TaxTMI Updates e-Newsletter
Apr 15,2021

Summary order. Leave granted; arguments heard; judgment reserved.

Concessional rate of tax for composite works contracts provided to a Government Entity - composite supply of works contract - sub-contractor's eligibility for concessional rate - privity of contract - interpretation and application of Notification No. 11/2017 - entries 3(iii), 3(vi) and 3(ix)

Sub-contractor's eligibility for concessional rate - privity of contract - concessional rate of tax for composite works contracts provided to a Government Entity - interpretation and application of Notification No. 11/2017 - entries 3(iii), 3(vi) and 3(ix) - Whether the applicant, as a second-tier sub-contractor (contracting with the first sub-contractor and having no privity of contract with the Government Entity or the main contractor), is eligible for the concessional GST rate under the entries in Notification No. 11/2017 (as amended). - HELD THAT: - The Authority examined the contractual chain and the documentary record and found no privity of contract between the applicant and the Government Entity or the main contractor; the applicant's contract is with the first sub-contractor. The concessional entries in Notification No. 11/2017 (as amended) apply to taxable persons providing composite works contract services to the Central/State Government, a local authority, a Governmental Authority or a Government Entity (and, in the case of entry 3(ix), to sub-contractors providing such services to the main contractor who is supplying to such Government bodies). Because the applicant supplies services to the first sub-contractor, and the first sub-contractor is not itself a Government Entity, the supply by the applicant is not a supply to a Government Entity within the meaning of the entries relied upon. The Authority therefore held that the applicant's supplies do not fall under entry 3(iii), 3(vi) or 3(ix) of Notification No. 11/2017 and are not entitled to the concessional rate; the finding follows from the absence of contractual privity with the Government Entity/main contractor and from the textual scope of the notification entries. [Paras 9, 10, 11, 12]

The applicant, being a subcontractor contracting with the first sub-contractor and having no privity with the Government Entity or main contractor, is not eligible for the concessional GST rate under the cited entries of Notification No. 11/2017 (as amended); therefore the concessional rate does not apply.

Final Conclusion: The Advance Ruling holds that the applicant's composite supply is not covered by entries 3(iii), 3(vi) or 3(ix) of Notification No. 11/2017 (as amended) and consequently the applicant is not entitled to the concessional GST rate; normal rates under the GST Acts apply.

Pure services - Services provided to State Government - Exemption under Notification No. 12/2017 - Central Tax (Rate) (entry no. 3) - Function entrusted to a Panchayat under Article 243G of the Constitution - Renting of immovable property

Pure services - Services provided to State Government - Function entrusted to a Panchayat under Article 243G of the Constitution - Exemption under Notification No. 12/2017 - Central Tax (Rate) (entry no. 3) - Whether rent received from Backward Classes Welfare Department for use as a post-metric girls' hostel is taxable under GST - HELD THAT: - The applicant's activity is the letting out of immovable property and does not involve works contract or composite supplies of goods; therefore it constitutes a pure service. The property has been rented to the Backward Classes Welfare Department, a Department of the State Government, which is using the premises to provide hostel facilities to post-metric girls of backward classes. Provision of such hostel facilities falls within the welfare of weaker sections, an item listed at entry 27 of the Eleventh Schedule and thus relates to a function entrusted to a Panchayat under Article 243G of the Constitution. Entry no. 3 of Notification No. 12/2017 - Central Tax (Rate) exempts nil-rated pure services provided to the Central Government, State Government or a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G. Applying that entry, the renting service supplied to the Backward Classes Welfare Department for the stated purpose is covered by the exemption and is not liable to GST. The same reasoning applies under the corresponding State GST provisions. [Paras 9, 11, 12, 13]

The rent received by the applicant from the Backward Classes Welfare Department for use as a post-metric girls' hostel is exempt from GST under entry no. 3 of Notification No. 12/2017 - Central Tax (Rate) as a pure service in relation to a function entrusted to a Panchayat under Article 243G.

Final Conclusion: The Authority rules that the applicant's renting of the building to the Backward Classes Welfare Department for running a post-metric girls' hostel is an exempt supply under entry no. 3 of Notification No. 12/2017 - Central Tax (Rate), and hence not taxable under CGST or KGST.

Composite supply - principal supply - naturally bundled and supplied in conjunction with each other - treatment under Section 8 of the CGST Act - time of supply determined by issuance of invoice - continuous supply and milestone-based invoicing

Composite supply - principal supply - naturally bundled and supplied in conjunction with each other - treatment under Section 8 of the CGST Act - Whether the supplies made under Cost Centres C, D, E and G are independent supplies or form a composite supply with the supply of intermediate cars as the principal supply - HELD THAT: - The contract is a single integrated contract for supply of intermediate cars along with related integration, commissioning, training and spares; the contractual breakup into cost centres and milestone payments is for facilitating cash flows and does not convert separate obligations into independent supplies. The agreement contemplates supply of goods and services together that are naturally bundled and supplied in conjunction with each other. Applying the definition of composite supply and the determinative rule in Section 8 of the CGST Act, where one supply is the principal supply, the composite supply is to be treated as supply of that principal supply. The Authority finds that the supply of intermediate cars is the principal supply and accordingly the combined supplies under Cost Centres C to G constitute a composite supply to be treated as supply of intermediate cars. [Paras 30, 33, 37]

Supplies under Cost Centres C, D, E and G form a composite supply and are to be treated as supply of intermediate cars (the principal supply).

Time of supply determined by issuance of invoice - continuous supply and milestone-based invoicing - What is the time of supply for the composite supply and related milestone-based transactions - HELD THAT: - For composite supply treated as supply of goods (intermediate cars), the time of supply principle applicable to goods governs. A combined reading of the provisions dealing with time of supply and invoicing for continuous supplies and milestone-linked payments leads to the conclusion that the time of supply, in the present contractual matrix, is the date of issuance of the invoice (including invoices required to be issued on completion of milestones) in accordance with the invoicing provisions for continuous supplies. [Paras 35, 36, 37]

Section 12 of the CGST Act governs time of supply and, on the facts, the time of supply is the issuance of the invoice (including milestone-based invoices for continuous supplies).

Advance ruling scope - Whether the Authority should rule on entitlement to refund of differential tax claimed by the applicant - HELD THAT: - The applicant sought a ruling on entitlement to refund of differential GST paid. The Authority observed that the question of refund falls outside the matters permissible under the advance ruling provision invoked and therefore declines to answer that question. [Paras 36]

The question of refund of excess tax paid is outside the scope of the advance ruling application and is not answered by the Authority.

Final Conclusion: The Authority rules that supplies under Cost Centres C, D, E and G constitute a composite supply to be treated as supply of intermediate cars (the principal supply) under Section 8 of the CGST Act, and that time of supply is governed by Section 12 and is the date of issuance of the invoice (including milestone-based invoicing). The applicant's claim for refund is not decided as it falls outside the advance ruling jurisdiction.

Export of services under Section 2(6) of the IGST Act, 2017 - place of supply (actual performance) under Section 13(3)(a) of the IGST Act, 2017 - second proviso to Section 13(3)(a) (repairs, treatment or process) - amendment w.e.f. 01.02.2019 - job-work as treatment or process - location of the recipient of services - receipt of payment in convertible foreign exchange - establishments of a distinct person (Explanation 1 to Section 8) - zero rated supply under Section 16(1)(a) of the IGST Act, 2017

Export of services under Section 2(6) of the IGST Act, 2017 - place of supply (actual performance) under Section 13(3)(a) of the IGST Act, 2017 - second proviso to Section 13(3)(a) (repairs, treatment or process) - amendment w.e.f. 01.02.2019 - job-work as treatment or process - Whether the applicant's services (stevedoring, transportation, storage, bagging, stuffing and onward transportation of temporarily imported goods) qualify as 'export of services'. - HELD THAT: - Section 2(6) requires satisfaction of all five conditions for a supply to be an 'export of services'. The supplier is located in India and the invoices show payment in dollars, so conditions (i) and (iv) are met; the recipients have no business establishments in India so their location is the usual place of residence outside India, satisfying condition (ii); the supplier and recipients are not establishments of a distinct person, satisfying condition (v). Prior to amendment, Section 13(3)(a) applied because the goods were made physically available to the supplier and, in absence of the proviso covering repairs/treatment/process, the place of supply was the location where services were actually performed (India). Hence condition (iii) failed before 01.02.2019 and the services were not 'export of services'. Following the amendment to the second proviso to Section 13(3)(a) w.e.f. 01.02.2019, services supplied in respect of goods temporarily imported into India for 'repairs or for any other treatment or process' and exported after such treatment/process fall outside Section 13(3)(a) and are governed by Section 13(2) (place of supply = location of recipient). The Authority construed the applicant's activities (stevedoring, transport, storage, bagging, stuffing and dispatch) as a 'process' and therefore as 'treatment or process' and as job-work within the statutory meaning. Consequently, w.e.f. 01.02.2019 the place of supply is outside India and condition (iii) of Section 2(6) is satisfied, bringing the services within 'export of services'. [Paras 19, 20, 21, 22, 23]

The services are not 'export of services' upto 31.01.2019, but are 'export of services' w.e.f. 01.02.2019.

Zero rated supply under Section 16(1)(a) of the IGST Act, 2017 - export of services under Section 2(6) of the IGST Act, 2017 - Whether the applicant is eligible for zero rated supply treatment under Section 16 of the IGST Act, 2017 in respect of the said services. - HELD THAT: - Section 16(1)(a) treats 'export of services' as a zero rated supply. Having concluded that the services do not qualify as 'export of services' prior to 01.02.2019, the applicant cannot claim zero rated supply for that period. As the services qualify as 'export of services' w.e.f. 01.02.2019 by reason of the amended proviso to Section 13(3)(a) and the services meeting all conditions of Section 2(6), the applicant becomes eligible for zero rated supply treatment under Section 16(1)(a) from 01.02.2019 onwards, subject to other procedural and documentary requirements under the Act and rules. [Paras 24, 25, 26]

Not eligible for zero rated supply upto 31.01.2019; eligible for zero rated supply under Section 16(1)(a) of the IGST Act, 2017 w.e.f. 01.02.2019.

Final Conclusion: Advance Ruling: The applicant's services (stevedoring, transportation, storage, bagging, stuffing and onward transportation of temporarily imported goods) are not 'export of services' and therefore not zero-rated upto 31.01.2019; following the amendment to the proviso to Section 13(3)(a) effective 01.02.2019, those services qualify as 'export of services' and the applicant is eligible for zero rated supply treatment under Section 16(1)(a) of the IGST Act, 2017 from 01.02.2019 onwards.

Classification as Local authority - exemption for pure services provided to a local authority by way of any activity in relation to functions entrusted under Article 243W of the Constitution - scope of the expression "in relation to" - reverse charge mechanism on security services - reverse charge mechanism on services supplied by a local authority to a business entity - compulsory GST registration as a deductor (TDS) under Section 24 read with Section 51

Classification as Local authority - functions entrusted under Article 243W - Ahmedabad Municipal Transport Service (AMTS) qualifies as a "local authority" under Section 2(69)(c) of the CGST Act. - HELD THAT: - The Authority held that AMTS is a statutory transport undertaking of Ahmedabad Municipal Corporation constituted and governed by the Gujarat Provincial Municipal Corporations Act, 1949, with a separate transport fund, appointment of a Transport Manager and administration under transport committee. Transportation services are public amenities listed in the Twelfth Schedule and entrusted to municipalities under Article 243W. Applying the "like nature" test and the requirement that the body be legally entitled to or entrusted with control or management of a municipal or local fund, the Authority concluded that AMTS is a body discharging municipal functions and is therefore includible as an "other authority" under Section 2(69)(c) of the GST Act and qualifies as a local authority. [Paras 62, 63, 64, 66, 67]

AMTS is a local authority within the meaning of Section 2(69)(c) of the CGST Act.

Exemption for pure services provided to a local authority by way of any activity in relation to functions entrusted under Article 243W of the Constitution - scope of the expression "in relation to" - reverse charge mechanism on security services - Security services procured by AMTS from persons other than body corporates are not liable to GST under the reverse charge mechanism by AMTS in view of the exemption. - HELD THAT: - The Authority examined Sl. No. 3 of Notification No. 12/2017-CT (Rate) which exempts pure services provided to a local authority by way of any activity in relation to functions entrusted under Article 243W. Having held that AMTS is a local authority and that transportation/security are services "in relation to" municipal functions (the phrase "in relation to" being of wide amplitude), the Authority found that security services have direct nexus with providing passenger transport and thus fall within the exemption. Further, Notification No. 29/2018 amending the reverse charge entries excludes application of reverse charge for security services provided to a local authority by any person other than a body corporate. On these bases the Authority ruled that AMTS is not liable to pay GST under RCM for such security services. [Paras 69, 70, 71, 72]

Negative - AMTS is not liable to pay GST under reverse charge on receipt of security services from persons other than body corporate.

Reverse charge mechanism on services supplied by a local authority to a business entity - services of advertisement on buses - For advertisement services supplied by AMTS to business entities, the service recipients are liable to discharge GST under the reverse charge mechanism. - HELD THAT: - Notification No.13/2017-CT (Rate) (Sl. No.5) makes services supplied by a local authority to a business entity (subject to specified exclusions such as transport of passengers) liable to tax under reverse charge. Having concluded that AMTS is a local authority and that it supplies advertisement services to business entities, the Authority held that such recipients - not AMTS - are required to pay GST under the reverse charge mechanism in respect of advertisement services. [Paras 73, 74, 75]

Service recipients of AMTS (business entities) are liable to pay GST under reverse charge on advertisement services.

Compulsory GST registration as a deductor (TDS) under Section 24 read with Section 51 - persons mandated to deduct tax at source - AMTS is required to obtain registration as a GST TDS deductor and deduct tax under Section 51. - HELD THAT: - Section 24(vi) makes persons required to deduct tax under Section 51 compulsorily registrable. Section 51(1)(b) specifically includes "local authority" among categories which the Government may mandate to deduct TDS. Notifications by the Central Government (including Notification No.50/2018-Ct) specify the categories and the date of enforcement. Having found AMTS to be a local authority, the Authority concluded that AMTS falls within the category required to deduct tax at source and therefore must register as a GST TDS deductor. [Paras 76, 77, 78]

AMTS is required to obtain registration as a GST TDS deductor and comply with TDS provisions.

Final Conclusion: The Authority ruled that AMTS is a "local authority" under Section 2(69)(c) of the CGST Act; it is not liable to pay GST under reverse charge on security services procured from persons other than body corporates (such services being covered by the exemption and specific exclusion from RCM); recipients must pay GST under reverse charge for advertisement services supplied by AMTS to business entities; and AMTS is required to register as a GST TDS deductor and deduct tax under Section 51.

Classification under the Customs Tariff / HSN - applicability of Notification No. 01/2017-Central Tax (Rate) - composite supply - mixed supply - principal supply - works contract - determination of tax on composite or mixed supply under Section 8 - installation services (Service Code 998739) - advance ruling binding only on the applicant and concerned officers

Classification under the Customs Tariff / HSN - applicability of Notification No. 01/2017-Central Tax (Rate) - Classification of specified marine/port support goods and the applicable GST rates under Notification No.01/2017. - HELD THAT: - Having applied the First Schedule to the Customs Tariff Act, the Chapter and sub heading notes and the Notification No.01/2017, the Authority identified the appropriate tariff entries and corresponding schedule entries in the Notification. Bollards are classifiable under 7325 99 99 and attract 18%. Fasteners (bolts, screws, nuts, washers) fall under sub heading 7318 (with specific tariff items for bolts, nuts, screws and washers) and attract 18%. Frontal frames are classifiable under 7326 90 80 and attract 18%. Fascia pads (UHMW PE sheets) are classifiable under 3920 10 99 and attract 18%. Buoys are classifiable under 8907 90 00 and attract 5%. Chains, swivels, D shackles and chain tensioners fall under 7315 (7315 89/7315 90 as applicable) and attract 18%. Rubber fenders are classifiable under 4016 94 00 (boat or dock fenders) and the applicable rate was 28% up to 14.11.2017 and 18% from 15.11.2017. The rulings follow the Notification's reliance on the Customs Tariff and HSN explanatory notes for characterisation and the mapping of tariff entries to GST schedules. [Paras 38, 66]

The products are classified and taxed as set out in the ruling table: bollards 73259999 @18%; bolts/screws/nuts/washers 7318 series @18%; frontal frames 73269080 @18%; fascia pads 39201099 @18%; buoys 89079000 @5%; chains/swivel/d shackle/chain tensioner 7315/73159000 @18%; rubber fenders 40169400 @28% up to 14.11.2017 and @18% from 15.11.2017.

