TaxTMI Updates e-Newsletter
Apr 22,2023

Refund of unutilised input tax credit on account of inverted duty structure - application of the formula in Rule-89(5) - CBIC Circular No.125/44/2019-GST compliance requirements - exclusion of input services and capital goods from refund - production and verification of books of account for refund claims

Refund of unutilised input tax credit on account of inverted duty structure - application of the formula in Rule-89(5) - CBIC Circular No.125/44/2019-GST compliance requirements - Whether the petitioner is entitled to refund of accumulated unutilised ITC for the period December, 2021 to January, 2022 and whether the refund rejection dated 02.08.2022 is liable to be set aside. - HELD THAT: - The Court examined the statutory scheme in Section 54(3), Rule-89(5) and the CBIC Circular No.125/44/2019-GST which prescribes the documentation and the formula for grant of refund on account of inverted duty structure. The authority must follow the Rule-89(5) formula and consider the documents and statements required under the CBIC circular. The record shows that except for a specific mismatch in the net ITC figure, the petitioner had filed the refund application, produced documents and complied with the requirements listed in the circular and the Rules. The departmental objection relates only to a quantified mismatch which requires invoice verification and adjudication. The Court held that, subject to final adjudication of the disputed amount, the balance refundable amount must be released to the petitioner in accordance with law and the statutory formula. [Paras 10, 11, 13, 17]

The refund rejection is set aside to the extent that the balance amount (excluding the disputed sum) shall be refunded to the petitioner pending final adjudication in accordance with Rule-89(5) and the CBIC circular.

Production and verification of books of account for refund claims - remand for verification of invoices - Whether the disputed mismatch in net ITC (Rs.5,18,230/- as pleaded) requires further verification and adjudication and whether that sum should be withheld. - HELD THAT: - The Court noted the department's specific plea that a mismatch of net ITC figures exists and that invoice verification is necessary to determine entitlement as regards that amount. The pleadings admit that the only dispute relates to the quantified mismatch and that its adjudication requires verification of suppliers' invoices and accounts. The Court therefore directed that the disputed sum be kept out of the immediate refund and left open for final adjudication after verification by the competent authority. The direction preserves the revenue interest while allowing immediate release of the undisputed portion. [Paras 12, 13]

The disputed amount is to be subjected to verification and final adjudication by the authority; that sum is excluded from the interim refund and adjudicated later.

Final Conclusion: The writ petition is disposed of by directing payment of the refund for the period December, 2021 to January, 2022 excluding the specifically disputed amount which shall be verified and adjudicated by the authority; no order as to costs.

Claim for refund of GST - interest on delayed refund - completion of prescribed formalities for refund - directions for consideration of refund of tax claims - remand for fresh consideration

Claim for refund of GST - completion of prescribed formalities for refund - directions for consideration of refund of tax claims - Claim for refund of GST is to be considered after the petitioner completes requisite formalities and removes deficiencies. - HELD THAT: - The petitioner has sought refund of GST and initially sought two reliefs but has expressly declined to press the second relief. The counter-affidavit states that certified evidence/documents and certified input tax details are required in terms of government guidelines, and that departmental letters requested the petitioner to complete formalities which were not complied with. The Court directed the petitioner to complete the formalities and remove any deficiencies within fifteen days. The matter was not finally adjudicated on the merits; instead, the respondents were directed to consider the petitioner's refund claim afresh and take a decision thereon within six weeks, subject to there being no legal impediment and if it is otherwise permissible under law.

Petitioner to complete formalities within fifteen days; respondents to consider and decide the refund claim within six weeks on fresh consideration.

Interest on delayed refund - directions for consideration of refund of tax claims - Claim for interest on delayed refund to be considered by the respondents in the same exercise of fresh consideration. - HELD THAT: - The petition included a claim for interest on delayed payment of GST. The Court permitted the petitioner to claim interest if it is otherwise permissible under law and directed the respondents to decide the claim for interest along with the refund claim when they reconsider the matter within the stipulated six weeks. The Court did not rule on entitlement to interest on the merits but left the question to be decided by the respondents in accordance with law.

Respondents to decide the petitioner's claim for interest, if otherwise permissible, when considering the refund claim within six weeks.

Remand for fresh consideration - If aggrieved by the fresh decision, the petitioner may invoke arbitration or other remedies available in law. - HELD THAT: - The Court disposed of the writ petition by directing completion of formalities and fresh consideration by the respondents. It expressly preserved the petitioner's right to pursue arbitration or other legal remedies if dissatisfied with the outcome of the respondents' decision, indicating that the order channels the dispute back for administrative determination rather than final adjudication by the Court.

Petitioner may invoke arbitration or other legal remedies if aggrieved by the respondents' decision after fresh consideration.

Final Conclusion: Writ petition disposed of by directing the petitioner to complete requisite formalities within fifteen days and the respondents to consider and decide the refund claim, including any claim for interest if legally permissible, within six weeks; statutory or contractual remedies (including arbitration) remain available if the petitioner is aggrieved by that decision.

Revocation of cancellation of GST registration - Section 29(2)(b) and (c) cancellation for non-compliance - failure to apply within statutory time and appellate time bar under Section 107 - Notification No. 3/2023-Central Tax - window for revocation - requirement to furnish returns and pay dues before revocation - no further extension of time for revocation applications - beneficial/ameliorative relief under a statutory notification

Revocation of cancellation of GST registration - Notification No. 3/2023-Central Tax - window for revocation - failure to apply within statutory time and appellate time bar under Section 107 - requirement to furnish returns and pay dues before revocation - Petitioner entitled to invoke Notification No. 3/2023 to apply for revocation of cancellation of GST registration despite earlier cancellation and rejection of appeal as time barred. - HELD THAT: - The Court observed that Notification No. 3/2023, issued on the recommendations of the GST Council, creates a limited, beneficial window allowing registered persons whose registrations were cancelled under clauses (b) or (c) of Section 29(2) on or before 31.12.2022 to apply for revocation up to 30.06.2023. The notification expressly covers persons who failed to apply within the time specified in Section 30 and also includes those whose appeals under Section 107 against cancellation or against rejection of revocation were rejected for non adherence to the statutory time limit. The notification conditions grant of the window upon filing all returns due up to the effective date of cancellation and payment of tax, interest, penalty and late fee as applicable, and it precludes any further extension of the deadline. Applying these provisions, the Court held that although the petitioner's appeal was rejected as time barred, the petitioner falls within the class of persons entitled to seek revocation under the notification and may approach the proper officer by 30.06.2023 after fulfilling the prescribed conditions. [Paras 7, 8, 9]

Writ petition disposed of by permitting petitioner to apply to the proper officer for revocation of cancellation of registration under Notification No. 3/2023 by 30.06.2023, subject to the notification's conditions.

Impugned orders not to impede consideration of revocation application - beneficial/ameliorative relief under a statutory notification - Whether the impugned cancellation order and the order in appeal would preclude the proper officer from considering a revocation application made under the notification. - HELD THAT: - The Court directed that if the petitioner makes an application for revocation in terms of Notification No. 3/2023 and complies with its conditions, the impugned order of cancellation and the appellate order affirming it shall not stand in the way of the proper officer considering the application. The order thus leaves the substantive consideration of revocation to the competent authority, subject to statutory conditions and the limits prescribed by the notification. [Paras 9]

The impugned orders shall not prevent the proper officer from considering an application for revocation filed under Notification No. 3/2023 in accordance with its terms.

Final Conclusion: The writ petition is disposed of by permitting the petitioner to invoke Notification No. 3/2023 and to apply to the proper officer for revocation of cancellation of GST registration by 30.06.2023 after furnishing returns and paying dues as required; the impugned cancellation and appellate orders shall not impede consideration of such application.

Ultra vires of Section 174(2) of the KSGST Act - Legislative competence of the State Legislature - Conflict with Section 19 of CAA 2016 - Right to reopen assessments for pre-16.09.2016 liabilities - Vested or accrued right to finality of assessment

Ultra vires of Section 174(2) of the KSGST Act - Conflict with Section 19 of CAA 2016 - Validity of Section 174(2) of the KSGST Act as being within the legislative competence of the State and consistent with Section 19 of CAA 2016. - HELD THAT: - The Court considered whether Section 174(2) of the KSGST Act was ultra vires the State Legislature and whether it was contrary to the federal provision contained in Section 19 of the Central Act. Adopting the reasoning and conclusions recorded in the earlier judgment dated 30.11.2022 in the connected appeals, the Court held that the challenge to Section 174(2) did not succeed. The statutory provision as enacted was examined against the competence of the State and the relevant provision of the Central Act, and the Court concluded that Section 174(2) could not be struck down on the grounds urged by the Dealers.

Challenge to the vires of Section 174(2) of the KSGST Act dismissed; provision not declared ultra vires on the grounds raised.

Right to reopen assessments for pre-16.09.2016 liabilities - Vested or accrued right to finality of assessment - Whether Section 174(2) of the KSGST Act confers any vested or accrued right on dealers to prevent reopening of assessments for liabilities arising before 16.09.2016. - HELD THAT: - The Court addressed whether Section 174(2) gave dealers a right, vested right or accrued right to preclude reopening of assessments relating to legal obligations or liabilities arising before 16.09.2016. Relying on the reasoning adopted in the judgment of 30.11.2022, the Court rejected the contention that a vested right accrued to dealers which would bar reopening under the provision. The conclusion was that no such vested or accrued right existed that would prevent the statutory power to reopen being exercised as provided by Section 174(2).

Contention that Section 174(2) creates a vested or accrued right against reopening assessments for pre-16.09.2016 liabilities rejected.

Final Conclusion: Appeals dismissed by adopting the reasoning and conclusions recorded in the connected judgment dated 30.11.2022; interlocutory applications disposed of and the challenges to Section 174(2) of the KSGST Act and to any claimed vested right preventing reopening of assessments for liabilities arising before 16.09.2016 were negatived.

Penalty under Section 129(3) of the GST regime - e-way bill correctness versus invoice discrepancy - verification of monthly returns - imposition of a minor penalty

E-way bill correctness versus invoice discrepancy - verification of monthly returns - Whether the tax treatment shown in the monthly return for July 2022 corresponds to IGST despite the invoice showing CGST/SGST and the proper course to be followed pending verification. - HELD THAT: - The petition challenges an order imposing a penalty under Section 129(3) on account of the invoice showing tax as CGST/SGST when the tax ought to have been shown as IGST, while the e-way bill accompanying the goods correctly recorded IGST. The Court noted the petitioner has corrected the error by issuing credit/debit note and by filing the monthly return for July 2022 showing the amount as IGST. In view of these facts, the Court directed the assessing officer to verify the monthly returns filed for July 2022 to determine whether the amount in question was indeed correctly declared as IGST. The Court therefore did not decide the merit of the penalty on the basis of the record before it but required administrative verification of the returns before concluding on liability.

The 1st respondent is directed to verify the petitioner's monthly returns for July 2022 to ascertain whether the tax was correctly shown as IGST.

Penalty under Section 129(3) of the GST regime - imposition of a minor penalty - What action the assessing officer should take regarding the penalty already imposed under Section 129(3) if the returns show the tax correctly as IGST. - HELD THAT: - The Court observed that if the officer, upon verification, finds that the amount has been correctly shown as IGST in the July 2022 return notwithstanding the extant penalty order, the officer should consider whether the mistake committed by the petitioner warrants a lesser sanction. Specifically, the officer is to consider imposition of a minor penalty instead of proceeding on the basis of the extant order. This direction contemplates reassessment of the punitive measure in light of corrected returns and does not finally adjudicate the appropriateness of any specific penalty quantum.

If verification confirms correct disclosure as IGST, the officer shall consider whether the mistake can be met with a minor penalty instead of upholding the existing penalty order.

Final Conclusion: Interim directions issued: the assessing officer is to verify the petitioner's July 2022 return and, if it discloses the tax as IGST, reconsider the penalty already imposed and assess whether a minor penalty is appropriate; the petitioner's authorised representative to appear and produce the return, and the officer to pass orders by the dates directed.

