was shown only after departmental investigation commenced. On these facts the Tribunal concluded that the failure to deposit collected tax was not for a reasonable cause within the meaning of Section 80 and that imposition of penalty under Section 78 was justified. Accordingly the assessee's appeal against penalty was dismissed. [Paras 12, 13, 14]

Penalty under Section 78 upheld; benefit under Section 80 denied; appeal against penalty dismissed.

Final Conclusion: The Tribunal dismissed the Departmental appeal on the inclusion of study material in taxable value, granting abatement under Notification No. 12/2003-ST, but dismissed the assessee's appeal against penalty - upholding imposition of penalty under Section 78 and refusing relief under Section 80 for the disputed tax periods.

Time bar for refund claims under Section 102(3) of the Finance Bill, 2016 - non entertainment of refund filed after statutory period - prohibition on re filing same refund after earlier rejection under specific statutory provision - misrepresentation and concealment of material facts before appellate authorities - imposition of costs for frivolous or misleading conduct

Time bar for refund claims under Section 102(3) of the Finance Bill, 2016 - non entertainment of refund filed after statutory period - prohibition on re filing same refund after earlier rejection under specific statutory provision - Whether the refund claim was time barred under the six month limitation prescribed by Section 102 of the Finance Bill, 2016 and whether a subsequent re filed claim could be entertained after earlier rejection on limitation grounds. - HELD THAT: - The Tribunal held that Section 102(3) prescribes a six month period from the date the Finance Bill, 2016 received Presidential assent for filing refund claims. The President's assent was received on 15/05/2016, mandating filing on or before 14/11/2016. A refund filed after that statutory period cannot be entertained by the Adjudicating Authority. The Adjudicating Authority correctly rejected the earlier refund application as beyond six months; the appellant's later attempt to obtain the same refund by re characterising it outside Section 102 or under a general provision after such rejection was impermissible. The Tribunal therefore found no merit in the appeal against the limitation based rejection and dismissed the appeal. [Paras 4, 5, 6]

Refund claim was time barred under Section 102(3) and the re filed claim for the same amount could not be entertained after earlier rejection; appeal dismissed.

Misrepresentation and concealment of material facts before appellate authorities - imposition of costs for frivolous or misleading conduct - Whether the appellant concealed material facts and whether costs should be imposed for such conduct. - HELD THAT: - The Tribunal recorded that the appellant did not disclose the earlier refund claim and its rejection to the Commissioner (Appeals) or to the Tribunal, and that the appellant's belated assertion of having dispatched the first claim by Speed Post lacked supporting evidence and contradicted the appellant's own recorded statement in the proceedings before the Adjudicating Authority. The Tribunal found this constituted concealment and an attempt to obtain the refund by misleading the authorities. Considering the seriousness of the conduct, the Tribunal imposed costs to reflect its displeasure and to deter similar conduct. [Paras 7, 8]

Appellant concealed material facts and misled authorities; cost of Rs.10,000 imposed to be deposited in the Prime Minister's Relief Fund and proof of deposit to be furnished to the CESTAT Registry.

Final Conclusion: Appeal dismissed on merits as the refund claim was time barred under Section 102(3) of the Finance Bill, 2016; appellant found to have concealed material facts and misled authorities, and directed to pay costs to the Prime Minister's Relief Fund with compliance directed to be shown to the Tribunal registry.