Composite supply - mixed supply - principal supply - determination of tax on composite or mixed supply under Section 8 - Whether the supply of frontal frames with fascia pads and fixtures as a single set (fender panel system) is a composite supply or a mixed supply and the tax consequence. - HELD THAT: - The Authority examined the statutory tests for composite supply (naturally bundled supplies in the ordinary course of business and presence of a principal supply) and mixed supply (multiple individual supplies for a single price not constituting a composite supply). The applicant's assertion that the three items are supplied as a single bundled system was not supported by evidence showing that such bundling is the ordinary course in trade; the Authority found the goods are not naturally bundled and none of the three items individually constitutes the principal supply. Consequently the transaction does not satisfy the test for a composite supply. All conditions for a mixed supply were, however, satisfied (two or more individual supplies made for a single price and not a composite supply). Section 8(b) requires treating a mixed supply as the supply attracting the highest rate; since all three component supplies attract the same rate (18%), the mixed supply will be taxable at 18% and may be treated as supply of any one of the component goods. [Paras 45, 46, 47, 48, 66]

The bundled supply of frontal frames, fascia pads and fixtures is not a composite supply but is a mixed supply; it is taxable at 18% and can be treated as supply of any one of the component goods (frontal frames 73269080 or fascia pads 39201099 or fixtures 7318 series).

Composite supply - mixed supply - works contract - principal supply - determination of tax on composite or mixed supply under Section 8 - Whether supply of the fender panel system together with assembly, installation and supervision services qualifies as a composite supply or mixed supply and the tax consequence. - HELD THAT: - The Authority noted the applicant's submission that goods and services would be invoiced separately and considered the statutory definitions. It found that the goods (frontal frames, fascia pads, fixtures) are not naturally bundled nor is there evidence that the goods and the installation services are supplied in the ordinary course as a single bundled supply; further, none of the component supplies was shown to be the principal supply. The supply therefore does not meet the test of a composite supply. Because the price/consideration for goods and services are agreed to be separate, the conditions for a mixed supply (single price covering all components) were not met either. The Authority therefore held that goods and services must be supplied and taxed separately; classification and tax of any bundle are not applicable. [Paras 54, 55, 56, 57, 66]

Supply of the fender panel system together with assembly, installation and supervision does not constitute a composite supply or a mixed supply; the goods and services must be supplied and treated separately.

Composite supply - principal supply - installation services (Service Code 998739) - determination of tax on composite or mixed supply under Section 8 - Whether supply of installation services that necessarily consume a chemical (specified by the customer and not handed over) is a composite supply and, if so, its classification and tax rate. - HELD THAT: - The Authority examined whether installation services together with the consumed chemical form a composite supply. The supply comprised installation services (a taxable service) and supply of chemicals consumed in the course of providing that service. The Authority held the components are naturally bundled in the ordinary course (the chemical is used to effectuate the installation), and the installation service constitutes the principal supply while the chemical is ancillary. Applying Section 8(a), the composite supply is to be treated as the principal supply. The Authority classified the composite supply as installation services (other than construction) falling under Service Code 998739 and applied the Notification on services which prescribes GST at 18% for installation services other than construction. [Paras 61, 62, 63, 64, 66]

Supply of installation service where a chemical is consumed in rendering the service is a composite supply; it is to be treated as installation service (Service Code 998739) and is taxable at 18% (9% CGST + 9% SGST).

Final Conclusion: The Authority ruled the tariff classifications and GST rates for the listed products as set out in its table; the bundle of frontal frames, fascia pads and fixtures is a mixed supply taxable at 18%; the fender panel system supplied with assembly/installation/supervision is neither a composite nor mixed supply and must be invoiced/taxed separately; and installation services that necessarily consume chemicals constitute a composite supply treated as installation service (998739) and are taxable at 18%. The ruling is binding as provided by the Act only on the applicant and the concerned officers.

Eligibility and conditions for taking input tax credit under Section 16 of the CGST Act, 2017 - nexus between inputs and outward supplies (input-output nexus) - utilisation of balance in the electronic credit ledger for payment of output tax - excluded inputs under Section 17(5) of the CGST Act, 2017

Eligibility and conditions for taking input tax credit under Section 16 of the CGST Act, 2017 - nexus between inputs and outward supplies (input-output nexus) - utilisation of balance in the electronic credit ledger for payment of output tax - Whether input tax credit balance in the Electronic Credit Ledger, earned on gold and silver dores used for bullion manufacture, can be utilised to discharge GST liability on castor oil seeds procured from agriculturists and supplied by the applicant. - HELD THAT: - The Authority examined Section 16(1) which entitles a registered person to take input tax credit only where the inputs are "used or intended to be used in the course or furtherance of business," and Section 17(5) which lists ineligible items. The Authority found that gold and silver dores intended as inputs for manufacture of bullion are not covered by the exclusions in Section 17(5) and thus are prima facie eligible as inputs for the bullion business (para 11). However, the determinative requirement is a demonstrable nexus between the inputs on which ITC was availed and the outward supply for which credit is to be utilised. The applicant sought to apply ITC earned on bullion inputs to tax on castor oil seeds, but failed to furnish any documentary material, product literature or explanation showing how gold/silver dores are used or intended to be used in the course or furtherance of the business of supplying castor oil seeds (para 12). On plain comparison, there is no nexus between the bullion inputs and castor oil seeds. In absence of evidence establishing the required connection under Section 16(1), the basic statutory condition for entitlement to utilise that ITC for payment of tax on castor oil seeds is not satisfied. The Authority therefore concluded that the applicant is not eligible to utilise the Electronic Credit Ledger balance (earned on bullion inputs) for payment of GST on castor oil seeds (paras 11-12, ruling stated in para 13). [Paras 11, 12, 13]

The applicant cannot utilise the input tax credit balance in the Electronic Credit Ledger (earned on inputs for bullion manufacture) to discharge GST liability on castor oil seeds procured from agriculturists.

Final Conclusion: Advance ruling: Input tax credit accumulated on gold/silver dores used for the applicant's bullion business cannot be used to pay GST on castor oil seeds because the applicant has not established the statutory nexus between those inputs and the supply of castor oil seeds as required under Section 16(1) of the CGST Act, 2017.

Governmental Authority - functions entrusted to a Municipality under Article 243W - functions entrusted to a Panchayat under Article 243G - exemption of pure services provided to Governmental Authority under Notification No.12/2017 and Notification No.09/2017 - pure services (excluding works contract or composite supplies involving goods) - reverse charge mechanism - tax deductor under Section 24 read with Section 51 - ninety percent or more participation by way of equity or control - fifty-one percent or more participation by way of equity or control (Notification No.50/2018)

Governmental Authority - functions entrusted to a Municipality under Article 243W - ninety percent or more participation by way of equity or control - Whether NID qualifies as a "Governmental Authority" under the IGST Act. - HELD THAT: - The Authority examined the statutory Explanation to Section 2(16) of the IGST Act and the inserted definition in Notification No.39/2017-Integrated Tax(Rate) and identified three cumulative conditions: (1) the entity is set up by an Act of Parliament or State Legislature or established by any Government; (2) government has ninety per cent or more participation by way of equity or control; and (3) the entity is established to carry out functions entrusted to a municipality under Article 243W or to a panchayat under Article 243G. NID is established by an Act of Parliament and its activities relate to education which falls within the functions listed under Article 243W/Article 243G; therefore conditions (1) and (3) are satisfied. However, no evidence was placed on record to demonstrate that the Government has ninety percent or more participation by way of equity or control in NID. Consequently, the Authority concluded that NID will qualify as a "Governmental Authority" only if the ninety percent or more participation/control condition is established. [Paras 23]

NID will qualify as a "Governmental Authority" if it also fulfils the condition of ninety percent or more participation by way of equity or control by the Government.

Exemption of pure services under Sr.No.3 of Notification No.12/2017 & No.09/2017 - pure services - reverse charge mechanism - Whether NID is liable to pay GST under reverse charge on (a) security services from persons other than body corporate and (b) access to e-books/e-database from foreign service providers, having regard to the exemption for pure services provided to Governmental Authorities. - HELD THAT: - The Authority set out the three pre-conditions for the entry at Sr. No. 3 of the Notifications: (i) the supply must be a "pure service" (not a works contract or composite supply involving goods); (ii) it must be provided to Central/State/UT/local authority/Governmental Authority/Government Entity; and (iii) it must be by way of an activity in relation to functions entrusted to Panchayats/Municipalities under Articles 243G/243W. Determination whether the specific supplies to NID (security services; subscription/access to e-books/e-database) qualify as "pure services" and are in relation to municipal/panchayat functions requires examination of the contracts/agreements between NID and its service providers. The applicant did not furnish copies of the relevant agreements; accordingly the Authority refrained from adjudicating the taxability under reverse charge for these supplies. [Paras 24]

No decision on tax liability under reverse charge for the specified services could be given due to non-submission of the agreements/contracts necessary to determine whether the supplies qualify as exempt "pure services."

Tax deductor under Section 24 - Section 51 mandating deduction of tax - fifty-one percent or more participation by way of equity or control (Notification No.50/2018) - Whether NID is required to register as a tax deductor under GST. - HELD THAT: - Section 24(vi) requires registration of persons who are required to deduct tax under Section 51. Section 51 empowers the Government to mandate deduction by specified categories and Notification No.50/2018 appoints authorities/boards/bodies set up by an Act of Parliament or established by Government with fifty-one percent or more participation by way of equity or control as persons required to deduct tax. NID is formed by an Act of Parliament; however, the applicant has not demonstrated that the Government has fifty-one percent or more participation by way of equity or control. Therefore, registration as a tax deductor under Section 24 read with Section 51 will be required only if NID satisfies the fifty-one percent (or more) participation/control criterion specified in the notification. [Paras 25]

NID must register as a tax deductor under Section 24 read with Section 51 only if it fulfils the condition of fifty-one percent or more participation by way of equity or control by the Government.

Final Conclusion: The Authority held that (i) NID meets the criteria of being formed by an Act of Parliament and its functions align with Articles 243W/243G, and will qualify as a "Governmental Authority" only upon proof of ninety per cent or more government participation/control; (ii) no ruling on reverse charge liability for security services and foreign e resource subscriptions could be given for want of contracts to determine whether those are "pure services" exempt under the Notifications; and (iii) NID will be required to register as a tax deductor under Section 24/Section 51 only if it demonstrates fifty-one per cent or more government participation/control as specified in the notification.

Scope of advance ruling under Section 97(2) of the CGST Act, 2017 - Jurisdiction of Authority for Advance Ruling to determine place of supply - Export of services - Place of supply of services - Non-submission of contract for determination of tax liability

Export of services - Place of supply of services - Scope of advance ruling under Section 97(2) of the CGST Act, 2017 - Jurisdiction of Authority for Advance Ruling to determine place of supply - Advance ruling on whether the applicant's online training service supplied to recipients located outside India is an export and a zero rated supply was not answered by the Authority. - HELD THAT: - The Authority examined the applicant's query on whether services delivered digitally to recipients outside India qualify as export of services and hence zero rated. It found that determination of export status necessarily requires determining the place of supply of services, which falls outside the ambit of matters enumerated in Section 97(2) for which an advance ruling may be sought. Reliance was placed on earlier AAAR decisions which held that the Advance Ruling Authority lacks jurisdiction to decide questions involving place of supply and the consequent levy. Given this jurisdictional limitation, the Authority declined to answer the question on export/zero-rating. The Authority also noted absence of the underlying agreement which prevented examination of the contractual terms that could be material to place of supply and export determination. [Paras 11, 12]

No answer provided on whether the service is export/zero rated because the question is outside the scope of Section 97(2) and the contract was not submitted.

Liability to pay tax - Commission paid to non-resident agent - Non-submission of contract for determination of tax liability - Scope of advance ruling under Section 97(2) of the CGST Act, 2017 - Advance ruling on GST liability in respect of commission payable to a non resident foreign agent was not answered by the Authority. - HELD THAT: - The applicant sought clarity on GST liability on commission payable to a foreign agent who is a non resident without permanent establishment in India. The Authority observed that such a question implicates determination of the nature and place of supply of services and the liability to tax, which cannot be resolved absent jurisdiction under Section 97(2) for the specific facts and contractual terms. Further, the applicant failed to furnish the agreement/contract which is necessary to ascertain the nature of the arrangement and tax consequences. For these reasons the Authority refrained from giving any ruling on the GST liability of commission paid to the foreign agent. [Paras 11, 12, 13]

No answer provided on GST liability of commission to the foreign agent because the question lies outside Section 97(2)'s ambit and requisite contract documents were not submitted.

Final Conclusion: The Authority refused to answer both questions: (i) whether the online training service to recipients outside India is export/zero rated, and (ii) the GST liability on commission to a non resident foreign agent. The refusal was on two grounds - the questions fall outside the scope of matters amenable to advance ruling under Section 97(2) of the CGST Act, 2017, and the applicant did not furnish the contractual documents necessary for determination.

Classification under Heading 9503 - Interpretation of the First Schedule to the Customs Tariff Act - Application of HSN explanatory notes - Tax liability under Notification No.01/2017-Central Tax (Rate) - Input tax credit - time limit under Section 16(4) - Effect of omission of words "invoice relating to such" by Finance Act, 2020 w.e.f. 01.01.2021 - Nature of debit note and its connection to the original invoice

Classification under Heading 9503 - Tax liability under Notification No.01/2017-Central Tax (Rate) - Classification and GST rate applicable to plastic toys manufactured and supplied by the applicant. - HELD THAT: - The Authority examined Chapter 95 and Heading 9503 of the First Schedule to the Customs Tariff Act, 1975, the Chapter Notes and the entries for sub-heading 9503 00 30 (of plastics). Having considered the product descriptions, samples and submissions, the Authority concluded that the applicant's plastic toys are toys made of plastics and are not electronic. Sub-heading 9503 00 30 therefore applies. On reference to Notification No.01/2017-Central Tax (Rate), sub-heading 9503 is listed at Sr. No. 228 in Schedule II where the applicable combined GST rate is 12% (6% CGST + 6% SGST). The Authority accordingly held that plastic toys of the applicant are classifiable under 95030030 and attract GST at 12% (6% + 6%). [Paras 14, 15]

Plastic toys of the applicant are classifiable under 95030030 and taxable at 12% (6% CGST + 6% SGST).

Input tax credit - time limit under Section 16(4) - Effect of omission of words "invoice relating to such" by Finance Act, 2020 w.e.f. 01.01.2021 - Nature of debit note and its connection to the original invoice - Whether input tax credit can be claimed in 2020-21 in respect of debit notes issued in 2020-21 for supplies made in 2018-19. - HELD THAT: - The Authority compared the pre-amendment text of Section 16(4) with the amendment effected by the Finance Act, 2020 and the notified commencement date 01.01.2021. It held that omission of the words "invoice relating to such" does not sever the intrinsic connection between a debit note and the original invoice: a debit note, by statutory definition and prescribed particulars, must reference the corresponding tax invoice. Consequently the financial year to which a debit note pertains remains the financial year in which the original invoice was issued. Applying amended Section 16(4) w.e.f. 01.01.2021, the Authority concluded that input tax credit in respect of debit notes issued for transactions of 2018-19 can be claimed only within the time limit specified in Section 16(4) for that financial year (i.e., on or before the due date for furnishing the return under section 39 for the month of September following the end of financial year 2018-19 or the relevant annual return, whichever is earlier). The Authority rejected the applicant's contention that the amendment grants independent existence to debit notes permitting ITC in the year of issuance notwithstanding the year to which the underlying invoice pertains. [Paras 17, 18, 19, 20, 21]

The applicant cannot claim input tax credit in 2020-21 in respect of debit notes issued in 2020-21 for supplies of 2018-19 unless the claim is within the time-limit prescribed by Section 16(4) for the financial year 2018-19.

