TaxTMI Updates e-Newsletter
May 01,2020

Eligibility for composition scheme under Section 10 of the CGST Act - restriction on supply of services under the composition scheme (ten per cent. rule or Rs. 5 lakh threshold) - distinction between composition levy under Section 10 and optional scheme under Notification No.2/2019 - Central Tax (Rate) - applicability of uniform prescribed rate under Notification No.2/2019 on aggregate first supplies - prohibition on applying different composition/optional rates to separate lines of business of the same registered person

Eligibility for composition scheme under Section 10 of the CGST Act - restriction on supply of services under the composition scheme (ten per cent. rule or Rs. 5 lakh threshold) - Whether the applicant is eligible to be in the composition scheme. - HELD THAT: - The Authority examined Section 10 and noted that a registered person whose aggregate turnover in the preceding financial year did not exceed Rs. 50 lakh may opt for the composition levy subject to the proviso limiting supplies of services to not more than ten per cent. of turnover in the State in the preceding financial year or Rs. 5 lakh, whichever is higher. The applicant admittedly carries on both supply of goods and supply of services (rent) and has asserted aggregate turnover below Rs. 50 lakh. Eligibility therefore depends on satisfaction of the proviso: if the value of services exceeds the higher of ten per cent. of turnover or Rs. 5 lakh, the applicant is not eligible for composition. The Authority also recorded that obtaining separate registrations for the two lines of business would not enable applicability of composition for both if the proviso is breached. [Paras 7]

The applicant is eligible for the composition scheme under Section 10 if the turnover from services does not exceed ten per cent. of turnover in the State in the preceding financial year or Rs. 5 lakh, whichever is higher.

Distinction between composition levy under Section 10 and optional scheme under Notification No.2/2019 - Central Tax (Rate) - applicability of uniform prescribed rate under Notification No.2/2019 on aggregate first supplies - Whether the applicant can opt for the rate prescribed by Notification No.2/2019 and, if so, whether different rates may be applied to goods and services separately. - HELD THAT: - The Authority observed that Notification No.2/2019 prescribes an optional rate for "first supplies of goods or services or both upto an aggregate turnover of fifty lakh rupees" and is not a notification issued under Section 10. One condition for availing the notification is that the person should not be eligible to pay tax under Section 10(1). Since the applicant is registered as a composition taxpayer under Section 10, he cannot simultaneously opt for the optional scheme under Notification No.2/2019 while remaining a composition registrant. The Authority further interpreted the notification as applying to the entire aggregate value of such first supplies and not permitting differential application of rates to different types of supplies by the same registered person. If the applicant opts out of composition and then avails the notification (with separate registrations), the notification prescribes uniform rates (as applied by the Authority) on the entire turnover covered by that notification. [Paras 8]

The applicant is not eligible to opt for Notification No.2/2019 while registered as a composition taxpayer; the notification applies to the entire aggregate turnover of first supplies and does not permit applying different rates to goods and services separately.

Prohibition on applying different composition/optional rates to separate lines of business of the same registered person - applicability of prescribed aggregate rate under the optional scheme - Whether the rate of tax applicable can be 1% for turnover of goods and 6% for turnover of service (rent), aggregated and paid, or whether a single combined rate applies. - HELD THAT: - Having distinguished the composition levy and the optional notification, the Authority examined applicable rates. The applicant's proposal to pay 1% on goods and 6% on services was rejected. The Authority held that under the optional Notification No.2/2019 (if the applicant were to opt out of composition and qualify for the notification) the tax is to be paid on the entire aggregate value of first supplies at the prescribed uniform rate (as administered by the authorities). Accordingly, the applicant cannot apply 1% for goods and 6% for services for the same registered person; instead, the applicable tax under the notification (as explained by the Authority) results in 3% CGST and 3% KGST on the entire value if the notification is availed after opting out of composition. [Paras 8, 9]

The applicant cannot pay 1% on supplies of goods and 6% on supplies of services; the applicable position is 3% CGST and 3% KGST on the entire value if the optional notification is availed after opting out of composition.

Final Conclusion: The Authority ruled that the applicant may remain under the composition scheme only if the turnover from services does not exceed ten per cent. of state turnover or Rs. 5 lakh (whichever is higher); while so registered he cannot opt for Notification No.2/2019; and he cannot split composition/optional rates between goods and services - if he avails the optional notification after opting out of composition the applicable levy is 3% CGST and 3% KGST on the entire aggregate first supplies.