Manufacture - processes incidental or ancillary to completion of a manufactured product - making goods marketable - CENVAT Credit admissibility on duty-paid inputs - duty-paid nature of goods as decisive for credit

Manufacture - processes incidental or ancillary to completion of a manufactured product - making goods marketable - CENVAT Credit admissibility on duty-paid inputs - duty-paid nature of goods as decisive for credit - Whether the processes of grinding, sizing and packaging of duty-paid Ferro Silicon cake in the appellant's factory constitute 'manufacture' and whether CENVAT credit on such inputs is admissible. - HELD THAT: - The Tribunal found as an undisputed fact that the appellant received Ferro Silicon cake in an unfinished state on payment of appropriate central excise duty, undertook grinding, sizing and packing in its factory, and thereafter cleared the resultant goods on payment of duty. Applying Section 2(f) of the Central Excise Act, 1944, which treats as 'manufacture' any process incidental or ancillary to completion of a manufactured product and processes necessary to make goods marketable, the Tribunal held that sizing, grinding and packaging were essential processes to render the Ferro Silicon cake marketable and to meet customers' specifications. The Department did not dispute payment of duty on the finished goods cleared by the appellant. Reliance was placed on precedents that a rightfully eligible CENVAT credit cannot be denied on mere technicalities where the duty paid nature of the goods is established. On these grounds the Tribunal concluded that the activities carried out amounted to 'manufacture' and that denial of CENVAT credit was unwarranted. [Paras 6, 7, 9]

Processes of grinding, sizing and packaging undertaken by the appellant amount to 'manufacture' and CENVAT credit on the duty paid Ferro Silicon cake is admissible; the impugned order is set aside and the appeal is allowed.

Final Conclusion: Appeal allowed; the order dated 29/06/2010 is set aside as the Tribunal held that grinding, sizing and packaging amounted to 'manufacture' and that CENVAT credit on the duty paid input was rightly availed by the appellant.

Negative list - enforceability of Office Memorandum upon notification - interpretation of excise classification - retrospective effect - cause of action

Negative list - interpretation of excise classification - enforceability of Office Memorandum upon notification - Products manufactured by the petitioner were not included in the negative lists annexed to the notifications dated 08.01.2003 and 10.06.2003, and thus the petitioner was not excluded from benefits under those notifications on that ground. - HELD THAT: - The Court examined the wording of the negative lists annexed to the Office Memorandum dated 07.01.2003 and the notifications dated 08.01.2003 and 10.06.2003 and concluded that those negative lists specified particular species of kraft paper and printing/writing paper by excise classifications (e.g., 4804.10, 4804.20, 4802.10-4802.30) which did not encompass the products manufactured by the petitioner (classified as 4804.90 and 4802.90). The subsequent inclusion of broader categories under 4802.90 and 4804.90 was effected only by the Office Memorandum dated 21.06.2005 and later by notification dated 27.06.2008. The Court reiterated the principle, earlier observed by a Division Bench, that an Office Memorandum acquires enforceability only upon issuance of a notification, and found that the notifications actually conferring benefits had not been amended to include the petitioner's product within the negative list. For these reasons the Court held that, on the material before it, the petitioner's products were not excluded from eligibility under the extant notifications. [Paras 14, 15, 16, 17]

Petitioner's products were not included in the negative lists attached to the notifications of 2003 and therefore were not precluded from claiming benefits on that basis.

Retrospective effect - cause of action - The question of retrospectivity of the amendment effected by notification dated 27.06.2008 did not arise for decision, and the petitioner had not pleaded a cause of action under the notifications to entitle it to the reliefs claimed. - HELD THAT: - Having found that the notifications of 2003 (which conferred the benefits) were not themselves amended, the Court held that it was unnecessary to decide whether the 2008 notification operated retrospectively. The Court further observed that the petition challenged the amendment to the Office Memorandum rather than recording any antecedent claim by the petitioner under the 2003 notifications which had been rejected. In the absence of averments that the petitioner had made claims under the notifications and been denied relief, there was no established cause of action for the Court to grant the reliefs sought; accordingly the substantive writ prayers were not maintainable on the pleaded facts. [Paras 18, 19]

Retrospectivity was not adjudicated; petition dismissed on merits for want of pleaded cause of action to claim entitlement under the 2003 notifications.