Final Conclusion: Advance ruling: (i) The applicant's plastic toys are classifiable under 95030030 and attract GST at 12% (6% CGST + 6% SGST). (ii) Input tax credit in respect of debit notes relating to supplies made in 2018-19 can be availed only subject to the time-limit under Section 16(4) for the financial year 2018-19; debit notes issued in 2020-21 do not, by reason of the amendment, independently extend the period for claiming ITC for those earlier supplies.

Composite supply - principal supply - naturally bundled and supplied in conjunction with each other - in-patient services (SAC 999311) - clinical establishment - health care services exempt under Serial No. 74 of Notification No. 12/2017-C.T. (Rate) - room rent and food forming part of composite health care supply - Circular Nos. 27/01/2018-GST and 32/06/2018-GST (clarifications)

Composite supply - principal supply - in-patient services (SAC 999311) - health care services exempt under Serial No. 74 of Notification No. 12/2017-C.T. (Rate) - room rent and food forming part of composite health care supply - Medicines, consumables and implants supplied to in patients by the hospital in the course of treatment are a composite supply with health care services as the principal supply and eligible for exemption under the health care services entry. - HELD THAT: - The Authority examined the nature of supplies made to in patients and applied the definition of composite supply (supply of two or more taxable supplies naturally bundled with one principal supply). The hospital provides diagnosis and treatment under medical direction and, in that course, supplies room/ICU, nursing care, medicines, consumables and implants which are billed together. These goods are indispensable to, and administered under, the supervision of medical personnel and are therefore naturally bundled with the health care service which is the raison d'e tre for admission. The Authority relied on the Explanation/classification of in patient services (SAC 999311)Circular Nos. 27/01/2018 GST and 32/06/2018 GST that room rent and food supplied to in patients form part of the composite health care supply and are not separately taxable. Prior AAR decisions on identical issues were held to be persuasive and binding on the applicant. Applying these principles, the Authority concluded that supplies of medicines, consumables and implants to in patients form a single composite supply with health care services as the principal supply, and consequently the aggregate supply falls within the exemption granted to health care services under Serial No. 74 of Notification No. 12/2017 C.T. (Rate). [Paras 23, 24, 26]

Supply of medicines, consumables and implants to in patients is a composite supply with health care services as the principal supply and is exempt from CGST under Serial No. 74 of Notification No. 12/2017 C.T. (Rate).

Final Conclusion: The Authority rules that supplies of medicines, consumables, implants, room rent and food provided to in patients by the applicant hospital form a composite in patient health care supply; such in patient health care services supplied by the clinical establishment are exempt from CGST under Serial No. 74 of Notification No. 12/2017 C.T. (Rate).

Non-bailable cognizable offence - Vicarious liability of proprietor - Power to arrest on "reasons to believe" - Prosecution under CGST not dependent on prior completion of assessment - Compoundability of offences under CGST Act - Bail jurisprudence balancing individual liberty and protection of public exchequer

Bail jurisprudence balancing individual liberty and protection of public exchequer - Non-bailable cognizable offence - Bail application of accused-applicant Smt. Chhaya Devi rejected. - HELD THAT: - Considering the nature and gravity of the alleged economic offence, namely clandestine removal of finished goods and evasion of duties alleged to be in excess of the statutory threshold, the court applied the established balance between liberty and public interest in economic offences. The court noted precedents recognising that economic offences involving substantial loss to the public exchequer warrant a serious approach in bail considerations and concluded, without adjudicating merits, that the case did not merit grant of bail. The prosecution's claim of large-scale evasion and the attendant risk to the public interest were treated as determinative in denying bail while refraining from commenting on the merits of evidence. [Paras 14, 15, 16, 17, 18]

Bail application rejected.

Non-bailable cognizable offence - Power to arrest on "reasons to believe" - The offence alleged against the applicant is cognizable and non-bailable as evasion exceeds the statutory monetary threshold, and the Commissioner may order arrest if there are "reasons to believe." - HELD THAT: - The court held that where the evasion of duty is in excess of the threshold (more than Rs. 5 crores as alleged), the offence falls within the cognizable and non-bailable categories under the CGST scheme. The court further observed that the statutory standard governing arrest under the empowering provision requires "reasons to believe," and that such reasons may be recorded in the investigation file even if not reproduced verbatim in the arrest order itself. [Paras 4, 5]

Offence is cognizable and non-bailable; arrest may be ordered on "reasons to believe" recorded in file.

Vicarious liability of proprietor - Proprietor of the concern can be held vicariously liable for offences under the CGST Act notwithstanding management by a manager. - HELD THAT: - Relying upon the statutory scheme and precedent, the court held that the proprietor satisfies the legal and factual requisites for vicarious liability under the CGST provisions. The fact that day-to-day management may be conducted by a manager does not negate the proprietor's responsibility for conduct of the business and consequent liability under the Act. [Paras 9, 10]

Applicant, as proprietor, is vicariously liable for offences alleged against the business.

Prosecution under CGST not dependent on prior completion of assessment - Prosecution for offences specified under the CGST Act can be launched without awaiting completion of departmental assessment. - HELD THAT: - The court observed that the statutory offences enumerated do not require completion of an assessment as a precondition to prosecution. Acts such as issuance of invoices without supply, evasion of tax, and wrongful availing of input tax credit constitute offenses independently of the assessment process, and therefore criminal proceedings may be initiated notwithstanding pending or incomplete assessment. [Paras 6]

Prosecution is not contingent upon prior completion of assessment.

Compoundability of offences under CGST Act - Offences under the CGST Act are compoundable both before and after institution of prosecution, but no attempt to compound has been made by the applicant. - HELD THAT: - The court noted the statutory provision allowing compounding of offences under the CGST Act at both pre- and post-prosecution stages. It recorded that in the present matter the applicant did not pursue compounding as an alternative remedy either prior to or after institution of prosecution, and this lack of effort was noted in assessing the overall position on bail. [Paras 7, 8]

Offences are compoundable; applicant has not sought compounding.

Final Conclusion: Having applied the relevant principles to the alleged large-scale evasion and attendant public-interest considerations, the High Court declined to grant bail to the applicant and dismissed the bail petition.

Summary order. Petitioner alleged non-compliance with Rule 142(1A) and Rule 142(2A) of the Central Goods and Services Tax Rules, 2017 in issuance of a show cause notice; respondents were granted time to obtain instructions and matter was listed on 09.04.2021.

Exemption of individual advocates from service tax/GST for legal services falling in the negative list - administrative direction to prevent issuance of demands and notices to exempt persons - burden of proof to establish practising advocate status - protection against departmental harassment by wrongful demand notices

Exemption of individual advocates from service tax/GST for legal services falling in the negative list - burden of proof to establish practising advocate status - administrative direction to prevent issuance of demands and notices to exempt persons - Practising advocates rendering legal services falling in the negative list should not be issued notices demanding payment of service tax/GST and the Department must issue clear instructions to its officers to that effect. - HELD THAT: - The counter affidavit records that proceedings against the petitioner were dropped after receipt of information that he is an individual advocate practising in the High Court. The affidavit and submissions show that a Notification exists under which individual advocates are not liable for service tax for legal services to business entities in the taxable territory, yet the Department continued to issue notices and at times insisted that the petitioner produce documentary proof of his practising status. The Assistant Solicitor General conceded that no initial notice ought to have been issued to a practising advocate. In view of recurring instances of notices being issued to advocates despite their exemption, the Court directed the Commissioner GST to issue clear instructions to all officers in the GST Commissionerates in Odisha that no notice demanding payment of service tax/GST shall be issued to lawyers rendering legal services that fall within the negative list, and to place copies of such instructions on record. [Paras 2, 3, 4, 5, 7]

The Court directed the Commissioner GST to issue and place on record clear instructions that practising advocates rendering services in the negative list shall not be issued notices demanding service tax/GST; proceedings against the petitioner were dropped.

Final Conclusion: The High Court directed the GST Commissioner to issue departmental instructions preventing issuance of demand notices to practising advocates covered by the exemption and to place copies of those instructions before the Court; the petitioner's proceedings were accordingly dropped.

Assessment against non-existing company is void - Amalgamation and successor liability - Notice under section 148 and assessment under section 147/144 - Principle that assessment in name of non-existent entity is substantive illegality - Territorial jurisdiction under Article 226(2)

Assessment against non-existing company is void - Amalgamation and successor liability - Notice under section 148 and assessment under section 147/144 - Principle that assessment in name of non-existent entity is substantive illegality - Impugned notice dated 30th March, 2019 under section 148 and assessment order dated 31st December, 2019 passed in the name of M/s. Tecnovate Esolutions Pvt. Ltd. for AY 2012-13 are without jurisdiction and liable to be quashed. - HELD THAT: - Court found on the admitted facts that M/s. Tecnovate Esolutions Pvt. Ltd. had ceased to exist with effect from 1st April, 2010 pursuant to an approved scheme of amalgamation and that the petitioner is the successor company which had filed returns and undergone assessments for the relevant periods. Applying the legal principle affirmed by the Supreme Court in Maruti Suzuki and related authorities, the Court held that initiation of re-assessment and passing of an assessment order in the name of an entity which has ceased to exist is a substantive illegality and not a mere procedural infirmity. Consequently, the notice under section 148 and the subsequent order under sections 147 read with 144 in the name of the non-existing transferor company cannot be sustained and must be quashed. [Paras 7, 21, 22, 24, 25]

Notice dated 30th March, 2019 and assessment order dated 31st December, 2019 in the name of M/s. Tecnovate Esolutions Pvt. Ltd. for AY 2012-13 are quashed.

Territorial jurisdiction under Article 226(2) - Maintainability of the writ petition before the Bombay High Court under Article 226(2) of the Constitution despite the assessment order being passed by authorities in Delhi. - HELD THAT: - The Court examined the territorial jurisdiction question and, relying on settled authorities, held that if any part of the cause of action arises within the territorial limits of the High Court, the Court may entertain the writ petition under Article 226(2). On the admitted facts - that the petitioner as successor company is registered and stationed at Mumbai and that correspondence and prejudice to the petitioner arose in Mumbai - the Court concluded that a part of the cause of action arose within this State and that the Bombay High Court has jurisdiction to adjudicate the petition. The respondents' contention that jurisdiction lies exclusively with the forum at Delhi was rejected as lacking efficacy on the facts. [Paras 13, 16, 19, 25]

Writ petition is maintainable before the Bombay High Court; the objection on territorial jurisdiction is repelled.

Final Conclusion: The writ petition is allowed: the notice dated 30th March, 2019 under section 148 and the assessment order dated 31st December, 2019 in the name of M/s. Tecnovate Esolutions Pvt. Ltd. for AY 2012-13 are quashed; the Bombay High Court is held to have territorial jurisdiction to entertain the petition.

Direct Tax Vivad Se Vishwas Act, 2020 - disputed tax - tax arrears - declaration under Section 4(1) - eligibility as appellant under Section 2(1)(a)(v) - designated authority's duty to determine amount and issue certificate under Section 5(1) (Form 3) - summary rejection of declarations without a reasoned order

Disputed tax - eligibility as appellant under Section 2(1)(a)(v) - tax arrears - Whether the petitioner satisfied the definition of "disputed tax" under the DTVSV Act and was an eligible declarant in respect of the assessment years 1988-89 to 1998-99. - HELD THAT: - The Court found on the facts that the petitioner had filed revision applications under Section 264 which were pending as on the specified date and that, if those revision applications were rejected, the petitioner would be liable to a tax demand. Applying the definition in Section 2(1)(j)(F) of the DTVSV Act, the petitioner's situation fell within the statutory definition of "disputed tax." The Court noted that "tax arrears" under the Act encompasses the aggregate of disputed tax and related interest/penalty, and that the petitioner had filed declarations under Section 4(1) in respect of such tax arrears. Consequently the petitioner qualified as an appellant/declarant under the scheme and there was a subsisting disputed tax and tax arrear for the years in question. [Paras 33, 48]

Petitioner satisfies the definition of disputed tax and is an eligible declarant for A.Y. 1988-89 to 1998-99.

Declaration under Section 4(1) - designated authority's duty to determine amount and issue certificate under Section 5(1) (Form 3) - summary rejection of declarations without a reasoned order - Whether the Designated Authority was justified in rejecting the petitioner's Form 1 declarations by updating the portal to "Rejected" without issuing Form 3 or a reasoned order, and what relief follows. - HELD THAT: - The Court observed that the Act and Rules provide a regime under which the designated authority must receive a declaration in Form 1, determine the amount payable and grant a certificate in Form 3 within the statutory timeframe. There was no provision authorising the Designated Authority to summarily mark declarations as "Rejected" on the e filing portal without passing any order or reasons. The respondents had not invoked any specific disqualification under Section 4(6) or the exceptions in Section 9, and the petitioner's declarations and undertakings were on their face compliant. In those circumstances the summary updating of status to "Rejected" was held to be unjustified. The Court therefore set aside the rejections and directed the Designated Authority to consider and determine the petitioner's declarations in accordance with the Act and Rules within a limited time. [Paras 49, 50, 51, 52]

Summary rejection was not justified; rejections set aside and Designated Authority directed to consider the declarations and proceed in accordance with the DTVSV Act and Rules within two weeks.

Final Conclusion: The Court allowed the petition, set aside the summary rejections of the Form 1 declarations dated 18th November, 2020, and directed the Designated Authority to consider the petitioner's declarations and issue the certificate/otherwise proceed under the DTVSV Act and Rules in accordance with law within two weeks; no order as to costs.

Allowability of depreciation as application of income - treatment of cost of asset as application of income - prohibition against double deduction where cost already allowed as application - interpretation of section 11 regarding application of income

Allowability of depreciation as application of income - treatment of cost of asset as application of income - prohibition against double deduction where cost already allowed as application - interpretation of section 11 regarding application of income - Depreciation claimed by a registered charitable trust is allowable as application of income under section 11 even though the cost of the assets had earlier been treated as application of income, and allowing such depreciation does not amount to a double deduction. - HELD THAT: - The appeal was heard and the learned Senior Standing Counsel for the Revenue accepted that the substantial questions raised had been answered against the Revenue by earlier decisions, including the Supreme Court decision in CIT v. Rajasthan and Gujarati Charitable Foundation and the Division Bench judgment in T.C.A.Nos.343 to 345 & 347 of 2014. Following those precedents, the Court applied the settled legal position that depreciation may be allowed in computing application of income under section 11 notwithstanding that the purchase cost had been treated as application in the year of acquisition, and that such allowance does not result in an impermissible double benefit. On the basis of the admitted position and the binding precedents relied upon by the Court, the substantial questions framed in the admitted issue were answered against the Revenue and the Tribunal's order sustaining the allowance of depreciation was upheld. [Paras 3, 5]

The Tax Case Appeal is dismissed and the substantial questions are answered against the Revenue.

Final Conclusion: Following authoritative precedent and the concession made by counsel, the High Court dismissed the Revenue's appeal and upheld the Tribunal's and CIT(A)'s allowance of depreciation as an application of income for Assessment Year 2009-2010.

Operation of Section 153(3)(ii) in consequence of a finding or direction - computation of limitation under Section 153(1)(a) including exclusion of stayed period and extension to sixty days - court order not amounting to a direction or finding - time-barred assessment/draft assessment

Operation of Section 153(3)(ii) in consequence of a finding or direction - court order not amounting to a direction or finding - Whether Section 153(3)(ii) could be invoked on the basis of the High Court order dated 07.03.2012. - HELD THAT: - The Court held that Section 153(3)(ii) applies only where an assessment, reassessment or recomputation is made consequential to or to give effect to a finding or direction contained in an order of an appellate or revisional authority or a court. Established authorities require that such a finding or direction must be necessary for disposal of the case and within the power of the deciding forum. The writ order dated 07.03.2012 merely set aside the impugned order and remitted the matter to the Assessing Officer and directed the assessee to appear; it did not contain any expressed finding or direction falling within the scope of Section 153(3)(ii). Consequently Section 153(3)(ii) was not attracted to extend the limitation period in this case. [Paras 8]

Section 153(3)(ii) did not apply because the High Court order contained no finding or direction necessary to invoke that clause.