Supply of goods in the course of business (section 7(1)) - sale simpliciter of printed books - classification as printed books (HSN 4901) - exemption of printed books under Notification No.2/2017 (entry no.119) - applicability of IGST/CGST/KGST exemptions to inter-State and intra-State supplies

Sale simpliciter of printed books - classification as printed books (HSN 4901) - exemption of printed books under Notification No.2/2017 (entry no.119) - applicability of IGST/CGST/KGST exemptions to inter-State and intra-State supplies - Whether the applicant's printing and sale of religious books to madrasas attracts GST and, if not, the classification (HSN) and rate/exemption applicable. - HELD THAT: - The Authority found that the applicant supplies printed books to madrasas for consideration in the course of business and that the content-provider (religious heads) has no role in selection of buyers or the sale; accordingly the transactions amount to sale simpliciter of books. The Authority held that the printed books fall within HSN 4901 (specifically 4901 10 10 as noted) and observed that such printed books are covered by entry no. 119 of Notification No.2/2017 (Central Tax Rate) dated 28.06.2017 and the corresponding State and Integrated Tax notifications. On that basis the supply of the printed religious books by the applicant is exempt from CGST and KGST, and inter-State supplies are exempt under the IGST notifications referenced. [Paras 4, 5]

The supply of printed religious books by the applicant to madrasas is a sale of printed books classified under HSN 4901 and is exempt from tax under entry no.119 of Notification No.2/2017 under the CGST, KGST and IGST notifications.

Final Conclusion: The Authority ruled that the applicant's printing and sale of religious books to madrasas are taxable as sale of printed books but are exempt from tax by virtue of entry no.119 of Notification No.2/2017 (HSN 4901) under the CGST, KGST and IGST notifications.

Pre developed (packaged) computer software as goods - Application Software - HSN 8523 - supply of goods vs supply of services - concessional rate for computer software supplied to public funded research institutions - conditions precedent for notification benefit

Pre developed (packaged) computer software as goods - Application Software - HSN 8523 - supply of goods vs supply of services - The nature of the software supplied by the applicant - whether it qualifies as "computer software" constituting supply of goods. - HELD THAT: - The Authority found that the applicant supplies off the shelf, pre developed/pre designed software delivered and controlled through encryption/license keys and not customised for individual customers. Such software must be loaded on a computer and becomes usable only after activation. The Authority held that these attributes bring the software within the concept of goods and specifically within "Application Software" classifiable under HSN 8523, thereby treating the supply as supply of goods rather than a supply of services. The conclusion follows from the factual finding that the software is not tailor made and meets conditions required to be treated as goods. [Paras 8]

The software supplied by the applicant qualifies as supply of goods and as computer software (Application Software) covered under HSN 8523.

Concessional rate for computer software supplied to public funded research institutions - conditions precedent for notification benefit - Whether the concessional rates under Notification No.45/2017 Central Tax (Rate) and Notification No.47/2017 Integrated Tax (Rate) dated 14.11.2017 apply to the applicant's supplies. - HELD THAT: - The Authority examined the Notifications and observed that "computer software" appears in the table and that the concessional rates apply where the goods are supplied to the specified institutions listed in Column (2) and where the supplier satisfies the conditions set out in the Notifications (Column (4)), including production of prescribed certificates and certifications at the time of supply. The Authority further noted that the same position applies under the corresponding IGST Notification. Consequently, the benefit of the concessional rate is available to supplies of the applicant's software only if the recipient falls within the specified categories and the conditions in the Notifications are complied with at the time of supply. [Paras 9]

The concessional rates under the cited Notifications are available for the applicant's software supplies when made to recipients covered in Column (2) and when the conditions specified in the Notifications are satisfied.

Final Conclusion: Advance Ruling: (1) The applicant's off the shelf, non customised software is a supply of goods - "computer software" (Application Software) classifiable under HSN 8523. (2) The concessional tax rates under Notifications No.45/2017 CT(R) and No.47/2017 IT(R) dated 14.11.2017 apply to such supplies only when made to the specified institutions and subject to fulfillment of the conditions prescribed in those Notifications.