Determination of arm's length price under Chapter X of the Income tax Act (transfer pricing) - High Court jurisdiction under Section 260A to examine compliance with transfer pricing guidelines - Perversity as a substantial question of law - Comparability and selection of comparables/filters in transfer pricing (fact intensive inquiries subject to scrutiny where perversity is demonstrated) - Rule based determination under Rules 10A-10E and Rule 10B transactional net margin method

Determination of arm's length price under Chapter X of the Income tax Act (transfer pricing) - High Court jurisdiction under Section 260A to examine compliance with transfer pricing guidelines - Perversity as a substantial question of law - Whether the determination of the arm's length price by the Tribunal is invariably final and immune from scrutiny by the High Court in an appeal under Section 260A of the Income tax Act. - HELD THAT: - The Court rejected an absolute proposition that a Tribunal's determination of arm's length price attains finality against all appellate scrutiny. Chapter X and the Rules prescribe specific guidelines and methods (including Rule 10B/TNMM) for determination of ALP; if the Tribunal determines ALP de hors those statutory guidelines, such determination can be perverse. Perversity in the Tribunal's factual findings or in applying the statutory/ rule based methodology may constitute a substantial question of law under Section 260A. Consequently, the High Court, in entertaining an appeal under Section 260A, may examine whether the Tribunal followed the guidelines laid down under the Act and the Rules and whether the Tribunal's findings (including on comparability and selection of filters) are perverse, and interference is permissible where perversity is demonstrated. [Paras 5, 7, 8]

The Court held that the Tribunal's ALP determination is not invariably final; the High Court may examine compliance with statutory guidelines and may interfere where the Tribunal's determination is perverse, thereby giving rise to a substantial question of law.

Comparability and selection of comparables/filters in transfer pricing (fact intensive inquiries subject to scrutiny where perversity is demonstrated) - Rule based determination under Rules 10A-10E and Rule 10B transactional net margin method - Remand to High Courts for fresh consideration of compliance and perversity - Whether the batch of impugned High Court orders dismissing Revenue appeals on the ground that no substantial question of law arose must be set aside and remitted for fresh consideration. - HELD THAT: - Having held that High Courts may examine whether the Tribunal applied the transfer pricing provisions and rules while determining ALP and whether the Tribunal's findings are perverse, the Court found it appropriate not to decide merits of individual cases. The impugned High Court judgments and orders dismissing the Revenue's appeals (and certain assessee appeals) are quashed and set aside. The matters are remitted to the respective High Courts to decide the appeals afresh in light of the principle that compliance with Chapter X and the Rules must be examined and perversity assessed; the remand is for fresh adjudication and not for this Court to re determine ALP on the merits. [Paras 9, 10]

Impugned High Court orders are quashed and the matters remitted to the respective High Courts for fresh disposal to examine compliance with the Act and Rules in ALP determination and whether the Tribunal's findings are perverse.

Final Conclusion: The appeals are allowed; the Supreme Court held that High Courts may scrutinise whether the Tribunal applied Chapter X and the Rules in determining arm's length price and may interfere where perversity gives rise to a substantial question of law. The impugned High Court orders are set aside and the matters remitted to the respective High Courts for fresh adjudication in accordance with these observations.

Appellate tribunal's duty to decide merits - remand for fresh assessment - precedential effect of Full Bench decision - application of Rule 7A to set-off of business loss

Appellate tribunal's duty to decide merits - precedential effect of Full Bench decision - remand for fresh assessment - Questions (i), (ii) and (iii) raised by the assessee were answered in its favour and against the Revenue and the matter was remitted to the Assessing Officer for fresh assessment in view of the Full Bench order dated 01.08.2022 in I.T.A No.201/2013. - HELD THAT: - The High Court recorded that questions (i) to (iii) fall within the scope of the Full Bench decision in I.T.A No.201/2013 dated 01.08.2022. Applying that precedent, those substantial questions of law are answered in favour of the assessee and against the Revenue for statistical purposes. The Court did not decide the merits afresh; instead the matter is remitted to the Assessing Officer to proceed with assessment afresh, keeping in view the Full Bench order, thereby directing reconsideration consistent with the binding Full Bench reasoning.

Questions (i)-(iii) answered in favour of the assessee and the matter remitted to the Assessing Officer for fresh assessment in accordance with the Full Bench order.

Application of Rule 7A to set-off of business loss - remand for fresh assessment - precedential effect of Full Bench decision - Question (iv) on whether the loss of the rubber sheet factory should be set off as business loss without applying Rule 7A was answered in favour of the assessee and remitted to the Assessing Officer for fresh consideration. - HELD THAT: - The Court followed the reasoning and remand in I.T.A No.37/2018 and held that question (iv) is to be answered in favour of the assessee and against the Revenue for statistical purposes. The matter is remitted to the Assessing Officer for reconsideration and disposal afresh, enabling the AO to apply the legal position (as articulated by the referenced authority) while determining whether Rule 7A applies or whether the loss is to be set off as business loss.

Question (iv) answered in favour of the assessee and remitted to the Assessing Officer for fresh consideration and disposal.

Final Conclusion: Appeal allowed; substantial questions answered in favour of the assessee and against the Revenue for statistical purposes, and the matters remitted to the Assessing Officer for fresh assessment consistent with the Full Bench and related authority; no order as to costs.

Disallowance of delayed statutory employee contributions - capital gains on sale of agricultural land - definition of "agricultural land" under section 2(14)(iii) - application of clause (a) versus clause (b) of section 2(14)(iii) - condonation of limitation by reference to Supreme Court orders during COVID 19 - interest under sections 234B and 234C regarded as consequential

Disallowance of delayed statutory employee contributions - Whether payments of employees' ESI and PF contributions made after the statutory due dates qualify for deduction or are liable to be disallowed. - HELD THAT: - The Assessing Officer disallowed employees' contributions to ESI and PF paid belatedly relying on the amended statutory tests. The Tribunal noted that the payments were admittedly made after the dates prescribed under the respective statutes and that the issue is covered by the decision of the Hon'ble Supreme Court in M/s. Checkmate Services P. Ltd. The Tribunal therefore found no merit in the assessee's contention and upheld the disallowance of the belated payments. [Paras 5]

Disallowance of the late-paid employees' ESI and PF contributions is upheld and the appeal on this point is dismissed.

Capital gains on sale of agricultural land - definition of "agricultural land" under section 2(14)(iii) - application of clause (a) versus clause (b) of section 2(14)(iii) - Whether the sold land qualifies as agricultural land exempt from capital gains under the definition of "capital asset" in section 2(14)(iii), and if clause (a) or clause (b) applies. - HELD THAT: - The facts are admitted: the land sold (in Kodigenahalli village) is 4 kilometres aerially from Hindupur municipal limits and the Hindupur municipality population per 2011 census is 151,677, while the village population is 3,560. The sole dispute was whether clause (a) (land within the jurisdiction of a municipality having population not less than 10,000) or clause (b)(ii) (land within six kilometres of a municipality having population more than one lakh but not exceeding ten lakh) governs. The Tribunal examined the statutory text and held that clause (a) applies only to land comprised within municipal limits and must be read with its population threshold; land situate outside municipal limits is to be tested by clause (b). On the admitted facts the land lies outside municipal limits at a distance of 4 km and Hindupur municipality's population exceeds one lakh, bringing clause (b)(ii) into play. Consequently the land does not qualify as agricultural land for exemption and is chargeable to capital gains. The Tribunal found the lower authorities' conclusion to be correct. [Paras 6, 7, 11, 13]

The land is not agricultural land within the exemption; the assessment of capital gains is sustained and the appeal on this point is dismissed.

Interest under sections 234B and 234C regarded as consequential - Whether interest under sections 234B and 234C charged on account of the capital gain assessment could be adjudicated independently. - HELD THAT: - The Tribunal observed that the charging of interest under the specified provisions is consequential upon the confirmation of the assessment for capital gains. No independent interference with the interest computation was undertaken or warranted in the order. [Paras 14]

The interest charges are consequential to the confirmed assessment and were not separately disturbed.

Final Conclusion: Delay in filing the appeal was condoned by reference to the Supreme Court's COVID 19 orders; the disallowance of belated employee ESI and PF payments was upheld; the sold land was held not to qualify as agricultural land under section 2(14)(iii) and capital gains assessment was confirmed; interest charges were treated as consequential. The assessee's appeal is dismissed.

Additions under section 153A limited to incriminating material - rebuttable presumption under section 132(4A) and section 292C - dumb documents (non speaking seized papers) require corroboration - assessment under section 68 - identity, genuineness and creditworthiness - remand for fresh adjudication

Additions under section 153A limited to incriminating material - rebuttable presumption under section 132(4A) and section 292C - Validity of addition in assessment framed under section 153A for a completed/unabated assessment year in absence of incriminating material seized during search - HELD THAT: - The Tribunal held that completed assessments (unabated years) cannot be disturbed under proceedings pursuant to search unless there is incriminating material unearthed in the search which was not produced or disclosed in the original assessment. The word 'assess' in section 153A/153C is linked to abated proceedings and reassessment of completed years requires incriminating documents found in search to justify additions. Where the AO made addition based solely on regular bank credits already disclosed in the return and without any reference to seized incriminating material, the addition was beyond the scope of section 153A and liable to be deleted. The Tribunal followed authoritative decisions and the jurisdictional High Court/Tribunal position that non seized regular items disclosed earlier cannot be added by invoking section 153A unless supported by incriminating material discovered during the search.

Deletion of the addition made under section 153A for AY 2011-12 was upheld and Revenue's appeal dismissed.

Dumb documents (non speaking seized papers) require corroboration - rebuttable presumption under section 132(4A) and section 292C - Whether entries/notings on loose sheets, pocket diaries and similar seized papers can form the basis for assessing unexplained receipts/payments in AYs 2013-14, 2014-15 and 2015-16 - HELD THAT: - The Tribunal set out that the presumption under section 132(4A)/section 292C is rebuttable and seized 'books of account or other documents' must be speaking documents, or corroborated by independent cogent material, to sustain an assessment. Loose notings, rough jottings or undated/unsigned entries that do not, by themselves or together with corroborative material, identify the transaction, the person in whose hands tax arises, and the year of taxability are 'dumb documents' and cannot alone support additions. The CIT(A)'s approach of page wise analysis - accepting uncontested amounts, re working disputed entries after examining seized pages together with the assessee's statements recorded under section 132(4) and submissions - was held to be a permissible, fact based application of these principles. The Tribunal found no cogent contrary material and therefore upheld the CIT(A)'s reworked additions for the years in dispute, save for the correction of an amount found to have been double added, which was deleted.

The CIT(A)'s findings on treatment of seized loose papers/diaries were upheld for AYs 2013-14 and 2015-16; the appeal in respect of AY 2013-14 dismissed and adjustments made to remove a double addition; the assessee's appeal for AY 2014-15 was partly allowed to the extent indicated.

Assessment under section 68 - identity, genuineness and creditworthiness - remand for fresh adjudication - Whether bank credit entries could be treated as unexplained (section 68/69) in AYs 2014-15 and 2015-16 and whether the matter required remand - HELD THAT: - The Tribunal applied the threefold test under section 68: identity of creditors, genuineness of transactions and creditworthiness of creditors. Where the assessee furnished PANs, confirmations, bank statements and ITR acknowledgements and the receipts routed through banking channels, the primary onus was held to be discharged and the AO was required to make independent inquiries; in absence of adverse findings the CIT(A) rightly deleted additions. In respect of one creditor (Jalaram Finvest Ltd) where the assessee could not establish creditworthiness and the creditor did not cooperate, the Tribunal considered that the assessee had not discharged the onus but, in the interest of justice, remitted the issue to the AO for fresh adjudication and necessary inquiries. Similarly, other unexplained bank credits for which primary evidence was furnished were deleted. For AY 2015-16, deletion of certain bank credit additions was also sustained upon similar reasoning.

Deletions of most bank credit additions confirmed (AYs 2014-15 and 2015-16); the credit from Jalaram Finvest Ltd. was remitted to the AO for fresh adjudication.

Final Conclusion: The Tribunal dismissed the Revenue appeals and upheld the CIT(A)'s deletions and reworkings in relation to (i) the limitation on making additions in completed/unabated years under section 153A absent incriminating material; (ii) the need for corroboration before relying upon loose seized notings (dumb documents) to assess unexplained receipts/payments; and (iii) the section 68 inquiries where primary evidence was furnished; one disputed bank credit (from Jalaram Finvest Ltd.) was remitted to the Assessing Officer for fresh adjudication.

