TaxTMI Updates e-Newsletter
Apr 15,2023

Invalidity of ex-parte order based solely on SIB report - mandatory opportunity of hearing under Section 75(4) of the U.P. G.S.T. Act - burden of proof on the department to corroborate inspection or scrutiny discrepancies - scope of Sections 61 and 67 as preliminary steps to proceedings under Sections 73/74 - doctrine of merger - appeal dismissal on grounds of limitation - remand for fresh adjudication after supply of relied-on material

Appeal dismissal on grounds of limitation - doctrine of merger - Validity of the appellate authority's dismissal of the appeal as time-barred and whether the original adjudication order merged in the appellate order. - HELD THAT: - The High Court found that the first appellate authority dismissed the appeal as beyond the period of limitation prescribed under Section 104(4) of the U.P. G.S.T. Act. Applying the settled law cited from M.P. Steel Corporation, the court did not find error in dismissing the appeal on limitation grounds. Because the appeal was dismissed on limitation and not on merits, the doctrine of merger did not operate to extinguish the right of judicial review under Article 226 in respect of the original order dated 24.01.2022. Accordingly, the appellate order's being time-barred was sustained, but that did not preclude limited judicial review of the original quasi-judicial order. [Paras 4, 5]

Appeal dismissal as beyond limitation upheld; doctrine of merger held inapplicable to bar judicial review of the impugned order.

Invalidity of ex-parte order based solely on SIB report - mandatory opportunity of hearing under Section 75(4) of the U.P. G.S.T. Act - burden of proof on the department to corroborate inspection or scrutiny discrepancies - scope of Sections 61 and 67 as preliminary steps to proceedings under Sections 73/74 - Whether the adjudication order dated 24.01.2022, passed ex parte relying on the SIB report without supplying the report or granting the statutory hearing, was sustainable. - HELD THAT: - The court examined the statutory scheme and facts and concluded that Sections 61 and 67 are preliminary investigatory steps and do not, by themselves, establish evasion of tax; the department bears the burden of establishing non-payment or wrongful availment of input tax credit by adducing corroborative material and following the procedure under Section 74. The adjudicating authority relied solely on the SIB report, which was not supplied to the petitioner, and no opportunity of hearing under Section 75(4) was shown to have been afforded. The order therefore violated principles of natural justice and failed because there was prima facie no corroborative material other than the SIB report. In view of these deficiencies the impugned order was quashed and the matter remanded for fresh adjudication after supply of the SIB report and an opportunity to file replies and be heard. [Paras 15, 16, 17, 18, 19]

Order dated 24.01.2022 quashed for failure to supply relied-on material and for denying the mandatory hearing; matter remanded for fresh decision after supplying the SIB report and granting opportunity of hearing and filing of reply.

Final Conclusion: Writ petitions allowed: appellate dismissal on limitation sustained, but impugned adjudication order dated 24.01.2022 quashed for breach of natural justice and lack of corroborative material; matter remitted to the adjudicating authority for fresh adjudication after supplying the SIB report and granting statutory hearing and opportunity to file a reply.

Mandatory right to personal hearing - opportunity of hearing before adverse order - Section 75(4) of the U.P. GST Act - appeal is a creature of statute - doctrine of merger

Mandatory right to personal hearing - opportunity of hearing before adverse order - Section 75(4) of the U.P. GST Act - doctrine of merger - Order dated 01.10.2020 passed under Section 74 was without affording the petitioner personal hearing mandatory under Section 75(4) and whether that order should be quashed. - HELD THAT: - The court examined the show cause notice and subsequent communications and found that dates were fixed only for filing of a reply and no date for personal hearing was ever fixed or served on the petitioner. Reliance was placed on the settled construction of Section 75(4) that an authority must afford an opportunity of personal hearing before passing any order adverse to a person, even if no written request for hearing is made. The order sheet and materials produced by the respondent did not disclose that any personal hearing was granted prior to the order dated 01.10.2020. Because the appeal filed against that order was dismissed subsequently for non-deposit, the court held that the doctrine of merger does not operate to cure the defect where the appeal was not considered on merits; consequently the original order cannot be permitted to stand where it was passed without the mandatory personal hearing required by Section 75(4). The respondents were therefore directed to conclude the proceedings afresh in accordance with law, if so advised.

Order dated 01.10.2020 is quashed for want of mandatory personal hearing; proceedings are remitted to the authority to be concluded afresh in accordance with law.

Appeal is a creature of statute - Whether the order dated 28.11.2020 dismissing the appeal for non-deposit of the prescribed amount warrants interference. - HELD THAT: - The court observed that statutory appeals are subject to conditions prescribed by the statute and an appellant must comply with those conditions to avail the statutory remedy. The petitioner failed to deposit the required amount for the appeal due to financial difficulty; however, non-compliance with the statutory condition justified dismissal of the appeal. As the order of dismissal operated as a procedural consequence of non-deposit and not a merits adjudication, the court declined to interfere with the order dated 28.11.2020.

Order dated 28.11.2020 dismissing the appeal for want of deposit is not interfered with.

Final Conclusion: Writ petitions allowed insofar as the order dated 01.10.2020 is quashed for failure to afford the mandatory personal hearing under Section 75(4) and the matter is remitted for fresh decision; challenge to the order dated 28.11.2020, dismissing the appeal for non-deposit, is rejected.

Cancellation of GST registration - lack of application of mind - quashing of administrative order - opportunity of hearing and show cause notice - filing of returns as condition for grant of relief - appeal under Section 107 of the CGST Act

Cancellation of GST registration - lack of application of mind - opportunity of hearing and show cause notice - quashing of administrative order - filing of returns as condition for grant of relief - Validity of the order dated 20.04.2022 cancelling the petitioner's GST registration. - HELD THAT: - The High Court found that the second respondent's cancellation order recorded an opinion that was said to be based on examination of the petitioner's reply and submissions at personal hearing, whereas the petitioner had neither filed any response nor participated in any hearing. This internal inconsistency demonstrated a complete lack of application of mind and rendered the exercise of jurisdiction arbitrary. The petitioner's explanation regarding prolonged hospitalization and inability to file returns was noted as relevant to bona fides. In view of these findings the Court exercised its supervisory jurisdiction to quash the cancellation order, while imposing a condition that the petitioner must file the outstanding returns within four weeks of receipt of certified copy of the order, failing which the cancellation would revive.

Order dated 20.04.2022 cancelling GST registration quashed; relief made conditional on filing returns within four weeks, failing which the cancellation order shall stand revived.

Appeal under Section 107 of the CGST Act - condonation of delay in appeal - disposal of appeal as not surviving - Fate of the appellate order dated 14.12.2022 dismissing the petitioner's appeal on the ground of delay. - HELD THAT: - The High Court observed that because the primary impugned order (Annexure-A) cancelling registration has been quashed on substantive grounds, the appellate authority's order dismissing the appeal as belated no longer required independent adjudication. Consequently, the grievance against the appellate order was disposed of as not surviving for consideration.

Order dated 14.12.2022 disposed of as not surviving in view of quashing of the cancellation order.

Final Conclusion: The petition is allowed: the cancellation order dated 20.04.2022 is quashed subject to the petitioner filing the outstanding returns within four weeks of receipt of certified copy of this order; the appellate order dated 14.12.2022 is disposed of as not surviving for consideration.

Cancellation of GST registration - Non-application of mind - Filing of returns as condition for revival of registration - Condonation of delay in preferring statutory appeal

Cancellation of GST registration - Non-application of mind - Filing of returns as condition for revival of registration - Impugned order cancelling the petitioner's GST registration on 27.09.2021 was quashed for lack of application of mind and set aside subject to a condition. - HELD THAT: - The Court found that the third respondent recorded cancellation despite noting that there was no response to the show cause notice dated 07.09.2021 and that the petitioner did not participate in the proceedings. The cancellation order demonstrates non-application of mind because it proceeded on the premise of having perused replies and submissions which were not on record and without adequate consideration of the petitioner's pleaded circumstances. In exercise of supervisory jurisdiction, the High Court interfered with the impugned order, quashed it and conditioned revival upon the petitioner filing the outstanding returns within four weeks from receipt of certified copy of the order. The order provides that failure to file the returns within the stipulated period will result in revival of the cancellation order.

Order dated 27.09.2021 cancelling GST registration quashed; registration to be revived subject to petitioner filing returns within four weeks, failing which cancellation shall stand revived.

Condonation of delay in preferring statutory appeal - The petitioner's appeal against the cancellation (order dated 12.10.2022) which had been rejected by the appellate authority for being beyond the four month statutory period was disposed of as not surviving in view of the quashing of the cancellation order. - HELD THAT: - The appellate authority had refused to condone delay in filing the appeal on the ground that the statute does not permit condonation beyond four months; the High Court observed that, having quashed the cancellation order, the challenge to the appellate order does not require separate adjudication and therefore the appeal stands disposed of as not surviving. The Court did not decide the merits of condonation beyond observing the statutory limitation as the appellate order's relevance was overtaken by the quashing of the cancellation.

Grievance against the appellate order rejecting condonation of delay disposed of as not surviving consequent to quashing of the cancellation order.

Final Conclusion: The petition is allowed: the cancellation of GST registration dated 27.09.2021 is quashed for non application of mind and is revived on condition that the petitioner files the returns within four weeks of receipt of the certified copy of this order, failing which the cancellation shall be revived; the separate challenge to the appellate order stands disposed of as not surviving.

Supply of goods or services between distinct persons / registrations - Services of employees treated as supply under Schedule I(2) - Related persons concept in Explanation to Section 15 (employer-employee) - Distinct persons for each GST registration under Section 25(4) - Inter State supplies taxable under IGST

Supply of goods or services between distinct persons / registrations - Services of employees treated as supply under Schedule I(2) - Related persons concept in Explanation to Section 15 (employer-employee) - Distinct persons for each GST registration under Section 25(4) - Inter State supplies taxable under IGST - Whether services, including services rendered by common employees, provided by a branch office to the head office (each having separate GST registration) constitute supply liable to GST. - HELD THAT: - The Authority found on the facts and submissions that the branch in one State rendered various technical and support services to the head office in another State through employees deployed at the branch. The legal scheme treats separate registrations of the same legal entity as distinct persons for GST purposes under Section 25(4). Schedule I(2) treats supply of goods or services between related persons or between such distinct persons, when made in the course or furtherance of business, as supply even if made without consideration. The Explanation to Section 15 deems employer and employee to be related persons. Applying these provisions together, services provided by employees deployed at a registered place of business to another registration of the same person attract the provisions of Section 7 read with Schedule I(2) and Section 15. Where such services cross State boundaries between distinct registrations, the levy falls under the IGST provisions for inter State supplies. The Authority therefore concluded that the services supplied by the branch to the head office, including services effected through common employees, amount to supply and are liable to GST under the appropriate Acts. [Paras 6, 7, 8, 9]

Services supplied by a branch to the head office, including services of common employees, constitute supply and attract GST; inter State transactions fall under IGST while intra State transactions attract CGST/SGST as applicable.

Final Conclusion: The Authority ruled that services (including services rendered by employees) supplied between a branch and head office which are separately registered for GST constitute taxable supplies; such transactions are liable to GST under the IGST Act where inter State, or under the CGST/SGST (or UTGST) Acts where intra State.

Classification under HSN 940429 - inter-state supply - IGST applicability and rate under Notification No.1/2017 I.T. (Rate) as amended (SI. No. 438) - absence of exemption in Notification No.02/2017 I.T. (Rate) - inapplicability of Schedule III to the supplies in question

Classification under HSN 940429 - inter-state supply - IGST applicability and rate under Notification No.1/2017 I.T. (Rate) as amended (SI. No. 438) - absence of exemption in Notification No.02/2017 I.T. (Rate) - inapplicability of Schedule III to the supplies in question - Liability to IGST on supply of mattresses to hostel students of Government schools/educational institutions of Government of Karnataka made through M/s Coir Industrial Co-operative Society Limited. - HELD THAT: - The Authority found that the goods supplied are mattresses classified under HSN 940429 and were supplied from Tamil Nadu to recipients in Karnataka, constituting inter-state supply. The relevant rate schedule (SI. No. 438 of Notification No.1/2017 I.T. (Rate) as amended) prescribes IGST at 18% for goods under HSN 9404. No exemption for HSN 9404 or for supplies to hostel students of Government educational institutions is available in Notification No.02/2017 I.T. (Rate). The applicant's reference to Schedule III was examined and the Authority held that Schedule III (activities neither supply of goods nor services) does not list the goods or render these supplies outside the ambit of taxable supply. On these bases the Authority concluded that the supplies in question are taxable as inter-state supplies at IGST 18%. [Paras 7, 8, 9]

Mattresses supplied by the applicant to hostel students of Government schools/educational institutions of Government of Karnataka through M/s Coir Industrial Co-operative Society Limited are liable to IGST at 18% under SI. No. 438 of Notification No.1/2017 I.T. (Rate) as amended.

Classification under HSN 940429 - inter-state supply - IGST applicability and rate under Notification No.1/2017 I.T. (Rate) as amended (SI. No. 438) - absence of exemption in Notification No.02/2017 I.T. (Rate) - Liability to IGST on supply of mattresses to any hostel of educational institutions located in another State. - HELD THAT: - The Authority applied the same legal and statutory matrix to supplies of mattresses to any hostel of educational institutions in another State. The mattresses fall under HSN 940429 and the inter-state character of such supplies attracts IGST. There is no exemption or concessional end use rate for HSN 9404 in the exemption notification, and Schedule III does not remove these supplies from the scope of taxation. Consequently, the prescribed rate in Notification No.1/2017 I.T. (Rate) (SI. No. 438) at 18% applies to such inter-state supplies. [Paras 8, 9]

Mattresses supplied by the applicant from Tamil Nadu to any hostel of educational institutions in another State are liable to IGST at 18% under SI. No. 438 of Notification No.1/2017 I.T. (Rate) as amended.