Health care services by a clinical establishment - clinical establishment - exempt supply - reverse charge - testing / diagnostic service as integral to treatment

Health care services by a clinical establishment - clinical establishment - exempt supply - reverse charge - testing / diagnostic service as integral to treatment - Whether HLA Typing services procured by DKMS BMST Foundation India from an overseas laboratory qualify as "health care services by a clinical establishment" and are therefore exempt from IGST and not taxable in the hands of the applicant under reverse charge. - HELD THAT: - The Authority found that HLA typing is a diagnostic service aimed at identifying donor alleles to enable transplantation and is analogous to blood-group testing; it is performed as a pre-requisite for treatment of blood cancer and other blood disorders and has no other clinical purpose. The definition of "health care services" in Notification No.12/2017-Central Tax (Rate) includes services by way of diagnosis for illness and the definition of "clinical establishment" includes places established to carry out diagnostic or investigative services of diseases. An institution performing the investigative HLA tests therefore falls within the definition of a "clinical establishment" and the service falls within "health care services by a clinical establishment." Entry No.77 of Notification No.09/2017-Integrated Tax (Rate) grants nil rate (exemption) to such services. Because the service itself is exempt under the entry cited, the recipient is not liable to discharge IGST on the said service under the reverse charge mechanism. The Authority declined to determine the place of supply, observing that determination of place of supply was outside its mandate. [Paras 13, 14, 15, 16, 17]

HLA Typing services received by the applicant from the overseas laboratory are "health care services by a clinical establishment" and are exempt from IGST; consequently the applicant is not liable to pay IGST on such services under reverse charge.

Final Conclusion: Advance ruling: HLA Typing services procured by DKMS BMST Foundation India from the overseas laboratory qualify as exempt health-care services provided by a clinical establishment and are not taxable in the hands of the applicant under the reverse charge mechanism.

Classification of poha bran as rice bran - classification under HSN 2302 40 00 - taxability under entry no. 103B of Notification No. 1/2017 - Central Tax (Rate) - rate of tax at 2.5% under CGST and SGST

Classification of poha bran as rice bran - classification under HSN 2302 40 00 - Poha bran is same as rice bran and is classifiable under HSN 2302 40 00. - HELD THAT: - The Authority found that poha bran is a by product of the poha (avalakki) manufacturing process from paddy and that both rice bran and poha bran are derived from paddy with the same constituents. The difference in commercial name arises only from the manufacturing process. On this basis the Authority concluded that poha bran is nothing but rice bran and the correct tariff classification is under HSN 2302 40 00, rejecting the applicant's classification under HSN 2304 00 90 as inapplicable to products derived from paddy and applicable to soybean derivatives. [Paras 6]

Poha bran is classifiable as rice bran under HSN 2302 40 00.

Taxability under entry no. 103B of Notification No. 1/2017 - Central Tax (Rate) - rate of tax at 2.5% under CGST and SGST - Poha bran (classified as rice bran) is taxable at 2.5% each under CGST and SGST as covered by entry no. 103B of Notification No. 1/2017 (as amended). - HELD THAT: - Having classified poha bran as rice bran, the Authority examined the applicable rate notifications and held that the product falls within entry no. 103B of the cited Notification, which, as amended, prescribes tax at 2.5% from 25.01.2018. The Authority therefore applied that rate to poha bran for levy under both the Central and Karnataka GST Acts. [Paras 6]

Poha bran attracts tax at 2.5% under both CGST and KGST (SGST) from 25.01.2018.

Final Conclusion: The Authority ruled that poha (avalakki) bran is rice bran classifiable under HSN 2302 40 00 and is taxable at 2.5% under both CGST and SGST (KGST) in terms of the entry relied upon in the rate notification.

Advance ruling - sub-judice bar - exemption for transmission or distribution of electricity - composite supply - Circular No. 34/8/2018-GST

Advance ruling - sub-judice bar - exemption for transmission or distribution of electricity - Circular No. 34/8/2018-GST - composite supply - Advance ruling on taxability of administration, pre-connection and post-connection charges related to supply/distribution of electricity cannot be given when the same question is pending before the Supreme Court. - HELD THAT: - The Authority considered the applicant's claim that various non tariff charges and ancillary services are exempt as part of the transmission or distribution of electricity and/or form a composite supply with electricity. It noted the Ministry of Finance Circular No. 34/8/2018-GST which took the contrary view that such ancillary services are taxable, and recorded that the Gujarat High Court had held ancillary charges to be covered by the exemption but that the Department has filed special leave petition before the Supreme Court (Diary No(s). 24733/2019). Given that the dispositive legal question on whether the ancillary charges fall within the exemption under the notification and the related interpretation is sub judice before the Supreme Court, the Authority held that it cannot pronounce an advance ruling on the same issue. The Authority thus declined to decide the substantive taxability question and withheld the advance ruling for the reasons stated. [Paras 6, 7]

Advance ruling withheld because the question of exemption for the activities/charges claimed by the applicant is sub judice before the Supreme Court.