Computation of limitation under Section 153(1)(a) including exclusion of stayed period and extension to sixty days - time-barred assessment/draft assessment - Whether the draft assessment dated 05.07.2012 and the final assessment dated 31.05.2013 were barred by limitation under Section 153(1)(a) after excluding the stayed period and applying the proviso extension. - HELD THAT: - The Court accepted the tribunal's computation: the assessment proceedings were stayed by injunction from 08.12.2011 to 07.03.2012 (103 days), which is excluded under the Explanation to Section 153. After excluding that period and applying the proviso that any remaining period less than sixty days is extended to sixty days, the Assessing Officer was required to complete the draft assessment by 06.05.2012. The draft assessment was, however, completed on 05.07.2012. Applying the statutory exclusions and the proviso, the draft order and consequential final order were held to be beyond the permissible period and therefore time-barred. [Paras 9]

The draft assessment and the consequential final assessment were barred by limitation under Section 153(1)(a) and were correctly quashed.

Final Conclusion: The substantial questions are answered against the revenue: Section 153(3)(ii) was not attracted as the High Court order contained no finding or direction, and after excluding the stayed period and applying the proviso the draft assessment was time barred; the appeal is dismissed.

Setting off of loss of a Unit eligible for deduction under Section 10A against profits of other Units eligible for deduction under Section 10A - effect of efflux of time rendering substantial questions of law academic - application of binding Supreme Court precedent to decide substantial question of law

Setting off of loss of a Unit eligible for deduction under Section 10A against profits of other Units eligible for deduction under Section 10A - application of binding Supreme Court precedent to decide substantial question of law - Whether loss of a Unit eligible for deduction under Section 10A can be set off against the profits of other Units likewise entitled to deduction under Section 10A. - HELD THAT: - The parties before the Court accepted that the other substantial questions of law had become academic by reason of efflux of time and did not press those for adjudication. The second substantial question was considered in the light of the Supreme Court's decision in Commissioner of Income-tax v. Yokogawa India Ltd., which the Court held answers the question in favour of the assessee. Applying that binding precedent, the Court found that the Tribunal's contrary conclusion on this point could not stand. Consequently the portion of the impugned Tribunal order dealing with this question was quashed.

Substantial question No.(ii) is answered in favour of the assessee; the impugned order is quashed insofar as it contains the contrary finding.

Final Conclusion: The appeal is disposed of: substantial questions Nos.(i) and (iii) were rendered academic and need not be answered; substantial question No.(ii) is answered for the assessee based on the Supreme Court precedent, and the impugned Tribunal order is quashed to that extent.

True and full disclosure for settlement under Chapter XIX-A (application under Section 245-C read with provisos) - statutory requirement for additional income disclosure for years outside block assessment (first proviso to Section 245C) - applicability and terminal point of interest under Sections 234-A, 234-B and 234-C in settlement proceedings - deemed dividend concept as envisaged by Section 2(22)(e) in relation to loans/advances from companies - scope of judicial review under Article 226 - interference limited to perversity/arbitrariness in administrative decision-making

True and full disclosure for settlement under Chapter XIX-A (application under Section 245-C read with provisos) - statutory requirement for additional income disclosure for years outside block assessment (first proviso to Section 245C) - Validity of the Settlement Commission's admission and settlement for Assessment Year 2012-13 where no additional income was offered in the settlement application - HELD THAT: - The Court analysed the statutory scheme of settlement under Chapter XIX-A and the provisos to Section 245C. For years falling outside the block assessment period (i.e. 2012-13), an applicant must satisfy the proviso to Section 245C by disclosing additional income above the threshold prescribed (ten lakh), whereas for block years the threshold is higher. The applications filed by the respondents did not disclose any additional income for Assessment Year 2012-13 and therefore did not meet the statutory requirement under the proviso to Section 245C(1-B)(ii). The Court held that the Settlement Commission's order insofar as it settled the case for 2012-13 was contrary to the statutory requirement and liable to be set aside; the matter for 2012-13 must be finalized by the assessing officer in accordance with law and procedural safeguards. [Paras 29, 30]

Impugned orders are set aside insofar as they settle the case for Assessment Year 2012-13 and the assessing officer is directed to finalize assessment for 2012-13 within three months in accordance with law.

Applicability and terminal point of interest under Sections 234-A, 234-B and 234-C in settlement proceedings - true and full disclosure for settlement under Chapter XIX-A (application under Section 245-C read with provisos) - Whether the Settlement Commission could direct payment of interest in a manner contrary to the Supreme Court decision in Brij Lal (regarding levy of interest up to the order under Section 245-D(1)) - HELD THAT: - The Court examined the reasoning in Brij Lal which explains that computation of total income under Section 245-C(1-B) makes the settlement application akin to a return and that interest under Sections 234-A, 234-B and 234-C is engrafted into Chapter XIX-A only up to the stage of the order under Section 245-D(1) (admission). The legislature did not contemplate levy of interest between the 245-D(1) order and the final settlement order under 245-D(4). Consequently, the Settlement Commission cannot direct interest beyond the limits prescribed by Brij Lal, nor reopen concluded proceedings to levy such interest. The impugned orders' directions on interest that are inconsistent with Brij Lal were held to be liable to be modified and the assessing officers were directed to compute interest strictly in accordance with that decision. [Paras 35, 38, 41]

Impugned orders are set aside to the extent they direct payment of interest contrary to Brij Lal; officers must finalise interest strictly in accordance with the Supreme Court's decision.

Deemed dividend concept as envisaged by Section 2(22)(e) in relation to loans/advances from companies - scope of judicial review under Article 226 - interference limited to perversity/arbitrariness in administrative decision-making - Challenge to the Settlement Commission's factual conclusion (including treatment of amounts as not being deemed dividend) and whether the High Court should interfere under Article 226 - HELD THAT: - The petitioners urged that certain sums received by one respondent from a company of which she was a director/shareholder should be treated as deemed dividend under Section 2(22)(e). The Court observed that determination of true and full disclosure and related factual conclusions fall within the Settlement Commission's fact-finding domain. Exercising writ jurisdiction under Article 226, the High Court's supervisory power is narrow and limited to cases of perversity or arbitrariness in the decision-making process. No such perversity or extraordinary circumstances were demonstrated; accordingly there is no scope for interference with the Commission's factual determinations on these points. [Paras 31, 33, 34]

No interference with the Settlement Commission's factual findings (including on the deemed dividend contention); writ petitions lack merit on this aspect.

Final Conclusion: Writ petitions are partly allowed: the Settlement Commission's orders are set aside for Assessment Year 2012-13 and the cases for that year are remitted to the assessing officer for fresh finalisation within three months; the Commission's directions on interest inconsistent with the Supreme Court's decision in Brij Lal are quashed and officers are directed to compute interest strictly in accordance with that authority; challenges to the Commission's factual findings (including on deemed dividend) are dismissed for want of jurisdictional error.

Scope of inquiry at the stage of Section 245D(2C) - full and true disclosure in a settlement application - adjudication of merits by the Settlement Commission at a preliminary stage - remand for fresh consideration and hearing on merits - laches and delay in instituting judicial proceedings

Scope of inquiry at the stage of Section 245D(2C) - full and true disclosure in a settlement application - adjudication of merits by the Settlement Commission at a preliminary stage - Whether the Settlement Commission exceeded the permissible scope under Section 245D(2C) by going into merits of taxability and documentary bifurcation at the preliminary stage - HELD THAT: - The Commission, while considering whether there had been a full and true disclosure, proceeded to examine the nature of the documentation and the bifurcation of the scope of work - matters which directly touch the substantive issues raised in the settlement application. The Court held that such discussion on the merits at the stage of Section 245D(2C) amounted to putting the cart before the horse and was beyond the scope of that preliminary provision. Reliance was placed on the earlier decision in Hitachi Power Europe GmbH (order dated 17.02.2020 in W.P.No.3706 of 2020) affirmed by the Division Bench, and the Revenue did not seriously contest that position. The impugned order was therefore found to be legally impermissible to the extent it adjudicated merits at that stage. [Paras 4, 5]

The Commission erred in delving into merit issues at the Section 245D(2C) stage; that aspect of the impugned order is set aside.

Laches and delay in instituting judicial proceedings - Whether the writ petition was barred by laches because it was filed six months after the impugned order and after participation in assessment proceedings - HELD THAT: - The Revenue contended that the petitioner was lethargic in approaching the Court. The petitioner explained the delay as resulting from administrative formalities and approvals required from abroad. The Court accepted this explanation and rejected the contention of laches, finding the delay satisfactorily explained and not fatal to the petition. [Paras 6]

The plea of laches is rejected; the delay in filing the writ petition is excused.

Remand for fresh consideration and hearing on merits - Direction as to the sequel: whether the matter should be remitted to the Settlement Commission for fresh hearing on merits - HELD THAT: - Having set aside the portion of the impugned order that improperly dealt with merits at the preliminary stage, the Court directed that the petitioner be heard by the Settlement Commission on the merits. The Commission is to issue notice and decide the matter finally after hearing the parties, and to do so as expeditiously as possible. [Paras 7]

The matter is remitted to the Settlement Commission for fresh hearing and final disposal on merits after issuing notice; the impugned order is set aside.

Final Conclusion: Writ petition allowed; the Settlement Commission's order is set aside insofar as it adjudicated merits at the Section 245D(2C) stage. The petitioner is to be heard on merits by the Commission after issuance of notice and a final order is to be passed expeditiously. Connected petitions closed; no costs.

Write back of depreciation - computation of depreciation under the Income-tax Act - tax neutrality of reversal of depreciation - Section 145A(ii) - valuation of closing stock and excise duty - bonded warehouse and excise liability - restoration/remand for fresh adjudication - principles of natural justice

Write back of depreciation - computation of depreciation under the Income-tax Act - tax neutrality of reversal of depreciation - restoration/remand for fresh adjudication - principles of natural justice - Grounds 5 and 6 (treatment and tax effect of write back of earlier years' depreciation) restored to the file of the Assessing Officer for fresh adjudication. - HELD THAT: - The Tribunal observed that the assessee claimed write back of depreciation (Rs. 292.92 lacs) in books relating to earlier years and contended that the write back did not affect depreciation computation under the Income-tax Act as WDV for tax purpose had not been altered. The Assessing Officer and the Commissioner(Appeals) reached differing conclusions, and the matter requires verification of records and earlier years' returns/computations to ascertain whether the reversal is tax neutral. Both parties agreed verifications by the AO are necessary. Accordingly, the Tribunal restored the issue to the AO for fresh adjudication on merits, directing the assessee to produce relevant evidence to demonstrate correct depreciation/WDV treatment for earlier years and that no prejudice is caused to Revenue; the AO is directed to admit and adjudicate the evidence and to afford adequate opportunity of being heard in accordance with principles of natural justice. [Paras 2]

Grounds 5 and 6 allowed for statistical purposes and remanded to the AO for fresh verification and adjudication.

Section 145A(ii) - valuation of closing stock and excise duty - bonded warehouse and excise liability - restoration/remand for fresh adjudication - principles of natural justice - Ground 7 (whether excise duty must be included in valuation of closing stock under Section 145A(ii)) restored to the file of the Assessing Officer for fresh adjudication. - HELD THAT: - The Tribunal noted conflicting findings below on whether excise duty on finished goods lying as closing stock must be included in inventory valuation under Section 145A(ii). Reliance was placed on precedents (including Polyset) that excise need not be included where goods are in factory/bonded warehouse set up with excise permission to retain goods without payment of duty. The records did not clearly establish the location/status of the warehouse or existence of excise permission. Therefore, the Tribunal restored the issue to the AO for verification of factual records (location of warehouse, excise permissions, bonded status) and directed the AO to admit evidence, verify these facts, and adjudicate the question in accordance with the cited ratio while affording the assessee proper opportunity of hearing. [Paras 3]

Ground 7 allowed for statistical purposes and remanded to the AO for factual verification and fresh adjudication in accordance with law and precedent.

Final Conclusion: The Tribunal allowed the miscellaneous application in part by restoring Grounds 5, 6 and 7 in ITA No. 117/Alld/2011 (AY: 2007-08) to the file of the Assessing Officer for fresh adjudication; the AO is directed to verify records, admit and decide the evidence on merits and afford the assessee adequate opportunity of hearing in accordance with law.

Requirement of corroborative seized material to sustain additions - assessment under section 153A of the Act - seizure and admissibility of seized material - penalty under section 271(1)(c) - notice non specification of limb - notice under section 274 read with section 271(1)(c) must specify the limb of default

Requirement of corroborative seized material to sustain additions - seizure and admissibility of seized material - assessment under section 153A of the Act - Validity of addition made to income on account of interest on Post Dated Cheques (PDCs) based on seized material from searches of group companies. - HELD THAT: - The Tribunal found that the first search (15/11/2007) produced seized material that did not belong to the assessee, which was incorporated only on 30/07/2009, and that the subsequent search concluded on 05/02/2011 yielded no incriminating material attributable to the assessee. In the absence of any corroborative seized material connecting the seized documents to the assessee, the Assessing Officer and the CIT(A) failed to establish that the assessee was involved in unexplained or unaccounted transactions giving rise to the addition. Consequently, the addition on account of interest on PDCs, which was founded on the seized material, could not be sustained. [Paras 7]

Addition on account of interest on PDCs deleted; quantum appeal allowed.

Penalty under section 271(1)(c) - notice non specification of limb - notice under section 274 read with section 271(1)(c) must specify the limb of default - Validity of penalty imposed under section 271(1)(c) where the notice did not specify which limb of the provision was invoked. - HELD THAT: - The Tribunal held that the notice under section 274 read with section 271(1)(c) did not indicate the specific limb of section 271(1)(c) for which penalty proceedings were initiated, rendering the notice defective in view of the jurisdictional High Court precedent relied upon by the assessee. Further, having deleted the addition on merits, the Tribunal observed that the penalty could not survive. On both grounds - defect in the notice and the disposal of the quantum appeal in favour of the assessee - the penalty was held to be unsustainable. [Paras 8]

Penalty set aside; penalty appeal allowed.

Final Conclusion: Both the quantum appeal and the penalty appeal are allowed: the addition on account of interest on PDCs founded on seized material is deleted for lack of corroboration, and the penalty under section 271(1)(c) is set aside both because the notice failed to specify the limb and because the substantive addition has been deleted.

Reopening of assessment under Section 147/148 - failure to disclose fully and truly material facts - Subsequent judicial decision as 'information' for reopening after four years - Principle that change in law after assessment cannot justify reassessment beyond four years absent failure to disclose - Disallowance under Section 40(a)(ia) for non-deduction of tax at source

Reopening of assessment under Section 147/148 - failure to disclose fully and truly material facts - Subsequent judicial decision as 'information' for reopening after four years - Principle that change in law after assessment cannot justify reassessment beyond four years absent failure to disclose - Validity of notice issued under Section 148 and proceedings under Section 147 where notice was issued after four years from the end of the relevant assessment year. - HELD THAT: - The Tribunal held that the impugned notice under Section 148 was issued after the expiry of four years and the recorded reasons do not allege any omission or failure on the part of the assessee to disclose fully and truly material facts necessary for assessment. Where an assessment under Section 143(3) has been completed, reopening beyond four years requires a specific finding of such failure to disclose as a condition precedent to assumption of jurisdiction. The Assessing Officer's reliance on a subsequent judgment of the jurisdictional High Court as constituting 'information' to reopen does not relieve the requirement of recording a failure to disclose material facts; a mere change or clarification in legal position after the assessment cannot, by itself, be treated as an omission by the assessee. The Tribunal applied the established principle that when the law, as it stood at the time of assessment, supported the assessee's position, subsequent judicial reversal of that legal position does not authorise reopening unless the Assessing Officer can point to an omission or concealment of material facts by the assessee. The Tribunal noted and followed the reasoning of higher and coordinate courts to the effect that the Assessing Officer must record which facts were not disclosed and demonstrate the link between those undisclosed facts and the reasons for reopening. In the absence of any 'whisper' in the recorded reasons alleging failure to disclose fully and truly, the notice and consequent proceedings under Section 147/148 were held not sustainable and were quashed. As a consequence, the Tribunal did not adjudicate the merits of the additions under Section 40(a)(ia) since reassessment was set aside.

Impugned notice under Section 148 and proceedings under Section 147 quashed for want of jurisdiction; reassessment set aside.