Enforceability of Office Memorandum upon notification - cause of action - Petitioner may, if permitted by law, make fresh claims to the respondents under the extant notifications and the respondents are directed to decide such claims strictly in accordance with law. - HELD THAT: - Although the petition was disposed of for want of cause of action, the Court left the petitioner with the procedural avenue of approaching the administrative respondents to seek benefits under the notifications of 2003. The Court mandated that any such claim be considered and decided by the respondents in accordance with law, thereby preserving the petitioner's right to administrative adjudication of entitlement rather than judicial grant in the present proceedings. [Paras 20]

Petitioner is permitted to approach the respondents for claiming benefits; respondents to decide any claim strictly in accordance with law.

Final Conclusion: Writ petition dismissed: the Court held that the petitioner's products were not excluded by the negative lists annexed to the 2003 notifications, the issue of retrospectivity of the 2008 notification was not adjudicated as it did not arise, and no cause of action was pleaded; petitioner may, if legally entitled, approach the respondents for administrative consideration of claims, which the respondents must decide in accordance with law.

Import parity price as transaction value - transaction value under Section 4(1)(a) of the Central Excise Act, 1944 - sale between Oil Marketing Companies under Memorandum of Understanding - place of sale - refinery gate - assessment of excise duty on inter-OMC exchanges

Import parity price as transaction value - transaction value under Section 4(1)(a) of the Central Excise Act, 1944 - Validity of adopting Import Parity Price (IPP) as the transaction value for excise duty purposes - HELD THAT: - The Tribunal upheld the adjudicating authority's finding that the Import Parity Price was not a notional figure but reflected international transactions and was properly adopted as the transaction value for the petroleum products cleared by the respondent. The Tribunal observed that earlier decisions of coordinating benches had held that where an IPP-based price is adopted at the refinery gate for clearances to other Oil Marketing Companies under the MOU, such price constitutes transaction value for the purposes of Section 4(1)(a). The Tribunal relied on the settled position in multiple precedents and noted that although appeals by the revenue were pending before the Supreme Court, no stay had been obtained; accordingly the settled approach favouring acceptance of IPP as transaction value was followed. [Paras 4]

Import Parity Price was validly adopted as the transaction value and its adoption did not give rise to a demand.

Sale between Oil Marketing Companies under Memorandum of Understanding - place of sale - refinery gate - assessment of excise duty on inter-OMC exchanges - Whether clearances under the Oil Marketing Companies' MOU constituted sales covered by Section 4(1)(a) and were taxable at refinery gate - HELD THAT: - The Tribunal agreed with the Commissioner that transactions effected under the MOU between the refiner (respondent) and other OMCs amounted to sale and purchase of products, with the place of sale or delivery being the refinery (factory) gate. The Tribunal noted the consistent view in a majority of tribunal decisions that clearances to OMCs, even if at different (lower) agreed prices as part of exchange arrangements, fall within Section 4(1)(a) as transaction value-based clearances. The Tribunal found no infirmity in the adjudicating authority's conclusion that such clearances were properly assessed and that the demand stood discharged. [Paras 4, 5]

Clearances under the MOU were sales at the refinery gate covered by Section 4(1)(a); the impugned adjudication upholding this view is affirmed.

Final Conclusion: The Tribunal, following prevailing coordinate bench decisions and noting absence of any stay from the Supreme Court, upheld the adjudicating authority's orders accepting IPP as transaction value and treating MOU-based inter-OMC clearances as sales at the refinery gate; revenue's appeal is dismissed.