Final Conclusion: The Authority ruled that mattresses classified under HSN 940429 supplied inter state to hostel students of Government schools/educational institutions (including supplies routed through M/s Coir Industrial Co operative Society Limited) and to any hostel of educational institutions in another State are taxable under IGST at 18%, there being no applicable exemption in the relevant notifications and Schedule III not rendering such supplies non taxable.

Works contract - composite supply of works contract to a Government Entity - definition of Government Entity - effect of amendment to Notification No.11/2017 C.T. (Rate) - applicability of concessional tax rate for supplies to Government Entities - binding nature of advance ruling

Composite supply of works contract to a Government Entity - definition of Government Entity - effect of amendment to Notification No.11/2017 C.T. (Rate) - Rate of tax applicable to civil works contract services provided to Indian Institute of Technology, Madras with effect from 01.01.2022 - HELD THAT: - The Authority examined the contract and documents to find that the services rendered are a works contract within the meaning of Section 2(119) and, until 31.12.2021, fell within entry serial number 3(vi) of Notification No.11/2017 C.T. (Rate) as services provided to a Government Entity. The Institutes of Technology Act, 1961 characterises IIT Madras as a 'society' and a body corporate (Section 3(j)(iii), Section 4(1)) and therefore it qualified as a 'Government Entity' under explanation 4(x) to Notification No.11/2017 C.T. (Rate) prior to amendment. However, Notification No.15/2021 C.T. (Rate) (subsequently read with Notification No.22/2021) omitted the words 'Governmental Authority or a Government Entity' from the description in serial number 3(vi) with effect from 01.01.2022. Consequently, from 01.01.2022 the services in question no longer attract the concessional entry and instead fall under serial number 3(xii) of Notification No.11/2017 C.T. (Rate), thereby altering the applicable rate. The Authority applied these legal characterisations and the statutory amendment to conclude the applicable tax treatment from the specified effective date. [Paras 8, 9]

Civil contract services provided to IIT Madras are liable to CGST @ 9% and SGST @ 9% with effect from 01.01.2022

Final Conclusion: The advance ruling holds that although IIT Madras qualified as a 'Government Entity' under the earlier notification until 31.12.2021, the amendment to Notification No.11/2017 C.T. (Rate) effective 01.01.2022 removes that coverage; consequently the applicant's civil works services to IIT Madras attract CGST 9% and SGST 9% from 01.01.2022.

Change of opinion - reassessment under Section 147/148 of the Act - setting aside of reassessment notice and order - liberty to the Assessing Officer to take next steps - obligations to consider earlier dropped reassessments - opportunity to file fresh objections and hearing

Change of opinion - reassessment under Section 147/148 of the Act - setting aside of reassessment notice and order - Validity of the notice dated 30.03.2021 and order dated 29.12.2021 initiating reassessment for AY 2017-18 in view of alleged discrepancy between ITR and Tax Audit Report. - HELD THAT: - The Court held that the facts indicate a change of opinion. A specific query had been raised by the Assessing Officer about a purported discrepancy in sales turnover between the Tax Audit Report (Form 3CD) and the ITR; reconciliation was provided pursuant to that query and an assessment order was passed under section 143(3). On the material before it, the Court concluded that the impugned notice and order initiating reassessment amounted to a change of opinion and therefore could not sustain as a basis for reopening under the reassessment provisions. For these reasons the impugned notice dated 30.03.2021 and the impugned order dated 29.12.2021 were set aside.

Impugned notice and order initiating reassessment for AY 2017-18 set aside on the ground of change of opinion.

Liberty to the Assessing Officer to take next steps - obligations to consider earlier dropped reassessments - opportunity to file fresh objections and hearing - Procedure to be followed thereafter and whether reassessment may be recommenced. - HELD THAT: - The Court granted the Assessing Officer liberty to take next steps in accordance with law but directed that the AO must have regard to the fact that reassessment proceedings on the same issue were earlier dropped for AYs 2015-16 and 2016-17. Any decision to recommence assessment/reassessment proceedings is to be taken by the AO within four weeks of receipt of this judgment. If reassessment is sought to be recommenced, the petitioner shall be afforded liberty to file fresh objections and to be heard before any final action is taken. Until such decision is taken and action completed, the interim order in the writ petition will continue to operate.

AO permitted to reconsider within four weeks, having regard to prior dropped reassessments; if proceedings are reopened petitioner to be allowed to file objections and be heard; interim stay to continue meanwhile.

Final Conclusion: Writ petition disposed by setting aside the impugned reassessment notice and order for AY 2017-18 on the ground of change of opinion; AO granted liberty to take further steps in accordance with law within four weeks, with directions to consider earlier dropped reassessments and to afford the petitioner an opportunity to file objections and to be heard if proceedings are recommenced; interim protection to continue until such action.

Settlement of cases under Chapter XIX-A - full and true disclosure in settlement application - scope of judicial review of Settlement Commission orders - principles of natural justice (audi alteram partem) - immunity from prosecution and penalty under settlement - finality of settlement orders and Article 226 review

Full and true disclosure in settlement application - settlement of cases under Chapter XIX-A - Validity of the Settlement Commission's admission and acceptance of the assessee's settlement application and the quantification of undisclosed income. - HELD THAT: - The Court examined the Settlement Commission's order which accepted the additional income offered by the assessee (comprising amounts offered under Section 153A, in the settlement application and a further sum offered during hearing) and recorded that the Commission found no basis for departmental estimation or quantification of undisclosed income. Having reviewed the statutory scheme (Sections 245C and 245D and related provisions) and the record, the Court found that the Settlement Commission followed the procedure contemplated under Chapter XIX-A and the Rules, and that principles of natural justice were observed. There was no allegation or evidence of fraud or misrepresentation by the assessee that would vitiate the settlement. On these findings the Court concluded that there was no procedural or substantive infirmity in the Commission's approach and that the settled amount met the ends of justice. [Paras 15, 16]

The Settlement Commission's admission of the application and its quantification of the settled income were held to be valid; no interference was warranted.

Scope of judicial review of Settlement Commission orders - finality of settlement orders and Article 226 review - principles of natural justice (audi alteram partem) - Extent of High Court's power to interfere with a Settlement Commission order in writ jurisdiction under Article 226. - HELD THAT: - Relying on the Supreme Court's decision in Jyotendrasinhji and the scheme of Chapter XIX-A, the Court reiterated that despite the finality clause in Section 245-I, jurisdiction under Article 226 is not ousted but is narrowly confined. Judicial review of Settlement Commission orders is limited to questions of procedural irregularity, breach of principles of natural justice, bias, fraud or malice, or where the order is contrary to the provisions of the Act and has prejudiced the petitioner. The Court applied this limited scope to the facts, observed no procedural violation, no breach of natural justice and no allegation of fraud or malice, and therefore declined to reopen the settlement. [Paras 13, 16, 17]

High Court's interference is restricted to limited judicial review grounds; none of those grounds were established and the writ petition failed.

Final Conclusion: Writ petition dismissed: the Settlement Commission's order admitting and quantifying the settlement stand affirmed as free from procedural infirmity, no breach of natural justice or fraud having been shown, and the scope of judicial review being limited did not permit reopening the settlement.

Section 68 - unexplained loans/advances - burden of proof on assessee to explain source of credits - creditworthiness of creditors - genuineness of transactions - circumstantial evidence cannot substitute for proof

Section 68 - unexplained loans/advances - creditworthiness of creditors - burden of proof on assessee to explain source of credits - circumstantial evidence cannot substitute for proof - genuineness of transactions - Whether additions made by the Assessing Officer under Section 68 in respect of alleged unsecured loans/advances from related parties should be sustained. - HELD THAT: - The Assessing Officer treated amounts received from several closely connected parties as unexplained and added them under Section 68 relying on circumstantial factors (timing of transactions, common jeweller, absence of wealth tax returns and statements of affairs). The assessee, and subsequently the First Appellate Authority, produced corroborative material including sale invoices from the jeweller, serially numbered cheques evidencing payment by the jeweller, and bank credits in the accounts of the lenders, together with ledger entries and affidavits in some cases. The Tribunal found that the AO did not pursue available inquiries (for example, from the jeweller) or otherwise seek to verify the sale transactions before making the addition, and that mere circumstantial suspicion could not displace the documentary proof placed on record. The CIT(A) applied a prudent approach by examining the evidence, accepting the explanation of sale of jewellery as source for the deposits (except insofar as specific cash deposit was shown), and restricted the addition to the limited amount that remained unsubstantiated. The Tribunal agreed that the assessee had furnished sufficient explanation for the deposits for the purposes of Section 68 and that the AO's reliance on circumstantial factors without attempting independent verification did not justify reversing the CIT(A)'s findings.

The order of the Commissioner of Income tax (Appeals) deleting the bulk of the addition and sustaining only a limited addition was upheld; the Revenue's appeal was dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s finding that the assessee had sufficiently explained the source and genuineness of the deposits for the assessment year 2013-14, thereby sustaining only the limited addition made by the CIT(A).

Non-speaking order - requirement of reasons in appellate orders - remand for speaking order - opportunity of hearing under Rule 46A - Employee Stock Option Plan (ESOP) cost as revenue expenditure - section 40(a)(ia) - disallowance for failure to deduct TDS - perquisite under section 17(2)(vi)(c)

Non-speaking order - requirement of reasons in appellate orders - remand for speaking order - The first appellate order was non-speaking for want of reasons and therefore unsustainable. - HELD THAT: - The Tribunal examined the impugned order of the learned CIT(A) and found that the authority did not record any reasons rejecting the assessee's contentions that ESOP expenditure is allowable. The Tribunal observed that the CIT(A)'s conclusion that 30% of the ESOP cost should be disallowed under section 40(a)(ia) - disallowance for failure to deduct TDS was reached without dealing with the written submissions, materials placed on record, or the case law relied upon by the assessee. The absence of reasons made it impossible to discern the appellate authority's rationale; accordingly the order was held to be a non-speaking order requiring interference. The Tribunal set aside the impugned order and directed the learned CIT(A) to dispose of the appeal afresh by a speaking order after affording opportunity to both parties. [Paras 12, 13, 14]

Impugned order set aside; appeal restored to the file of the learned CIT(A) for passing a speaking order after affording opportunity to both parties.

Employee Stock Option Plan (ESOP) cost as revenue expenditure - section 40(a)(ia) - disallowance for failure to deduct TDS - perquisite under section 17(2)(vi)(c) - opportunity of hearing under Rule 46A - The merits of allowance of ESOP cost, the applicability of section 17(2)(vi)(c) as perquisite, and the correctness of the 30% disallowance under section 40(a)(ia) (and related TDS credit issue) were not finally adjudicated and require fresh consideration. - HELD THAT: - The Tribunal noted that the learned CIT(A) did not address the detailed submissions and authorities cited by the assessee on the question whether the discount on issue of shares under the ESOP scheme amounted to an allowable revenue expenditure in the hands of the employer or was to be treated as a perquisite in the hands of the employee under section 17(2)(vi)(c). The CIT(A) also did not deal with particulars of TDS deduction and the credit claim, and the record did not reflect that the Assessing Officer was afforded an opportunity under Rule 46A before adverse conclusions were recorded. Because the appellate order lacks reasoning on these contested legal and factual aspects, the Tribunal remanded these matters to the CIT(A) for fresh determination on merits after giving both parties an opportunity to be heard and, where appropriate, after affording the Assessing Officer the chance contemplated by Rule 46A. [Paras 9, 10, 11, 12, 14]

Issues relating to the allowability of ESOP expenditure, treatment as perquisite under section 17(2)(vi)(c), the 30% disallowance under section 40(a)(ia), and the TDS credit shortfall are remanded to the learned CIT(A) for fresh consideration by way of a speaking order after affording opportunity to both parties (and as necessary to the Assessing Officer under Rule 46A).

Final Conclusion: Impugned order of the learned CIT(A) set aside for want of reasons and restored to the file for de novo disposal by a speaking order after affording opportunity to the parties; both appeals treated as allowed for statistical purposes.

Unexplained cash credit under Section 68 read with Section 115BBE - burden of proof under Section 68 (identity, creditworthiness and source) - loan sanction letter and supporting bank records as evidence of source - remand for de novo adjudication

Unexplained cash credit under Section 68 read with Section 115BBE - burden of proof under Section 68 (identity, creditworthiness and source) - loan sanction letter and supporting bank records as evidence of source - remand for de novo adjudication - Whether the addition made under Section 68 read with Section 115BBE in respect of loan of Rs.9,30,00,000/- required confirmation or fresh adjudication. - HELD THAT: - The Tribunal noted that the assessee asserted the loan was advanced by a director out of borrowings sanctioned by India Infoline Finance Ltd. and had placed the loan sanction letter, repayment schedule and bank records before the Assessing Officer. The lower authorities recorded no clear factual finding on the provenance of the funds. Given the continuous absence of the assessee before the Tribunal and the lack of decisive findings below, the Tribunal considered it appropriate in the interests of justice to remit the matter to the Assessing Officer for fresh adjudication. The assessee was permitted to produce fresh evidence and must be afforded a reasonable opportunity of hearing. The remand requires the Assessing Officer to examine the materials on record (including the loan sanction letter and bank statements), apply the legal tests under Section 68 (identity, creditworthiness and source) and decide the claim on merits in accordance with law. [Paras 6]

Issue remanded to the Assessing Officer for de novo adjudication; assessee may file fresh evidence and must be heard.