Final Conclusion: The Authority refused to pronounce on the taxability/exemption of the listed administration, pre connection and post connection charges because the identical legal question is pending before the Supreme Court; accordingly no advance ruling on those issues is given.

Composite supply as defined in Section 2(30) of the CGST Act, 2017 - Principal supply and taxability of composite supply under Section 8 of the CGST Act, 2017 - Value of supply including incidental expenses under Section 15(2) of the CGST Act, 2017 - Independent supply - Advance Ruling

Value of supply including incidental expenses under Section 15(2) of the CGST Act, 2017 - Composite supply as defined in Section 2(30) of the CGST Act, 2017 - Principal supply and taxability of composite supply under Section 8 of the CGST Act, 2017 - Whether freight and insurance charges form part of the value of supply of power packs and/or constitute a composite supply with the power packs. - HELD THAT: - The Authority examined the purchase order and contractual terms showing delivery on freight pre-paid door-delivery basis and insurance charged extra. Applying Section 15(2), incidental expenses and amounts charged by the supplier for anything done in respect of the supply at or before delivery form part of the value of the goods. Even if treated as distinct supplies, freight and insurance are naturally bundled with the supply of power packs in the ordinary course of business and thus fall within the definition of composite supply. The principal supply is the supply of power packs and, in terms of Section 8, the composite supply must be treated as supply of the principal supply; accordingly the freight and insurance charges are to be treated as part of the supply of power packs for tax purposes. [Paras 9]

Freight and insurance charges form part of the value of the supply of power packs and, as naturally bundled components, are to be treated with the power packs as the principal supply.

Independent supply - Composite supply as defined in Section 2(30) of the CGST Act, 2017 - Whether installation and commissioning services are part of a composite supply with the power packs or are independent services. - HELD THAT: - The applicant itself stated that installation and commissioning can be carried out by the recipient or procured from another service provider. The Authority found that installation and commissioning are not part of the supply contract of the power packs and are not naturally bundled in the ordinary course of business. Consequently, installation and commissioning are independent supplies; if provided by the applicant they must be taxed as supply of services distinct from the supply of power packs. The Authority did not decide rates of tax, as that was not sought. [Paras 8]

Installation and commissioning services are independent supplies and are not part of a composite supply of the power packs.

Final Conclusion: The Authority rules that freight and insurance charges shall form part of the value of the supply of power packs and be treated with the power packs as the principal supply, while installation and commissioning services are independent supplies separate from the supply of power packs.

Genuineness of sale of jewellery - accommodation entry - remand for fresh consideration to Assessing Officer - onus of proof on the assessee - verification from purchaser's books and Sales Tax records - opportunity of being heard / principles of natural justice

Genuineness of sale of jewellery - accommodation entry - remand for fresh consideration to Assessing Officer - verification from purchaser's books and Sales Tax records - onus of proof on the assessee - opportunity of being heard / principles of natural justice - Whether the alleged sale of jewellery to Bemco Jewellers / Bishan Chand Mukesh Kumar was genuine or an accommodation entry and the appropriate forum and procedure for deciding that question. - HELD THAT: - The Tribunal, following directions of the Hon'ble High Court and consistent coordinate-bench decisions, held that the question of genuineness of the sale could not be finally resolved at the Tribunal stage and must be remitted to the file of the Assessing Officer for fresh adjudication. The Tribunal recorded that verification is required from the purchaser's books, records of the Sales Tax authorities and, if necessary, by summoning the purchaser to record evidence regarding (a) treatment of the alleged purchase in the purchaser's books, (b) whether the purchaser had included the transactions in its turnover before Sales Tax authorities, and (c) other contemporaneous records bearing on the transaction. The Tribunal noted that declaration under VDIS establishes possession or acquisition but does not, by itself, discharge the onus of proving the genuineness of the sale of jewellery vis-a -vis corresponding bank credits. Where allegations arise from seized material or confessions in separate proceedings, the assessee remains obliged to prove the reality of the sale; conversely, the Assessing Officer must afford the assessee a fair opportunity to meet adverse material, in accordance with principles of natural justice. Absent the possibility of conducting these enquiries at the appellate stage, remand was necessary so the AO may examine the purchaser's books, obtain Sales Tax records, summon the purchaser, consider all stands taken by the assessee, and then decide the issue in accordance with law. [Paras 5, 6]