Eligibility for exemption under Notification No.20/2007 CE to a new industrial unit - commencement of commercial production as determinative of benefit - intimation of commercial production and ER 1 returns as corroborative evidence - delay or failure of departmental verification and its evidentiary consequence - effect of continuity of partners, premises or transfer of assets from an earlier unit on entitlement

Commencement of commercial production as determinative of benefit - intimation of commercial production and ER 1 returns as corroborative evidence - Appellant had commenced commercial production on 31.03.2017 and thereby satisfied the condition for claiming exemption under Notification No.20/2007 CE. - HELD THAT: - The Tribunal examined the documentary record including the intimation letter dated 31.03.2017, daily production register, excise invoice, certificate of commercial production issued by the Department of Industries and ER 1 returns showing clearances on payment of duty. It found that machinery installation was completed by 30.03.2017, trial production had commenced on 30.03.2017 and commercial production on 31.03.2017, with clearances of finished goods effected and duty paid. The Tribunal held that these contemporaneous documents collectively establish commencement of commercial production on 31.03.2017 and amount to admissible corroboration for entitlement under the Notification. The Tribunal further noted that the procurement of plant and machinery and main raw material (MS rod) was not in dispute and that the absence of some specific vendor invoices (for hexagonal bar) could not, by itself, defeat the claim when other documentary evidence supported commencement and clearances. [Paras 4, 5, 7]

Appellant commenced commercial production on 31.03.2017 and meets the condition for exemption under Notification No.20/2007 CE.

Effect of continuity of partners, premises or transfer of assets from an earlier unit on entitlement - eligibility for exemption under Notification No.20/2007 CE to a new industrial unit - Continuity of partners, operation in the same premises and transfer of assets from the erstwhile unit do not, by themselves, disqualify the appellant from being a new industrial unit eligible for the Notification, where evidence shows establishment and commencement of production prior to the cutoff date. - HELD THAT: - The Tribunal considered the department's contention that most partners of the appellant had been partners of the earlier unit and that office building and some machinery had been transferred, and that these facts pointed to a continuation rather than a new unit. It held that such allegations, without negating the documentary proof of establishment and commencement of production before the cutoff date, are insufficient to deny the exemption. The Tribunal observed that the Notification entitles a 'new industrial unit' that has been established and commenced commercial production prior to the specified date; if documentary evidence satisfies those requirements, entitlement follows regardless of continuity of personnel or transfer of assets. [Paras 2, 8]

Allegations of continuity of partners, premises or transfer of assets do not defeat the appellant's entitlement where establishment and commencement of production before the cutoff date are otherwise established.

Delay or failure of departmental verification and its evidentiary consequence - intimation of commercial production and ER 1 returns as corroborative evidence - The department's failure to verify the appellant's intimation of commencement of commercial production immediately after 31.03.2017 limits the department's later challenge when contemporaneous documentary evidence was subsequently produced. - HELD THAT: - The Tribunal noted that the appellant gave intimation of commercial production on 31.03.2017 but the Range Officer did not conduct immediate verification; doubts were first raised months later and a formal investigation followed in 2018. Meanwhile the department accepted ER 1 returns and refund claims for subsequent months without objection. Given the absence of prompt verification and the presence of supporting contemporaneous documents, the Tribunal held that the department could not successfully impugn the appellant's claimed date of commencement merely on the basis of later investigation findings. The Tribunal therefore gave weight to the timely intimation and contemporaneous production and clearance records. [Paras 7]

Failure of the department to verify the intimation promptly and its prior acceptance of returns/refunds undermine its later challenge; appellant's documentary evidence must be accepted.

Final Conclusion: The appeal is allowed; the appellant is held to have established commencement of commercial production on 31.03.2017 and is entitled to the benefit of Notification No.20/2007 CE.

Jurisdiction of Lok Ayukta - maladministration - administrative versus quasi-judicial functions - hierarchy of statutory remedies - challenge to order of Sales Tax Officer rejecting option under Amnesty Scheme