Final Conclusion: The appeal is allowed for statistical purposes and the matter is restored to the file of the Assessing Officer for fresh adjudication in accordance with law.

Obligation to deduct tax at source under section 194H - Credit or payment as triggering event for TDS - Principal-to-principal transactions - Applicability of second proviso to section 40(a)(ia) - Precedent of the Jurisdictional High Court on non-payment as negating TDS obligation

Obligation to deduct tax at source under section 194H - Credit or payment as triggering event for TDS - Principal-to-principal transactions - Assessee not liable to deduct tax at source under section 194H on commission expenditure where it received net sale proceeds and did not pay or credit the commission to the payee. - HELD THAT: - The Tribunal examined whether the assessee was obliged to deduct TDS under section 194H in respect of amounts shown as commission expense where, on the facts, the assessee received only net sale proceeds and neither paid nor credited the commission to the alleged payees. The Tribunal did not decide the contested question whether the relationship between the parties was principal-to-principal; instead it proceeded on the material fact that no payment or credit to the payees was made by the assessee. Reliance was placed on the decision of the Jurisdictional High Court in CIT v. Super Religare Laboratories Ltd. , which held that the duty to deduct arises only when a person is responsible for paying commission and either credits the income to the payee's account or makes payment; where the taxpayer does not perform any act of paying, there is no obligation to deduct TDS. Applying that principle to the present facts, the Tribunal held that the assessee had no obligation to deduct tax at source on the commission expenditure debited to its profit and loss account because the assessee had only received reduced receipts and had not effected payment or credit to the payees. [Paras 7, 8]

The assessee was not under an obligation to deduct TDS under section 194H in respect of the commission expenditure; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal for AY 2012-13, holding that where the assessee received sale proceeds net of commission and did not pay or credit the commission to the payees, there was no obligation to deduct tax at source under section 194H.

Artificial split of contract - dependent agent permanent establishment - construction permanent establishment - business connection - offshore supply - taxation - attribution to permanent establishment - application of Section 44BBB - Fees for Technical Services - "make available" clause - onus on revenue to prove PE

Artificial split of contract - Whether the three agreements constituted an artificial splitting of a single composite turnkey contract. - HELD THAT: - The Tribunal examined the bid documents, notification of award and executed contracts and held that the bid itself required an Indian associate to execute the on shore works. Separate notifications and separate contracts were awarded for the off shore (First) contract to the assessee and for the on shore (Second and Third) contracts to the Indian associate, each with a defined scope. The Tribunal found the revenue authorities had selectively read clauses and ignored the bid requirement and commercial prudence behind separate contracts. Reliance on precedents dealing with consortium/independent agencies supported the view that cooperative or coordinating obligations do not convert independent contractors into a single composite contracting entity. The Tribunal concluded there was no deliberate split by the assessee to avoid tax. [Paras 15, 16, 18, 19, 23]

No artificial split of a single composite contract; the three contracts were separate as awarded and executed.

Dependent agent permanent establishment - business connection - onus on revenue to prove PE - Whether the Indian associate (ALSTOM I / GE T&D) constituted a dependent agent PE or created a business connection of the assessee in India. - HELD THAT: - The Tribunal found that the Revenue failed to prove PE with reference to evidence. The contracts and award treated ALSTOM I as the Employer's independent contractor; the associate's involvement flowed from the bid requirement rather than from acts establishing agency by the assessee. The facts showed no independent acts of solicitation by the associate that would convert it into a dependent agent, and the open bidding process undermined the claim of solicitation. Applying the principle that the department bears the burden to establish a PE, the Tribunal held the AO/DRP conclusions rested on general assertions and selective reading of documents rather than specific evidence to discharge that onus. [Paras 11, 12, 25, 29]

ALSTOM I/GE T&D did not constitute a dependent agent PE or give rise to a business connection of the assessee in India; findings of PE/business connection are set aside.

Construction permanent establishment - Whether the assessee had a construction PE in India under Article 5(2) of the DTAA. - HELD THAT: - The Tribunal noted that under the First Contract the assessee's role was limited to offshore supply and related offshore activities; it did not undertake construction, erection, testing or commissioning in India. The AO/DRP made no factual findings to demonstrate the assessee performed construction activities in India. Given the absence of on ground construction activities by the assessee, the condition for a construction PE was not satisfied. [Paras 26, 29]

No construction PE of the assessee in India.

Offshore supply - taxation - attribution to permanent establishment - Whether receipts from offshore supplies under the First Contract are taxable in India and whether profits from those supplies can be attributed to a PE. - HELD THAT: - Relying on contractual scope showing CIF Indian port of entry supply and that property in goods and payment were effected outside India, the Tribunal applied the territorial principle that only income attributable to operations carried out in India is taxable. Because the assessee's offshore supplies and payments occurred outside India and no PE was established, the revenue could not attribute profits from those offshore supplies to a PE in India. The Tribunal also observed that the AO/DRP failed to distinguish between existence of a business connection and taxable income arising from it. [Paras 16, 28, 29]

Receipts from offshore supplies under the First Contract are not taxable in India and cannot be attributed to a non existent PE.

Application of Section 44BBB - Whether section 44BBB applies to attribute income of the assessee in respect of offshore supplies for the turnkey power project. - HELD THAT: - Section 44BBB is predicated on the existence of business operations such as construction, erection or installation in India. The Tribunal found the assessee's revenues arose from offshore supplies where property in goods passed outside India and the assessee did not engage in construction/erection/testing activities in India. Consequently, the conditions for invoking the special presumptive provisions of section 44BBB were not met and the application of section 44BBB by the AO/DRP was unsustainable. [Paras 4, 27]

Section 44BBB is not applicable to the assessee's offshore supply receipts.

Offshore supply - taxation - Whether offshore supplies made to GE T&D India Ltd and SFO Technologies (GETDIL & SFO) should be assessed, despite DRP direction to exclude such receipts if not related to the PGCIL contract. - HELD THAT: - The DRP had directed deletion of receipts from GE T&D and SFO if those supplies were not related to the PGCIL contract. The AO, relying on his PE finding, treated those supplies as taxable, and also noted lack of underlying agreements. The Tribunal held that because the PE finding was overturned, the AO's reasoning collapses. The invoices and purchase orders on record contained terms indicating independent offshore supplies; the AO failed to give substantive effect to the DRP directions or to establish a link to the PGCIL contract. [Paras 30, 31, 32]

Additions relating to offshore supplies to GETDIL and SFO are deleted in accordance with DRP directions; AO's contrary treatment set aside.

Fees for Technical Services - "make available" clause - Whether the global operation fee received from GE T&D India Ltd constitutes Fees for Technical Services (FTS) taxable in India by satisfying the 'make available' requirement of Article 13(4)(c) of the DTAA. - HELD THAT: - The Tribunal examined the Global Operation Fees Agreement and invoices and found that many services provided were managerial/industrialization support of an ongoing nature and renewed annually. The DRP's reliance on certain sub heads ignored that amounts relating to Global Industrialization had already been offered to tax. The Tribunal applied the 'make available' test - whether technical knowledge/skills were imparted enabling the recipient to use them independently - and concluded that the services in question did not satisfy the 'make available' requirement. The services were prima facie managerial and did not enable the recipient to deploy the technology independently. [Paras 33, 35]

Global operation fee to the extent contested does not satisfy the 'make available' clause and is not taxable as FTS in India.

Final Conclusion: The appeal is allowed. The Tribunal set aside the AO/DRP findings of an artificial contract split, dependent agent PE, construction PE and attribution of offshore supply receipts to a PE; section 44BBB and FTS treatment (under the 'make available' test) were held inapplicable to the disputed receipts, and additions relating to offshore supplies to GETDIL and SFO are deleted with consequential effects.

Disallowance under section 14A read with Rule 8D of the Income tax Rules - objective satisfaction requirement under section 14A(2)/14A(3) read with Rule 8D(1) - mechanical application of Rule 8D - interest under section 234C chargeable on returned income - interest under section 220(2) consequential - interest under section 244A on refund

Disallowance under section 14A read with Rule 8D of the Income tax Rules - objective satisfaction requirement under section 14A(2)/14A(3) read with Rule 8D(1) - mechanical application of Rule 8D - The disallowance under section 14A read with Rule 8D made by the AO and upheld by the CIT(A) was not sustainable in the absence of objective satisfaction recorded by the AO. - HELD THAT: - The AO applied the computation mechanism in Rule 8D(2)(iii) and arrived at a disallowance, recording only a general satisfaction that common administrative expenses could pertain to earning exempt income. The Tribunal found that the AO did not examine the assessee's financial statements to arrive at an objective satisfaction as mandated by section 14A(2)/14A(3) read with Rule 8D(1). Reliance was placed on the requirement-as articulated by the Supreme Court in Maxopp Investment Ltd.-that the AO must record objective reasons demonstrating why the assessee's claim is incorrect. Because the AO's recorded satisfaction was not an objective satisfaction based on scrutiny of accounts, the disallowance had no legal basis and had to be deleted. The same conclusion was held to apply mutatis mutandis to the identical issue in the subsequent assessment year. [Paras 4]

The disallowance under section 14A read with Rule 8D is deleted for both AY 2010 11 and AY 2011 12; the AO is directed to delete the disallowance.

Interest under section 234C chargeable on returned income - Interest under section 234C cannot be imposed on assessed income and is to be computed only on the returned income. - HELD THAT: - The Tribunal observed the settled legal position that interest under section 234C is chargeable only on the returned income and not on income as assessed by the AO. In accordance with this principle, the AO was directed to revise the levy of interest under section 234C. [Paras 5]

The AO is directed to compute and charge interest under section 234C only on the returned income.

Interest under section 220(2) consequential - The question of interest under section 220(2) is consequential on other adjustments and should be charged in accordance with law. - HELD THAT: - The Tribunal treated the chargeability under section 220(2) as consequential to the primary adjustments and therefore did not undertake separate adjudication; it directed the AO to charge interest under section 220(2) in accordance with law after giving effect to the adjustments. [Paras 6]

AO to charge interest under section 220(2) in accordance with law, consequential to the revised assessment.

Interest under section 244A on refund - Interest under section 244A on refund is to be granted in accordance with law. - HELD THAT: - The Tribunal found that the grant of interest under section 244A had been incorrectly computed and directed the AO to grant interest under section 244A in accordance with law on any refund found due after recomputation. [Paras 7]

AO to grant interest under section 244A in accordance with law on any refund due.

Final Conclusion: Both appeals are allowed: the disallowances under section 14A read with Rule 8D are deleted for AY 2010 11 and AY 2011 12; the AO is directed to revise interest under section 234C, to charge interest under section 220(2) consequentially, and to grant interest under section 244A in accordance with law.

Reopening of assessment - reasons to believe - client code modification and fictitious losses in F&O transactions - absence of live link between recorded reasons and escapement of income - approval under section 151 of the Act - quashing of reassessment

Reopening of assessment - reasons to believe - absence of live link between recorded reasons and escapement of income - client code modification and fictitious losses in F&O transactions - approval under section 151 of the Act - Validity of reopening the assessment under section 147/148 in consequence of information received about client code modification - HELD THAT: - The Tribunal examined the materials relied upon by the AO and found multiple inconsistent figures (Rs.20,18,500/-, Rs.10,09,250/-, and Rs.1,70,650/-) stated at different stages as the amount of income alleged to have escaped assessment. The reasons recorded were based solely on information received from the I&CI wing without independent verification by the AO as to whether the assessee had in fact claimed the alleged loss in his return or books. The broker (IMSPL) explained that client code modification may be used legitimately to rectify punching errors, and the assessee produced ledger entries showing no such loss claimed. The AO failed to establish a live link between the reasons recorded and actual escapement of income and proceeded on an incorrect assumption of fact; the approval obtained under section 151 was therefore given in the context of those defective reasons. In view of these infirmities the Tribunal held the reassessment proceedings to be legally unsustainable. [Paras 9, 10, 11]

Reopening of assessment quashed for want of valid reasons and independent verification; reasons recorded did not sustain formation of belief under section 147.

Client code modification and fictitious losses in F&O transactions - quashing of reassessment - absence of live link between recorded reasons and escapement of income - Validity of addition of the amount disallowed as fictitious losses and consequent deletion of the addition - HELD THAT: - Given the quashing of the reassessment on account of defective reasons and lack of enquiry, the Tribunal considered the substantive allegation that the assessee had taken fictitious losses. The record showed the assessee had declared profit in the F&O segment and produced broker ledger details which did not reflect the alleged loss. The Revenue failed to establish on merits that the assessee had incurred the alleged fictitious losses. Consequently the addition made by the AO of the aggregate figure was unsustainable and was deleted. [Paras 10, 11]

Addition of the alleged fictitious loss is deleted; Grounds No.1, 3 and 4 allowed.

Final Conclusion: The appeal is allowed: reassessment proceedings under section 147/148 are quashed for defective reasons and lack of verification, the disputed addition is deleted, and the issues relating to carry forward loss are rendered academic.