Deduction under Section 80P(2)(a)(i) in respect of interest from nationalised banks - deduction under Section 80P(2)(d) for income of co-operative societies/co-operative banks - allowability of proportionate expenditure relating to income excluded from deduction

Deduction under Section 80P(2)(a)(i) in respect of interest from nationalised banks - Interest received from State Bank of India and Dena Bank (nationalised banks) is not allowable as deduction under Section 80P for the assessee. - HELD THAT: - The Tribunal applied the binding decision of the Hon'ble Gujarat High Court in SBI vs. CIT which has held that interest received from nationalised banks is not allowable under Section 80P. Having regard to that precedent and the facts that the interest in question was received from State Bank of India and Dena Bank savings accounts, the Tribunal dismissed the ground raised by the assessee and confirmed the disallowance. [Paras 7]

Ground no.1 dismissed; disallowance of interest from nationalised banks upheld.

Allowability of proportionate expenditure relating to income excluded from deduction - Whether proportionate expenditure attributable to earning the interest (which is not allowable under Section 80P) should be allowed as a deduction. - HELD THAT: - Although interest from nationalised banks is not allowable under Section 80P, the Tribunal recognised that the assessee incurred expenditure to earn that interest and that the question of allowance of proportionate expenditure requires verification. The Tribunal therefore did not decide the substantive entitlement but directed that the matter be remitted to the Assessing Officer for adjudication and verification, with an opportunity of hearing to the assessee in accordance with principles of natural justice. [Paras 10]

Ground no.2 partly allowed for statistical purpose and remanded to the Assessing Officer for verification and adjudication.

Deduction under Section 80P(2)(d) for income of co-operative societies/co-operative banks - Interest received from Mehsana Urban Co-operative Bank and Mehsana District Central Co-operative Bank (co-operative banks) is allowable as deduction under Section 80P(2)(d). - HELD THAT: - It was not disputed that the interest of Rs.11,23,088/- was received from co-operative banks registered under the Co-operative Societies Act. Relying on the decision of the Hon'ble Gujarat High Court in Surat Vankar Sahakari Sangh Limited vs. ACIT , which treats interest received from co-operative banks as eligible for deduction under Section 80P(2)(d), the Tribunal allowed the ground and deleted the disallowance in respect of interest from such co-operative banks. [Paras 14]

Ground no.3 allowed; disallowance in respect of interest from co-operative banks deleted.

Final Conclusion: The appeal is partly allowed: disallowance in respect of interest from co-operative banks is deleted; disallowance in respect of interest from nationalised banks is upheld; the question of allowance of proportionate expenditure relating to interest from nationalised banks is remanded to the Assessing Officer for verification and adjudication after affording the assessee an opportunity of hearing.

Deduction under section 80G - section 80G(5B) - assessment of religious/Poojari expenditure as percentage of total receipts - appreciation of facts - de novo consideration - remand for fresh consideration

Deduction under section 80G - section 80G(5B) - assessment of religious/Poojari expenditure as percentage of total receipts - appreciation of facts - de novo consideration - Whether the rejection of the assessee's application for registration under section 80G on the ground that religious/Poojari expenses exceeded 5% of receipts was justified, and if not, what relief is appropriate. - HELD THAT: - Tribunal found that the Commissioner (Exemption) rejected the 80G application on a factual premise that religious/Poojari expenses exceeded 5% of the trust's total receipts. The assessee contested the factual computation, asserting that for the year under consideration the total receipts were Rs. 33,67,741 and religious/Poojari expenses were Rs. 5,600, which is only 1.67% of receipts. The Commissioner had, however, proceeded on an incorrect figure of total receipts, thereby reaching an erroneous conclusion under section 80G(5B). Because the rejection rested on that incorrect factual premise rather than on adjudication of the claims on merits, the Tribunal held that the matter could not be properly decided without correct appreciation of the receipts and expenses. The Tribunal therefore set aside the Commissioner's order and remitted the matter to the Commissioner (Exemption) for fresh adjudication on merits after giving the assessee an opportunity of hearing and to place correct facts and figures before the authority. [Paras 5]

Order of the Commissioner (Exemption) rejecting the 80G application is set aside and the matter is remitted to the Commissioner (Exemption), Ahmedabad for de novo consideration after affording the assessee opportunity of hearing.

Final Conclusion: The appeal is allowed for statistical purposes; the order rejecting registration under section 80G is set aside and the application is remitted to the CIT(Exemption) for fresh consideration on merits after hearing the assessee.

Indexed cost of acquisition for assets acquired under a will - Benefit of indexation from the year the previous owner first held the asset - Deductibility of expenditure wholly and exclusively for transfer under section 48 - Allowability of brokerage and solicitor's fees as transfer-related expenses - Allowability of compensation to tenant for early termination of leave and licence as transfer-related expense - Ad hoc restriction of transfer expenses versus proof of actual expenditure - Application of the third proviso to section 50C for computation of capital gains

Indexed cost of acquisition for assets acquired under a will - Benefit of indexation from the year the previous owner first held the asset - Entitlement to indexation benefit from the year the previous owner first held the asset in respect of capital gains on asset received under a will. - HELD THAT: - The Tribunal followed the coordinate-bench decision in the brother's case, which applied the Bombay High Court decision in CIT v. Manjula J. Shah, holding that where an assessee acquires an asset under a will the indexed cost of acquisition is to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became owner. The Assessing Officer's contention that indexation should commence only from the year the assessee acquired title (or from a later year such as 2007-08) was rejected, and the Revenue's ground on this point was dismissed. [Paras 6, 7]

Revenue's challenge to indexation was dismissed; indexation allowed from F.Y.1981-82 (the year the previous owner first held the asset) as held by the Tribunal.

Deductibility of expenditure wholly and exclusively for transfer under section 48 - Allowability of brokerage and solicitor's fees as transfer-related expenses - Allowability of compensation to tenant for early termination of leave and licence as transfer-related expense - Ad hoc restriction of transfer expenses versus proof of actual expenditure - Whether brokerage, solicitor's fees and compensation to tenant for vacating premises are deductible as expenses wholly and exclusively incurred for transfer of the property. - HELD THAT: - The Tribunal examined the invoices, confirmations and contemporaneous material. It found the brokerage paid to the broker who arranged meetings, negotiated price and coordinated vacation of occupiers was incurred wholly and exclusively for the transfer and thus fully allowable (overturning the Assessing Officer's pro rata adhoc restriction). The solicitor's consolidated invoice was parsed: only certain items related to the sale transaction and legal steps necessary for transfer were held allowable; the Tribunal directed allowance of the portion already recognised by the AO as reasonable (Rs.18,07,258) and disallowed the remainder as not wholly and exclusively for transfer. Payments made to the licensee for premature termination of the leave and licence were found to be a necessary precondition to complete the sale and therefore deductible in full as transfer-related expenditure (directing allowance of the assessee's share of the compensation). The Tribunal thus modified the AO's adhoc 2% cap and directed allowance in accordance with its apportionment and findings. [Paras 4, 7]

Brokerage fully allowed; solicitor's fees allowed only to the extent related to transfer (as quantified by the Tribunal); compensation to tenant for vacating premises allowed as deductible transfer expense; Revenue's challenge on these heads partly allowed.

Application of the third proviso to section 50C for computation of capital gains - Whether the benefit of the third proviso to section 50C (tolerance band between sale consideration and stamp duty value) applies for computation of capital gains for the assessment year. - HELD THAT: - Relying on a coordinate-bench precedent, the Tribunal held that the amendment introducing the third proviso to section 50C (increasing tolerance band from 5% to 10%) is effective from the date section 50C was introduced, and directed the Assessing Officer to compute capital gains after granting the benefit of the third proviso. The assessee's plea was accepted for statistical purposes and the AO was directed to apply the proviso while recomputing gains. [Paras 11]

Benefit of the third proviso to section 50C directed to be allowed while computing capital gains; ground allowed for statistical purposes.

Deductibility of expenditure wholly and exclusively for transfer under section 48 - Whether the assessee's grounds in the cross-objection concerning small-amount disallowances (chartered accountant fees, valuation fees, payment to servant/occupier) should be adjudicated. - HELD THAT: - The Tribunal recorded that grounds No.1 to No.3 in the assessee's cross-objection were not pressed during hearing due to the smallness of the amounts, and accordingly dismissed those grounds as not pressed. The cross-objection was otherwise partly allowed for statistical purposes where directed (see other issues). [Paras 10, 12]

Grounds relating to small-amount disallowances dismissed as not pressed; cross-objection otherwise partly allowed for statistical purposes.

Final Conclusion: The Revenue's appeal was partly allowed: the challenge to indexation was dismissed; certain additions/disallowances were modified with brokerage and tenant compensation allowed and solicitor fees allowed in part; and the Assessing Officer was directed to apply the third proviso to section 50C when recomputing capital gains. The assessee's cross-objection was partly allowed for statistical purposes, with minor grounds dismissed as not pressed.

Revenue expenditure versus capital expenditure - stores and spares replacement - principle of consistency - TDS credit - direction to Assessing Officer to examine and grant - computation of interest under section 234C - computation of interest under section 234D

Revenue expenditure versus capital expenditure - stores and spares replacement - principle of consistency - Allowability as revenue expenditure of stores and spares consumed during the year which the AO treated as capital in nature. - HELD THAT: - The Tribunal held that the disallowance of expenditure on replacement of stores and spares cannot be sustained where the replacement did not enhance the capacity of the existing facility and is in line with earlier decisions in the assessee's own case. Following the coordinate Bench's earlier orders for other assessment years and applying the principle of consistency, the Tribunal found no change in facts or law and no material to controvert those findings. Consequently the disallowance of the claimed expenditure was set aside and the grounds challenging that disallowance were allowed. [Paras 8, 9]

Grounds Nos.2 to 2.2 allowed; disallowance set aside and expenditure treated as revenue in nature following co ordinate Bench decisions.

TDS credit - direction to Assessing Officer to examine and grant - Claim for non grant/short grant of TDS credit and the appropriate course of action. - HELD THAT: - The Tribunal recorded that the assessee's claim concerned non grant or short grant of TDS credit and noted the Assessing Officer had not granted the credit despite reminders. The Tribunal directed the Assessing Officer to examine the relevant documents and evidence and to grant TDS credit in accordance with law. The matter was allowed for statistical purposes by directing compliance with statutory provisions and verification by the AO. [Paras 13, 14]

Ground No.3 allowed for statistical purposes; AO directed to examine and grant TDS credit in accordance with law.

Computation of interest under section 234C - computation of interest under section 234D - consequential relief - Challenge to interest charged under sections 234C and 234D and the appropriate remedy. - HELD THAT: - The Tribunal treated the contentions on interest under sections 234C and 234D as consequential to the adjustments directed. It therefore directed the Assessing Officer to compute interest under the respective provisions in accordance with law, leaving quantification and computation to the AO upon giving effect to the Tribunal's directions. [Paras 16]

Grounds Nos.4 and 5 allowed for statistical purposes; AO directed to compute interest under sections 234C and 234D as per law.

Final Conclusion: The appeal is partly allowed: the disallowance of stores and spares for AY 2008 09 is set aside following co ordinate Bench precedent; the AO is directed to examine and grant the claimed TDS credit; and interest under sections 234C and 234D is to be computed by the AO in accordance with law.

Estimation of undisclosed income - bank deposits as evidence of business receipts - treatment of contra entries in bank accounts - application of a uniform presumptive rate - credit for income voluntarily offered - taxability on mercantile basis and reliance on Form 26AS - requirement of evidentiary basis for additions

Estimation of undisclosed income - bank deposits as evidence of business receipts - application of a uniform presumptive rate - credit for income voluntarily offered - treatment of contra entries in bank accounts - Extent of addition made on account of undisclosed bank deposits and the appropriate rate of estimated profit to be applied - HELD THAT: - There were substantial deposits in the assessee's bank accounts which the Revenue treated as undisclosed business receipts after adjusting contra entries. The Assessing Officer estimated taxable profit at 8% on the net deposits and made an addition. The Tribunal noted absence of any material basis in the assessment or appellate orders for selecting the 8% rate and observed that application of a uniform presumptive rate is not automatically appropriate for every business. The assessee had, however, offered a portion of income for taxation which was to be given credit. In exercise of its appellate power and in view of the lack of supporting material for the 8% estimate, the Tribunal reduced the estimated profit rate to 4%, allowed credit for the amount already offered by the assessee, and recalculated the net addition accordingly. [Paras 5]

Addition confirmed in part but reduced by applying a 4% estimated profit rate and giving credit for the amount already offered, resulting in a net retained addition in place of the original addition.