Jurisdiction of Lok Ayukta - maladministration - administrative versus quasi-judicial functions - hierarchy of statutory remedies - challenge to order of Sales Tax Officer rejecting option under Amnesty Scheme - Maintainability of the complaint before the Lok Ayukta and the competence of the Lok Ayukta to set aside the Sales Tax Officer's order rejecting the option under the Amnesty Scheme-2020. - HELD THAT: - The Court examined the scope of investigation under Section 7 of the Lok Ayukta Act and the definitions of 'allegation', 'grievance' and 'maladministration' in Sections 2(b), 2(h) and 2(k) of the Lok Ayukta Act. Maladministration is confined to unreasonable, unjust, oppressive or improperly discriminatory action in the exercise of administrative functions, or willful negligence/undue delay in such administrative action. The order of the Sales Tax Officer rejecting the application to opt for the Amnesty Scheme-2020 was held to be a quasi judicial exercise for which a statutory hierarchy of remedies exists under the KGST Act and under the Revenue Recovery Act. Where a statute provides a complete machinery of remedies (appeal, revision or other remedies), those remedies must be pursued and the Lok Ayukta, being a statutory creation without inherent jurisdiction, cannot override or substitute those remedial forums by re adjudicating a quasi judicial order. The Court relied on earlier decisions of this Court and the principle that acts which are judicial or quasi judicial in character do not ordinarily fall within 'maladministration' for the purposes of the Lok Ayukta Act, noting that permitting the Lok Ayukta to entertain such disputes would conflict with the statutory remedial scheme and create administrative chaos. Applying these principles to the facts, the complaint filed before the Lok Ayukta did not disclose an allegation or grievance arising from maladministration and therefore was not maintainable. [Paras 11, 12, 13, 14]

Ext.P1 complaint is not maintainable before the Lok Ayukta; Ext.P3 report of the Lok Ayukta is set aside and the Lok Ayukta had no jurisdiction to decide the correctness of the Sales Tax Officer's order rejecting the option under the Amnesty Scheme-2020.

Final Conclusion: Writ petition allowed; the Kerala High Court set aside the Lok Ayukta's report on the ground that the Lok Ayukta lacked jurisdiction to re adjudicate a quasi judicial order for which statutory remedies exist, and the Court has not gone into the correctness of the assessing authority's order on the merits.

Classification of stone chips and ballast as minor minerals - tax rate applicable to minor minerals under the Rate Chart (4%) - deduction of separately charged transportation and incidental charges from taxable turnover - distinction between sale of goods and works contract - precedential effect of High Court decision in State of Odisha v. D.K. Construction - recomputation of tax liability on remand in accordance with binding precedent

Classification of stone chips and ballast as minor minerals - tax rate applicable to minor minerals under the Rate Chart (4%) - Supply of stone chips and ballast is exigible to tax as minor minerals at the concessional rate applicable under the Rate Chart rather than as unspecified goods taxable at a higher rate. - HELD THAT: - The Tribunal had held that the goods fall within Entry 189 and taxed them at 12%. This Court, however, found the factual and legal position identical to that considered in State of Odisha v. D.K. Construction and accepted the legal conclusion in that precedent that the supply of stone chips and ballast constitutes minor minerals for the purposes of the Rate Chart. Applying that binding decision, the Court concluded that the goods are taxable at the concessional rate applicable to minor minerals (4%), and therefore the impugned higher-rate assessment and confirmation by the fora below could not stand. [Paras 8, 13, 14]

Order set aside; supply of chips and ballast to be treated as minor minerals and taxed at the concessional rate as held in D.K. Construction.

Deduction of separately charged transportation and incidental charges from taxable turnover - distinction between pre-sale and post-sale charges for inclusion in sale price - Transportation and incidental charges shown and charged separately are deductible from gross turnover insofar as they do not form part of the sale price, in accordance with the legal position adopted by this Court. - HELD THAT: - The assessing authority treated certain charges as pre-sale and included them in taxable turnover, while the assessee contended that separately charged transportation and incidental charges are deductible under the statutory provision permitting deduction of such separately shown charges. The Court accepted the petitioner's submissions and the precedent in D.K. Construction, holding that such separately charged transportation and incidental charges are not part of the sale price for purposes of computing taxable turnover and are therefore allowable deductions when properly shown and distinct from the sale consideration. [Paras 5, 9, 13, 14]

Deduction of separately charged transportation and incidental charges to be allowed; assessment to be recomputed accordingly.