Addition under the doctrine of unexplained cash credits and taxation under section 68 read with section 115BBE - rejection of books of account and the method of accounting principle affecting admissibility of entries - burden of proof and shift on revenue once assessee furnishes prima facie material - reliance on surmises and conjectures vis-a -vis requirement for corroborative evidence - double taxation principle where amounts have already been offered to tax as business receipts - assessment of demonetization-period cash deposits against declared turnover and VAT returns

Addition under the doctrine of unexplained cash credits and taxation under section 68 read with section 115BBE - assessment of demonetization-period cash deposits against declared turnover and VAT returns - Whether the addition made by the AO treating large cash deposits during the demonetization period as unexplained cash credit and taxing the same under section 68 read with section 115BBE was sustainable. - HELD THAT: - The Tribunal found that the assessee had furnished books of account, cash book, VAT returns, purchase invoices, quantitative stock tally and other documentary material which prima facie explained that the bank deposits arose from cash sales, cash withdrawals and recoveries from debtors. The AO's computation reduced the declared sales for October and November 2016 on hypothetical grounds and treated the shortfall as unexplained deposits, an exercise held to be based on assumption, surmise and conjecture. Having accepted that purchases, opening and closing stocks and the trading results (and VAT liability) were not doubted by the AO, the Tribunal held that once the assessee discharged the initial onus by producing adequate material, the burden shifted to the revenue to bring contrary cogent evidence, which was not done. Consequently the addition was quashed as unsustainable. [Paras 12]

Addition of Rs. 2,74,00,000/- on account of unexplained cash deposits (taxed under section 68 read with section 115BBE) is quashed and deleted.

Rejection of books of account and the method of accounting principle affecting admissibility of entries - reliance on surmises and conjectures vis-a -vis requirement for corroborative evidence - Whether the AO was justified in rejecting the books of account under the method of accounting doctrine and then relying on the same records or speculative estimates to make additions. - HELD THAT: - The Tribunal observed that the AO purported to reject the books under section 145(3) but did not point out specific defects in purchases, sales, opening or closing stock; the evidentiary material (stock registers, VAT returns, purchase invoices, quantitative details) remained undisputed save for the AO's doubts about two months. The Tribunal held that the basis for rejection was not acceptable and that the AO could not compute hypothetical sales figures by ignoring documentary material. Reliance upon mere suspicion or conjecture to reject books or to compute sales was held impermissible; rejection or adjustments must be founded on pointed defects and corroborative evidence which the AO failed to produce. [Paras 12]

Rejection of books and consequential computation based on conjecture is unsustainable; entries in books explaining the cash deposits cannot be displaced on mere surmise.

Burden of proof and shift on revenue once assessee furnishes prima facie material - double taxation principle where amounts have already been offered to tax as business receipts - Whether the deposits could be taxed afresh under section 68 when the amounts had been declared as turnover and were subject to VAT and the books and returns reflected the receipts. - HELD THAT: - The Tribunal noted that the cash deposits formed part of the assessee's declared turnover and were supported by VAT filings and audited accounts; taxing the same again as unexplained income would amount to double taxation. Having accepted that the deposits corresponded with disclosed sales and that the department had earlier accepted similar deposits for another year, the Tribunal held that section 68 could not be invoked to levy additional tax in the absence of evidence contradicting the assessee's explanation. [Paras 12]

Where amounts are part of declared business receipts and supported by books and VAT returns, they cannot be subjected to a second tax charge under section 68 in absence of contrary evidence.

Reliance on surmises and conjectures vis-a -vis requirement for corroborative evidence - assessment of demonetization-period cash deposits against declared turnover and VAT returns - Whether the CIT(A) erred in proceeding ex parte and upholding the AO's additions without considering the appellant's submissions and documentary material. - HELD THAT: - The Tribunal recorded that the assessee had filed written submissions and documentary material before the bench and that the CIT(A) had proceeded ex parte and upheld the AO's additions citing non-prosecution. On merits the Tribunal examined the material which showed the assessee had discharged the initial onus; since the AO had relied on conjectural estimates and had not brought corroborative contrary evidence, the Tribunal found that upholding the additions in an ex parte order was not justified. The Tribunal therefore considered the documentary record and allowed the appeal. [Paras 4, 12]

CIT(A)'s ex parte confirmation of the AO's additions was not sustained; the Tribunal considered the assessee's material and set aside the additions.

Final Conclusion: The assessee's appeal is allowed: the addition made by the Assessing Officer treating demonetization-period bank deposits as unexplained cash credited and taxed under section 68 read with section 115BBE is quashed, the AO's rejection of books and speculative computation of sales are held impermissible in absence of corroborative evidence, and amounts reflected as turnover and supported by VAT and audited accounts cannot be subjected to double taxation.

Addition based on unsigned draft agreement to sell - burden of corroborative evidence for alleged cash payments - distinction between lease deed and agreement to sell for taxability - inadmissibility of diary/jottings or loose entries without independent corroboration - treatment of surrendered income declared under section 132(4) vis-a -vis additions under section 69/69A - unexplained investment versus loan corroboration and interplay with prohibitions on cash transactions - avoidance of double taxation where surrendered income is brought to tax and utilised for bank deposits - deletion of additions where assessing officer fails to verify alleged payments or obtain confirmations

Addition based on unsigned draft agreement to sell - distinction between lease deed and agreement to sell for taxability - burden of corroborative evidence for alleged cash payments - Sustenance of addition made on the basis of an unsigned, undated and cut/trimmed draft agreement to sell and related claimed payments. - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the addition could not be sustained where the primary document was an unsigned, draft agreement with cutting and scribbling and there was no independent evidence to show that the amounts mentioned therein were actually paid. A duly executed lease deed, lease rent reflected in the society's accounts and TDS deduction, and continuing possession of the trust over the property supported the assessee's case that the transaction resulted in a lease, not a sale. In absence of proof of cash payments or corroboration by parties mentioned in the draft, the assessing officer's addition based on presumption was held unsustainable and deleted. [Paras 7, 8]

Addition deleted; revenue grounds on this issue dismissed.

Incriminating documents under search and seizure - scope of assessment under section 153A - Whether cash payment of stamp duty which was not part of incriminating documents seized during search falls within proceedings under section 153A. - HELD THAT: - The Tribunal accepted the assessee's submission and coordinate bench precedent relied upon that the addition for payment of stamp duty in cash was not based on incriminating material seized during search and thus did not fall within the scope of assessment under section 153A. Consequently the addition of the cash component of stamp duty was quashed. [Paras 11]

Addition of Rs.12,00,000 on account of stamp duty in cash quashed; appeal of assessee allowed.

Unexplained investment versus loan corroboration - requirement of evidence or cross examination of alleged recipient - inadmissibility of diary/jottings or loose entries without independent corroboration - Sustainability of addition under unexplained investment provisions in respect of alleged cash loan of Rs.40 lakh based on seized receipts/diary entries. - HELD THAT: - The Tribunal found that the AO relied on seized documents and diary entries without obtaining corroboration from the alleged recipient or independent verification. No statement or confirmation was recorded from the purported recipient and the assessee contested the documents. Where the documents seized do not provide conclusive proof and the AO failed to verify the transactions or link ledger entries, the addition could not be sustained and was therefore quashed. [Paras 14]

Addition of Rs.40,00,000 as unexplained investment quashed; assessee's appeal allowed on this ground.

Inadmissibility of diary/jottings or loose entries without independent corroboration - requirement of corroboration for additions based on 'rough proposals' or jottings - Sustainability of addition of Rs.1.45 crore on account of alleged investment in property founded on rough proposals and seized jottings. - HELD THAT: - The Tribunal relied on precedent and appellate reasoning that diary notings, rough proposals or decoded values based on assumption cannot form the sole basis for additions unless corroborated by independent documentary evidence. The assessee produced registered sale deeds and affidavits showing transactions substantively accounted for; the revenue failed to place contrary material or verification. Consequently the addition based on assumption and unreconciled jottings was deleted. [Paras 15, 16]

Addition of Rs.1.45 crore quashed; appeal of assessee allowed on this ground.

Surrendered income under section 132(4) and its evidentiary effect - avoidance of double taxation where surrendered income is brought to tax - Whether addition of unexplained construction expenditure could be made where the assessee had surrendered construction-related income which exceeded the impugned addition. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the assessee had made a surrender in respect of construction expenditure and included the surrendered amount in the return and paid tax. Since the admitted surrender covered an amount higher than the addition, making a further addition would amount to double taxation. The assessing officer had accepted a higher figure for construction surrender; absent contrary material the further addition was not sustainable. [Paras 19, 20]

Addition of Rs.38,07,065 on construction expenditure deleted; revenue's ground dismissed.

Treatment of surrendered income declared under section 132(4) vis-a -vis additions under section 69/69A - avoidance of double taxation where surrendered income is brought to tax and utilised for bank deposits - Sustainability of addition of cash deposits where assessee had declared and paid tax on surrendered income which was reflected in cashbook and subsequently deposited in bank. - HELD THAT: - The Tribunal agreed with the CIT(A) that the assessee had surrendered Rs.7.5 crore under section 132(4), included it in the return and paid tax. The cash deposits in bank formed part of the surrendered amount reflected by entries in the cashbook and the seized cash. Since the assessing officer did not afford the benefit of surrendered income, upholding the addition would amount to double taxation. On the record (ITR, surrender letter, cashbook, balance sheet) the deletion of addition was warranted. [Paras 23, 24, 25]

Addition of Rs.5,67,04,000 relating to cash deposits deleted; revenue grounds dismissed.

Final Conclusion: The Tribunal found no merit in the revenue's challenges and sustained the CIT(A)'s deletions or reliefs: revenue appeals are dismissed and the assessee appeals are allowed in the respects decided above.

Estimated disallowance on conjecture and non-rejection of books - Principle of consistency in depreciation rate - Disallowance under section 14A limited to exempt income (pre Finance Act 2022) - Return filed under section 153A substitutes original return filed under section 139 - Fresh claims in post search returns for abated assessments - Requirement of audit report under section 80IA(7) and section 80AC timing treated as satisfied if filed within notice period under section 153A

Estimated disallowance on conjecture and non-rejection of books - Deletion of estimated disallowance made by AO (and partly sustained by CIT(A)) in respect of cost of material consumed for AY 2014-15. - HELD THAT: - Tribunal found AO made ad hoc 5% addition without pointing to specific defective bills or evidencing that transactions were not genuine; books of account were audited and were not rejected by AO. CIT(A) had rightly observed that estimate disallowance cannot be sustained where no specific discrepancies are identified and books are not rejected, but CIT(A)'s own re estimation at 0.64% was also held to be based on estimate and contrary to the law. Applying settled authorities that assessment cannot rest on conjecture or suspicion, the Tribunal deleted the entire estimate disallowance made by AO of 5% of material consumed. [Paras 9, 11, 17, 21]

Impugned estimate addition deleted; assessee's ground allowed and revenue's challenge dismissed.

Estimated disallowance on conjecture and non-rejection of books - Deletion of additions alleged to arise from duplicate booking of Vehicle Running Expenses and Repairs & Maintenance for AY 2014-15. - HELD THAT: - AO alleged certain expense heads appeared twice and disallowed amounts, but did not identify any single transaction or ledger entry that proved duplication. Assessee produced ledger copies and explanations (multiple project sites, differing heads). CIT(A) deleted AO's additions on the ground AO proceeded on suspicion and failed to conduct enquiries or point to specific instances. Tribunal agreed AO did not discharge onus to demonstrate duplication and there was no contrary auditor observation; accordingly additions were deleted. [Paras 26, 29, 31]

Additions on account of vehicle running and repairs & maintenance deleted; revenue ground dismissed.

Principle of consistency in depreciation rate - Deletion of addition relating to excess depreciation (disallowance for claiming 30% instead of 15%) for AY 2014-15. - HELD THAT: - AO treated certain vehicles as eligible for 15% only and disallowed difference; CIT(A) followed earlier tribunal/coordinate bench decisions in assessee's own case and principle of consistency showing the assessee had been allowed higher rate in prior years, and AO had proceeded on a mistaken premise conflating excess depreciation with additional depreciation under section 32(1)(iia). Tribunal found no adverse material to rebut earlier consistent treatment and held AO's disallowance was unsustainable; CIT(A)'s deletion was upheld. [Paras 33, 34, 42, 43]

Disallowance on account of excess depreciation deleted; revenue ground dismissed.

Disallowance under section 14A limited to exempt income (pre Finance Act 2022) - Restriction of disallowance under section 14A (read with Rule 8D) to the amount of exempt income for AY 2014-15. - HELD THAT: - Assessee had minimal exempt dividend income and had suo moto disallowed a small amount; AO applied rule 8D and computed a larger disallowance. CIT(A) (and Tribunal) relied on prevailing judicial precedents holding that prior to the Finance Act 2022 the disallowance under section 14A/Rule 8D could not exceed exempt income; Tribunal held the disallowance should be restricted to the exempt income earned in the year and sustained CIT(A)'s result. [Paras 44, 45, 47]

Disallowance under section 14A restricted to exempt income (Rs.11,600); revenue ground dismissed.

Return filed under section 153A substitutes original return filed under section 139 - Fresh claims in post search returns for abated assessments - Whether an assessee can make fresh claims of deduction under section 80IA in returns filed in response to notices under section 153A for abated assessment years (AYs 2017-18 to 2019-20). - HELD THAT: - Tribunal analysed section 153A(1) and its provisos and held that where pending assessments abate on initiation of search, the returns filed under section 153A substitute the prior returns filed under section 139 and the assessment is to be re started de novo on the basis of post search return. Relying on a consistent line of High Court and Tribunal authorities, and applying the abatement doctrine, the Tribunal held that for abated/pending years the assessee may make legitimate fresh claims (including section 80IA) in the section 153A return even if such claims were not made in the original return, and AO cannot deny such claims by treating them as afterthoughts. [Paras 64, 71, 75, 83, 96]

Fresh claims of deduction under section 80IA in returns filed under section 153A for abated assessment years are allowable; departmental grounds on this point dismissed.