Taxability on mercantile basis and reliance on Form 26AS - bank deposits as evidence of business receipts - Validity of addition based on difference between contract receipts shown in Form 26AS and receipts declared in return - HELD THAT: - The Assessing Officer treated the excess contract receipt reflected in Form 26AS as taxable and computed profit thereon. The assessee contended that the disputed sum was not received into his bank account and thus was not a receipt to be included. The Tribunal found that the Revenue did not rebut the assessee's contention or demonstrate that the amount had actually been received by him; mere reflection in Form 26AS without corroborative evidence of receipt was insufficient to sustain the addition. [Paras 8]

Addition on this account deleted.

Requirement of evidentiary basis for additions - reliance on TDS statement - Sustainability of a small addition alleged on account of unreported commission income - HELD THAT: - The Assessing Officer made a minor addition alleging undisclosed commission income, but no supporting facts or corroborative material were placed on record. The assessee pointed to the absence of such entries in the TDS/26AS statements. In the absence of evidentiary foundation for the asserted omission, the Tribunal accepted that the Revenue had not established the addition. [Paras 9]

Addition deleted.

Final Conclusion: Appeal partly allowed: the large addition on undisclosed bank deposits is reduced by applying a 4% estimated profit rate and crediting the amount offered by the assessee; the additions of Rs.60,000 (on contract receipt differential) and the small commission-related addition are deleted; interest consequences to follow accordingly.

Condonation of delay - rectification under section 154 - mistake apparent on record - treatment of uncertified bills as revenue/turnover - deductibility of employee welfare contributions paid within due date - appeal on merits against assessment order

Condonation of delay - Audi alteram partem - Whether the delay of 142 days in filing the appeal before the Tribunal should be condoned. - HELD THAT: - The Tribunal considered the assessee's explanation supported by an affidavit that the assessment order and subsequent notices were not perused by the assessee's staff and that the matter came to counsel's attention only later. Balancing technical grounds against substantial justice and applying the principle that a party must be afforded an opportunity to be heard, the Tribunal followed the authority cited and preferred substantial justice over procedural technicality. Accordingly, the delay in filing the appeal was condoned. [Paras 2]

Delay of 142 days in filing the appeal is condoned and the appeal is admitted for hearing.

Rectification under section 154 - mistake apparent on record - treatment of uncertified bills as revenue/turnover - appeal on merits against assessment order - Whether the addition made in the assessment treating uncertified bills/credit notes as turnover could be rectified under section 154 as a mistake apparent on record. - HELD THAT: - The Tribunal recorded that the Assessing Officer made a detailed reasoning for adding the amounts claimed as uncertified bills to income. The CIT(A) had considered the rectification application and held that the matter did not fall within the limited scope of section 154 because it was not a mistake apparent on the record but a matter to be contested on merits. The Tribunal agreed that the addition could not be treated as a mistake apparent on the record and that the proper remedy for the assessee is to contest the addition in the appeal against the assessment order. Consequently, the Tribunal refrained from interfering with the CIT(A)'s conclusion on this point. [Paras 5]

The challenge to the addition for uncertified bills is not maintainable under section 154; the CIT(A)'s decision in this respect is upheld.

Rectification under section 154 - mistake apparent on record - deductibility of employee welfare contributions paid within due date - Whether the disallowance of employees' contributions to EPF/ESI (allegedly not deposited by the specified date) as incorporated in the intimation could be rectified under section 154. - HELD THAT: - The Tribunal found that the Assessing Officer had incorporated the disallowance from the intimation issued under section 143(1)(a) into the final assessment without calling for details during the scrutiny assessment. Given that the case had been picked up for complete scrutiny, issuing a separate intimation disallowing the contributions was unnecessary. The Tribunal considered this to be a mistake apparent on the record amenable to rectification. Rather than deciding the deduction on merits, the Tribunal allowed relief by directing that the assessee be permitted to raise this disallowance before the CIT(A) in the pending appeal against the assessment order. [Paras 5]

The rectification is allowed in respect of the disallowance of employees' contributions; the assessee is granted liberty to raise the disallowance before the CIT(A) in the appeal pending against the assessment order.

Final Conclusion: The Tribunal condoned the delay in filing the appeal, upheld the CIT(A)'s rejection of rectification under section 154 insofar as the addition for uncertified bills is concerned, and allowed rectification in respect of the disallowance of employees' contributions by granting the assessee liberty to contest that disallowance before the CIT(A); appeal thus stands partly allowed.

Penalty under Section 271B for failure to furnish audit report - penalty under Section 271A for non-maintenance of books under Section 44AA - obligation to get accounts audited under Section 44AB - no double penalty where primary statutory duty of maintaining books is breached

Penalty under Section 271B for failure to furnish audit report - penalty under Section 271A for non-maintenance of books under Section 44AA - obligation to get accounts audited under Section 44AB - Whether penalty under Section 271B can be sustained where books of account were not maintained and penalty under Section 271A was attracted. - HELD THAT: - The Tribunal found that the Assessing Officer had imposed penalty under Section 271A for non-maintenance of books as contemplated by Section 44AA; where books are not maintained the obligation to get them audited under Section 44AB does not arise. Applying this legal position, as explained by the Gauhati High Court in Surajmal Parsuram Todi and the Allahabad High Court in CIT v. Bisauli Tractors (both relied on in the order), once the primary contravention of Section 44AA attracts penalty under Section 271A, imposition of penalty under Section 271B for non-furnishing of an audit report is erroneous because the precondition for Section 44AB (maintenance of books) is not satisfied. On these facts - admitted non-maintenance of books - the levy of penalty under Section 271B could not be sustained and had to be deleted. [Paras 6, 7, 8]

Penalty under Section 271B deleted; appeal allowed.

Final Conclusion: The tribunal upheld that where books of account were not maintained the obligation to obtain an audit (and thus penalty under Section 271B) does not arise; the penalty under Section 271B was deleted and the appeal was allowed.

Reasonableness of remuneration to interested persons under section 13(3) - application of income: payments as incidental to objects of a charitable trust - allowability of expenditure on student transport and hostel accommodation as fulfilment of trust objects - maintainability of Revenue appeal where disputed tax amount is below departmental monetary threshold for filing appeal

Reasonableness of remuneration to interested persons under section 13(3) - Deletion of disallowance of salary/remuneration paid to the Secretary and Treasurer of the trust under the view that amounts were excessive and unreasonable under section 13(3). - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the Assessing Officer failed to demonstrate on any reasonable basis that the salaries paid to the Secretary and the Treasurer were excessive. The CIT(A) recorded that both persons rendered full time services for several years initially without compensation and that, after the trust resolved to commence payments, the salaries were in line with what would be payable to full time professionals of comparable qualifications and experience. The Assessing Officer's conclusion was held to be conjectural and unsupported by enquiry or discussion of the documentary material. On that basis, the Tribunal found no reason to interfere with the CIT(A)'s conclusion that the remuneration was reasonable and allowable as application of income of the trust. [Paras 4, 5]

The disallowance of salary/remuneration to the Secretary and Treasurer was deleted and the CIT(A)'s acceptance of reasonableness was upheld.

Allowability of expenditure on student transport and hostel accommodation as fulfilment of trust objects - Deletion of disallowance of bus hiring charges and hostel building rent on the ground that such expenditures were not justified by the assessee. - HELD THAT: - The Tribunal affirmed the CIT(A)'s conclusion that the bus hiring charges and hostel building rent were incurred for providing travelling and accommodation facilities to students and that these activities were fundamental to the fulfilment of the trust's objects. The CIT(A) accepted the assessee's explanation and documentary material showing that these expenditures were integral to school operations. The Assessing Officer's disallowance, made for want of justification, was therefore held to be unsustainable in the absence of contrary evidential findings. [Paras 4, 5]

The disallowances in respect of bus hiring charges and hostel building rent were deleted and the CIT(A)'s order on these points was sustained.

Maintainability of Revenue appeal where disputed tax amount is below departmental monetary threshold for filing appeal - Effect of the Departmental monetary limit on the Revenue's appeal before the Tribunal. - HELD THAT: - The assessee's representative contended that the disputed tax amount was below the monetary limit prescribed by the Department for instituting an appeal before the Tribunal. The Revenue's representative did not rebut this contention. The Tribunal, noting the uncontroverted submission, recorded that there was no merit in the Revenue's appeal and dismissed it. The Tribunal therefore treated the point as a material factor in disposing of the appeal alongside the substantive conclusions upholding the CIT(A). [Paras 6, 7]

In view of the uncontested submission regarding the departmental monetary limit and the substantive conclusions, the Revenue's appeal was dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletion of disallowances in respect of salaries to the Secretary and Treasurer and of bus hiring and hostel rent, and noting that the Revenue did not rebut the assessee's submission that the disputed tax amount fell below the Department's monetary threshold for filing the appeal.

Penalty under section 270A - under-reporting of income - disallowance on estimated basis - condonation of delay - assessment completed under section 143(3)

Condonation of delay - Delay of 52 days in filing the appeal before the Tribunal was condoned and the appeal was admitted for adjudication. - HELD THAT: - The assessee filed affidavits explaining the cause of delay, attributing part of the delay to technical glitches in the income tax portal and to delayed courier service. The Revenue did not press any substantial objection. On the material before the Tribunal the delay was held to be for a reasonable cause and was therefore condoned, allowing the appeal to be admitted for hearing. [Paras 3]

Delay condoned and appeal admitted.

Penalty under section 270A - under-reporting of income - disallowance on estimated basis - Penalty under section 270A levied for under-reporting of income was deleted where the Assessing Officer had made a disallowance on an estimated basis. - HELD THAT: - The Assessing Officer disallowed 20% of claimed repair and maintenance expenditure on an estimated basis and invoked section 270A for under-reporting. The Tribunal found that a disallowance made on an estimated basis, when the assessee had furnished details and records, does not amount to under-reporting of income warranting penalty under section 270A. Since the disallowance was by estimate and the assessee had placed details before the AO, the penalty imposed and confirmed by the CIT(A) was held to be unsustainable and therefore deleted. [Paras 8, 9]

Penalty under section 270A deleted.

Final Conclusion: Delay in filing the appeal was condoned and, on merits, the penalty under section 270A imposed for alleged under-reporting arising from an estimated disallowance of repair and maintenance expenditure was deleted; the assessee's appeal is allowed.

Addition based on seized documents - third-party entries in seized documents insufficient without corroboration - requirement to establish identity and nexus for making additions - assessment completed under section 144 r.w.s. 147 of the Act - reopening of assessment consequent to search

Addition based on seized documents - third-party entries in seized documents insufficient without corroboration - requirement to establish identity and nexus for making additions - Whether additions of Rs.27.00 lacs (AY 2013-14) and Rs.5.00 lacs (AY 2014-15) could be sustained solely because the assessee's name appeared in documents seized during search in the case of a third party. - HELD THAT: - The Tribunal found that the only foundation for the additions was the appearance of the assessee's name in documents seized during a search of the Ameya Group. There was no material on record to explain the nature or purpose of the alleged cash payments, no evidence establishing that the name in the seized documents referred to the assessee and not to another person of the same name, and no statement or corroborative material linking the assessee to the payments. The Tribunal held that an addition cannot be sustained merely because an assessee's name appears in third-party seized records; identity of the recipient and the nexus for the payment must be established. In absence of any corroboration or explanation, the live reason for the cash payments was absent and the additions could not be upheld. [Paras 6]

Additions made in the hands of the assessee for AY 2013-14 and AY 2014-15 set aside and appeals allowed.

Final Conclusion: The Tribunal allowed the appeals for assessment years 2013-14 and 2014-15, setting aside the additions which were founded solely on the appearance of the assessee's name in documents seized from a third party without any corroboration establishing identity or nexus for the payments.