Final Conclusion: Reassessment proceedings initiated by notice dated under Section 148 (relating to AY 2004-05) are quashed because the recorded reasons lack any allegation of failure by the assessee to disclose fully and truly material facts; appeal allowed and merits not adjudicated as academic.

Validity of proceedings under section 153C - Meaning of "belongs to" under section 153C - Incriminating material requirement for reopening concluded assessment - Applicability of section 50C - date of transfer and stamp duty valuation - Agreement to sell as transfer under section 2(47)(vi) - Retrospective operation of proviso to section 50C (beneficial construction)

Validity of proceedings under section 153C - Meaning of "belongs to" under section 153C - Proceedings under section 153C initiated against the assessee were not sustainable in the absence of seized material belonging to the assessee which had a bearing on its income. - HELD THAT: - The Tribunal examined the jurisdictional requirement of section 153C - that seized/requisitioned material during search must 'belong or belong to' the other person and such material must have a bearing on that person's income. Documents seized in the search proceedings were books of account and tally of SJ Securities Ltd (the person searched) and recorded transactions of SJSL; those documents were not property of the assessee. Mere references to the assessee in documents of the person searched or statements recorded during search do not convert such material into documents 'belonging to' the assessee. The Tribunal relied on the principle that record maintained by a person for his own purposes, though referable to another, cannot be said to belong to that other person, and noted there was no incriminating material found against the assessee nor independent evidence showing that consideration realized by ultimate buyers was remitted to the assessee. In these circumstances the essential jurisdictional condition to assume jurisdiction under section 153C was absent and the AO could not disturb the concluded assessment framed earlier under section 143(3). [Paras 8]

Proceedings under section 153C were invalid and unsustainable for want of seized material belonging to the assessee that had bearing on its income; the addition could not be sustained on that basis.

Incriminating material requirement for reopening concluded assessment - The tally and balance sheet entries of SJ Securities Ltd seized during the search did not constitute incriminating material against the assessee sufficient to reopen the assessment. - HELD THAT: - The Tribunal analysed the concept of 'incriminating material' and concluded that incriminating material must be such fact/evidence which suggests that previously declared transactions were a device or not genuine. The seized tally and audited accounts were records of SJSL showing its purchases and sales; corresponding entries in the assessee's books and the capital gain were disclosed and assessed earlier. There was no seized document showing that amounts realized by SJSL were returned to the assessee or that the assessee was the ultimate beneficiary. Statements recorded during search are not equivalent to seized documents belonging to the assessee. Absent incriminating material, the concluded assessment could not be disturbed. [Paras 8]

Seized accounting records of SJSL were not incriminating material against the assessee; they could not justify reopening the concluded assessment.

Applicability of section 50C - date of transfer and stamp duty valuation - Agreement to sell as transfer under section 2(47)(vi) - For the purpose of section 50C, the transfer occurred on the date of the agreement to sell (12-03-2008) because the agreement extinguished the vendor's rights and enabled enjoyment by the buyer; therefore stamp duty value as on the date of agreement is to be taken as full value of consideration. - HELD THAT: - The Tribunal applied section 2(47)(vi) and the Supreme Court authority reasoning that an agreement to sell which extinguishes the vendor's right or enables enjoyment by the buyer amounts to 'transfer'. Evidence showed SJSL had subdivided the land, applied for municipal approvals and exercised rights of enjoyment after the agreement, indicating that the agreement conferred enforceable rights. Consequently the relevant date for ascertaining the stamp valuation authority's value under section 50C is the date of agreement. The Tribunal found support in coordinate decisions holding that guideline/stamp values as on the date of agreement are to be considered where right in personam is created. [Paras 8]

The date of agreement (12-03-2008) is the date of transfer for section 50C; the stamp duty value as on that date is to be adopted for computing capital gains.

Retrospective operation of proviso to section 50C (beneficial construction) - The CIT(A)'s alternate reliance on the proviso to section 50C (as inserted by Finance Act 2016) to grant relief was not sustained because the assessee did not comply with the proviso's condition of receipt of consideration or part thereof by account payee cheque or specified banking mode on or before the date of the agreement. - HELD THAT: - The Tribunal noted that the proviso permits taking stamp valuation as on the date of agreement where consideration or part thereof was received by account payee cheque/bank draft/ electronic transfer on or before the agreement date. In the present case the assessee had received only small cash payments at agreement and the significant cheque payment was dated 05-10-2009, which does not satisfy the proviso's temporal and mode conditions. Therefore the alternate view of the CIT(A) under the proviso was incorrect insofar as it purported to confer relief based on earlier receipt by cheque. [Paras 8]

The proviso's benefit could not be invoked by the assessee because the specified mode and timing of payment condition was not met.

Final Conclusion: The Tribunal dismissed the Revenue's appeal: proceedings under section 153C were held unsustainable for want of seized material belonging to the assessee and the addition under section 50C was deleted on merits because the transfer was held to occur on the date of the agreement (12 03 2008) so that the stamp duty value as on that date governs; the CIT(A)'s alternate reliance on the 50C proviso was rejected as the assessee did not satisfy its conditions.

Taxability of capital gains in year of transfer versus year of receipt under section 45(3) - Vivad se Vishwas settlement and its effect on adjudication of disputed tax issues - taxation of undisclosed income detected in search proceedings in the hands of partnership firm vis-a -vis its partners - res judicata/effect of settlement before Settlement Commission on subsequent assessment proceedings - remand for factual verification whether undisclosed income of firm was included in additional income declared before Settlement Commission - exemption under section 54B and verification of investment in agricultural land for applicability of exemption

Taxability of capital gains in year of transfer versus year of receipt under section 45(3) - Vivad se Vishwas settlement and its effect on adjudication of disputed tax issues - Whether separate adjudication was required on the assessee's plea that capital gain should be assessed in AYs 2007-08 and 2008-09 instead of being taxed in AY 2006-07 - HELD THAT: - The assessee disputed the AO's treatment of the entire capital gain as taxable in AY 2006-07 under the principle embodied in section 45(3), contending that amounts were received in AYs 2007-08 and 2008-09 and therefore taxable in those years. At hearing the assessee produced Form No.3 under the Vivad se Vishwas scheme showing settlement of the dispute for AY 2006-07. The Revenue did not contest that, and the Tribunal recorded that where the dispute for the year in question has been settled under the VSV scheme no separate adjudication of that issue is required. Accordingly the ground of appeal relating to re allocation of capital gains was treated as infructuous in view of the settlement under VSV. [Paras 8]

Ground dismissed as infructuous because the dispute for AY 2006-07 has been settled under the Vivad se Vishwas scheme; no separate adjudication required.

Taxation of undisclosed income detected in search proceedings in the hands of partnership firm vis-a -vis its partners - res judicata/effect of settlement before Settlement Commission on subsequent assessment proceedings - remand for factual verification whether undisclosed income of firm was included in additional income declared before Settlement Commission - Whether the addition of the assessee's share of undisclosed firm income should be upheld or the matter remanded to determine if that undisclosed income was already included in the partnership firm's settlement - HELD THAT: - The AO made an addition of the assessee's share of undisclosed income attributed to the partnership firm. The Tribunal noted that in identical circumstances appeals in respect of other partners had been remanded by the ITAT to the CIT(A) to examine the limited factual question whether the disputed undisclosed income had already been included in the additional income declared by the partnership firm before the Settlement Commission. The Tribunal agreed with the reasoning of that order: while in principle undisclosed income already taxed in the hands of the firm should not be taxed again in the hands of the partners, whether the firm had included the particular income before the Settlement Commission is a question of fact not previously examined by the lower authorities. Following the identical factual matrix and the earlier ITAT directions, the Tribunal set aside the issue and remanded it to the CIT(A) for fresh adjudication in accordance with law. [Paras 15, 16]

Issue remitted to the file of the CIT(A) for fresh adjudication to determine whether the undisclosed income was included in the partnership firm's settlement; appeal allowed for statistical purposes.

Exemption under section 54B and verification of investment in agricultural land for applicability of exemption - limited remand to verify factual claims of investment for grant of statutory exemption - Whether the assessee is entitled to exemption under section 54B by virtue of investment in agricultural land amounting to the claimed sum, and whether the matter requires verification by the AO - HELD THAT: - The assessee claimed that investment in another agricultural land exceeded the capital gain (after disregarding indexed cost of improvement) and therefore the entire capital gain should be exempt under section 54B. The CIT(A) granted the section 54B exemption but disallowed indexed cost of improvement; however the alternate contention that, if the improvement cost is ignored, the investment still covers the gain was not adjudicated on the merits by the authorities below. The Tribunal found the assessee's assertion prima facie plausible but noted that the factual claim regarding the investment had not been verified. In view of that, the Tribunal set aside the issue to the AO for verification of the claimed investment; if verified, the assessee is to be granted the exemption under section 54B. [Paras 30, 31]

Issue remitted to the AO for limited verification of the claimed investment in agricultural land; if verified, exemption under section 54B to be allowed.

Final Conclusion: The appeals are partly allowed for statistical purposes: the challenge to taxation of capital gain for AY 2006-07 was held infructuous in view of settlement under Vivad se Vishwas; the addition of undisclosed partnership income is remanded to the CIT(A) for fresh adjudication to determine whether that income was already included in the partnership firm's settlement; and the claim for exemption under section 54B is remanded to the AO for verification of the assessee's investment so that exemption may be allowed if the claim is established.

Condonation of delay - application of statement recorded under section 132(4) - acceptance of part of a voluntary statement versus rejection of the remainder - onus on Revenue to prove year of receipt for taxability - double taxation - estimation of brokerage/commission on accommodation entries

Condonation of delay - Delay in filing the assessee's appeal was condoned. - HELD THAT: - The assessee's appeal against the CIT(A) for Asstt.Year 2010-11 was time-barred by 40 days. The assessee produced an affidavit and medical certificate showing hospitalization and coronary artery bypass surgery during the relevant period. The Tribunal found that the assessee was prevented by a reasonable cause from filing the appeal within time and therefore exercised its discretion to condone the delay and proceed to decide the appeal on merits. [Paras 3]

Delay of 40 days condoned and appeal admitted for hearing on merits.

Application of statement recorded under section 132(4) - acceptance of part of a voluntary statement versus rejection of the remainder - onus on Revenue to prove year of receipt for taxability - double taxation - Addition of undisclosed income of Rs. 20.50 crores in Asstt.Year 2009-10 was deleted and the AO's protective assessment in Asstt.Year 2010-11 was upheld to avoid double taxation. - HELD THAT: - The assessee had, in a statement recorded under section 132(4), declared the undisclosed amount as income for Asstt.Year 2010-11. The AO, relying on partial statements and limited enquiries, treated the amount as income for Asstt.Year 2009-10. The Tribunal (having regard to the CIT(A)'s reasoning) held that the AO failed to bring independent, concrete evidence to contradict the assessee's explicit admission as to the year of taxability. Authorities relied upon indicated that a statement must be accepted in whole or rejected in whole unless other concrete evidence justifies part-rejection. The AO's enquiries covered only some subscribing entities and did not establish that funds originated from the assessee in the earlier year; no credit for tax paid in Asstt.Year 2010-11 was given when assessing 2009-10, amounting to double taxation. For these reasons the addition in Asstt.Year 2009-10 was not sustained and was deleted. [Paras 11, 13]

Addition of Rs. 20.50 crores in Asstt.Year 2009-10 deleted; Revenue's appeal dismissed.

Estimation of brokerage/commission on accommodation entries - acceptance of part of a voluntary statement versus rejection of the remainder - Notional addition on account of brokerage/commission in Asstt.Year 2010-11 was reduced to 0.5% of the share capital/premium; corresponding brokerage addition in Asstt.Year 2009-10 was cancelled. - HELD THAT: - Both AO and CIT(A) had made a notional estimate of brokerage-AO at 2% (or 2%-4%), CIT(A) at 1%-without concrete material. The only direct evidence on record was statements of entry operators indicating they received brokerage between 0.25% and 0.50%, which the authorities did not discredit. No incriminating material corroborated higher market-rate commissions. Considering that the CIT(A) had already reduced the estimate and that the operators' statements were uncontradicted, the Tribunal gave further relief, restricting the notional addition to 0.5% of the capital/premium introduced. Consequently, the AO's brokerage-based addition for Asstt.Year 2009-10 lacked independent support once the principal addition was deleted, and was therefore cancelled. [Paras 12, 18]

Brokerage addition in Asstt.Year 2009-10 cancelled; in Asstt.Year 2010-11 brokerage disallowance restricted to 0.5% of the share capital/premium (assessed amount accordingly reduced).

Final Conclusion: Delay in filing the assessee's appeal was condoned. The Tribunal upheld deletion of the undisclosed income addition in Asstt.Year 2009-10 (holding the amount taxable in Asstt.Year 2010-11 as admitted by the assessee) and cancelled the related brokerage addition for 2009-10. For Asstt.Year 2010-11 the notional brokerage disallowance was restricted to 0.5% of the introduced share capital/premium; Revenue's cross-appeal dismissed and the assessee's appeal partly allowed.

Re-opening of assessment - Validity of reopening under section 147 read with section 148 - Reason to believe escapement of income - Information triggering reason to suspect vis-a -vis requirement of reason to believe - Borrowed satisfaction - Stand-alone examination of reasons recorded for reassessment

Re-opening of assessment - Reason to believe escapement of income - Information triggering reason to suspect vis-a -vis requirement of reason to believe - Stand-alone examination of reasons recorded for reassessment - Whether the Assessing Officer validly assumed jurisdiction to reopen assessment for A.Y. 2011-12 by recording reasons under section 147 read with section 148 of the Act. - HELD THAT: - The Tribunal examined the reasons recorded by the AO on a stand alone basis and found that the AO's recorded foundation rested on information from the Investigation Wing alleging that two paper/shell companies were used to route unaccounted cash and that the assessee had received Rs. 25,00,000/- from those entities. After the assessee objected and averred it had not received funds from those companies, the AO himself altered the factual basis in the assessment to show receipt from an intermediary (Radharani Vyapaar (P) Ltd.) and traced a cash trail involving other layers. The Tribunal held that such information, as recorded, amounted only to material capable of triggering a reason to suspect and not a reason to believe; the AO did not make the requisite reasonable enquiries to convert suspicion into a bona fide belief that income chargeable to tax had escaped assessment. Further, the AO's original recorded reason - direct receipt from the named shell companies - was factually incorrect and was not corrected in the reasons themselves; the subsequent factual elaboration in the assessment order could not be read into or added to the recorded reasons. The Tribunal applied the principle that reasons recorded for reopening must stand on their own, that borrowed satisfaction is impermissible, and that the jurisdictional fact (reason to believe) must be of the AO. Because the condition precedent for exercise of jurisdiction under section 147 was absent, the reopening was held to be vitiated and the consequential assessment addition based thereon could not survive. [Paras 11, 12]

The reopening notice issued under section 148 and the reassessment made under section 147 are invalid; the addition made consequentially is null and void and is quashed.

Final Conclusion: The appeal is allowed: the notice under section 148 is quashed, the reassessment under section 147 is set aside and the addition made in consequence is nullified.

Allowability of additional depreciation under Section 32(1)(iia) - carry forward of balance additional depreciation when plant and machinery is used for less than 180 days - proviso restricting additional depreciation to 50% in the year of use and its scope - beneficial construction of tax relief to permit claim of remaining additional depreciation in subsequent year

Carry forward of balance additional depreciation when plant and machinery is used for less than 180 days - allowability of additional depreciation under Section 32(1)(iia) - beneficial construction of tax relief to permit claim of remaining additional depreciation in subsequent year - Whether the assessee was entitled to claim the balance portion of additional depreciation in the assessment year 2014-15 where only part of the additional depreciation was claimed in the earlier year because the new assets were put to use for less than 180 days. - HELD THAT: - The Tribunal examined earlier coordinate-bench decisions in the assessee's own cases and the reasoning of the Hon'ble Karnataka High Court in CIT v. Rittal India (P) Ltd., which held that the proviso limiting the quantum allowable in the year of use to 50% does not preclude claiming the remaining balance in a subsequent year. The Tribunal distinguished the decision relied on by the Department (M.M. Forgings / Madras High Court) as inapplicable to facts where the assessee had claimed only part of the statutory 20% additional depreciation (10%) in the year of installation and sought the residual 10% in the next year. The Revenue's contention that the Finance Act, 2015 amendment (effective 01.04.2016) affects the outcome was not substantiated before the Tribunal; the Department did not demonstrate how the amendment retrospectively altered the applicability of the earlier judicial pronouncements or the Tribunal's consistent view. Respectfully following the coordinate-bench and the Karnataka High Court decisions, the Tribunal concluded that the balance additional depreciation was allowable in the subsequent year and that the CIT(A)'s direction to delete the addition was correct. [Paras 4]

The order of the CIT(A) directing allowance of the balance additional depreciation is upheld and the ground raised by the Revenue is dismissed.