Requirement of audit report under section 80IA(7) and section 80AC timing treated as satisfied if filed within notice period under section 153A - Whether audit reports in Form 10CCB filed by assessee in the period allowed by the section 153A notice satisfy the timing requirement of section 80IA(7) and section 80AC for AYs 2017-18 to 2019-20. - HELD THAT: - Tribunal held that a return filed under section 153A within the time permitted by the 153A notice is to be treated as filed within the time under section 139(1); consequently, ancillary filings (including Form 10CCB required by section 80IA(7)) filed within the 153A notice period are to be treated as timely for purposes of section 80IA and section 80AC. Assessee had e filed Form 10CCB before expiry of the 153A notice period; AO's objection that the forms were belated (with reference to original return deadlines) was rejected. [Paras 108, 112, 114]

Forms 10CCB filed within the period allowed by the section 153A notice are treated as timely for section 80IA(7)/80AC; departmental ground dismissed.

Final Conclusion: For AY 2014-15 the Tribunal deleted the AO's estimated addition in respect of material consumed, upheld deletion of additions for vehicle running and repairs & maintenance, sustained deletion of excess depreciation disallowance, and restricted section 14A disallowance to the exempt income. For AYs 2017-18 to 2019-20 the Tribunal held that returns filed under section 153A for abated years substitute the earlier returns and permit fresh legitimate claims (including section 80IA), and that audit reports/Form 10CCB furnished within the period allowed by the section 153A notice satisfy the timing requirements of section 80IA(7)/80AC; accordingly the departmental appeals on these points were dismissed.

Condonation of delay for filing appeal - disallowance under section 56(2)(vii)(c) as income on difference between guideline value and consideration - tolerance band in amended section 50C and its retrospective effect - disallowance under section 40(a)(ia) for failure to deduct tax at source - role of stamp duty/registration authority valuation in determining deemed income

Condonation of delay for filing appeal - Whether the delay of 11 days in filing the appeal should be condoned. - HELD THAT: - The assessee explained that the delay was caused by travel to his hometown for a religious function and unforeseen late return, and filed a petition with affidavit for condonation. The Revenue disputed the sufficiency of these reasons. The Tribunal found the explanation to constitute a reasonable cause under the Act and, exercising discretion in the interest of substantial justice, condoned the delay and admitted the appeal for adjudication. [Paras 4]

Delay of 11 days condoned and appeal admitted.

Disallowance under section 56(2)(vii)(c) as income on difference between guideline value and consideration - tolerance band in amended section 50C and its retrospective effect - role of stamp duty/registration authority valuation in determining deemed income - Whether addition under section 56(2)(vii)(c) for difference between guideline value and consideration is sustainable, and whether the tolerance band under amended section 50C precludes such addition. - HELD THAT: - The AO made an addition after the registration authority levied additional stamp duty, evidencing a difference between the guideline value and consideration. The Tribunal accepted that on the face of the record there was a difference and that the AO had reason to make the addition under section 56(2)(vii)(c). However, the Tribunal considered the assessee's alternate plea relying on the retrospective operation of Finance Act amendments to section 50C (as recognised in precedent) which introduce a tolerance band; where the difference is within that tolerance, deemed consideration under section 50C is not attracted and consequently section 56(2)(vii)(c) cannot be invoked in the buyer's hands. Finding the difference in the present case to be within the tolerance band, the Tribunal directed deletion of the addition under section 56(2)(vii)(c). [Paras 7, 10, 11]

Addition under section 56(2)(vii)(c) deleted as difference falls within the tolerance band under amended section 50C.

Disallowance under section 40(a)(ia) for failure to deduct tax at source - Whether disallowance under section 40(a)(ia) of certain interest/other payments for non-deduction of TDS is justified. - HELD THAT: - The tax auditor quantified amounts in Form No.3CD as liable to TDS. The assessee argued part of the payment comprised processing/upfront fees not in the nature of interest and thus not subject to TDS, but failed to produce corroborative evidence or an auditor's certificate clarifying the composition of amounts reported in Form No.3CD. The Tribunal held that in absence of correctible evidence or documentation to establish that the payments were not covered by the TDS provisions, the AO's disallowance under section 40(a)(ia) was sustainable and the CIT(A)'s confirmation of that disallowance was upheld. [Paras 12, 13]

Disallowance under section 40(a)(ia) upheld for lack of supporting evidence that payments were not subject to TDS.

Final Conclusion: The Tribunal condoned the delay and admitted the appeal; it deleted the addition under section 56(2)(vii)(c) on account of the difference being within the tolerance band under the amended section 50C, but upheld the disallowance under section 40(a)(ia) for failure to deduct tax at source; appeal dismissed on remaining grounds.

Revisionary jurisdiction under section 263 of the Income-tax Act - best judgment assessment under section 144 of the Income-tax Act - error and prejudice test for exercise of section 263 - application of mind and plausibility of estimation

Revisionary jurisdiction under section 263 of the Income-tax Act - error and prejudice test for exercise of section 263 - best judgment assessment under section 144 of the Income-tax Act - application of mind and plausibility of estimation - Validity of the Principal Commissioner's exercise of revisional jurisdiction under section 263 in setting aside the assessment on estimation of agricultural income - HELD THAT: - The Tribunal examined whether the PCIT correctly invoked section 263 to set aside the AO's best judgment assessment under section 144 in respect of estimated agricultural income. The AO had completed a best judgment assessment after considering materials placed on record and public domain information (including National Horticultural Board data) and estimated yield for tomato and other crops. The PCIT's sole ground for revision was that the AO's adopted tomato yield (higher than the assessee's self-estimate) rendered the assessment erroneous and prejudicial to revenue. The Tribunal held that once an AO has made a best judgment assessment by applying a plausible, methodical approach to the available data, that conclusion amounts to application of mind; mere disagreement with the AO's estimation does not satisfy the twin conditions of error and prejudice necessary to exercise revisional jurisdiction under section 263. The PCIT failed to demonstrate that the AO's approach was unsustainable in law or that requisite enquiries were not made; instead the PCIT selectively questioned only the crop where the AO's estimate exceeded the assessee's own estimate while accepting the AO's estimates for other crops. In those circumstances the PCIT's reason for setting aside the assessment lacked sound reasoning and did not show that the AO's view was perverse or without basis. [Paras 7, 8]

The PCIT's invocation of section 263 was incorrect; the assessment is not shown to be erroneous and prejudicial to revenue and the revisional order is quashed.

Final Conclusion: The appeal is allowed; the order passed by the Principal Commissioner under section 263 is quashed and the assessment framed by the Assessing Officer under section 144 is upheld as not erroneous or prejudicial to the revenue.

Rectification under section 154 - mistake apparent from the record - power of revision under section 263 - taxability of interest awarded under the Land Acquisition Act - exemption under section 10(37) - interpretation by superior courts as binding for rectification - CBDT Circular No.68 dated 17.11.1971 - subsequent interpretation constituting mistake apparent

Rectification under section 154 - mistake apparent from the record - exemption under section 10(37) - interpretation by superior courts as binding for rectification - CBDT Circular No.68 dated 17.11.1971 - subsequent interpretation constituting mistake apparent - Validity of the Assessing Officer's rectification under section 154 to treat interest awarded under the Land Acquisition Act as exempt following judicial precedent - HELD THAT: - The Tribunal held that the Hon'ble Supreme Court's decision in Ghanshyam Dass (HUF) declaring interest awarded under the Land Acquisition Act to be non-taxable meant that the interest acquired the nomenclature of 'compensation' and was exempt under section 10(37). In conformity with CBDT Circular No.68/1971 and precedents recognising that a subsequent judicial interpretation can give rise to a 'mistake apparent from the record', the AO was justified in invoking section 154 to rectify the assessment. The Tribunal emphasised that income-tax proceedings are not adversarial as to who erred; what matters is the existence of a clear, rectifiable mistake and that the income liable to tax must be determined in accordance with law as in force. [Paras 3, 4, 8]

The AO's rectification under section 154 treating the interest as exempt pursuant to the Supreme Court decision is valid and is upheld.

Power of revision under section 263 - prejudicial to the interests of revenue - Validity of the Commissioner invoking section 263 to set aside the AO's section 154 rectification - HELD THAT: - The Tribunal found that the CIT erred in concluding that the AO's order under section 154 was prejudicial to the interests of revenue. Given that the issue of taxability had been authoritatively settled by the Supreme Court and the AO's action was a permissible rectification in light of that precedent and the CBDT circular, there was no justiciable basis to invoke section 263. The Tribunal held that the department cannot demand tax by invoking revisionary powers where the rectification correctly applied binding judicial interpretation and thereby removed an erroneous tax liability. [Paras 4, 10]

The order passed by the CIT under section 263 is erroneous and is quashed; the AO's order under section 154 is upheld.

Final Conclusion: The appeal is allowed: the Assessing Officer's rectification under section 154 treating interest awarded under the Land Acquisition Act as exempt (in light of the Supreme Court decision and CBDT Circular No.68/1971) is upheld and the Commissioner's order under section 263 setting aside that rectification is quashed.

Effect of substitution of statutory provision - retrospective versus prospective operation of amendment - vested right of a warehousing agency to recover rent - liability to pay warehousing/ detention charges where confiscation/detention upheld or accepted - scope of Regulation 6(1) of the Handling of Cargo and Customs Areas Regulations, 2009

Vested right of a warehousing agency to recover rent - liability to pay warehousing/ detention charges where confiscation/detention upheld or accepted - Whether CWC was entitled to demand and retain warehousing charges for the period prior to substitution of Section 68 and whether the amount paid by the appellant for that period was refundable. - HELD THAT: - The court found that at the time the goods were warehoused (2002) the statutory scheme permitted custodians such as CWC to demand and collect rent, and that right vested on that factual matrix. The adjudicating order dated 05.01.2018, which the appellant accepted unconditionally, conclusively established the appellant's liability for diversion and related consequences; having accepted the order-in-original and paid redemption fine, duty, interest and penalties, the appellant could not claim full waiver of warehousing charges. In these circumstances the demand and recovery of warehousing charges by CWC up to the date of substitution of the statutory provision was valid and need not be refunded. The learned single bench's grant of relief to the appellant prospectively (i.e., for the period after the amendment) was noted and not challenged by revenue; the High Court refrained from expressing an opinion on that aspect. The court also observed that Regulation 6(1) was relied upon but, on the facts, the statutory entitlement of CWC to recover rent at the time of warehousing predominated. [Paras 13, 14]

Demand and recovery of warehousing charges by CWC for the period prior to substitution of Section 68 is valid; the amounts so collected need not be refunded to the appellant.

Effect of substitution of statutory provision - retrospective versus prospective operation of amendment - Whether the substitution of Section 68 by the Finance Act, 2016 operates retrospectively so as to extinguish CWC's entitlement to rent for periods prior to the substitution. - HELD THAT: - The court reviewed the principle that substitution ordinarily effects repeal of the old provision and brings a new provision into existence, and noted authorities recognising that substitution is not invariably retrospective; legislative intent and context govern. However, having regard to the facts - in particular that the goods were warehoused in 2002 and the appellant had accepted the adjudication - the court held it unnecessary to decide finally whether the substituted Section 68 operates retrospectively or prospectively. The learned single bench had granted relief prospectively (post-amendment) and that part of its order was not appealed by revenue; accordingly the High Court refrained from expressing a definitive view on the temporal operation of the substitution, leaving the broader legal question open for determination on an appropriate occasion. [Paras 11, 14]

Left open for future adjudication; the High Court declined to pronounce finally on retrospective operation of the substitution, treating the question as unnecessary to decide on the facts of this case.

Final Conclusion: The appeal is dismissed. The High Court upheld CWC's entitlement to warehousing charges for the period prior to substitution of Section 68 and refused refund of those amounts; the broader question whether the substituted provision operates retrospectively was not finally decided by the court.

Principles of natural justice - reliability of witness statements - service of notice - postal endorsement - physical verification of witnesses - remand for verification

Principles of natural justice - reliability of witness statements - service of notice - postal endorsement - remand for verification - Reliance on statements of two witnesses without permitting their cross-examination and the propriety of remanding the matter for verification of service and existence of those witnesses. - HELD THAT: - The impugned adjudication relied upon statements attributed to two witnesses, Sri Ambarmoni Dutta and Santanu Dutta, whose statements were not subjected to cross-examination by the petitioner, raising a potential breach of the principles of natural justice. The Customs Authority's proof of service under the provision invoked consisted only of postal endorsements which were unclear and inconsistent: in respect of Ambarmoni Dutta the endorsement recorded as "deceased," while in respect of Santanu Dutta earlier endorsements indicated "addressee moved/left" and subsequently differing entries, creating factual ambiguity about service and the witnesses' availability. The department did not produce additional documentary evidence to dispel these uncertainties. In these circumstances the Court did not finally adjudicate the evidentiary weight of the witness statements but directed that the factual questions concerning service of notice and the existence/availability of the witnesses be resolved by administrative verification. The Customs Authority was ordered to send a copy of the Court's order to the witnesses at their recorded addresses by acknowledged delivery within one week and to cause an inspector to visit the addresses for physical verification of witnesses. The Court further directed the respondent to file postal-service documents and the physical verification report before the Court on the next listing date.

The matter is remanded for verification: respondent Customs Authority to serve the order with acknowledgement and carry out physical verification of the two witnesses, and to file postal and verification documents before the Court on the listed date.

Final Conclusion: The Court has not finally decided the admissibility or probative value of the impugned witness statements; instead it remanded the factual questions about service and the witnesses' availability for administrative verification and ordered production of postal and physical verification records on the next date of listing.