Characterisation of receipts as royalty versus business profits - Fees for technical services / Fees for included services and the make available test - Application of Article 12 and Article 7 of the India-USA DTAA - Distinction between transfer/use of copyright and supply of a copyrighted article - Relevance of end user licence agreements (EULAs) and Engineering Analysis Centre (Supreme Court) precedent

Characterisation of receipts as royalty versus business profits - Distinction between transfer/use of copyright and supply of a copyrighted article - Application of Article 12 of the India-USA DTAA - Relevance of EULA jurisprudence (Engineering Analysis Centre) - Whether amounts received by the assessee from Atos India as recharge of Microsoft licence costs constitute royalty/FTS or business profits not taxable in India - HELD THAT: - The Tribunal examined the contractual arrangements and invoices evidencing that the assessee acquired global licences from Microsoft and recharged group entities based on actual usage while ownership and proprietary rights in the software remained with Microsoft. Applying the legal principle that payment is only royalty under Article 12 if it is consideration for use of, or the right to use, a copyright (i.e., transfer of exclusive rights under copyright law), the Bench relied on the Supreme Court's analysis in Engineering Analysis Centre to hold that end user access/licences which do not transfer the exclusive rights in section 14 of the Copyright Act do not amount to royalty. The Tribunal also endorsed the reasoning in EY Global Services that what matters is the agreement between the payer and the non resident and whether that agreement confers proprietary copyright rights; mere access/use under licence does not. On these foundations, the Tribunal found the recharge of Microsoft licences did not constitute royalty or FIS and should be treated as business receipts governed by Article 7 of the DTAA. [Paras 14, 15, 16]

Recharge of Microsoft licence costs is not taxable as royalty or FIS in India and the addition is deleted; the receipts fall to be considered as business profits under Article 7.

Fees for technical services / Fees for included services and the make available test - Application of Article 12(4)(b) of the India-USA DTAA - Characterisation of service desk/help desk support as making available technical knowledge - Whether amounts received by the assessee for providing a centralized service desk to Tower Watson (and recharged to Atos India) constitute FIS/royalty under Article 12 or business profits not taxable in India - HELD THAT: - The Tribunal analysed the service desk arrangement and the subcontract structure: the assessee maintained a centralized service desk for the Tower Watson group and Atos India had a separate subcontract to perform onsite work. The Tribunal observed that the service desk provided routine support and incident resolution and that there was no evidence that the assessee transferred proprietary technical knowledge, plans or designs to enable Atos India to operate independently. Reliance was placed on the Memorandum to the DTAA and authorities distinguishing mere provision of technical input in performance of services from making available technology. The Bench found the service desk to be a common support facility and not a transfer that enabled the recipient to apply technology independently; accordingly it did not satisfy the make available requirement of Article 12(4)(b). Therefore the receipts were not taxable as FIS/royalty but are business receipts under Article 7. [Paras 17, 18]

Service desk receipts are not FIS/royalty under the DTAA and the addition is deleted; the receipts are to be treated as business profits.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y.2014 15, deleting the additions: (i) recharge of Microsoft licence costs is not royalty/FIS but business profits under Article 7, and (ii) service desk receipts do not satisfy the DTAA make available test and are not taxable as FIS/royalty in India.

Anticipatory bail - arrest guidelines under Customs enforcement - cooperation with investigation - deposit of passport and furnishing of personal bond

Anticipatory bail - arrest guidelines under Customs enforcement - cooperation with investigation - Interim protection in the form of anticipatory bail granted to the applicant subject to conditions - HELD THAT: - The Court accepted that the value of the gold recovered from the co-accused is Rs.1,75,55,000/-, which is below the threshold of Rs.2,00,00,000/- specified in the Government of India, Ministry of Finance (Department of Revenue) circular dated 16.8.2022 that places a rider on making arrests in Customs offences. The DRI's case that ownership has not been conclusively proved and that there is a confessional statement by the co-accused was considered but the Court found that, having regard to the guidelines limiting arrests in cases below the specified value and to the fact that the applicant has not been found in possession of the seized gold, the applicant's liberty may be protected for the time being. The protection is made conditional on the applicant's cooperation with the investigation, attendance before the Investigating/Intelligence Officer, deposition of passport or affidavit about non-possession of passport, furnishing of a personal bond with sureties, and communication of contact details to the DRI counsel and Investigating Officer. The Court observed that failure to cooperate would permit the DRI to move for vacation of the interim order before the next listing date.

Applicant granted interim anticipatory bail until the next date of listing on furnishing a personal bond of Rs.50,000 with two sureties of like amount and subject to specified conditions of cooperation, attendance and deposit of passport.

Duty to file counter-affidavit - verification of culpability by investigating agency - Direction to the DRI to file a counter-affidavit addressing the applicant's culpability and the representation made by a partner of the firm - HELD THAT: - The Court recorded that a representation by a partner of the firm is alleged to be pending before the DRI and that the gold was not seized at any entry or exit point; in view of these circumstances the Court directed the DRI to file a better counter-affidavit dealing with the culpability of the applicant and the pending representation so that the matter can be properly considered on the next listing. This is a procedural direction to the investigating agency to place its case and materials before the Court.

DRI directed to file a counter-affidavit specifying the basis of the applicant's alleged culpability and addressing the pending representation; matter listed for further consideration.

Final Conclusion: Interim anticipatory bail granted to the applicant until the next date of listing on conditions of bond, cooperation, attendance and deposit of passport; DRI directed to file a detailed counter-affidavit on culpability and the pending representation, failing which the interim protection remains subject to review.

Maintainability of writ petition/public interest litigation - locus and nondisclosure in public interest litigation - availability of alternative remedies - precedential effect of Division Bench judgments and bar on relitigation - judicial caution in directing criminal investigation against high constitutional functionaries - exercise of jurisdiction under Article 226 to direct or monitor investigations only in exceptional cases - judicial supervision/monitoring of ongoing investigations

Locus and nondisclosure in public interest litigation - maintainability of writ petition/public interest litigation - Whether non-disclosure of the petitioner's connection with the sixth respondent and omission to plead credentials render the writ petition non-maintainable - HELD THAT: - The Court noted that the petitioner failed to disclose that he was an employer of the sixth respondent and had prior involvement as an accused in related criminal proceedings. While recognising that the locus and credentials of a public interest litigant are material and nondisclosure may disentitle relief in some cases, the Court distinguished the present facts from authorities where suppression was material and motivated (Shiv Shankar Sharma). Given the public importance of the allegations and that any person can trigger a criminal investigation, the omission here was not treated as fatal at the threshold. The Court observed that, ideally, the connection ought to have been disclosed but, in the peculiar circumstances, dismissal on that ground alone was not justified. [Paras 8, 9, 10, 11]

The petition was not dismissed for want of disclosure of the petitioner's connection with the sixth respondent; nondisclosure was not fatal in the circumstances.

Availability of alternative remedies - maintainability of writ petition/public interest litigation - Whether existence of alternative remedies and imperfections in affidavits/documents (Rule 174) render the petition non-maintainable - HELD THAT: - The Court treated the principle of alternative remedies as a discretionary rule that can justify dismissal in appropriate cases, but held that respondents cannot invoke it to dispose of a public interest petition at the threshold where public interest and far-reaching allegations exist. Likewise, defects in the affidavit and non-disclosure of the source of a produced document (show-cause notice) were examined. Relying on authority that the manner of procurement of evidence is not ordinarily decisive, the Court concluded that neither the procedural infirmities nor the non-disclosure of source warranted dismissal in the peculiar facts of this case. [Paras 11, 12, 13, 14]

Objections based on alternative remedies and affidavit/document imperfections were not sustained and did not render the petition non-maintainable.

Precedential effect of Division Bench judgments and bar on relitigation - judicial caution in directing criminal investigation against high constitutional functionaries - exercise of jurisdiction under Article 226 to direct or monitor investigations only in exceptional cases - Whether earlier Division Bench decisions on the same subject preclude the present petition and justify dismissal - HELD THAT: - The Court observed that two Division Bench judgments of the same High Court had earlier considered and dismissed writ petitions seeking similar reliefs based on revelations by the same persons. Emphasising the need to guard against multiplicity of litigation and the special caution required before ordering investigations against high constitutional functionaries, the Court held that a fresh writ petition raising practically the same public cause is not maintainable merely by changing the petitioner. The proper remedy for challenging such earlier decisions is by review where permissible. In absence of exceptional cogent material warranting judicial intervention, the Court found merit in the Advocate General's preliminary objection and concluded that the petition must be dismissed on that basis. [Paras 15, 18, 19, 20, 21]

The writ petition was dismissed as not maintainable in view of earlier Division Bench judgments which had considered and rejected the same cause; relitigation was barred absent exceptional circumstances.

Judicial supervision/monitoring of ongoing investigations - exercise of jurisdiction under Article 226 to direct or monitor investigations only in exceptional cases - Whether the Court should direct a fresh investigation or monitor the investigations by Customs and the Enforcement Directorate into allegations of gold smuggling and money laundering - HELD THAT: - The Court recorded that the Customs had conducted enquiries, issued a show-cause notice and filed criminal complaints, and the Enforcement Directorate had registered ECIRs and initiated prosecution under the PMLA before the Special Court. Given that criminal proceedings and investigations were already pending and there was no material to demonstrate mala fide or failure to investigate, the Court held that it should not, in exercise of Article 226, order a further investigation or supervisory monitoring except in exceptional circumstances. The Court emphasised that existing legal provisions permit adding parties if offences against others are revealed during investigation, and there was no basis to assume ongoing investigations would be improperly conducted. [Paras 23, 24, 25, 26, 27]

No direction for a fresh investigation or monitoring was issued; the Court declined to intervene as investigations and prosecutions were already pending and no exceptional circumstances to warrant judicial supervision were shown.

Final Conclusion: The writ petition was dismissed. The Court declined to direct a fresh investigation or judicial monitoring, holding that nondisclosure by the petitioner and procedural imperfections were not fatal in the peculiar circumstances, but that earlier Division Bench judgments on the same cause bar relitigation and, since investigations/prosecutions are pending, no exceptional grounds existed to exercise Article 226 to order further intervention.

Confiscation of smuggled goods - reasonable belief - presumption under Section 123 of the Customs Act, 1962 - assayer's certificate - admissibility and evidentiary value - retracted statement recorded under Section 108 of the Customs Act, 1962 and need for corroboration - right to cross-examination / principles of natural justice

Confiscation of smuggled goods - presumption under Section 123 of the Customs Act, 1962 - assayer's certificate - admissibility and evidentiary value - retracted statement recorded under Section 108 of the Customs Act, 1962 and need for corroboration - reasonable belief - right to cross-examination / principles of natural justice - Whether the Department proved that the seized gold bars were smuggled (of foreign origin) so as to justify confiscation and imposition of penalties. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals)'s conclusion that the Department failed to discharge the onus of proving that the gold was of foreign origin and smuggled into India. The purported assayer's certificate relied upon by Revenue was not included in the Relied Upon Documents, was produced belatedly at the appellate stage, did not specify the testing method or state the asserted 999.9% purity, and the noticee was not supplied a copy or permitted to cross-examine the assayer; on these grounds the certificate could not be accepted in evidence. The respondent's initial statements under Section 108 were subsequently retracted and, in the absence of independent corroboration, could not sustain the allegation of smuggling. Critical links in the Department's case - verification of call records, existence/identity of the persons (Murugan/Batcha) mentioned by the respondent, and inquiry about the goldsmith alleged to have converted family jewellery - remained unestablished. Where seized gold lacks foreign markings, the presumption under Section 123 cannot be mechanically applied; cogent, corroborative evidence is required to establish foreign origin. Rejection of the request to cross-examine the assayer, without cogent reasons, vitiated the reliance placed on the assayer's report. Viewed cumulatively, the evidence was too flimsy to sustain confiscation or penalties. [Paras 32, 33, 34, 38, 39]

The Tribunal found the Department's case on merits to be unsustainable, affirmed the Commissioner (Appeals)'s finding that smuggling and foreign origin were not proved, and declined to interfere with the order setting aside confiscation and penalties.

Final Conclusion: The appeal by the Department is dismissed; the appellate tribunal upholds the Commissioner (Appeals)'s conclusion that the Department did not prove that the seized gold was smuggled or of foreign origin, and therefore the confiscation and penalties were not sustainable.