Final Conclusion: Following earlier Tribunal and Karnataka High Court decisions construing the proviso to Section 32(1)(iia) purposively, the Tribunal upheld the CIT(A)'s direction allowing the balance additional depreciation in AY 2014-15; the Revenue's appeal is dismissed.

Seizure under Section 110 of the Customs Act - confiscation under Section 111 of the Customs Act - mis-declaration / misrepresentation of imported goods - misuse of advance authorisation and claim of exemption - provisional release of seized goods on bond and security - authority to draw and test samples in customs investigation - administrative insertion of IEC alert (as distinct from blocking) - assessment of bills of entry and clearance subject to verification

Seizure under Section 110 of the Customs Act - confiscation under Section 111 of the Customs Act - mis-declaration / misrepresentation of imported goods - Validity of seizure of imported consignments and legality of investigation into alleged mis-declaration and misuse of advance authorisations. - HELD THAT: - The court recorded that the investigation revealed material and test reports suggesting that the consignments may have been mis-declared and that there was apparent manipulation of records and mis-utilisation of advance authorisations. Given these disputed factual findings and the laboratory results relied upon by the revenue, the seizure carried out under the statutory powers was not shown to be beyond jurisdiction or based on no grounds. The petition did not establish that the respondents had acted without authority or that the seizure suffered from absence of belief or non-application of mind. [Paras 22, 23, 25, 37]

Seizure and continuation of investigation upheld; relief to quash the seizure refused and the writ petition seeking to set aside seizure dismissed.

Assessment of bills of entry and clearance subject to verification - misuse of advance authorisation and claim of exemption - provisional release of seized goods on bond and security - Whether the petitioner was entitled to direction for immediate assessment and clearance of the imported goods without payment of duty or for unconditional provisional release. - HELD THAT: - The court declined to direct unconditional assessment or clearance without payment of duty in favour of the petitioner in view of the ongoing investigation and the revenue's apprehension of misuse of advance authorisations. The respondents indicated willingness to consider provisional release subject to execution of bond and furnishing of security to protect government revenue, consistent with departmental guidelines and the CBIC circular referenced. The Court observed that allowing clearance without adequate security would be inappropriate where evasion and misrepresentation are alleged. [Paras 29, 30, 31, 37]

No direction for clearance without duty; provisional release may be considered by authorities on execution of bond and appropriate security; petition for unconditional relief refused.

Authority to draw and test samples in customs investigation - administrative insertion of IEC alert (as distinct from blocking) - Entitlement of petitioner to supply/obtain copies of samples and test reports and the status of the IEC record. - HELD THAT: - The court noted competing contentions as to availability and testing of samples: samples were drawn and tested at JNCH and at an accredited private laboratory, and differences in test results were placed before the court. The court observed that the petitioner may take appropriate steps to seek further testing or production of sample portions by making a proper application to authorities. The court also recorded that the IEC had not been 'blocked' but an internal alert had been inserted to require examination and NOC from the investigating unit prior to clearance. [Paras 14, 26, 36, 38]

Petitioner not granted writ relief to compel fresh testing through court order; petitioner may approach authorities for drawing/testing of samples; IEC remains under alert, not blocked.

Final Conclusion: Writ petition dismissed. The court declined to set aside the seizure or to direct unconditional assessment and release of the consignments; authorities are directed to proceed expeditiously with assessment and the petitioner may seek provisional release or fresh sampling by following the appropriate administrative process and by providing bonds/security where required.

Extraterritorial application of the Customs Act, 1962 - Jurisdictional scope of the Customs Act within the territories of India - Penalty under Section 112(a) of the Customs Act, 1962 - Binding effect of Division Bench/Larger Bench precedent

Extraterritorial application of the Customs Act, 1962 - Jurisdictional scope of the Customs Act within the territories of India - Penalty under Section 112(a) of the Customs Act, 1962 - Whether a penalty under Section 112(a) of the Customs Act, 1962 can be imposed on an entity located outside India. - HELD THAT: - The Tribunal held that Section 1(2) of the Customs Act, 1962 confines the Act's operation to the whole of India and its territories and does not extend the Act's penal provisions beyond Indian territory. The appellant is located outside India and, on that factual basis, cannot be subjected to penalty under the Customs Act. The Tribunal further noted the existence of a contrary Division/ Larger Bench decision adverse to the Revenue and emphasised that departmental representatives should take note of such precedents; the adjudicatory outcome follows the binding territorial interpretation recorded by the Division Bench/Larger Bench. Applying that territorial limitation to the facts of the case, the imposition of penalty under Section 112(a) could not be sustained. [Paras 7]

The penalty imposed under Section 112(a) of the Customs Act, 1962 on the appellant located outside India is not sustainable and is set aside.

Final Conclusion: The appeal is allowed; the impugned order imposing penalty under Section 112(a) of the Customs Act, 1962 on an entity situated outside India is set aside with consequential relief.

Moratorium under the Insolvency and Bankruptcy Code - use of common passage/common road by third parties vis-a -vis corporate debtor's property - protection of possession and assets by the Resolution Professional - bar of jurisdiction where the Adjudicating Authority is empowered under the Code - summary, time-bound nature of insolvency proceedings under the Code - provisions of this Code to override other laws

Use of common passage/common road by third parties vis-a -vis corporate debtor's property - protection of possession and assets by the Resolution Professional - moratorium under the Insolvency and Bankruptcy Code - Validity of the Adjudicating Authority's order permitting the respondents' use of a common road and restraining them from creating hindrance to the Resolution Professional and his staff. - HELD THAT: - The Tribunal found that the registered sale deed dated 09.10.2015 and the site map (Schedule 1) relied upon in the respondents' pleadings showed existence of a common road on the south side of the respondent's property and that this fact was not disputed by the appellant. In view of the unchallenged title documents on record, the Tribunal held that the respondents' use of the common road could not be objected to by the Resolution Professional unless the sale deed itself was first declared invalid in a proceeding filed by the Resolution Professional. The Adjudicating Authority's order was noted to balance competing rights by permitting continued use of the common passage while simultaneously restraining the respondents from causing disturbance or hindrance to the Resolution Professional or his staff. The Tribunal treated the matter as one falling within the summary, time bound regime of insolvency proceedings and found no legal infirmity in the impugned order. [Paras 19, 21, 22]

The Adjudicating Authority's direction that the respondents' use of the common road cannot be objected to unless the sale deed is declared invalid and that the respondents must not create any hindrance was upheld.

Bar of jurisdiction where the Adjudicating Authority is empowered under the Code - summary, time-bound nature of insolvency proceedings under the Code - provisions of this Code to override other laws - Whether the Adjudicating Authority lacked jurisdiction to pass the impugned interlocutory order and whether the matter was properly dealt with by the Adjudicating Authority rather than by civil courts. - HELD THAT: - The Tribunal considered the appellant's submissions regarding jurisdiction, including references to amendments and to the competency of civil courts, but observed that the Adjudicating Authority had the power to pass the interlocutory order in the summary proceedings before it. The Tribunal further emphasised the summary and time bound character of proceedings under the Code and found that the appellant failed to demonstrate any legal infirmity in the Adjudicating Authority's exercise of jurisdiction in the present interlocutory application. Accordingly, no jurisdictional defect was found that would warrant interference with the impugned order. [Paras 20, 21, 22]

The Adjudicating Authority had competence to pass the impugned order; the appellant did not establish a jurisdictional or legal error, and the Tribunal declined to interfere.

Final Conclusion: The Tribunal affirmed the Adjudicating Authority's order dated 22.09.2020 in I.A. No. 234/2020 in C.P.(I.B.) No. 197/Chd/Chd/2019: the respondents' use of the common road standing on unchallenged title documents cannot be objected to unless the sale deed is set aside, respondents are restrained from creating hindrance to the Resolution Professional, and the appeal is dismissed for lack of merit.

Liquidation under Section 33(1) of the Insolvency and Bankruptcy Code, 2016 - Sale as a going concern under Regulation 32A of the IBBI (Liquidation Process) Regulations, 2016 - Appointment and remuneration of the Liquidator - Liquidator's powers and duties under sections 35 to 50 and 52 to 54 of the Code - Cessation of moratorium on liquidation - Notice of discharge to officers, employees and workmen upon liquidation - Maintainability of intervention and reliefs sought by employees during liquidation

Liquidation under Section 33(1) of the Insolvency and Bankruptcy Code, 2016 - Appointment and remuneration of the Liquidator - Sale as a going concern under Regulation 32A of the IBBI (Liquidation Process) Regulations, 2016 - Liquidator's powers and duties under sections 35 to 50 and 52 to 54 of the Code - Cessation of moratorium on liquidation - Notice of discharge to officers, employees and workmen upon liquidation - MA No. 227 of 2018 allowed and the Corporate Debtor ordered to be liquidated with specified directions. - HELD THAT: - The Tribunal found that no resolution plan was approved by the Committee of Creditors after the Resolution Professional complied with the earlier direction to place the last resolution plan before the CoC and the CoC subsequently approved liquidation with the requisite voting share. In exercise of powers under the Code and Regulations, the Tribunal directed liquidation of Unity Infraprojects Limited under Chapter III, appointed the Resolution Professional as Liquidator and authorised his fees in accordance with the Code and Regulations. The Liquidator was directed to endeavour to sell the company as a going concern in terms of Regulation 32A and, if unable to do so within 90 days, to proceed under the fallback provisions of Regulation 32. The Tribunal further directed public announcement of liquidation, cessation of the moratorium, vesting of powers in the Liquidator, and that the Liquidator shall exercise duties under the statutory provisions relied upon. The order also declared that it shall be deemed to be a notice of discharge to officers, employees and workmen except where the business is continued during the liquidation process.

MA No. 227 of 2018 is allowed; Unity Infraprojects Limited is ordered to be liquidated with the Liquidator appointed and specific directions issued regarding going-concern sale, public announcement, cessation of moratorium, vesting of powers and duties.

Maintainability of intervention and reliefs sought by employees during liquidation - Sale as a going concern under Regulation 32A of the IBBI (Liquidation Process) Regulations, 2016 - MA No. 350 of 2018 disposed of as redundant/inconsistent in part, with limited consideration of going-concern sale request. - HELD THAT: - The Tribunal held that intervention by the employees was redundant given the joined hearing of applications. The prayers of the employees other than the request for sale as a going concern could not be entertained because they were inconsistent with the Code. The Bench had earlier advised the employees to seek investors for a going-concern sale and granted liberty to mention the matter if investors emerged; none materialised. Consequently, the employees' application was disposed in accordance with the Tribunal's observations.

MA No. 350 of 2018 is disposed of in terms of the observations that intervention is redundant and the other prayers (except the limited going-concern plea) are inconsistent with the Code.

Final Conclusion: The Tribunal ordered liquidation of Unity Infraprojects Limited, appointed the Resolution Professional as Liquidator with stipulated powers and duties, directed an attempt to sell the corporate debtor as a going concern within 90 days (failing which to proceed under Regulation 32), terminated the moratorium, and disposed of the employees' application as redundant/inconsistent save for the limited position on a going-concern sale.

Preferential transactions - Relevant time for preference - Regulation 35A timeline for determination of objectionable transactions - Regulation 39(2) disclosure of objectionable transactions with resolution plan - Resolution professional's failure to act - Functus officio consequence of approval of a resolution plan - Maintainability of avoidance applications after approval of resolution plan

Preferential transactions - Relevant time for preference - The Applicant failed to prove that the impugned payments constituted preferential transactions under Section 43 of the I&B Code within the relevant time period. - HELD THAT: - The Tribunal examined the statutory definition of a preferential transaction and the concept of relevant time for related parties. The Applicant alleged repayments and a land sale between the corporate debtor and erstwhile directors but did not file the supporting transaction review report or any documents showing the transfers or that they fell within the two year relevant period prior to the insolvency commencement date. In absence of documentary proof establishing the transfers and their timing, the Tribunal held that the contention of preferential transactions under Section 43 could not be accepted. [Paras 10]

Claim of preferential transactions not established for want of documentary proof and demonstration of relevant time.

Regulation 35A timeline for determination of objectionable transactions - Regulation 39(2) disclosure of objectionable transactions with resolution plan - Resolution professional's failure to act - The Resolution Professional did not comply with the timelines and disclosure obligations under Regulation 35A and Regulation 39(2), and therefore belated scrutiny of alleged preferential transactions was unsustainable. - HELD THAT: - Regulation 35A requires the resolution professional to form an opinion by the 75th day, make a determination by the 115th day and apply to the Adjudicating Authority by the 135th day of the insolvency commencement date if objectionable transactions are found. Regulation 39(2) mandates disclosure of such transactions with resolution plans. The Tribunal noted that the examination of objectionable transactions is subject to these prescribed timelines and that the RP did not insist on or prosecute the avoidance application before approval of the resolution plan. The timelines serve the purpose of finalising such scrutiny during CIRP and the RP's failure to act within them undermines the present belated claim. [Paras 11, 12]

Failure to adhere to Regulation 35A timelines and to disclose/determine objectionable transactions under Regulation 39(2) precluded entertaining the belated avoidance claim.

Functus officio consequence of approval of a resolution plan - Maintainability of avoidance applications after approval of resolution plan - After approval of the resolution plan, the former Resolution Professional became functus officio and could not pursue the avoidance application belatedly on behalf of the corporate debtor. - HELD THAT: - The Tribunal observed that the resolution plan had been approved on 08.01.2021 and, upon such approval, management of the corporate debtor passes to the new management and the erstwhile RP ceases to act in that capacity. The RP had filed the avoidance application but did not press it before the plan approval and sought relief at a belated stage without having followed the timelines in Regulation 35A. Reliance was placed on the principle that an RP cannot, after approval of the resolution plan and becoming functus officio, pursue such avoidance relief on behalf of the corporate debtor. [Paras 13, 14]

Belated application for avoidance could not be entertained as the RP had become functus officio after approval of the resolution plan.

Final Conclusion: The IA is dismissed: the Applicant failed to prove preferential transactions or their timing, did not comply with Regulation 35A/Regulation 39(2) timelines and disclosures, and, having allowed approval of the resolution plan, the former Resolution Professional could not pursue the belated avoidance claim after becoming functus officio.

Date of default - consent terms - post-dated cheques - acceptance by conduct - definition of default - filing bar under Section 10A - moratorium on initiation of CIRP for pandemic-period defaults

Date of default - consent terms - post-dated cheques - acceptance by conduct - Date on which the Corporate Debtor committed default for the purposes of the Code was 31/03/2020 and not 31/07/2019. - HELD THAT: - The Consent Terms expressly provided that, notwithstanding the schedule of individual PDCs, the Corporate Debtor agreed to make the total agreed payment in any event on or before 31/03/2020. The Financial Creditor accepted replacement cheques issued by the Corporate Debtor and, by that conduct, assented to the extended due dates implicit in the fresh cheques. Clause 4 contemplated payment by post-dated cheques but clause 10 separately fixed the outer date for payment. Construing the contract as a whole, failure to pay by the express outer date in clause 10 constitutes the operative default. The Tribunal therefore rejected the petitioner's submission that the default occurred on the first scheduled PDC date of 31/07/2019. [Paras 17]

Default is to be treated as having occurred on 31/03/2020.

Filing bar under Section 10A - moratorium on initiation of CIRP for pandemic-period defaults - definition of default - Petition under Section 7 is not maintainable because the default occurred on or after 25/03/2020 and is therefore caught by Section 10A. - HELD THAT: - Section 10A, inserted by amendment with effect from 05/06/2020 and extended by subsequent notifications, prevents filing of applications for initiation of CIRP for defaults arising on or after 25/03/2020 during the notified moratorium period. Having concluded that the default in this matter occurred on 31/03/2020, the Tribunal held that the present petition falls within the period during which filing is prohibited. The statutory definition of 'default' was applied to conclude that the operative date is 31/03/2020, thereby attracting the Section 10A bar. [Paras 17]

The petition is not maintainable under Section 10A and is dismissed.