Condition No.104 of the Exemption Notification - non-scheduled (passenger) services - non-scheduled (charter) services - air transport service - power of Customs Authorities to independently examine compliance with exemption conditions - effect of DGCA findings on Customs action

Power of Customs Authorities to independently examine compliance with exemption conditions - effect of DGCA findings on Customs action - Whether Customs authorities are bound to await a finding by the DGCA that the conditions of the permit have been violated before taking action under the Exemption Notification. - HELD THAT: - The Court accepted the reasoning in East India Hotels Ltd. that Customs Authorities are entitled to independently examine whether the conditions of the Exemption Notification are satisfied and are not bound to act only upon a DGCA determination. The Tribunal's conclusion that Customs could act only when DGCA holds that permit conditions were violated was set aside. The Court therefore restored the principle that Customs may, on the basis of the undertaking and available material, investigate and take action for breach of exemption conditions without requiring prior cancellation or finding by the DGCA. [Paras 22, 23, 39]

Customs Authorities may independently examine and take action for violation of the conditions of the Exemption Notification; they are not bound to await a DGCA finding.

Condition No.104 of the Exemption Notification - non-scheduled (passenger) services - non-scheduled (charter) services - air transport service - Whether aircraft imported under Condition No.104 for non-scheduled (passenger) or non-scheduled (charter) services satisfy the exemption condition when used for the other category or for related-party revenue charters. - HELD THAT: - The Court analysed Condition No.104 and the definitions in the Aircraft Rules, noting that 'air transport service' is broadly defined to include carriage for any kind of remuneration. Condition No.104 grants exemption where aircraft are imported for providing non-scheduled (passenger) services or non-scheduled (charter) services; accordingly use for either purpose satisfies the condition. The Court referred to the DGCA Civil Aviation Requirement which permits a non-scheduled operator to carry passengers either by per-seat sales or by chartering the whole aircraft and allows revenue charters for related entities provided the operation is for remuneration. The subsequent amendment adding an explanation to Condition No.104 confirmed that use of an aircraft by a non-scheduled (passenger) operator for charter services, or by a non-scheduled (charter) operator for passenger services, is not a violation of the import conditions. Applying these principles, the Court held that the respondent's use of the helicopters for passenger/charter services satisfied Condition No.104. [Paras 33, 34, 35, 36, 37]

Condition No.104 is satisfied if the aircraft is used for non-scheduled (passenger) services or non-scheduled (charter) services; use across those modes (including related-entity revenue charters when for remuneration) does not vitiate the exemption.

Final Conclusion: The appeal is partly allowed: the impugned holding that Customs could act only on a DGCA finding is set aside; the Tribunal's conclusions that the respondent's use of the helicopters as non-scheduled passenger/charter services met Condition No.104 are affirmed under the legal principles stated, and no substantial question of law remains for consideration.

Obligations of a Customs Broker under the Customs Broker Licensing Regulations, 2018 - due diligence in verification of client identity and documents - reliance on government-issued registrations and public records for KYC - revocation of Customs Broker licence and ancillary forfeiture/penalty - standard of proof required for disciplinary action against a Customs Broker

Obligations of a Customs Broker under the Customs Broker Licensing Regulations, 2018 - due diligence in verification of client identity and documents - reliance on government-issued registrations and public records for KYC - Whether the appellant Customs Broker breached Regulations 10(d), 10(e) and 10(n) of CBLR, 2018 by failing to verify the identity and credentials of the exporter and thereby justified revocation of licence, forfeiture of security deposit and imposition of penalty. - HELD THAT: - Regulation 10(d) requires advising clients to comply with law and notifying authorities on non-compliance; Regulation 10(e) imposes a duty of due diligence as to correctness of information imparted to a client; Regulation 10(n) requires verification of IEC, GSTIN, identity and functioning of the client by using reliable, independent and authentic documents or data. The Tribunal found on the material placed that the exporter possessed an active IEC, PAN, bank account and GST registration at the relevant time and that these statutory registrations are issued by governmental authorities only after prescribed verification. The appellant had verified the exporter's KYC by reference to those registrations and governmental records which were operative on the public portal. The department produced no evidence of any overt involvement of the appellant in the exporter's fraud, nor cogent evidence that the appellant did not perform the usual documentary verifications or that mere non-personal collection of documents from an intermediary violated the Regulations. In these circumstances the Tribunal held that reliance upon operative government-issued registrations and public records sufficed and the department failed to establish, by cogent evidence, breach of the cited Regulations by the appellant.

No breach of Regulations 10(d), 10(e) and 10(n) of CBLR, 2018 was established; the disciplinary sanctions are not sustainable.

Revocation of Customs Broker licence and ancillary forfeiture/penalty - standard of proof required for disciplinary action against a Customs Broker - Whether the order revoking the appellant's Customs Broker licence, forfeiting the security deposit and imposing penalty is justified on the record. - HELD THAT: - The impugned order was founded on the conclusion that the appellant had violated the Regulations. Having found that the department did not produce cogent evidence of the appellant's overt involvement in the exporter's fraudulent transactions and that the appellant had relied on operative statutory registrations and standard documentary checks, the Tribunal concluded that the statutory threshold for disciplinary action had not been met. Where the foundational findings of regulatory violation are not supported by evidence, extreme sanctions such as revocation and forfeiture cannot be sustained.

Impugned order revoking licence, forfeiting security and imposing penalty is set aside.

Final Conclusion: The appeal is allowed; the order of the Commissioner of Customs revoking the appellant's Customs Broker licence, forfeiting the security deposit and imposing penalty is set aside and the appellant is entitled to consequential relief as per law.

Rejection of transaction value under Rule 12 - re-determination under Rule 5 - classification of goods - extended period under Section 28(4) - willful mis-statement - statements recorded under Rule 108 - appropriation of deposited amount - penalty under Section 114A

Classification of goods - Change of tariff classification could not be sustained where no proposal to reclassify was made in the show cause notice or in the order-in-original. - HELD THAT: - The Tribunal observed that neither the show cause notice nor the order in original contained any proposal to change the classification of the imported goods. The differential duty in the impugned order involved both classification and valuation, but because there was no prior notice proposing classification change the change of classification could not be upheld. The Tribunal therefore declined to sustain any re classification effected in the demand. [Paras 8]

Change of classification set aside for want of any proposal to reclassify in the SCN or original order.

Rejection of transaction value under Rule 12 - re-determination under Rule 5 - willful mis-statement - statements recorded under Rule 108 - Declared transaction value could not be rejected and re determined where there was no substantial evidence of mis declaration or willful mis statement. - HELD THAT: - The Revenue's case rested on two strands: admissions in statements by the Managing Director that the imports were native tapioca starch and higher market prices shown by TTSA. The Tribunal found that the only material favouring Revenue were statements which were subsequently retracted; if both the statements and retraction are considered nothing remains, and if neither is considered likewise nothing survives. Mere suspicion or doubt without credible evidence is insufficient to reject the transaction value under Rule 12 and re determine under Rule 5. On the materials before it the Tribunal found no substantial evidence to justify rejection of the declared value and consequent demand. [Paras 8]

Valuation rejection and re-determination quashed; demand based on rejected valuation set aside.

Extended period under Section 28(4) - willful mis-statement - Invocation of the extended period of limitation under Section 28(4) based on alleged willful mis statement was not justified on the record. - HELD THAT: - The Tribunal addressed the Revenue's reliance on extended limitation, which requires a finding of willful mis statement or suppression. Given the absence of credible, unambiguous evidence of deliberate mis declaration (the disputed statements being retracted and other material not supporting willfulness), the Tribunal concluded there was no basis to invoke the extended period for demand. Consequently, the extended period demand could not be sustained. [Paras 8]

Extended period invocation under Section 28(4) rejected; extended period demand set aside.

Appropriation of deposited amount - penalty under Section 114A - Appropriation of deposits, interest and penalty confirmed in the impugned order could not survive once the principal demand and its foundations were set aside. - HELD THAT: - The operative order had appropriated earlier deposits against the alleged differential duty and imposed penalty under Section 114A along with interest. The Tribunal's determination that the valuation rejection and classification change were unsustainable, and that there was no basis for extended period demand, meant that the consequential measures-appropriation, interest demand and penalty-had no subsisting foundation. The Tribunal therefore allowed the appeal and granted consequential relief to the appellant. [Paras 3, 9]

Appropriation, interest demand and penalty set aside consequentially; appeal allowed.

Final Conclusion: The impugned order upholding the re determination of value, differential duty, appropriation, interest and penalty is set aside; the appeal is allowed and consequential relief granted to the appellant.

Refund of Special Additional Duty on resale - sufficiency of sales records, VAT/CST payment evidence and CA certificate to establish sale - evidentiary value of communication not made RUD in the show cause notice - unjust enrichment - interest on delayed refund as per rules

Evidentiary value of communication not made RUD in the show cause notice - seizure communication cannot substitute for evidence if not placed in SCN - The reliance on a DRI communication not made RUD in the show cause notice to disallow part refund of SAD. - HELD THAT: - The Tribunal found that the Adjudicating Authority and Commissioner(A) had rejected part of the refund relying on a communication from DRI, Jaipur dated 22.03.2016 which was not made RUD in the show cause notice. The Tribunal held that because this document was not placed as RUD in the SCN, it had no evidentiary value and could not sustain the disallowance. The rejection was therefore based on surmise rather than admissible material properly relied upon in the proceedings. [Paras 10]

The reliance on the DRI communication was held impermissible and could not justify rejection of the part refund.

Refund of Special Additional Duty on resale - sufficiency of sales records, VAT/CST payment evidence and CA certificate to establish sale - unjust enrichment - Whether the appellant's produced records established entitlement to the claimed SAD refund for the imported machines. - HELD THAT: - The Tribunal examined the documentary record produced by the appellant - sales invoices, VAT/CST challans and returns evidencing payment of sales tax, stock register extracts, a CA certificate verifying records and an affidavit - and found no material to show these were incorrect. Having satisfied the conditions under the relevant notification for refund on resale and having shown payment of sales tax and absence of passing on the SAD burden, the Tribunal concluded that the appellant had discharged the onus to claim refund and that unjust enrichment was not attracted. [Paras 10]

The appellant's evidence was accepted as sufficient and the part refund previously rejected was directed to be granted.

Final Conclusion: Appeal allowed; the part rejection of the SAD refund was set aside and the Adjudicating Authority is directed to grant the refunded amount within 45 days together with interest as per rules.

Natural justice in disciplinary inquiry - admissibility and reliance on inquiry report - responsibility of customs broker for mis-declaration - due diligence and supervision obligations of customs brokers - forfeiture of security deposit and revocation of licence under CBLR

Admissibility and reliance on inquiry report - natural justice in disciplinary inquiry - The decision of the Principal Commissioner to finalise the show cause notice on the basis of the first Inquiry Report was lawful. - HELD THAT: - The Hon'ble High Court had quashed the second Inquiry Report and directed the Principal Commissioner to decide the notice on the basis of the first Inquiry Report. The Tribunal therefore held that reliance on the first Inquiry Report for finalising the Show Cause Notice did not suffer from any infirmity. The Court's order disallowing the second inquiry and permitting decision on the first enquiry removed the basis for challenge to finalisation on that report, and therefore the adjudicating authority was entitled to act on the first Inquiry Report. [Paras 8]

No infirmity in finalising the show cause notice on the basis of the first Inquiry Report.

Due diligence and supervision obligations of customs brokers - responsibility of customs broker for mis-declaration - The Customs Broker did not contravene Regulations 10(a), 10(d), 10(e), 10(f) and 13(12) of the CBLR, 2018 as alleged. - HELD THAT: - On the materials, the Appellant had produced authorisation from the importer and filed Bills of Entry in accordance with documents supplied by the importer, thus complying with Regulation 10(a). The mis-declaration emerged only after DRI's chemical testing; there was no evidence that the broker had prior knowledge of mis-description or imparted incorrect information to the importer, therefore Regulations 10(d), 10(e) and 10(f) were not proved. Concerning Regulation 13(12), the allegation rested on statements that a partner lent the broker licence to a third party; however, there was no corroborative documentary evidence that the third party filed the entries or that the broker had prior knowledge of mis-declaration. Mere statements without corroboration were held insufficient to establish failure of supervision. On these bases the Tribunal found the violations not proved. [Paras 12, 13, 14, 15, 16]

Allegations of breach of Regulations 10(a), 10(d), 10(e), 10(f) and 13(12) are not established.

Forfeiture of security deposit and revocation of licence under CBLR - The revocation of the Customs Broker licence and forfeiture of the security deposit, and the penalty imposed, as recorded in the impugned order, are not sustainable and are set aside. - HELD THAT: - Because the Tribunal concluded that the foundational allegations against the broker under the cited regulations were not proved, the consequential orders of revocation of licence, forfeiture of the security deposit and the penalty imposed could not be sustained. The Tribunal therefore allowed the appeal and set aside the Principal Commissioner's order. [Paras 17]

Revocation of licence, forfeiture of security deposit and penalty are set aside.

Final Conclusion: The appeal is allowed: the Tribunal finds no legal infirmity in adjudication on the first Inquiry Report, but holds that the alleged violations of CBLR, 2018 by the Customs Broker are not proved; accordingly the revocation of licence, forfeiture of security deposit and penalty imposed are set aside.