Recomputation of tax liability on remand in accordance with binding precedent - The matter is remitted to the Assessing Authority for recomputation of tax liability in accordance with the Court's conclusions and the binding precedent. - HELD THAT: - Having determined that the goods are minor minerals taxable at the concessional rate and that separately charged transportation/incidental charges are deductible, the Court set aside the orders of the fora below and directed the Assessing Authority to recompute the tax liability while giving effect to these legal conclusions and the High Court's decision in D.K. Construction. The remand is for quantification and implementation of the legal findings rather than adjudication of further legal issues. [Paras 14]

Assessment remitted for recomputation in conformity with this judgment and the cited precedent.

Final Conclusion: Revision petition allowed; orders of the fora below set aside. The Assessing Authority is directed to recompute tax for the year 2002-03 treating stone chips and ballast as minor minerals taxable at the concessional rate and allowing deduction for separately charged transportation and incidental charges, in accordance with the High Court's decision in State of Odisha v. D.K. Construction; no order as to costs.

Revision jurisdiction under the Himachal Pradesh Value Added Tax Act, 2005 - limitation for seeking revision (90 days) - rectification under Section 47 not challengeable by revision - classification of goods under Entry Tax Schedule - alloys as taxable entries - tax statutes to be read as enacted without importing additional distinctions

Rectification under Section 47 not challengeable by revision - revision jurisdiction under the Himachal Pradesh Value Added Tax Act, 2005 - The order passed by the Tax Tribunal in a rectification application under Section 47 of the VAT Act is not amenable to revision under Section 48(1) of the VAT Act. - HELD THAT: - The Court held that Section 48(1) permits revision to the High Court only against orders made by the Tribunal under Section 45(2) or Section 46(3). An order in a rectification application under Section 47 does not fall within the class of tribunal orders specified in Section 48(1) and therefore is not open to challenge by revision before this Court. [Paras 9]

Rectification order under Section 47 cannot be challenged by revision under Section 48(1).

Limitation for seeking revision (90 days) - revision jurisdiction under the Himachal Pradesh Value Added Tax Act, 2005 - The petitioners cannot assail the Tribunal's principal order dated 20.6.2017 by invoking Section 48(1) as the time limit prescribed by that provision has expired. - HELD THAT: - Section 48(1) requires that an application for revision be made within 90 days of communication of the tribunal's order and that a question of law be involved. The Court found that the petitioners sought to challenge the principal order beyond the statutory period and therefore the order dated 20.6.2017 is beyond the scope of challenge under Section 48(1). [Paras 9]

The challenge to the principal Tribunal order of 20.6.2017 is time-barred under Section 48(1).

Classification of goods under Entry Tax Schedule - alloys as taxable entries - tax statutes to be read as enacted without importing additional distinctions - There is no erroneous decision of law or failure to decide a question of law in the Tribunal's conclusion that the stainless steel scrap is a non-ferrous alloy taxable under the relevant entry at the rate specified in the Schedule. - HELD THAT: - The Court observed that the Entry Tax Act does not distinguish between ferrous and non-ferrous metals and alloys for the purposes of the Schedule entries relied upon. The Tribunal interpreted Schedule-II entries as they stand and classified alloys within the relevant entry attracting the lower rate. The High Court found no error in that interpretation and no demonstrable failure to decide any question of law warranting interference. [Paras 10, 11]

Tribunal's classification and interpretation of the Entry Tax Schedule is upheld; no error of law or failure to decide a question of law is found.

Final Conclusion: The revision petition is dismissed: the rectification order is not revisable under Section 48(1), the principal Tribunal order of 20.6.2017 is time barred for revision, and on merits there is no error of law in the Tribunal's interpretation and classification under the Entry Tax Schedule.