Amendment of shipping bills under Section 149 of the Customs Act - Conversion of shipping bills between export promotion schemes - Validity and applicability of CBEC Circular No.36/2010-Cus - Three month time limit for conversion as a condition for relief - Requirement of documentary evidence existing at the time of export - Discretion of the proper officer to authorise amendment subject to proviso - Prevention of duplicity of benefits under competing export promotion schemes

Amendment of shipping bills under Section 149 of the Customs Act - Conversion of shipping bills between export promotion schemes - Validity and applicability of CBEC Circular No.36/2010-Cus - Three month time limit for conversion as a condition for relief - Requirement of documentary evidence existing at the time of export - Whether the request for conversion of DEEC shipping bills to Drawback shipping bills could be rejected as time barred and for non submission of documentary evidence - HELD THAT: - The Tribunal examined Section 149, Rule 12 of the Drawback Rules and CBEC Circular No.36/2010-Cus and held that conversion of shipping bills from one export promotion scheme to another is governed by the proviso to Section 149 and by the Circular's conditions. The Circular relaxed earlier restrictions but expressly added conditions - most notably that requests be made within three months of Let Export Order and that documentary evidence existing at the time of export be produced to satisfy that inputs were used and the exported product met scheme conditions. Those conditions serve the twin objects of enabling timely verification and preventing duplicity of benefits. The Tribunal found that the appellant filed conversion requests after substantial delay and did not furnish the requisite shipping bills, export invoices, airway bills and advance authorisations for a large number of shipping bills; some documents were never produced. The Tribunal regarded the Delhi High Court's decision in M/s Terra Films (the jurisdictional High Court) as binding, which treated conversion after export as not being a mere amendment simpliciter and upheld refusal where conversion was sought after a long delay and verification/examination was rendered impracticable. The Circular, though subordinate, prescribes modalities where the statute is silent and may impose time and documentary conditions as a price for relief; an exporter accepting the benefit of the Circular must comply with its conditions. Reliance on other benches or decisions taking a contrary view did not displace the binding Delhi High Court precedent for this Tribunal. Applying these principles, the adjudicating authority's factual finding that the application fell outside the three month window and that necessary documentary evidence was not produced justified rejection of the conversion requests. [Paras 6, 14, 18, 20]

The conversion requests were correctly rejected as time barred and for failure to produce documentary evidence in terms of Section 149 and Circular No.36/2010-Cus; appeal dismissed.

Final Conclusion: The appeal is dismissed: the Tribunal, bound by the jurisdictional Delhi High Court's interpretation, upheld the adjudicating authority's refusal to convert DEEC shipping bills to Drawback shipping bills because applications were not made within the three month period prescribed by the Circular and requisite documentary evidence in existence at the time of export was not produced.

Revocation of CHA licence - Appropriation of bank guarantee as penalty - Non-speaking order - Obligations of Customs House Agents under CHALR 2004 - Penalty under Section 114 of the Customs Act - Standard for immediate suspension versus belated action - Tribunal's power to set aside adjudicatory orders on merits

Revocation of CHA licence - Obligations of Customs House Agents under CHALR 2004 - Validity of the revocation of the CHA licence of the appellant - HELD THAT: - The Tribunal reviewed the Adjudicating Authority's conclusion that the CHA had prima facie failed to comply with obligations under CHALR 2004, including alleged signing of blank customs documents, allowing unauthorized persons to operate and negligence in filing export documents. The Tribunal observed that on an earlier occasion it had not treated the contraventions as grave and had remanded the matter for supply of the Inquiry Report and hearing. On the present review the Tribunal found that the Adjudicating Authority had not addressed or rebutted the specific submissions made by the CHA after receipt of the Inquiry Report and had largely reiterated the Inquiry Officer's conclusions without engaging with the CHA's contentions. Considering the totality of facts and prior Tribunal findings, the Tribunal held that revocation of the licence was a disproportionate and harsh measure and therefore set aside the revocation.

Revocation of the CHA licence set aside; revocation held to be disproportionate.

Non-speaking order - Tribunal's power to set aside adjudicatory orders on merits - Whether the OIO was non-speaking for failing to deal with the CHA's written submissions - HELD THAT: - The Tribunal noted that the Adjudicating Authority did not specifically rebut or explain why the CHA's detailed submissions in reply to the Inquiry Report were unacceptable, instead repeating reliance on the Inquiry Officer's report. The Tribunal treated this failure as a material defect in the reasoning, particularly in light of its earlier remand which required supply of the Inquiry Report and an opportunity to be heard. The absence of engagement with the CHA's contentions contributed to the view that confirmation of the harsh sanction (revocation) could not be sustained.

Adjudicatory order flawed for failing to address the CHA's submissions; contributed to setting aside revocation.

Appropriation of bank guarantee as penalty - Appropriateness of lesser penalties for minor contraventions - Whether appropriation of the bank guarantee for the specified amount could be upheld in lieu of revocation - HELD THAT: - While finding revocation disproportionate, the Tribunal accepted that some minor contraventions had occurred. In light of the admitted or established minor breaches and the appropriateness of proportionate disciplinary measures, the Tribunal held that enforcement of the bank guarantee (previously furnished) amounted to an adequate penalty for those contraventions. The Tribunal therefore allowed the appeal insofar as revocation was set aside but left intact the encashment/appropriation of the bank guarantee as penalty for the minor contraventions.

Encashment/appropriation of the bank guarantee upheld as an adequate penalty; no revocation.

Penalty under Section 114 of the Customs Act - Effect of earlier Tribunal decision setting aside penalties under Section 114 on the present proceedings - HELD THAT: - The Tribunal took into account its earlier decision in which penalties under Section 114 imposed on the appellant and its director had been set aside for lack of specific findings attributing active role or knowledge to the CHA in misdeclaration. That earlier ruling weighed against sustaining harsher sanctions in the present proceedings and was relied upon to distinguish contrary High Court authority cited by the department, where facts and findings were different.

Earlier Tribunal decision setting aside penalties under Section 114 militated against upholding revocation; penalties under Section 114 not sustained in the earlier appeal.

Final Conclusion: The Tribunal set aside the revocation of the CHA licence as disproportionate and flawed for lack of engagement with the CHA's submissions, but upheld the appropriation/encashment of the bank guarantee as a proportionate penalty for minor contraventions; earlier Tribunal findings setting aside penalties under Section 114 were also taken into account in arriving at the outcome.

Confiscation of goods - foreign markings not conclusive of smuggling - burden of proof on the Revenue to establish smuggling - corroborative evidence required to prove smuggling - verification of purchase documents at source

Foreign markings not conclusive of smuggling - burden of proof on the Revenue to establish smuggling - corroborative evidence required to prove smuggling - verification of purchase documents at source - confiscation of goods - Whether confiscation of the seized pulses could be sustained solely on the basis of foreign markings on the bags where purchase documents were produced but not verified at source. - HELD THAT: - The Tribunal found that the seizure was from a godown located within Shillong city and not adjacent to any international border, and that the appellant had produced purchase documents showing a mixed origin (Indian and imported) which were not proved to be false. The mere presence of foreign markings on the bags, without any positive tangible or corroborative evidence, does not establish that the goods were smuggled. The burden to prove the smuggled nature of goods rests on the Revenue and was not discharged in this case. Further, the purchase bills were not verified at source to establish that the seized goods corresponded to those documents. In a liberalised economy foreign-origin goods may lawfully be present in the market; therefore foreign markings ipso facto do not justify confiscation. On these grounds the Tribunal concluded that the impugned confiscation order was unsustainable. [Paras 11, 12, 13, 14]

Order of confiscation set aside and appeal allowed; impugned orders quashed with consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeal, holding that foreign markings alone, without corroborative evidence and without verification of purchase documents at source, do not prove smuggling; therefore the confiscation order was set aside and the orders of the adjudicating authorities quashed.

Penalty under Section 112(b) of the Customs Act, 1962 - Requirement of possession or physical dealing for imposition of penalty - Mens rea as essential ingredient under Section 112(b) - Reliance on statement of co-accused without corroboration - Requirement of follow-up investigation / search and recovery and summons under procedural provisions - Principles of natural justice - opportunity to be heard before punitive action - Past offences only as enhancer and not substitute for nexus with seized goods

Penalty under Section 112(b) of the Customs Act, 1962 - Requirement of possession or physical dealing for imposition of penalty - Mens rea as essential ingredient under Section 112(b) - Sustainability of penalty imposed on the appellant under Section 112(b) of the Customs Act, 1962. - HELD THAT: - The Tribunal found that the impugned penalty was founded solely on the statement of a co-accused and on two past penalties against the appellant, without any evidence of the appellant having acquired possession of, or being physically concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing the seized goods. The adjudication lacks any finding of physical dealing with the goods or of knowledge/mens rea on the part of the appellant. Reliance on established authorities, and the ejusdem generis reading of similar provisions, lead to the conclusion that Section 112(b) requires proof of physical dealing/possession or comparable acts and knowledge that the goods were liable to confiscation. In absence of such proof, the statutory ingredients of Section 112(b) are not satisfied and the penalty cannot be sustained. [Paras 7, 12]

Penalty under Section 112(b) cannot be sustained and is set aside.

Reliance on statement of co-accused without corroboration - Requirement of follow-up investigation / search and recovery and summons under procedural provisions - Principles of natural justice - opportunity to be heard before punitive action - Validity of proceedings based on the statement of a co-accused without corroborative evidence or follow-up action and whether principles of natural justice were violated. - HELD THAT: - The Tribunal held that the department proceeded without conducting requisite follow-up investigations: no search and recovery at the appellant's premises, no summons under Section 108 to record the appellant's statement, and no verification (for example, call logs) to corroborate the co-accused's allegations. Proceeding to impose penalty relying solely on the statement of a co-accused, without confronting the accused with collected evidence or affording an opportunity to explain, offends principles of natural justice and is legally insufficient to fasten liability for smuggling. The Tribunal applied precedent establishing that an accused should not be implicated only on co-accused statements in absence of corroboration and proper investigative steps. [Paras 4, 8]

Proceedings based solely on the co-accused's statement, without corroboration or follow-up investigation and without affording the appellant a proper opportunity, were unsustainable.

Past offences only as enhancer and not substitute for nexus with seized goods - Whether previous penalties/convictions alone can justify imposition of penalty under Section 112(b) in respect of the seized goods. - HELD THAT: - The Tribunal observed that previous offences or penalties may only operate as an enhancement factor and cannot, by themselves, establish the necessary nexus between the appellant and the seized goods that would justify imposition of penalty under Section 112(b). The department must prove connection and culpability with respect to the specific seizure; antecedent records do not relieve the department of that burden. [Paras 13]

Past offences cannot substitute for proof of nexus with the seized goods; they do not justify imposing the penalty in this case.

Final Conclusion: The appeal is allowed. The penalty of Rs.50,00,000 imposed under Section 112(b)(ii) of the Customs Act, 1962 is set aside, and consequential relief is granted as per law.

Mandatory duty of resolution professional to give notice of committee of creditors meetings to operational creditors whose aggregate dues are not less than ten per cent. - right of operational creditors to attend and express views at CoC meetings though without voting rights - failure to give notice under Section 24(3)(c) as dereliction of duty attracting costs - non-compliance with notice requirement not automatically vitiating approval of a resolution plan where no prejudice is shown and plan overwhelmingly approved

Mandatory duty of resolution professional to give notice of committee of creditors meetings to operational creditors whose aggregate dues are not less than ten per cent. - right of operational creditors to attend and express views at CoC meetings though without voting rights - Whether the resolution professional was obliged to serve notice of each meeting of the Committee of Creditors to operational creditors (or their representatives) where their admitted aggregate dues were not less than 10% of the debt. - HELD THAT: - The Tribunal held that Section 24(3)(c) imposes a mandatory obligation on the resolution professional to give notice of each CoC meeting to operational creditors or their representatives when their aggregated admitted dues equal or exceed ten per cent. A purposive reading of Section 24 shows that although Section 24(4) denies them voting rights, their attendance is intended to ensure transparency and to enable them to express views to the CoC. The consequence of non-issuance of notice is a dereliction of the RP's duty; prior decisions of this Tribunal (ANG Industries Ltd.) were relied upon to emphasize that such persons are not mere spectators but entitled to be heard. The RP's failure to issue the statutorily mandated notice in the present case therefore amounted to non-compliance requiring remedial consequence in the form of costs. [Paras 11, 13, 14, 16]

It is incumbent on the resolution professional to serve notice of each CoC meeting on operational creditors or their representatives where their admitted aggregate dues are at least 10%; the RP's failure to do so was a dereliction of duty and warranted imposition of costs.