Prohibition of import based on CIF (transaction value) and its effect on confiscation - Redemption of confiscated goods under Section 125 of the Customs Act, 1962 - Transaction value (CIF) as contractual consideration and distinction from assessable value under Customs valuation rules - Rejection of declared transaction value and valuation under the Customs Valuation (Determination of value of Imported goods) Rules, 2007 (Rule 12) - Confiscation of goods required to be mentioned in arrival/import manifest and mis-declaration - Confiscation of goods used for concealing smuggled goods and judicial discretion under Section 119 - Penalty for improper importation under Section 112 of the Customs Act, 1962 - Penalty for use of false or incorrect material under Section 114AA of the Customs Act, 1962

Prohibition of import based on CIF (transaction value) and its effect on confiscation - Transaction value (CIF) as contractual consideration and distinction from assessable value under Customs valuation rules - Redemption of confiscated goods under Section 125 of the Customs Act, 1962 - Rejection of declared transaction value and valuation under the Customs Valuation Rules (Rule 12) - Imported areca nuts were not prohibited and the importer was entitled to option of redemption under section 125 - HELD THAT: - The tribunal examined whether the areca nuts were prohibited by reference to the CIF value. The court held that CIF is the transaction value agreed between buyer and seller and cannot be altered by the Customs officer for the purpose of determining whether a DGFT prohibition applies; while Rule 12 permits rejection of a declared transaction value for assessment purposes and substitution of an assessable value under the Valuation Rules, it does not empower the officer to change the transaction value itself. The DGFT prohibition is tied to the CIF (transaction) value and not to the assessable value determined for duty. On the facts, the declared CIF met the threshold in the DGFT notification and therefore the imports were not prohibited; accordingly the importer had the statutory right to seek redemption under section 125. [Paras 18, 20, 22, 24, 26]

Areca nuts held not to be prohibited; redemption option under section 125 is available and the appellate authority correctly allowed redemption.

Confiscation of goods used for concealing smuggled goods and judicial discretion under Section 119 - Confiscation for omission from import manifest versus Bill of Entry declarations - Confiscation of LLDPE under section 119 was not justified and was correctly set aside by the appellate authority - HELD THAT: - The tribunal noted that LLDPE was declared in the Bill of Entry and mentioned in the IGM, whereas areca nuts were not mentioned in the IGM (which is filed by the ship's master/agent). There was no evidence that the importer used LLDPE to conceal areca nuts or that the department's alert was communicated to the importer; mere filing of the Bill of Entry the day after an alert does not prove collusion. Section 119 renders such goods 'liable to confiscation' and confers a discretion which must be exercised judicially; precedent supports that confiscation is not mandatory. Applying these principles to the facts, the appellate authority prudently exercised discretion and set aside confiscation of LLDPE. [Paras 28, 29, 30, 31]

Confiscation of LLDPE under section 119 set aside; appellate authority's decision upheld.

Penalty for use of false or incorrect material under Section 114AA of the Customs Act, 1962 - Bill of Entry as the declaration; absence of false declaration - Penalty under section 114AA was rightly set aside by the appellate authority - HELD THAT: - Section 114AA targets knowingly or intentionally false or incorrect material. The only declaration by the respondent was the Bill of Entry, and the goods were found to match that Bill of Entry. Inaccuracies in the IGM (filed by the vessel master/agent) cannot be attributed to the importer absent evidence. On these facts the appellate authority correctly concluded that the ingredients of section 114AA were not made out and set aside the penalty. [Paras 32]

Penalty under section 114AA set aside; appellate authority's order sustained.

Penalty for improper importation under Section 112 of the Customs Act, 1962 - Interplay between confiscation findings and applicable heads of penalty under Section 112 - Reduction of penalty under section 112 to the amount imposed by the appellate authority was upheld - HELD THAT: - Section 112 contains distinct heads of penalty tied to prohibited goods, evasion of duty, and over-statement of value. The tribunal found that having determined the areca nuts were not prohibited, the head of penalty under section 112(i) does not apply; there was no material to show duty evasion under section 112(ii). Given the factual matrix and the appellate authority's exercise of discretion, there was no reason to interfere with the reduction of the penalty to the amount fixed on appeal. [Paras 33, 34, 35]

Reduction of penalty under section 112 to the appellate authority's figure sustained.

Final Conclusion: Revenue's appeal dismissed; impugned order of the Commissioner (Appeals) is upheld in all respects challenged before the tribunal and the interim stay application is disposed of.

Escalation clause in Resolution Plan - Remand to Adjudicating Authority for fresh consideration - Role of Monitoring Committee and Authorized Representative of Homebuyers - Voting by Class of Creditors under Section 25A(3A) - Approval of Resolution Plan by Committee of Creditors and Adjudicating Authority

Escalation clause in Resolution Plan - Role of Monitoring Committee and Authorized Representative of Homebuyers - Voting by Class of Creditors under Section 25A(3A) - Remand of the matter to the Adjudicating Authority for fresh consideration of the proposal to insert an escalation clause in the approved Resolution Plan and related voting and consent by the class of homebuyers. - HELD THAT: - The Appellants sought insertion of an escalation clause in their approved Resolution Plan; the Resolution Professional submitted that the Appellant proposed Clause 7.6 and the Monitoring Committee, with the Authorized Representative of homebuyers, considered competing proposals. A polling was conducted and a proposal (escalation of Rs. 192 per sq ft) was accepted by the Appellant and put to vote conducted in terms of Section 25A(3A). The Tribunal noted that the homebuyers/class of creditors had accepted the escalation proposal and that procedural steps (including issuing notice to respondents) had been taken. In view of these facts and the acceptance by the homebuyers, the Tribunal allowed the appeal and remanded the matter to the Adjudicating Authority to take a fresh decision expeditiously (within one month from appearance of parties), directing the parties to appear before the Adjudicating Authority on the specified date.

Appeal allowed; matter remitted to the Adjudicating Authority for fresh decision on the escalation clause and related voting/consent, to be decided within one month from appearance of the parties.

Final Conclusion: The Tribunal allowed the appeal and remitted the dispute regarding insertion of an escalation clause in the approved Resolution Plan to the Adjudicating Authority for fresh consideration, directing an early decision (within one month of parties' appearance) after taking into account the Monitoring Committee's proceedings and the voting by the class of homebuyers.

Admission under Section 7 of the Insolvency and Bankruptcy Code - debt and default - serious dispute - related-party / group set-off - moratorium restraining recovery

Admission under Section 7 of the Insolvency and Bankruptcy Code - debt and default - serious dispute - related-party / group set-off - moratorium restraining recovery - Whether the Adjudicating Authority was right in rejecting the Section 7 application and declining to admit CIRP against the Corporate Debtor. - HELD THAT: - The Appellate Tribunal upheld the Adjudicating Authority's exercise of discretion in rejecting the Section 7 petition. The record showed that the loan transaction involved entities within the same IL&FS group and that the Corporate Debtor had acted as a facilitator to enable an intra-group transfer pursuant to an arrangement adopted because of RBI-related restrictions. The Adjudicating Authority relied on communications from IL&FS group companies and found that the lender and ultimate borrower belonged to the same group, warranting set-off of claims within the group. Further, recovery from the ultimate borrower was impeded by a moratorium imposed by this Tribunal in earlier proceedings, which restricted the ability of the Corporate Debtor to obtain payment from the IL&FS entities. In view of these facts, the Adjudicating Authority correctly concluded that a substantial and triable dispute existed as to whether any default by the Corporate Debtor had occurred and that the matter was not fit for initiation of CIRP. The Appellate Tribunal found no error in this reasoning and refused to displace the discretion exercised below. [Paras 8, 9]

The Adjudicating Authority rightly rejected the Section 7 application; the appeal is dismissed.

Final Conclusion: The appeal is dismissed as the Tribunal is satisfied that the Adjudicating Authority correctly found a serious dispute and intra-group set-off, and that the moratorium and the factual matrix rendered the Section 7 petition unsuitable for admission.

Inclusivity of service tax in gross consideration under Section 67(2) - requirement of supporting evidence to invoke deduction - remand for fresh adjudication - opportunity to produce supporting documents - no expression of opinion on merits upon remit

Inclusivity of service tax in gross consideration under Section 67(2) - requirement of supporting evidence to invoke deduction - remand for fresh adjudication - opportunity to produce supporting documents - Whether the appellant had requisite supporting evidence to establish that the consideration received was inclusive of service tax and whether the matter should be remitted for fresh adjudication. - HELD THAT: - The Tribunal had accepted the revenue's contention that the appellant failed to produce evidence showing that its gross receipts were inclusive of service tax and accordingly denied the benefit of Section 67(2). The Supreme Court found that the appellant had offered to produce relevant documentary evidence before the Tribunal and that the revenue did not oppose this opportunity. In these circumstances the Court set aside the Tribunal's order insofar as it dealt with the question of inclusivity and remitted that question to the Tribunal for fresh adjudication, directing the Tribunal to consider the relevant material/documents which the parties may produce. The Court expressly declined to express any opinion on the merits of question (c), limiting its intervention to ordering a fresh consideration on the available record and any further documents produced by the parties.

Order of the Tribunal on the question of whether the consideration was inclusive of service tax is set aside and remitted to the Tribunal for fresh adjudication after allowing parties to place relevant documents; no opinion expressed on merits.

Final Conclusion: Appeals partly allowed by setting aside the Tribunal's order on the question of inclusivity under Section 67(2) and remitting that question for fresh adjudication with directions to consider documents to be produced by the parties; merits left open.

Business Auxiliary Service - commission agent - exemption Notification No.13/2003-ST dated 20.06.2003 - service tax liability for promotion or marketing services - penalty

Business Auxiliary Service - commission agent - exemption Notification No.13/2003-ST dated 20.06.2003 - Appellant's liability to service tax for services rendered as a commission agent during 01.07.2003 to 08.07.2004. - HELD THAT: - The Tribunal found on the record that the appellant received commission at the rate of 3% of the sale value for effecting sales on behalf of NINL and that the agreement preserved property and risk with NINL. Notification No.13/2003-ST dated 20.06.2003 defines a commission agent as a person who causes sale or purchase of goods on behalf of another for consideration based on the quantum of such sale or purchase. Applying that definition, the Tribunal concluded that the appellant's activities fell within the commission agent category and therefore were covered by the exemption for the period 01.07.2003 to 08.07.2004. [Paras 6, 7]

Appellant not liable to pay service tax for the period 01.07.2003 to 08.07.2004.

Service tax liability for promotion or marketing services - penalty - Validity of the demand of service tax (balance) and imposition of penalty for the periods covered by the show-cause notice. - HELD THAT: - Having held that the appellant was entitled to the benefit of the exemption for 01.07.2003 to 08.07.2004, the Tribunal found no merit in the impugned order demanding the remaining balance (as recorded) and further held that, in the facts and circumstances of the case, no penalty was imposable on the appellant. [Paras 8, 9]

Demand set aside and penalty quashed; appeal allowed with consequential relief.

Final Conclusion: The appeal is allowed: the appellant is not liable to service tax for 01.07.2003 to 08.07.2004 as a commission agent under the notified exemption, the impugned demand is set aside and the penalty is held not imposable.

Entitlement to interest on delayed refund - Rate of interest on delayed refund - Interest from date of deposit to date of refund - Deposit made during adjudication as payment under protest - Claim under Section 11B/11BB and applicability

Entitlement to interest on delayed refund - Deposit made during adjudication as payment under protest - Assessee's entitlement to interest on refund of amount deposited during pendency of investigation/adjudication - HELD THAT: - The Tribunal examined whether the amount deposited by the appellant while adjudication and investigation were pending must attract interest when refunded. Relying on its own precedents and decisions of the Punjab & Haryana High Court upholding those precedents, the Tribunal treated deposits made during the pendency of proceedings as being in the nature of payment under protest and not voluntary payments. The revenue's contention that no show cause notice was issued for the impugned period and that the payment was voluntary was rejected on the basis that amounts deposited during investigation/adjudication have been consistently held to be deposits under protest and therefore eligible for interest when refunded. The Tribunal followed earlier decisions (including Riba Textiles and subsequent consistent authorities) that such deposits attract interest from the date of deposit until the date of payment of refund.

Assessee entitled to interest on the refunded amount deposited during pendency of proceedings.

Rate of interest on delayed refund - Claim under Section 11B/11BB and applicability - Rate at which interest should be awarded on the delayed refund and whether statutory provisions confined the rate - HELD THAT: - The Tribunal considered competing authorities on the appropriate rate and observed that its consistent view - endorsed by the Punjab & Haryana High Court in Riba Textiles - is to award interest at 12% per annum on refunds of amounts deposited during adjudication or investigation. Noting that provisions prescribing differing rates (under various notifications) exist but that judicial discipline and binding precedents confine interest to 12%, the Tribunal held that the rate of 12% is appropriate. The Tribunal also addressed the submission that Sections 11B/11BB governed the refund, observing that where the refund relates to a revenue deposit made during adjudication/investigation the claim for interest is governed by the established judicial principle awarding 12% and is not defeated by the revenue's reliance on alternative statutory processing; accordingly the appellant's claim for interest was allowed at 12%.

Interest to be granted at the rate of 12% per annum on the refunded amount.

Interest from date of deposit to date of refund - Period for which interest is payable on the refunded amount - HELD THAT: - Applying the precedent that refunds of deposits made during pendency of proceedings attract interest from the date of payment/deposit, the Tribunal directed that interest be computed from the date of deposit of the contested amount until the date of its actual refund. The Tribunal relied on its prior decisions (including Reba/Riba Textiles and related authorities) which expressly hold that interest runs from the date of deposit/payment till realization of refund.

Interest to be calculated from the date of deposit until the date of payment of the refund.

Final Conclusion: Impugned order denying interest is set aside; appeal allowed and refundant interest granted at 12% per annum from date of deposit until date of payment.