Matter remitted to the Assessing Officer to verify the genuineness of the sale of jewellery, by examining purchaser's books and Sales Tax records, summoning the purchaser if necessary, and deciding afresh after giving the assessee an opportunity of being heard; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal, following the High Court's directions and consistent precedents, has remitted the issue of whether the sale of jewellery was genuine or an accommodation entry to the Assessing Officer for fresh consideration with directions to verify purchaser records, summon the purchaser if required, and to decide after providing the assessee a proper opportunity of being heard; the Revenue's appeal is allowed for statistical purposes.

Registration under Section 12AA for trusts with both charitable and religious objects - approval under Section 80G for trusts engaged in charitable and religious purposes - equality of treatment between charitable and religious purposes for exemption under Section 11 - precedential application of Supreme Court rulings to permit mixed-object trusts to obtain registration and approval

Registration under Section 12AA for trusts with both charitable and religious objects - equality of treatment between charitable and religious purposes for exemption under Section 11 - Assessee-Trust entitled to registration under Section 12AA despite having both charitable and religious objects. - HELD THAT: - The Court held that registration under Section 12AA cannot be denied merely because a trust's objects are an admixture of charitable and religious purposes. The decision follows the coordinate Bench's reasoning in Seervi Samaj Tambaram Trust and the Supreme Court precedents cited therein, which establish that the Income Tax Act does not distinguish between charitable and religious objects for the purposes of exemption under Section 11, and accordingly Section 12AA does not disqualify trusts with both kinds of objects from registration. Applying these legal principles, the Tribunal's allowance of the assessee's appeal and direction to grant registration was upheld as legally justified.

Registration under Section 12AA granted to the Trust is valid and is upheld.

Approval under Section 80G for trusts engaged in charitable and religious purposes - precedential application of Supreme Court rulings to permit mixed-object trusts to obtain registration and approval - Assessee-Trust entitled to approval under Section 80G subject to statutory provisions. - HELD THAT: - The Court accepted the Tribunal's conclusion that, having held the Trust eligible for registration under Section 12AA, it is also entitled to approval under Section 80G, subject to the limits and conditions in the Act. The Court relied on the settled legal position from the coordinate Bench decision in Seervi Samaj Tambaram Trust and the Supreme Court authorities applied therein, which treat charitable and religious purposes equivalently for income-tax exemption and ancillary approvals. Consequently, the direction to the DIT(E) to grant approval under Section 80G (with reference to the provisos in the statute) was affirmed.

Approval under Section 80G to be granted to the Trust, subject to statutory provisions.

Final Conclusion: The Revenue's appeal is dismissed. The Tribunal's order directing registration under Section 12AA and granting approval under Section 80G (subject to statutory conditions) is upheld; the substantial questions of law are answered against the Revenue and in favour of the Assessee.

Power of the Commissioner of Income Tax to cancel registration granted under Section 12A - quasi-judicial nature of an order granting registration under Section 12A - prospective effect of statutory amendment conferring cancellation power

Power of the Commissioner of Income Tax to cancel registration granted under Section 12A - quasi-judicial nature of an order granting registration under Section 12A - prospective effect of statutory amendment conferring cancellation power - Whether the Commissioner of Income Tax had jurisdiction to cancel the registration granted to the assessee under Section 12A prior to the amendment effective 1.10.2004. - HELD THAT: - The Court held that the order granting registration under Section 12A is quasi judicial in character and, prior to the insertion of sub section (3) in Section 12AA by the Finance (No.2) Act, 2004 w.e.f. 1.10.2004, there was no express statutory power vested in the Commissioner of Income Tax to cancel a registration once granted. The amendment conferring explicit cancellation power took effect on 1.10.2004 and is prospective; it could not be applied to validate a cancellation made earlier. In view of the Supreme Court's earlier decision in Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd. Vs. Commissioner of Income Tax, Gwalior , which held that the CIT had no such express power till 01.10.2004, the cancellation order dated 12.8.2003 was without jurisdiction. The Tribunal's conclusion quashing the CIT's cancellation of the registration was thus affirmed on that legal basis. [Paras 6, 8, 9, 11]

The cancellation of the registration certificate effected by the Commissioner on 12.8.2003 was invalid for want of express statutory power and the Tribunal's order allowing the assessee's appeal is upheld.