Final Conclusion: The Company Petition under Section 7 is dismissed on contest because the Tribunal found the date of default to be 31/03/2020 and held that petitions for defaults occurring on or after 25/03/2020 are barred by Section 10A; dismissal without costs and without prejudice to the petitioner pursuing other remedies in accordance with law.

Pre-show cause notice consultation - exception for preventive or offence-related SCN - binding character of Board instructions and Master Circular - scope of 'preventive action' under the Master Circular - revival or issuance of fresh show cause notice subject to limitation

Pre-show cause notice consultation - exception for preventive or offence-related SCN - scope of 'preventive action' under the Master Circular - binding character of Board instructions and Master Circular - Whether the contesting respondents were required to hold a pre-show cause notice consultation under the 2017 Master Circular and 2015 instruction, and whether the impugned SCN fell within the exceptions for preventive or offence-related SCNs. - HELD THAT: - The Court examined paragraph 5 of the 2017 Master Circular (mirroring the 2015 instruction) which makes pre-show cause notice consultation by the adjudicating authority mandatory in cases involving demands above the specified threshold, subject only to stated exceptions for preventive action or offence-related SCNs. The impugned SCN (covering 01.10.2013 to 30.06.2017) was held to seek adjudication on the taxability of services rendered and not to be preventive in character; therefore the preventive exception did not apply. Relying on the principle that Board instructions/circulars are binding on departmental officers, the Court held that the Master Circular could not be ignored and that the mere fact of searches or the possibility of later penal consequences does not automatically convert an SCN into an offence-related exception. Applying the coordinate-bench reasoning in Amadeus India Pvt. Ltd., the Court found that the contesting respondents failed to undertake the mandatory pre-notice consultation and consequently the proceedings initiated by the impugned SCN are non est in law. [Paras 5, 6, 7]

Pre-show cause notice consultation was mandatory and the impugned SCN did not fall within the preventive/offence exceptions; failure to consult renders the proceedings initiated by the SCN non est in law.

Pre-show cause notice consultation - revival or issuance of fresh show cause notice subject to limitation - Directions as to further course of action following quashing of proceedings for failure to consult and treatment of limitation in view of the pending Supreme Court proceedings. - HELD THAT: - The Court remanded the matter to the contesting respondents with concrete directions: to serve notice of a pre-show cause consultation meeting, afford a personal hearing to the petitioner's authorised representative, permit submissions on merits and jurisdiction, and thereafter decide whether to continue proceedings. If the officer concludes proceedings should continue, he/she must decide whether to revive the impugned SCN or issue a fresh SCN in consonance with any decision the Supreme Court renders in the pending SLP concerning limitation. These directions were framed to preserve the question of limitation for determination in the light of the Supreme Court's order and to ensure compliance with the mandatory consultation requirement before any adjudicatory step is taken. [Paras 7]

Matter remanded for mandatory pre-SCN consultation and further decision by the officers as directed; any revival or fresh SCN to be subject to the Supreme Court's decision on limitation.

Final Conclusion: The writ petition is disposed of: the proceedings initiated by the impugned show cause notice are set aside as non est for failure to hold the mandatory pre-show cause notice consultation; the matter is remanded to the contesting respondents to conduct the consultation, hear submissions and decide whether to proceed, with revival or reissuance of any SCN to be governed by the Supreme Court's determination on limitation.

Natural justice - opportunity of hearing - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - designated committee's estimate and issuance of Form SVLDRS-3 - deduction of pre-deposit and adjustment of payments - liberal interpretation of relief scheme to unwind legacy disputes

Natural justice - opportunity of hearing - designated committee's estimate and issuance of Form SVLDRS-3 - Impugned Form SVLDRS-3 dated 19th February, 2020 was issued without affording an effective opportunity of hearing and therefore its validity. - HELD THAT: - The Court found that while the scheme and rules provide for issuance of an estimate (Form SVLDRS-2), a declarant who disagrees is entitled to be heard before the designated committee issues the statement indicating the amount payable (Form SVLDRS-3). The petitioner claimed non-receipt of system-generated intimation (Form SVLDRS-2B) by email or SMS and asserted it was thereby deprived of personal hearing to explain and produce proof of deposits. The respondents could not point to a definitive record establishing that electronic intimation had been received by the petitioner, and the Court placed weight on authorities emphasising that administrative computerisation cannot supplant the requirement of an effective hearing when rights are adversely affected. In light of the scheme s object to unwind legacy disputes and the consistent judicial approach favouring hearing before imposing higher liabilities, the Court concluded that the decision-making process leading to SVLDRS-3 was vitiated for want of an effective opportunity of hearing. [Paras 21, 23, 26]

SVLDRS-3 dated 19th February, 2020 is set aside as having been issued without affording the petitioner an effective opportunity of hearing.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - deduction of pre-deposit and adjustment of payments - liberal interpretation of relief scheme to unwind legacy disputes - Whether the petitioner is an eligible declarant under the Scheme and whether the question of quantification of dues ought to be reconsidered by the designated committee after hearing. - HELD THAT: - The Court recorded that there was no dispute about the petitioner s eligibility to participate in the Sabka Vishwas scheme and make a declaration in Form SVLDRS-1. Given the petitioner s claim regarding pre-deposits and the scheme provision (and later circular) allowing deduction/adjustment of amounts paid during inquiry or investigation, the Court held that the designated committee must re-consider the quantification of dues after affording the petitioner an opportunity to explain and produce proof of payments. Reliance was placed on precedents and the scheme s objective which favour a hearing and a liberal construction to resolve legacy disputes rather than foreclose participation on procedural or technical grounds. [Paras 21, 23, 27]

Proceedings are restored and the matter remitted to the designated committee to hear the petitioner and decide the amount payable under the Sabka Vishwas scheme after considering claimed pre-deposits and related proof.

Designated committee's estimate and issuance of Form SVLDRS-3 - opportunity of hearing - Relief to be granted by the High Court on the petition challenging SVLDRS-3. - HELD THAT: - Balancing the absence of conclusive proof of electronic intimation to the petitioner and the overarching object of the scheme, the Court considered it appropriate to set aside the impugned statement and restore the proceedings to enable the designated committee to give the petitioner a fresh opportunity of hearing and to decide the declaration in accordance with the scheme and relevant circular. The Court observed that where an order adversely affects rights, adherence to principles of natural justice is necessary and failure to provide a hearing can invalidate the decision-making process. [Paras 26, 27]

Writ petition allowed; SVLDRS-3 set aside and proceedings restored directing the authority to afford hearing and decide afresh pursuant to the Scheme.

Final Conclusion: The High Court set aside the Form SVLDRS-3 dated 19th February, 2020 for want of an effective opportunity of hearing, restored the proceedings, and directed the designated committee to afford the petitioner a personal hearing and decide the declaration afresh under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.

Penalty under Section 78 of the Finance Act, 1994 - Reverse Charge Mechanism - Good faith and absence of intention to evade tax - Reliance on assessee's books for demand - Public sector undertaking - relevance to mens rea for penalty

Penalty under Section 78 of the Finance Act, 1994 - Good faith and absence of intention to evade tax - Reverse Charge Mechanism - Reliance on assessee's books for demand - Public sector undertaking - relevance to mens rea for penalty - The penalty under Section 78 of the Finance Act, 1994 is not attracted and is not justified in the present case. - HELD THAT: - The adjudicating authority invoked Section 78 alleging non-levy/short payment of service tax under the Reverse Charge Mechanism for legal opinion fees. The assessee initially raised a bona fide doubt about the applicability of service tax, explaining that the payments were neither recorded as income nor expense in the bank's books and were debited to customer accounts; there was no accounting entry captured in the bank's systems and no regulatory requirement to record such payments. The draft order relied upon figures taken from the assessee's own books. These facts negate the requisite culpability - fraud, collusion, wilful mis-statement, suppression of facts or contravention with intent to evade tax - which is the condition precedent for invoking Section 78. The status of the assessee as a public sector undertaking further militates against attributing mala fide intention to evade tax. The tribunal accordingly held that Section 78 could not be attracted on the material on record. The order also noted and relied upon earlier tribunal/authority decisions cited by the adjudicator, including M/s. Karnataka State Tourism Development Corporation v. Commissioner of Central Tax, Bangalore North , M/s. Karnataka State Tourism Dev. Corpn. Ltd. v. C.S.T., Bangalore , and B.S.N.L. v. Commissioner of Central Excise, Ahmedabad , insofar as they support the view that absence of mala fide intent and bona fide positions preclude imposition of penalty under Section 78. [Paras 5, 6, 7, 8]

Penalty imposed under Section 78 set aside and appeal allowed.

Final Conclusion: The penalty under Section 78 of the Finance Act, 1994 was quashed on the grounds of bona fide doubt regarding service tax liability, absence of fraud or intention to evade tax, and the appellant's status as a public sector undertaking; the impugned order is set aside and the appeal is allowed.

Eligibility of CENVAT credit as input service where service is essential for provision of output services - refund under Rule 5 of the CENVAT Credit Rules, 2004 - inclusion of freight and advertisement/sales-promotion services within the definition of input service - remand for verification where denial is based on non-production of details

Eligibility of CENVAT credit as input service where service is essential for provision of output services - Denial of CENVAT credit/refund for Cleaning Service, held to be not sustainable. - HELD THAT: - The Tribunal applied earlier decisions holding that cleaning services are essential for providing output services and therefore qualify as an input service. On that basis the impugned denial of CENVAT credit for Cleaning Service was set aside and the appeal allowed on this ground. [Paras 8]

Impugned order rejecting CENVAT credit for Cleaning Service set aside; appeal allowed on this ground.

Remand for verification where denial is based on non-production of details - treatment of plant/equipment rental as input service analogous to renting of equipment for events - Denial of CENVAT credit for Plant Rental Charges remanded for verification of details. - HELD THAT: - The Tribunal observed that renting of equipment for organising events has been treated as a valid input service in earlier decisions. However, because the lower authorities rejected the claim for non-production of particulars, the matter could not be finally adjudicated. The Tribunal held the denial to be prima facie bad in law but remanded the issue to the Adjudicating Authority to verify the nature of the services and apply the guidelines of the cited precedents. [Paras 9]

Ground allowed by way of remand to the Adjudicating Authority for verification and application of the relevant guidelines.

Inclusion of freight within the definition of input service - Denial of CENVAT credit for Freight Charges held to be impermissible. - HELD THAT: - The Tribunal accepted the assessee's case that freight was incurred for inward transportation of inputs used to provide output services. Freight Charges fall within the inclusive scope of the definition of input service under the CENVAT Credit Rules, 2004. Consequently, the rejection by the lower authorities was held to be bad and the impugned order was set aside in respect of Freight Charges. [Paras 10]

Impugned order rejecting Freight Charges set aside; appeal allowed on this ground.

Remand for verification where denial is based on non-production of details - eligibility of installation/modernisation related services as input service where not for construction - Denial of CENVAT credit for Installation Charges remanded for re-adjudication. - HELD THAT: - Though the Tribunal found precedents holding installation/modernisation-type services to be input services (when not related to construction of a building), the lower authorities rejected the claim for want of details. The Tribunal therefore set aside the impugned rejection insofar as it rested on non-production of particulars and remanded the matter to the Adjudicating Authority to verify details and apply the cited decisions. [Paras 11]

Issue set aside and remanded to the Adjudicating Authority for verification and fresh decision in accordance with the guidelines of the cited precedents.

Eligibility of CENVAT credit as input service where service is essential for provision of output services - Denial of CENVAT credit for Pest Control Charges held to be unsustainable. - HELD THAT: - Relying on the same line of authority that treats services necessary to keep business premises safe and clean as input services, the Tribunal held that denial of credit for Pest Control Charges was not justified and set aside the impugned order on this count. [Paras 12]

Impugned order rejecting Pest Control Charges set aside; appeal allowed on this ground.

Eligibility of parking and related facility charges as input services essential to business - Denial of CENVAT credit for Car parking charges, terrace charges and car-bike charges held to be bad. - HELD THAT: - The Tribunal held that parking and related facility charges are essential services provided for employees in the course of business and are covered by precedents favouring the taxpayer. Accordingly, the impugned denial was set aside and the appeal allowed on this ground. [Paras 13]

Impugned order rejecting parking and related charges set aside; appeal allowed on this ground.

Eligibility of rented auditorium charges as input service when used for training/meetings in relation to business - Denial of CENVAT credit for Auditorium Charges held to be not justified. - HELD THAT: - The Tribunal accepted that renting an auditorium for trainings or business meetings is an essential service for the appellant's business and applied precedents to conclude that such charges qualify as input services. The impugned order rejecting credit was therefore set aside. [Paras 14]

Impugned order rejecting Auditorium Charges set aside; appeal allowed on this ground.

Inclusion of event management and advertising/sales-promotion within the definition of input service - Denial of CENVAT credit for Event Management Charges held to be bad. - HELD THAT: - Relying on authorities that include expenditure on advertisement and sales promotion within the definition of input service, the Tribunal held that event management charges incurred for promoting the company's brand fall within the scope of input services and set aside the impugned rejection. [Paras 15]

Impugned order rejecting Event Management Charges set aside; appeal allowed on this ground.

Distinction between construction of building and maintenance/annual service charges for HVAC as relevant to input service eligibility - Denial of CENVAT credit for purchase/maintenance of air conditioning (civil work) held to be unsustainable. - HELD THAT: - The Tribunal found that the services in issue related to annual maintenance and not to construction of a building or civil structure; relying on cited precedents, it concluded such charges qualify as input services. The impugned denial was set aside. [Paras 16]

Impugned order rejecting charges relating to air conditioning maintenance set aside; appeal allowed on this ground.

Eligibility of membership subscription as input service for business promotion - Denial of CENVAT credit for Membership Subscription held to be bad. - HELD THAT: - The Tribunal accepted that corporate membership subscriptions and business magazine subscriptions expand the reach and promote the appellant's business; such business-promotion expenses fall within the definition of input service. Accordingly, the impugned rejection was set aside and the ground allowed. [Paras 17]

Impugned order rejecting Membership Subscription set aside; appeal allowed on this ground.

Final Conclusion: The appeals are partly allowed and partly remanded: the Tribunal set aside the impugned rejections and allowed CENVAT credit/refund claims in respect of Cleaning Service, Freight, Pest Control, parking/terrace charges, Auditorium Charges, Event Management Charges, air-conditioning maintenance, and Membership Subscription; claims in respect of Plant Rental Charges and Installation Charges were remanded to the Adjudicating Authority for verification of particulars and fresh decision in accordance with the guidelines of the cited precedents.

Input service - Cenvat credit on advertising services - definition of input service under Cenvat Credit Rules, 2004 (amended w.e.f. 01.07.2012) - use of service "in relation to" business / for providing output service - inapplicability of pre-amendment Master Circular where definition has been amended

Input service - Cenvat credit on advertising services - definition of input service under Cenvat Credit Rules, 2004 (amended w.e.f. 01.07.2012) - use of service "in relation to" business / for providing output service - Whether the appellant coaching institute could avail Cenvat credit on services of an advertising agency procured for promoting its business. - HELD THAT: - The definition of "input service" in the Cenvat Credit Rules, 2004 (as amended w.e.f. 01.07.2012) expressly includes services relating to advertisement or sales promotion and covers services used by a provider of taxable service for providing an output service or used in relation to activities of business. The amended inclusive part therefore recognises advertising agency services as input services when used in relation to the assessee's business. The appellant engaged the advertising agency for promotion of its coaching business and the invoices reflected commission and service tax charged to the appellant. The Commissioner (Appeals) relied on an earlier Master Circular issued prior to the amendment but failed to consider the subsequent amendment to the definition of "input service". A provision or circular in force prior to the amendment cannot be applied so as to deny credits where the amended definition clearly brings advertising services within the scope of input services. Applying the amended definition to the facts, the advertising agency services were input services used in relation to the appellant's business and the appellant was entitled to claim Cenvat credit of the service tax paid on those services.

Cenvat credit on advertising agency services availed for promotion of the appellant's business is allowable; the findings of the Commissioner (Appeals) based on the unamended provision are set aside and the appeal is allowed.