Consideration and processing of applications under Sabka Vishwas (Legacy Disputes Resolution) Scheme, 2019 - direction for expeditious disposal of statutory scheme applications - no expression of opinion on merits - refund claim to be decided subject to outcome of scheme processing

Consideration and processing of applications under Sabka Vishwas (Legacy Disputes Resolution) Scheme, 2019 - direction for expeditious disposal of statutory scheme applications - Challenge to delay in processing of the petitioners' applications under the said Scheme and the relief of mandating consideration and conclusion of those applications. - HELD THAT: - The writ petitions confined themselves to the limited grievance that applications submitted under the Sabka Vishwas (Legacy Disputes Resolution) Scheme, 2019 had not been taken forward. The Court recorded that Respondents 1 to 3 were in the process of ascertaining the correct status of the applications. In view of the limited scope of the petitions and the applications already filed, the Court directed the first respondent to consider, process and conclude the petitioners' applications under the said Scheme as expeditiously as the respondent's business permitted and, in any event, within four weeks from the date of the order. The Court further directed that the conclusion reached by the first respondent be communicated to the petitioners under due acknowledgement within seven working days from the date of disposal of the applications under the Scheme. The direction was procedural and limited to ensuring timely adjudication of the applications; the Court did not entertain or decide the merits of the claims under the Scheme.

The first respondent directed to consider, process and conclude the petitioners' applications under the Scheme within four weeks and communicate the result within seven working days thereafter.

Refund claim to be decided subject to outcome of scheme processing - no expression of opinion on merits - Prayer for refund in one petition and its linkage to the outcome of processing under the Scheme. - HELD THAT: - The Court observed that the prayer in W.P.No.33258 of 2022 included a claim for refund by the third respondent. The Court held that any refund relief is contingent upon and subject to the conclusion reached by the first respondent while considering and processing the petitioner's application under the Scheme. The Court expressly refrained from expressing any opinion on the merits, stating that the first respondent must consider the applications on their own merits and in accordance with law.

Refund claim left to be determined by the first respondent in the course of processing the application under the Scheme; Court expressed no opinion on merits.

Direction for expeditious disposal of statutory scheme applications - Disposition of the connected Writ Miscellaneous Petition. - HELD THAT: - Given the main direction to the first respondent to process and conclude the Scheme applications within the stipulated time, the Court disposed of the connected W.M.P.No.32692 of 2022 as closed. The disposal was consequential to the primary relief directing expeditious consideration.

The Writ Miscellaneous Petition disposed of as closed.

Final Conclusion: The writ petitions and connected WMP were disposed by directing the first respondent to consider, process and conclude the petitioners' applications under the Sabka Vishwas (Legacy Disputes Resolution) Scheme, 2019 within four weeks and to communicate the conclusion within seven working days; no opinion was expressed on the merits and any refund claim is to be decided in accordance with the outcome of that processing.

Inclusion of value of buyer supplied drawings/designs in transaction value under Rule 6 of the Central Excise Valuation Rules, 2000 - arbitrary adoption of a percentage for valuation - burden of proof on the Revenue to establish flow of additional consideration for drawings/designs - amortisation and depreciation of cost of drawings/designs as a defence to inclusion - penalty under section 11 AC of the Act

Inclusion of value of buyer supplied drawings/designs in transaction value under Rule 6 of the Central Excise Valuation Rules, 2000 - arbitrary adoption of a percentage for valuation - amortisation and depreciation of cost of drawings/designs as a defence to inclusion - Value of drawings/designs supplied by customers to the appellant for fabrication of steel structures and their treatment for determination of transaction value under Rule 6. - HELD THAT: - The Tribunal found that the Revenue's mechanical adoption of 10% towards value of drawings/designs was arbitrary and previously rejected by the Tribunal. The assessee had produced a Chartered Engineer's certificate and submissions that, on amortisation and depreciation and because drawings were repeatedly used and supplied by buyers, the effective additional value is negligible; alternatively a technical valuation of 0.025% was furnished. The Tribunal noted that Revenue itself had accepted 0.025% towards drawings/designs for the subsequent period (order dated 28th Feb., 2019) which attained finality. In light of the earlier rejection of the 10% addition, the supporting technical certificate and the Revenue's own acceptance for the later period, the Tribunal held it appropriate to fix the value of drawings/designs at 0.025% of the value of goods for the purpose of valuation under Rule 6, and thereby modified the impugned order accordingly. [Paras 11]

Modified the impugned order to treat drawing/design charges at 0.025% of the value of goods for valuation under Rule 6.

Burden of proof on the Revenue to establish flow of additional consideration for drawings/designs - penalty under section 11 AC of the Act - Whether the appellant remains liable for penalty and the standard of proof required from Revenue to justify inclusion of additional consideration for drawings/designs. - HELD THAT: - The Tribunal reiterated that the burden to prove the flow of additional consideration (direct or indirect) lies on the Revenue, and that arbitrary computation without documentary evidence is unsustainable. Nonetheless, having fixed the additional value at 0.025% for valuation purposes, the Tribunal directed that the appellant shall be liable to pay the penalty under section 11 AC calculated on the amount of additional duty as determined by this Order. The impugned confirmation of demand and penalty was therefore modified to reflect the reduced valuation. [Paras 11, 12]

Assessee liable to pay penalty under section 11 AC on the additional duty calculated as per the valuation fixed at 0.025%; Revenue must meet the burden of proof to justify any higher addition.

Final Conclusion: The appeal is allowed; the impugned order is modified to treat drawing/design charges at 0.025% of the value of the goods for valuation under Rule 6, and the appellant is directed to pay additional duty and penalty under section 11 AC computed on that basis.

Forfeiture of earnest money - exercise of writ jurisdiction under Article 226 - bona fide defence to non-deposit of balance bid - application of Rule 9(5) of the Security Interest (Enforcement) Rules, 2002 - entitlement to interest on delayed refund

Forfeiture of earnest money - bona fide defence to non-deposit of balance bid - application of Rule 9(5) of the Security Interest (Enforcement) Rules, 2002 - Validity of the bank's forfeiture of the amounts deposited by the successful bidder pursuant to the auction notice dated 18th June, 2013. - HELD THAT: - The Court held that the facts material to the forfeiture were not in dispute: the appellant was the highest bidder, deposited earnest money and 25% of the bid, but was not informed that substantive proceedings before the DRT were pending when the auction was held. The Bank relied on Rule 9(5) of the Rules, 2002 which prescribes consequences of default in deposit of the balance purchase price; however the Court found the situation was not one of simple default but involved a bona fide defence because the appellant was not apprised of the pending DRT proceedings that materially affected his decision to proceed. Given the undisputed factual matrix and the appellant's consistent offer to pay the balance once the DRT matter was decided, the Division Bench erred in treating forfeiture as a matter to be pursued through other remedies. The Court, exercising supervisory jurisdiction, concluded that forfeiture in these circumstances was not justified and directed refund of the amounts deposited by the appellant. [Paras 24, 25, 26]

Forfeiture set aside; the Bank directed to return the amounts deposited by the appellant in connection with the auction dated 18th June, 2013.

Exercise of writ jurisdiction under Article 226 - Whether the Division Bench should have exercised its writ jurisdiction to finally resolve the dispute instead of relegating the appellant to other remedial mechanisms. - HELD THAT: - The Court recorded that, since there was no factual dispute about the deposits and the appellant's bona fides, relegating him to pursue other remedies amounted to keeping a crystallized dispute alive. The Division Bench thereby committed a manifest error by not exercising Article 226 powers to resolve the controversy. The Supreme Court held that, in the circumstances, the High Court should have adjudicated the entitlement directly rather than leaving the issue open, and accordingly exercised its supervisory power to direct restitution. [Paras 25]

Division Bench's approach reversed; writ jurisdiction used to direct refund rather than require invocation of other remedies.

Entitlement to interest on delayed refund - Entitlement of the appellant to interest on the forfeited amount and the effect of delay in filing the appeal. - HELD THAT: - The Court observed that although it condoned the appellant's delay in filing the appeal, that condonation did not entitle him to interest on the forfeited sum for the period of delay. Nevertheless, to ensure timely compliance with the restitution direction, the Court directed that if the Bank fails to return the specified amount within two months, interest at 12% per annum would be payable from the date of default until payment is made. Thus the appellant was denied retrospective interest for the period covered by the condoned delay but protected by a prospective penal interest direction to secure compliance. [Paras 27, 28]

No interest awarded for the period of condoned delay; refund to be made within two months and, if not, to carry interest at 12% per annum until payment.

Final Conclusion: The appeal is allowed. The Bank is directed to refund the amounts deposited by the appellant in relation to the auction dated 18th June, 2013; no interest is payable for the period of condoned delay, but failure to refund within two months will attract interest at 12% per annum until payment.

Quashing of criminal proceedings under inherent jurisdiction (Article 226 / Section 482 CrPC) - Vicarious liability of officers of a company - Section 141 of the Negotiable Instruments Act, 1881 - Requirement of specific averments that a person was "in charge of, and responsible to" the company - Prima-facie satisfaction for issuance of summons - Exercise of extraordinary jurisdiction sparingly (Bhajanlal principle) - Authorised signatory / power of attorney and representation of the company - SMS Pharmaceuticals ratio on pleading and liability of directors/officers

Section 141 of the Negotiable Instruments Act, 1881 - Requirement of specific averments that a person was "in charge of, and responsible to" the company - Authorised signatory / power of attorney and representation of the company - Prima-facie satisfaction for issuance of summons - Quashing of criminal proceedings under inherent jurisdiction (Article 226 / Section 482 CrPC) - Whether the private complaints under Section 138 read with Section 141 of the N.I. Act insofar as they arraign the applicant (accused No.6) are liable to be quashed in exercise of the High Court's inherent jurisdiction - HELD THAT: - Applying the settled principles in S.M.S. Pharmaceuticals and related authorities, Section 141 imposes vicarious liability on those who "at the time the offence was committed, were in charge of, and were responsible to the company for the conduct of the business"; that averment is an essential pleading requirement. The Court examined the complaint and ancillary material and found admissions and documentary pointers from which a reasonable inference could be drawn that the applicant, despite earlier resignation as director, acted as an authorised signatory and power of attorney holder for the promoters, entered into the share subscription/ shareholders agreements and was shown in income-tax filings as serving with the company as Chief Operating Officer (Sales & Marketing). Those factual averments and materials, taken at face value for the limited purpose of a threshold inquiry, suffice to raise a prima-facie case that the applicant represented the company and was involved in day-to-day transactions. In the circumstances, the trial Court's issuance of summons was not shown to be perverse or manifestly unsustainable; the present stage (recording of further statements) and prospect of leading evidence at trial mean that the High Court should not substitute a trial on merits by quashing the complaints. The Court reiterated that inherent jurisdiction to quash is to be exercised sparingly (Bhajanlal), and declined to undertake an enquiry into the reliability of the allegations since the complaint discloses sufficient averments to proceed. The applicant remains free to disprove responsibility before the trial Court by evidence. [Paras 22, 23, 25]

The petitions are dismissed; the complaints are not quashed and summons were rightly issued, leaving the trial Court to decide the matter on merits.

Final Conclusion: The High Court declined to exercise its inherent jurisdiction to quash the private complaints against the applicant. The court found that the complaint and record disclose sufficient prima-facie averments that the applicant, as authorised signatory and power of attorney holder who acted for and represented the company, could be regarded as in charge of and responsible for the company's business at the relevant time; the trial shall proceed and the applicant may lead evidence in his defence.

Presentation to drawee bank within prescribed validity - Collecting bank's obligation to present cheque to drawee within six months - Validity period of cheque - Requirement of demand in notice under Section 138 proviso - Criminal liability under Section 138 of the Negotiable Instruments Act

Presentation to drawee bank within prescribed validity - Collecting bank's obligation to present cheque to drawee within six months - Validity period of cheque - Complaint dismissed insofar as the cheque was presented to the drawee bank after the expiry of its six months validity and thereby failed to attract criminal liability under Section 138. - HELD THAT: - The cheque was dated 14.09.2004. Although the complainant presented the cheque to her bank on 07.03.2005, the drawee bank received the cheque on 15.03.2005, which was after the six months validity period (expired on 13.03.2005). Relying on the principle that a collecting bank must present the cheque to the drawee bank within the prescribed period if criminal liability of the drawer is to be attracted, the court held that non-presentation to the drawee bank within six months absolves the drawer of criminal liability under Section 138 even though civil remedies may remain available. The Trial Court's finding that presentation to the drawee bank occurred after the cheque had expired is upheld. [Paras 8, 10]

The cheque was presented to the drawee bank after its six months validity; criminal liability under Section 138 is not attracted on that ground.

Requirement of demand in notice under Section 138 proviso - Criminal liability under Section 138 of the Negotiable Instruments Act - Complaint dismissed insofar as the statutory notice issued after dishonour did not constitute a valid demand as required by the proviso to Section 138. - HELD THAT: - Proviso (b) to Section 138 requires that the payee makes a demand for payment by giving a notice in writing within thirty days of receipt of information of return. The notice on record (Ext.CW1/D dated 05.04.2005) mentioned dishonour but did not specifically make a demand for payment of the cheque amount in the terms required by the proviso. Applying settled authority that the notice must clearly indicate the demand, the court agreed with the Trial Court that the notice did not satisfy statutory requirements and therefore was not a notice in law under Section 138. [Paras 11, 13, 15]

The notice did not contain the requisite demand for payment as envisaged by the proviso to Section 138 and therefore was invalid for the purpose of instituting criminal proceedings under that provision.

Final Conclusion: The High Court found no merit in the appeal: the cheque was presented to the drawee bank after its six months validity and the post-dishonour notice failed to make the statutory demand; accordingly the Trial Court's dismissal of the complaint under Section 138 is affirmed and the appeal is dismissed.