Final Conclusion: The substantial question of law is answered against the Revenue: the CIT had no jurisdiction to cancel the registration granted under Section 12A before the statutory power was expressly conferred w.e.f. 1.10.2004; the appeals are dismissed.

Reopening of assessment under Section 147/148 - reason to believe versus reasons to suspect - use of excise technical manual for computing suppressed production - finality of completed assessment and safeguards for reassessment

Reopening of assessment under Section 147/148 - reason to believe versus reasons to suspect - finality of completed assessment and safeguards for reassessment - Validity of reopening the assessment - whether the reasons recorded by the Assessing Officer constituted reasons to believe escapement of income or merely reasons to suspect. - HELD THAT: - The Court applied the settled principle that power to reopen an assessment under Section 147 cannot be exercised on mere suspicion; there must be a reason to believe. The Tribunal and the CIT(A) found that the Assessing Officer relied on a general extract from the Kerala State Excise Technical Manual while the assessee operated in Madhya Pradesh, there was no evidence of undisclosed production discovered during search, no independent information of unaccounted production, and the Assessing Officer's computation was premised on a pretence amounting to reasons to suspect only. The High Court agreed with these concurrent findings of fact and observed no illegality or perversity warranting interference, holding that the reassessment was not validly initiated. [Paras 7, 8, 9]

Reopening of assessment quashed: reasons recorded amounted to reasons to suspect and not reasons to believe; reassessment under Section 147/148 invalid.

Use of excise technical manual for computing suppressed production - reopening of assessment under Section 147/148 - Validity of the addition made on account of alleged suppressed sales computed by applying the Kerala Excise Technical Manual. - HELD THAT: - On merits the CIT(A) held, and the Tribunal concurred, that the Assessing Officer had incorrectly computed production by applying excise norms selectively (computing production on the basis of sugar consumption separately while disregarding that barley malt is the primary raw material), and that on correct application the assessee's declared production exceeded what the Assessing Officer worked out. The Tribunal also noted that the Kerala manual was of little relevance for an assessee operating in Madhya Pradesh and that there was no case of suppressed production as per the explained manufacturing process. The High Court found no error in these conclusions and declined to disturb the concurrent factual and factual-legal findings. [Paras 7, 9, 10]

Addition on account of suppressed sales based on the Kerala Excise Technical Manual not sustained; Tribunal/CIT(A) rightly disallowed the addition.

Final Conclusion: The substantial questions of law are answered against the Revenue; the reassessment was quashed as based on reasons to suspect and the addition for suppressed sales was not justified. The Revenue's appeal is dismissed.

Deductibility under Section 37(1) - revenue expenditure versus capital/donation - Mandate of Electricity (Supply) Act, 1948 - obligation to subscribe to associations for development of electricity - Allowability under Section 36(1)(va) - employee contribution credited to provident fund on or before the due date - Effect of exemption from deposit with Provident Fund Commissioner and applicability of Provident Fund Regulations permitting deposit with PF Trust

Deductibility under Section 37(1) - revenue expenditure versus capital/donation - Mandate of Electricity (Supply) Act, 1948 - obligation to subscribe to associations for development of electricity - Whether the contribution of Rs. 1.50 Crore to the National HVDC Project is allowable as a revenue expenditure under Section 37(1) of the Income Tax Act or is capital/donation in nature. - HELD THAT: - The Court upheld the findings of the CIT(A) and the Tribunal that the contribution was incurred in the ordinary course of the assessee's business and was wholly, necessarily and exclusively for the purpose of business. The contribution was made pursuant to Government of India directions and in conformity with Section 24 of the Electricity (Supply) Act, 1948, which authorised the Board to subscribe to associations conducive to development of electricity. The Assessing Officer had noted the project's purpose and the statutory power to subscribe but treated the payment as capital/donation without dealing with Section 24. In the absence of contrary material and given that the payment was to an organisation approved by the Government of India, the Court found no error in allowing the deduction under Section 37(1). [Paras 7]

The addition of Rs. 1.50 Crore was correctly deleted and the contribution is allowable as a revenue deduction under Section 37(1).