Non-compliance with notice requirement not automatically vitiating approval of a resolution plan where no prejudice is shown and plan overwhelmingly approved - requirement of showing prejudice to invalidate CoC decision - Whether the failure to serve notice under Section 24(3)(c) invalidated the CoC's approval of the resolution plan and required the plan (and the Adjudicating Authority's approval) to be set aside. - HELD THAT: - The Tribunal recognized the statutory notice obligation but declined to set aside the CoC-approved resolution plan. The reasons were that the plan had been approved by a very large voting share (96.38%) and the operational creditors did not demonstrate that their absence or non-notification caused material prejudice that would have changed the outcome. The Tribunal observed that the appellants themselves admitted that, if present, they might have secured only marginally higher amounts. Given the negligible impact on distribution and the overwhelming support for the plan, the Tribunal found it not a fit case for annulling the approval or the Adjudicating Authority's order. [Paras 15, 17, 18]

The non-compliance did not warrant setting aside the CoC's approval of the resolution plan or the Adjudicating Authority's order in the absence of demonstrable prejudice and in view of the plan's overwhelming approval; appeal dismissed subject to costs awarded against the RP.

Final Conclusion: The Tribunal held that the RP was statutorily required to serve notice of each CoC meeting to operational creditors whose admitted aggregate dues were at least 10%; the RP's failure to do so was a dereliction warranting an award of costs to the appellants. However, because the resolution plan had been approved by an overwhelming voting share and no material prejudice was shown, the plan and the Adjudicating Authority's approval were not set aside and the appeal was dismissed (costs to be paid by the RP to the appellants in equal proportion).

Civil contempt - wilful disobedience - contempt of court jurisdiction and standard of proof beyond reasonable doubt - settlement agreement and undertaking in court - termination clause leading to revival of proceedings - revival of Corporate Insolvency Resolution Process (CIRP) on account of breach - Section 9 application under the Insolvency and Bankruptcy Code, 2016

Civil contempt - wilful disobedience - settlement agreement and undertaking in court - contempt of court jurisdiction and standard of proof beyond reasonable doubt - Whether the Respondent is guilty of civil contempt for wilful disobedience of the Tribunal's order dated 27.07.2022 - HELD THAT: - The Tribunal examined whether the Respondent wilfully disobeyed the order of 27.07.2022 by breaching the settlement/undertaking recorded before the Court. It is an essential element of civil contempt that wilfulness must be proved beyond reasonable doubt and the Court must confine its inquiry to the four corners of the order alleged to have been violated. The record shows that the Respondent made the payments contemplated by the settlement (the initial tranche and a further payment), thereafter possession/hand over issues and operational difficulties arose, and the Respondent communicated reasons for delayed and subsequent payments including delayed physical handover of keys, costs and inspections required to reopen premises and alleged structural stability issues. The Tribunal found these facts and communications relevant to assess intent and concluded that the material before it did not establish deliberate, conscious and intentional disobedience of the order dated 27.07.2022. On that basis, the element of wilfulness requisite for civil contempt was not proved and the contempt proceedings could not be sustained. [Paras 19, 20, 25]

Contempt petition dismissed for want of proof of wilful disobedience.

Termination clause leading to revival of proceedings - revival of Corporate Insolvency Resolution Process (CIRP) on account of breach - Section 9 application under the Insolvency and Bankruptcy Code, 2016 - Whether the Section 9 proceedings/CIRP should be revived on account of alleged breach of the settlement agreement - HELD THAT: - The Tribunal considered the clause in the settlement which contemplated revival of proceedings on default and the applicant's IA seeking revival of the Section 9 proceedings. The admitted record shows that the Section 9 petition had been filed for a specified amount which the Respondent has paid. Given that the debt in respect of the original Section 9 petition has been discharged and that parallel proceedings to determine remaining claims have been initiated before the competent commercial court/arbitral forum, the Tribunal concluded that revival of the Section 9 proceedings and initiation of CIRP would serve no useful purpose at this stage. The Tribunal therefore declined to revive CIRP, while expressly refraining from adjudicating the substantive inter se rights of the parties, which are left open for determination by the appropriate forum. [Paras 21, 22, 24, 25]

Application for revival of CIRP dismissed; no revival of Section 9 proceedings.

Final Conclusion: The contempt petition was dismissed for lack of proof of wilful disobedience and the application to revive the Section 9/CIRP was refused because the debt underlying the original Section 9 petition had been paid; the Tribunal made no adjudication on the parties' substantive contractual claims, leaving those to the appropriate forum.

Maintainability of successive writ petitions / abuse of process - masquerading representations to circumvent prior judicial order - petitioner's duty of full disclosure / clean hands doctrine - imposition of costs for concealment or repetition of earlier dismissed litigation

Maintainability of successive writ petitions / abuse of process - masquerading representations to circumvent prior judicial order - Present writ petition seeking de-freezing of bank accounts and decision on representations is not maintainable as it repeats the same cause of action already adjudicated by this Court and is clothed as fresh representations. - HELD THAT: - The Court examined the petitioner's earlier writ (WRIT - C No. - 10611 of 2021) which had been dismissed on merits by judgment dated 04.05.2021. The impugned relief in the present petition is effectively identical to that sought earlier - quashment of communications and direction to de-freeze bank accounts - although presented now as representations dated 06.07.2022 and 28.07.2022. The court found that these representations operate as a masquerade to re-open the same dispute which had been previously considered, and that no liberty had been given to file a fresh petition. In these circumstances the petition amounts to repetition of the same cause of action and is not maintainable. The Court further noted absence of particulars about the stage or details of any pending proceedings before other authorities that might justify reopening the matter.

Writ petition dismissed as not maintainable being a repetition of an earlier adjudicated cause of action; representations cannot be used to circumvent the earlier order.

Petitioner's duty of full disclosure / clean hands doctrine - imposition of costs for concealment or repetition of earlier dismissed litigation - Petitioner has concealed relevant facts concerning prior proceedings and investigations, and accordingly is liable to pay costs. - HELD THAT: - The Court recorded that the earlier judgment had found freezing of accounts to be on account of alleged forgery of passport and initiation of investigation by the Enforcement Directorate, facts which the petitioner did not disclose in the present petition. The omission was treated as lack of candour before the court. Having regard to the concealment and repetition of the same relief without disclosure of material previous proceedings, the court exercised its disciplinary power to impose costs. The court however refrained from imposing additional punitive measures beyond the monetary cost ordered, while expressly expecting future petitions to disclose all relevant facts.

Costs of Rs. 25,000 imposed on the petitioner payable within one month, failing which recoverable as fine; amount to be deposited with the High Court Legal Services Committee.

Final Conclusion: The writ petition was dismissed as a non maintainable repetition of an earlier adjudicated petition and as an attempt to circumvent the prior order by filing representations; the petitioner was directed to pay costs of Rs. 25,000 to the High Court Legal Services Committee, recoverable as fine on default.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - strict compliance with procedural timeline - technical failure in electronic payment and bona fide attempt to pay - Article 226 - scope of judicial relief to extend or modify scheme timelines - challenge to vires of a statutory scheme as prerequisite to judicial relief - precedential effect of Yashi Constructions on non-extension of scheme deadlines

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - strict compliance with procedural timeline - technical failure in electronic payment and bona fide attempt to pay - precedential effect of Yashi Constructions on non-extension of scheme deadlines - Article 226 - scope of judicial relief to extend or modify scheme timelines - challenge to vires of a statutory scheme as prerequisite to judicial relief - Petition for direction to accept payment after the prescribed cut-off date on account of a technical glitch was dismissed and the petitioner was denied relief under the Scheme. - HELD THAT: - The Court found that although the petitioner made attempts to effect payment on the last date, the record does not show that the Revenue's account was credited by 30.06.2020 and the difficulty appears to have arisen at the stage of the petitioner's account. Relying on the Apex Court's decision in Yashi Constructions and this Court's earlier view in Metrics Promotions, the Court held that it cannot alter or extend the procedural timeline prescribed by the Scheme unless the vires of the Scheme is challenged and struck down. Permitting extensions for technical glitches not contemplated by the Scheme would risk widespread litigation and undermine the Scheme's procedural integrity. The Court therefore refused to exercise powers under Article 226 to relax the Scheme's deadline, while preserving the petitioner's liberty to challenge the constitutional validity of the Scheme if so advised. [Paras 5, 6, 7, 8]

Writ petition dismissed; no direction to accept late payment under the Scheme; liberty reserved to assail the constitutional validity of the Scheme.

Final Conclusion: The petition seeking directions to accept payment after the Scheme deadline due to a technical payment failure was dismissed; the court held that procedural timelines under the SVLDRS, 2019 must be strictly followed in view of binding precedent, but left open the option to challenge the Scheme's vires.

Export of taxable service - Business Auxiliary Service - Export of Service Rules - Reverse charge mechanism - exemption Notification No. 18/2009-ST - Cenvat credit

Export of taxable service - Business Auxiliary Service - Export of Service Rules - Whether the sales promotion and marketing services provided by the appellant to a recipient located outside India, with payment received in convertible foreign exchange, qualify as export of service and are not liable to service tax. - HELD THAT: - The Tribunal examined Rule 3(1)(iii) of the Export of Service Rules and noted that Business Auxiliary Service falls within the sub-clause (zzb) of clause (105) and is covered by clause (iii). There was no dispute that the services were provided in relation to business or commerce and that the recipient was located outside India; payment was received in convertible foreign exchange. Applying the Rule and the Board Circular No. 111/05/2009-ST, and following the Tribunal's earlier reasoning in Yamazaki Mazak India Pvt. Limited, the services were held to be export of service. Consequently, such services cannot be charged to service tax under the Finance Act, 1994. [Paras 4, 5]

Service of sales promotion and marketing provided to a recipient located outside India with payment in foreign exchange is export of service and not liable to service tax; demand set aside.

Reverse charge mechanism - exemption Notification No. 18/2009-ST - Cenvat credit - Whether the commission paid to foreign-based agents for sales promotion and marketing services received in India is taxable under reverse charge and whether exemption under Notification No. 18/2009-ST is available despite omission of invoice number in shipping bills. - HELD THAT: - The Tribunal accepted that services received from a provider located outside India and used in India attract service tax under the reverse charge mechanism (Section 66A). The appellant had paid service tax with interest up to 30.09.2009. For the period from 01.10.2009 onwards the appellant claimed exemption under Notification No. 18/2009-ST; the Adjudicating Authority denied exemption solely because the appellant had not mentioned the invoice number in the shipping bills. The Tribunal found that except for this procedural lapse the conditions of the notification were satisfied and, relying on precedent, held that a minor procedural omission did not justify denial of the exemption. The Tribunal also observed that the appellant, having paid service tax and being entitled to Cenvat credit, did not cause a revenue loss that would justify extended consequences. [Paras 2, 6]

Commission paid to foreign agents is prima facie taxable under reverse charge, but exemption under Notification No. 18/2009-ST applies despite the procedural omission; demand for the post-01.10.2009 period is not sustainable.

Cenvat credit - Whether penalty under Section 80 is imposable where the appellant had paid service tax with interest and was otherwise entitled to Cenvat credit. - HELD THAT: - The Tribunal noted that the appellant had paid service tax along with interest and, in any event, was entitled to take Cenvat credit for the service tax paid. Given the payment and absence of malafide on the facts, the Tribunal concluded that imposition of penalty under Section 80 was not warranted. [Paras 7]

Penalty under Section 80 is not imposable and is set aside.

Final Conclusion: The appeal is allowed: the demand for service tax on exported sales promotion and marketing services is set aside as they are export of service; the appellant is entitled to the exemption under Notification No. 18/2009 ST in respect of commission paid to foreign agents (post 01.10.2009) notwithstanding a procedural omission; and the penalty imposed under Section 80 is quashed.

Limitation for filing appeal under Section 85(3) of the Finance Act, 1994 - extension of limitation by showing sufficient reasons - dismissal of appeal as time barred

Limitation for filing appeal under Section 85(3) of the Finance Act, 1994 - extension of limitation by showing sufficient reasons - dismissal of appeal as time barred - Whether the appeals filed before the Commissioner (Appeals) were time barred and whether the Commissioner (Appeals) rightly dismissed them as barred by limitation. - HELD THAT: - The appellant conceded that the appeals were filed after the period of six months from communication of the Orders-in-Original. Section 85(3) requires filing within three months from communication, with a discretionary extension for a further three months upon demonstration of sufficient reasons for delay. No sufficient reason for extending limitation beyond the statutory maximum was established. In view of the admitted delay exceeding the total permissible period, there was no infirmity in the Commissioner (Appeals)'s conclusion that the appeals were barred by limitation, and the dismissal on that ground was correctly recorded.

The Commissioner (Appeals)'s finding that the appeals were time barred is upheld and the appeals are dismissed as barred by limitation.