Final Conclusion: The appeal is allowed; the impugned order disallowing Cenvat credit on advertising services is set aside and the appellant is entitled to claim the credit under the amended definition of "input service".

Service tax under reverse charge mechanism - ST-3 return - principle of natural justice - demand confirmation

Service tax under reverse charge mechanism - ST-3 return - principle of natural justice - demand confirmation - Whether the demand of service tax confirmed against the appellant could be sustained where the appellant had deposited the tax in time and reflected the payment in ST-3 returns but the authorities failed to consider those returns. - HELD THAT: - The Tribunal found that both the adjudicating authority and the Commissioner (Appeals) proceeded without considering the appellant's ST-3 returns which reflected timely deposit of service tax under the reverse charge mechanism. The Commissioner (Appeals) himself observed that the department had raised the demand without documentary basis and had deliberately ignored factual records. Ignorance of the ST-3 returns amounted to a gross violation of the principle of natural justice because the impugned order was passed without taking into account material documentary evidence of payment. In consequence, the demand confirmed against the appellant could not stand. [Paras 6, 7]

Impugned order set aside and the appeal allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, set aside the order confirming the service tax demand for April, 2015 to March, 2015, and granted consequential relief on the ground that the authorities had ignored the appellant's ST-3 returns showing timely payment, resulting in a breach of natural justice.

Audi alteram partem - natural justice - opportunity of hearing and authorization of representative - show cause notice - remand for fresh adjudication - refund of input service tax credit - reverse charge mechanism - claim for refund post introduction of CGST

Audi alteram partem - natural justice - opportunity of hearing and authorization of representative - show cause notice - remand for fresh adjudication - Validity of the Order in Original insofar as it was passed without issuing a Show Cause Notice and without establishing that an authorised and legally competent representative of the appellant was heard. - HELD THAT: - The Tribunal found that the Order in Original was passed without issuance of a Show Cause Notice and that both the Adjudicating Authority and the Commissioner (Appeals) were silent as to whether the person alleged to have been heard was authorised by the appellant or possessed requisite knowledge of Service Tax and the subsequent change in law. Emphasising the constitutional tenet that justice must manifestly and undoubtedly be seen to be done, the Tribunal held that any order creating doubt about the manner of hearing violates principles of audi alteram partem and natural justice. Because the authorities did not record or satisfy themselves about the representative's authority or competence, the impugned order suffers from legal infirmity and cannot stand. [Paras 5, 6]

Impugned order set aside; proceedings remanded to the Adjudicating Authority for fresh adjudication after affording proper and reasonable opportunity of hearing in accordance with audi alteram partem.

Refund of input service tax credit - claim for refund post introduction of CGST - reverse charge mechanism - remand for fresh adjudication - Whether the appellant's refund claim for input Service Tax credit (in respect of Service Tax paid on consent fees under reverse charge) should be adjudicated and, in particular, considered for refund in cash after the appointed date in light of the commencement of the CGST Act. - HELD THAT: - The Tribunal did not adjudicate the substantive entitlement to refund on the merits. The appellant claimed refund of input Service Tax credit paid under reverse charge (consent fees to TNPCB) and sought cash refund post commencement of the CGST Act relying on Section 142(3) of the CGST Act. Given the procedural infirmity in the earlier adjudication and the significance of the change in law, the Tribunal remanded the matter to the Adjudicating Authority to examine the refund claim afresh, including the effect of the CGST regime and the appellant's entitlement to refund in cash, after providing a proper hearing. [Paras 2, 6]

Substantive claim left undecided; matter remanded to the Adjudicating Authority for fresh consideration of the refund claim in light of the change in law and after affording proper hearing.

Final Conclusion: The appeal is allowed by way of remand: the Order in Original is set aside for failure to afford a proper and manifest hearing, and the matter is remitted to the Adjudicating Authority to decide the refund claim afresh in accordance with audi alteram partem and having regard to the change in law under the CGST regime.

Cenvat credit entitlement - issuance of invoices without physical supply / bogus invoicing - penalty for issuance of invoice without supply - burden on Revenue to ascertain alternate source of goods - reliability of third party statements and requirement of cross examination - benefit of doubt

Penalty for issuance of invoice without supply - reliability of third party statements and requirement of cross examination - benefit of doubt - Penalty imposed on M/s Mas Equipments Pvt. Ltd. for allegedly issuing invoices without physically supplying goods. - HELD THAT: - The Tribunal found that the sole basis for the penalty was the allegation that only invoices were issued and the goods had not crossed the Shambhu Border. The investigation did not disclose any shortage or excess of goods at the premises of either party. The Revenue also did not establish that funds flowed back or that the goods were not sold. Further, the third party transporters whose statements were relied upon were not subjected to cross examination despite requests, which undermines the reliability of those statements. The Tribunal held that the Revenue failed to discharge the duty of establishing that the supplies did not physically take place or that the invoices were sham, and therefore the prosecution of penalty could not be sustained. On these grounds, penalty on M/s Mas Equipments Pvt. Ltd. was held not imposable and the impugned order in that respect was set aside.

Penalty on M/s Mas Equipments Pvt. Ltd. annulled; impugned penalty order set aside.

Cenvat credit entitlement - burden on Revenue to ascertain alternate source of goods - benefit of doubt - Denial of cenvat credit to M/s Vardhman Industries Ltd. on the ground that goods were not physically supplied by M/s Mas Equipments Pvt. Ltd. - HELD THAT: - The Tribunal observed that although cenvat credit was denied on the premise that the supplier did not physically supply the goods, the Revenue's investigation did not determine where the appellant actually procured the goods used in manufacture and clearance on payment of duty, nor did it investigate where the supplier had cleared goods without payment of duty. Absence of any discrepancy in stock at the parties' premises and lack of enquiry into alternate sources or destinations created reasonable doubt as to the allegation that physical supply did not occur. Given these lacunae in the investigation, the benefit of doubt was extended to the appellants and the denial of cenvat credit (as reflected in the impugned order) could not be sustained.

Denial of cenvat credit to M/s Vardhman Industries Ltd. set aside; appeal allowed.

Final Conclusion: The appeals are allowed: the impugned order denying cenvat credit and imposing penalty is set aside insofar as it affects the appellants; penalty on M/s Mas Equipments Pvt. Ltd. is held not imposable and the denial of cenvat credit to M/s Vardhman Industries Ltd. is quashed due to deficiencies in the Revenue's investigation.

Reversal under Rule 6(3) of Cenvat Credit Rules - Computation under Rule 6(3A) - Common input/input service apportionment - Duplication of demand (monthly and yearly reversals) - Treatment of SEZ supplies and deemed exports as exempted clearances - Remand for de novo adjudication

Reversal under Rule 6(3) of Cenvat Credit Rules - Common input/input service apportionment - Computation under Rule 6(3A) - Whether the amount required to be paid under Rule 6(3) when inputs/input services are used both in exempted and dutiable clearances was correctly calculated by the department and the appellant - HELD THAT: - The Tribunal found a prima facie serious error in the department's calculation of the amount payable under Rule 6(3), observing that the department appears to have taken 'total Cenvat Credit' (including credits exclusively used for dutiable goods/taxable services) into account instead of restricting the base to common inputs/input services as contemplated for apportionment under Rule 6(3A). The Tribunal noted that the adjudicating authority had not properly appreciated the correct measure of 'total Cenvat Credit' for the formula and had failed to give proper consideration to the submissions and authorities cited by the appellant. Given these factual and calculational discrepancies, the Tribunal did not decide the matter on merits but held that fresh appreciation and correct computation are necessary. [Paras 4]

Remitted to the Adjudicating Authority for fresh de novo adjudication on correct calculation and apportionment under Rule 6(3)/6(3A).

Duplication of demand (monthly and yearly reversals) - Whether there was duplication of demand by issuance of show cause notices for monthly reversals as well as for yearly reversal - HELD THAT: - The Tribunal observed that show cause notices have been issued both on a monthly provisional reversal basis and again on final yearly reversal, which prima facie gives rise to duplication of demand. The Tribunal recorded that this aspect, being factual and arising from the framing of notices and the computation methodology adopted by the department, has not been satisfactorily addressed by the adjudicating authority and warrants reconsideration. [Paras 4]

Remitted to the Adjudicating Authority to examine and decide afresh whether duplication of demand exists and to take appropriate action in accordance with law.

Treatment of SEZ supplies and deemed exports as exempted clearances - Whether clearances to SEZ and deemed exports under Notification No.108/95-CE should be treated as exempted clearances for the purpose of computation under the relevant rules - HELD THAT: - The Tribunal noted that the adjudicating authority had not properly considered whether supplies to SEZ and deemed exports fall within the category of exempted clearances for the purpose of computing the reversal under Rule 6(3)/(3A). This question was identified as a material factual and legal point left undecided and requiring fresh adjudication, including consideration of the authorities relied upon by the appellant. [Paras 4]

Remitted to the Adjudicating Authority for fresh consideration and determination of the treatment of SEZ and deemed export clearances in the computation.

Remand for de novo adjudication - Whether the matters should be remitted to the Adjudicating Authority for fresh adjudication - HELD THAT: - Given the serious discrepancies in the show cause notices, the apparent misapplication of the computation formula, the potential duplication of demands, and the failure to properly consider the treatment of SEZ and deemed export clearances and the judgments cited by the appellant, the Tribunal concluded that the impugned orders could not stand. Rather than deciding the substantive controversies on the record before it, the Tribunal directed remand for a full fresh adjudication so that facts and law may be properly assessed and applied. [Paras 4, 5]

Impugned orders set aside and matters remitted to the Adjudicating Authority for de novo adjudication; cross objections disposed of.

Final Conclusion: The Tribunal found prima facie errors in the departmental computation and procedural discrepancies (including potential duplication of demand and unclear treatment of SEZ/deemed exports), set aside the impugned orders and remitted the matters to the Adjudicating Authority for fresh de novo adjudication, directing the authority to consider the appellant's submissions and the judicial decisions relied upon.

Inclusion of receipts from maintenance contracts within VAT turnover - deemed assessment under the TNVAT Act - remand for fresh adjudication - non-compliance with the procedure laid down in J.K.M. Graphics Solution Private Limited

Inclusion of receipts from maintenance contracts within VAT turnover - Portion of receipts characterized as income under the Income-tax law (maintenance contract charges) was included in the petitioner's turnover for TNVAT assessment and required reconsideration. - HELD THAT: - The Court recorded the petitioner's case that sums received for maintenance contracts represented income assessable to income-tax and therefore should not have been treated as turnover for TNVAT purposes; TDS had been deducted on those receipts and documentary material was placed by the petitioner. The court observed that the impugned order had included at least a portion of such income in computing turnover, but there was no clear proof on the record that the materials relied upon by the petitioner had been considered by the assessing authority. In view of these deficiencies, the Court found it appropriate to set aside the impugned order and remit the matter for fresh consideration so that the assessing authority may examine the nature of the receipts and decide whether they form part of taxable turnover under the TNVAT Act. [Paras 6, 7, 8]

Impugned order set aside and matter remitted to the assessing authority for fresh adjudication on whether maintenance-contract receipts form part of VAT turnover.

Non-compliance with the procedure laid down in J.K.M. Graphics Solution Private Limited - remand for fresh adjudication - Assessing authority failed to follow the procedure laid down in J.K.M. Graphics Solution Private Limited when making additions on account of mismatch, necessitating reconsideration. - HELD THAT: - The Court noted a separate defect pointed out by the assessing authority relating to a mismatch, and specifically recorded that the procedural directions in J.K.M. Graphics Solution Private Limited were not followed. Because the mandated procedure was not complied with, the Court concluded that the assessment could not stand and remitted the matter to the assessing authority to apply the correct procedure and pass fresh orders in accordance with law. [Paras 7, 8]

Assessment set aside on procedural grounds and remitted to the assessing authority to follow the prescribed procedure and pass fresh orders.

Final Conclusion: Writ petition allowed; impugned assessment order for Assessment year 2014-15 set aside and the matter remitted to the second respondent for fresh decision in accordance with law. The petitioner's undertaking to remit 10% of the disputed tax to the second respondent on or before 31.03.2021 is directed to be adhered to.

Levy of taxes on food and drinks - application of Section 7(1)(a) of the Tamil Nadu Value Added Tax Act - tax rate under Section 7(1)(a) and Section 7(1)(b) - restaurant attached to a star hotel - principles of natural justice - interest liability from date of demand/quantification under Section 42 - independent quasi judicial decision making versus Enforcement Wing proposal

Restaurant attached to a star hotel - application of Section 7(1)(a) of the Tamil Nadu Value Added Tax Act - Whether Rainbow Restaurant, carrying on business in the same premises as Rathna Residency, is a restaurant attached to a star hotel and therefore liable to tax under Section 7(1)(a). - HELD THAT: - The Court examined the location and ownership of the businesses and the wording of Section 7(1)(a). Rathna Residency is a star hotel recognised by the State and both the hotel and Rainbow Restaurant operate from the same premises at Door No.109, West Perumal Maistry Street, Madurai. The Court held that the expression "attached to" contemplates being part of or annexed to the star hotel and is different from mere ownership. Because the restaurant is carried on in the very same building as the star hotel, the assessing authority was justified in treating Rainbow Restaurant as a restaurant attached to a star hotel and applying Section 7(1)(a). The advance ruling relied upon by the petitioner was distinguishable because it concerned a restaurant located at premises separate and distinct from the star hotel. [Paras 8, 10]

Held that Rainbow Restaurant is a restaurant attached to the star hotel and falls within the scope of Section 7(1)(a).

Levy of taxes on food and drinks - tax rate under Section 7(1)(a) and Section 7(1)(b) - Whether the higher rate under Section 7(1)(a) could be applied to the petitioner's entire turnover. - HELD THAT: - The Court accepted the petitioner's submission that Section 7(1)(a) applies only to the items specifically mentioned in that clause (ready to eat unbranded foods, sweets, savouries, unbranded non alcoholic drinks and beverages served or catered by star hotels and attached restaurants). The assessing authority had levied the higher rate on the petitioner's entire turnover, which the Court found to be incorrect and a result of non application of mind. The statutory charging provisions confine the higher rate to the listed items and do not automatically permit taxing the whole turnover at that higher rate. [Paras 11]

Quashed the levy of the higher rate on the entire turnover; higher rate can be applied only to the items specified in Section 7(1)(a).

Interest liability from date of demand/quantification under Section 42 - Whether interest could be levied from the date of the original assessment order. - HELD THAT: - The Court accepted the petitioner's contention that, given a bona fide belief they were not liable to the higher rate, interest under the Act could not properly be levied from the date of the original assessment. Relying on the principle that interest arises only from the date on which liability is quantified, and having regard to Section 42 as referred to in the judgment, the Court held that the respondent was not justified in levying interest from the original assessment date in the circumstances of this case. [Paras 12]

Levy of interest from the date of original assessment set aside; interest, if any, to be considered from the date liability is quantified as per law.

Independent quasi judicial decision making versus Enforcement Wing proposal - principles of natural justice - Whether the assessing authority acted under the dictation of Enforcement Wing officials and failed to apply independent quasi judicial mind, and whether principles of natural justice were violated. - HELD THAT: - The Court first found that principles of natural justice were complied with since pre revision notices were issued, objections were received, and a personal hearing was held with the petitioner's representative whose statement was recorded prior to passing the impugned orders. However, on the substantive conduct of the assessment, the Court concluded that the respondent had been unduly swayed by the Enforcement Wing's report and had failed to exercise independent adjudicatory judgment as required of a quasi judicial authority. Relying on precedents and the material on record, the Court held that assessment orders founded solely on Enforcement Wing proposals without independent reasons are vulnerable and required interference. [Paras 6, 13, 14]

Although natural justice procedural steps were observed, the impugned orders are quashed for being based on Enforcement Wing proposals without independent application of mind; matters remitted for fresh consideration by the assessing authority.

Final Conclusion: The impugned assessment orders are quashed insofar as they taxed the entire turnover at the higher rate, levied interest from the original assessment date, and were passed under the influence of Enforcement Wing proposals without independent reasoning. The matters are remitted to the respondent to pass fresh orders after applying Section 7(1)(a) only to the items specified therein, determining interest in accordance with law, and conducting an independent adjudication. No costs.