Final Conclusion: The appeal against the Commissioner (Appeals)'s order is dismissed; the impugned order upholding dismissal of the appeals as time barred under the limitation framework of Section 85(3) of the Finance Act, 1994 is affirmed.

E-filing of appeals - mandatory electronic filing - discontinuance of physical filing post e-filing - paperless courts - amendment of procedural rules to incorporate e-filing - training of judicial/tribunal members for handling e-filed cases

E-filing of appeals - mandatory electronic filing - Directions to enable and facilitate e-filing of revenue appeals in specified High Courts. - HELD THAT: - The Court recorded that e-filing had not been enabled in the High Courts of Allahabad, Uttarakhand, Karnataka, Andhra Pradesh, Guwahati, Manipur, Tripura and Meghalaya and directed that the Registrar (Judicial) of this Court shall forward a copy of the order to the Registrars General of those High Courts so that necessary steps are taken to facilitate e-filing, at least for revenue appeals. The Court also noted the Chief Justice of India's communication to Chief Justices to facilitate e-filing and implementation of Phase III of the e-Courts project, thereby reinforcing the obligation on High Courts to operationalize e-filing for revenue matters. [Paras 3, 4]

High Courts specified shall be requested to operationalize e-filing for revenue appeals and necessary facilitation steps shall be taken.

Mandatory electronic filing - discontinuance of physical filing post e-filing - Mandate and target date for ITAT to accept only e-filed revenue appeals and to cease requiring simultaneous physical filing. - HELD THAT: - The Court observed that only a very small proportion of appeals before ITAT had been filed electronically and that ITAT continued to insist on physical submission even after e-filing. The Tribunal was directed to ensure that revenue appeals are filed only in e-filing mode and a target date of 30 June 2023 was fixed for this transition. The Court further held that insisting on physical filing in addition to e-filing defeats the purpose and ordered that such practice must be discontinued. The Court also required the Ministry of Finance to engage with the Acting President of the ITAT to facilitate this change and to amend rules where necessary. [Paras 2, 5, 7]

ITAT shall ensure revenue appeals are filed only through e-filing and shall stop requiring physical filings; target date fixed as 30 June 2023.

Amendment of procedural rules to incorporate e-filing - Requirement that the Ministry of Finance engage and, if necessary, amend rules to incorporate e-filing for ITAT appeals. - HELD THAT: - The Court directed the Ministry of Finance to depute a senior officer to engage with the Acting President of the ITAT and to cause amendments to the rules where required to incorporate e-filing requirements. This is a directive to the executive to take administrative and rule-making steps to give effect to the mandated electronic filing regime. [Paras 6]

Ministry of Finance to deputee a senior officer to liaise with ITAT and effect rule amendments to incorporate e-filing.

Paperless courts - training of judicial/tribunal members for handling e-filed cases - Implementation of paperless courts and addressing training deficits so Members can handle e-filed cases; implementation timeline for CESTAT e-filing. - HELD THAT: - The Court noted ITAT's efforts towards Paperless Courts and a pilot courtroom, and recorded that once paperless courts become operational, rules can be changed to dispense with physical submissions. The Court also observed that any training deficit among Members of the ITAT must be remedied immediately so they are equipped to handle e-filed cases. Separately, the Court appreciated CESTAT's progress on an e-filing module and requested the President of CESTAT to ensure implementation by 30 June 2023. [Paras 1, 5, 7, 8]

Paperless-court initiatives to proceed; ITAT Members to be trained to handle e-filed cases; CESTAT to implement e-filing by 30 June 2023.

E-filing of appeals - Filing of an updated status report and next listing. - HELD THAT: - The Court ordered that an updated status report on e-filing implementation be placed on record on the next listing, and directed that the Civil Appeals be listed on 28 July 2023 for further consideration of progress. [Paras 9, 10]

An updated status report to be filed and the matters listed on 28 July 2023.

Final Conclusion: The Court directed High Courts that had not enabled e-filing to facilitate electronic filing of revenue appeals; mandated ITAT to transition to exclusive e-filing (with cessation of duplicate physical filing) by 30 June 2023; required the Ministry of Finance to engage with ITAT and amend rules if necessary; called for training and paperless-court implementation, requested CESTAT to operationalize e-filing by 30 June 2023, and ordered an updated status report with further listing on 28 July 2023.

Clandestine manufacture and clearance - corroborative evidence requirement for clandestine clearance - evidentiary value of private records/registers - principles of natural justice - right to cross-examination of witnesses relied upon by Revenue - duty of Department to return and supply seized relied-upon documents

Clandestine manufacture and clearance - corroborative evidence requirement for clandestine clearance - evidentiary value of private records/registers - The charge of clandestine manufacture and clearance based predominantly on private records and statements was not established. - HELD THAT: - The Tribunal held that mere entries in a diary/register or private records recovered from the premises, without independent corroboration, cannot sustain a charge of clandestine manufacture and clearance. The burden to prove clandestine clearance lies on the Revenue and must be established beyond reasonable doubt by tangible, corroborative evidence (for example, raw material consumption, documented proof of manufacture/clearance or independent verification of entries). The adjudicating authorities relied on uncorroborated statistical data and buyers' statements without verifying or cross-matching those statements with specific details in the alleged records. That approach, in the absence of independent corroboration and without cross-verification of the seized entries, was legally inadequate to fasten duty liability. Consequently, the ex parte adjudication and reliance on such records failed to meet the standard required to sustain the grave charge of clandestine clearance. [Paras 5]

Charge of clandestine manufacture and clearance was not proved; demand cannot be sustained on the basis of the impugned evidence.

Principles of natural justice - right to cross-examination of witnesses relied upon by Revenue - duty of Department to return and supply seized relied-upon documents - Denial of access to seized records (including DSA in RG-12A) and refusal to permit cross-examination of buyers relied upon by the Department vitiated the proceedings. - HELD THAT: - The Tribunal found that the Department treated the DSA (RG-12A) inconsistently - while the adjudicating authority used stock figures for computation, the Department simultaneously asserted that the DSA was not a relied-upon document and refused to supply it to the noticee. Even if a document is not relied upon, once seized it should be returned or made available after issuance of show-cause notice where requested by the noticee for defence. Further, the appellant's repeated requests to cross-examine buyers whose statements were relied upon were summarily rejected by both the adjudicating and appellate authorities. Cross-examination is a fundamental tool to test the veracity of witness statements; denying it, particularly where such statements form a core plank of the Revenue's case, offends the principles of natural justice. The combined effect of non-supply of documents and denial of cross-examination constituted a failure to afford a fair opportunity of defence and rendered the impugned orders unsustainable. [Paras 5, 6, 7, 8, 9]

Proceedings were vitiated by denial of natural justice; impugned orders set aside.

Final Conclusion: The appeal is allowed; the order-in-appeal and adjudication are set aside because the Revenue failed to prove clandestine manufacture and clearance with corroborative evidence and denied the appellant access to relied-upon records and the opportunity to cross-examine witnesses, thereby violating principles of natural justice.

Valuation of waste/bye-product - price-cum-duty / cum-duty price - price realised to be treated as inclusive of excise duty - Explanation to Section 4(1) of the Central Excise Act (price-cum-duty deemed to include duty) - Board Circular No.749/65/2003-CX (clarification on cum-duty price)

Valuation of waste/bye-product - price-cum-duty / cum-duty price - price realised to be treated as inclusive of excise duty - Explanation to Section 4(1) of the Central Excise Act (price-cum-duty deemed to include duty) - Board Circular No.749/65/2003-CX (clarification on cum-duty price) - Whether the value adopted by the assessee as price inclusive of duty (cum-duty price) for the waste/bye-product (Fatty Acid) is permissible and whether the demand for differential duty on the ground that cum-duty price could not be adopted is sustainable. - HELD THAT: - The Tribunal found no dispute as to liability to duty but identified the determinative question as valuation of the waste/bye-product and the permissibility of treating the sale price as inclusive of duty. The Explanation to Section 4(1), inserted w.e.f. 14.05.2003, declares that where duty is not collected separately the price actually paid shall be deemed to include the duty payable. The Board Circular No.749/65/2003-CX reiterates the principle that sale price realised by the assessee is to be regarded as inclusive of excise duty and notes that the amended statutory provision applies prospectively. In the present case the assessee initially cleared the product under an exemption notification but subsequently accepted the Department's classification and paid duty by adopting the realized price as cum-duty price. Applying the Explanation and the clarified position in the Circular, and following the Tribunal precedent relied upon by the assessee, the Tribunal concluded that where duty is not separately recoverable from the buyer, the sale price must be treated as inclusive of duty and the demand for differential duty on that basis is not sustainable.

Demand for differential duty set aside; impugned order confirming the demand quashed and the appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the assessee lawfully adopted the realized sale price as cum-duty price for valuation of the waste/bye-product and that the demand for differential duty was unsustainable; the impugned order confirming the demand was set aside.

Enforceability of a statutory charge against a transferee who is a bona fide purchaser for value without notice - protection under Section 100 of the Transfer of Property Act for transferees without notice - form and effect of security bond (Form XIX-B) under the erstwhile TNGST Rules - requirement of creation of a mortgage or charge in conformity with the Transfer of Property Act for immovable property security - mortgage by deposit of title deeds and its distinction from mere personal undertaking

Form and effect of security bond (Form XIX-B) under the erstwhile TNGST Rules - requirement of creation of a mortgage or charge in conformity with the Transfer of Property Act for immovable property security - Whether the security bond executed by the vendor in the prescribed Form XIX-B format created a mortgage/charge enforceable against the property. - HELD THAT: - The Court examined the prescribed Form XIX-B under the erstwhile TNGST Rules and Explanation-I to Rule 24(15-A), which envisage that where immovable property is furnished as security the person may mortgage such property by deposit of title deeds (in specified towns) or by registered mortgage otherwise. The form supplied by the vendor did not conform to the prescribed mortgage/charge wording but was confined to a personal undertaking to pay sums due. In the absence of a mortgage or charge created in accordance with the Transfer of Property Act or the Rules, the memorandum executed as a mere personal undertaking cannot be construed as creating a mortgage/charge over the property. Accordingly the security bond signed by the vendor is not a mortgage/charge as contemplated under the erstwhile TNGST Act and Rules. [Paras 19, 20, 21]

The security bond executed by the vendor is a personal undertaking and not a mortgage or charge in conformity with the TNGST Rules or the Transfer of Property Act.

Enforceability of a statutory charge against a transferee who is a bona fide purchaser for value without notice - protection under Section 100 of the Transfer of Property Act for transferees without notice - Whether the petitioner, having purchased the property for value and without notice of any charge, is protected from enforcement of the sales tax charge. - HELD THAT: - Applying the principle embodied in Section 100 of the Transfer of Property Act and the rulings of higher and division benches cited in the judgment, a charge (as distinct from a mortgage) does not attach to the property in the hands of a transferee who is a bona fide purchaser for value without notice unless the relevant statute expressly makes the charge enforceable against such transferees. The evidence shows the petitioner obtained and verified original documents, was in possession, and there is no material of actual or constructive notice of any prior charge; the security bond did not create a mortgage/charge in any event. Consequently, the petitioner is a protected transferee and the statutory charge cannot be enforced against her property. [Paras 22, 23]

The petitioner, being a bona fide purchaser for value without notice and in the absence of a valid mortgage/charge, is protected from enforcement of the sales tax charge against the property.

Enforceability of a statutory charge against a transferee who is a bona fide purchaser for value without notice - interpretation of Form XIX-B under TNGST Rules - Whether the impugned order creating an encumbrance and the consequential entry in the Sub-Registrar's records are sustainable. - HELD THAT: - Given the Court's findings that the instrument relied on by the Department did not constitute a mortgage/charge in the prescribed form and that the petitioner was a bona fide purchaser without notice, the Department's action in directing registration of an encumbrance and the Sub-Registrar's entry are not in conformity with the statutory scheme. The encumbrance recorded on the petitioner's title therefore cannot be sustained. [Paras 22, 24]

The impugned order directing creation of encumbrance and the consequential entry in the Sub-Registrar's register are quashed.

Final Conclusion: The security instrument executed by the vendor was a personal undertaking and did not create a mortgage or charge in conformity with the erstwhile TNGST Rules and the Transfer of Property Act; the petitioner is a bona fide purchaser for value without notice and protected under Section 100 principles; the impugned order and the encumbrance entry on the petitioner's property are quashed and the writ petition is allowed.