Allowability under Section 36(1)(va) - employee contribution credited to provident fund on or before the due date - Effect of exemption from deposit with Provident Fund Commissioner and applicability of Provident Fund Regulations permitting deposit with PF Trust - Whether the deletion of the addition of Rs. 24,25,05,585 on account of provident fund contributions not deposited by the due date was justified under Section 36(1)(va). - HELD THAT: - Section 36(1)(va) mandates that employer-credit of employees' contributions to the relevant fund on or before the due date is a condition for deduction. The Court accepted that the assessee had exemption from depositing with the Provident Fund Commissioner and was permitted to deposit with its PF Trust. Regulation 11 of the applicable PF Regulations provides no specific date for deposit and contemplates that amounts may remain invested with the Board and credited with interest. The Court relied on earlier decisions involving identical facts (including a Division Bench decision and the Assessing Officer's earlier order for another year) and found no reason to take a different view. In these circumstances the deletion of the addition was sustained. [Paras 9]

The deletion of the addition relating to provident fund contributions was justified and the deduction under Section 36(1)(va) was properly allowed.

Final Conclusion: Both substantial questions raised by the Revenue were answered against it: the Rs. 1.50 Crore contribution to the National HVDC Project was deductible as revenue expenditure under Section 37(1) in view of statutory obligation under the Electricity (Supply) Act, 1948 and government approval; and the provident fund contribution addition was rightly deleted because the assessee, exempted to deposit with the PF Commissioner and governed by PF Regulations allowing deposit with its Trust without a specific due date, satisfied the conditions for deduction under Section 36(1)(va). The appeal is dismissed.

Reopening of assessment under section 148 read with section 147 - relevant shipping income under section 115VI(1) - tonnage tax scheme and computation of tonnage income under section 115VG - allocation/apportionment of other income between qualifying and non qualifying ships - treatment of foreign exchange gains as capital or revenue receipts in shipping - incidental activities list in Rule 11R and nexus test for core/incidental activities

Reopening of assessment under section 148 read with section 147 - Whether issuance of notice under section 148 for AY 2009-10 was valid where the AO formed opinion that a portion of "other income" had escaped assessment. - HELD THAT: - The Tribunal found that the AO issued the notice within four years from the end of the relevant assessment year and had formed an opinion that Rs. 1,83,32,362 (a portion of other income credited to the profit and loss account) was not derived from the core or incidental activities as envisaged under section 115VI. On the facts, the AO's action was distinguishable from decisions relied upon by the assessee and the reopening was held to be within the statutory power of the AO. Consequently the grounds challenging jurisdiction to reopen and alleging mere change of opinion were dismissed. [Paras 7]

Notice under section 148 was validly issued and the reopening was upheld.

Relevant shipping income under section 115VI(1) - allocation/apportionment of other income between qualifying and non qualifying ships - treatment of foreign exchange gains as capital or revenue receipts in shipping - tonnage tax scheme and computation of tonnage income under section 115VG - incidental activities list in Rule 11R and nexus test for core/incidental activities - Whether components of the "other income" (foreign exchange gains, interest on fixed deposits, insurance claims, write back of sundry balances) are derived from core or incidental activities and thereby form part of relevant shipping income exempt under the tonnage tax provisions. - HELD THAT: - The Tribunal examined each category of other income and applied the statutory concept of relevant shipping income under section 115VI and the tonnage tax scheme under section 115VG. It found that (a) foreign exchange gains arose on repayment/closure of foreign currency loans taken to acquire vessels and therefore relate to the activity of operating ships (and being capital in nature are not chargeable as revenue), (b) interest on fixed deposits resulted from deposits made to secure bank guarantees (performance/bid guarantees) necessary for earning charter hire and thus have direct nexus with operating ships and must be apportioned between qualifying and non qualifying ships, (c) insurance claims were receipts relating to repair and maintenance of vessels and hence directly connected to operation of ships, and (d) writing back of sundry creditors/debtors arose from expenditures relating to repair/maintenance and other core operations. In the absence of clear bifurcation, the Tribunal directed apportionment on the basis of the established 36.44% ratio to determine the portion attributable to qualifying ships. Reliance on prior decisions on foreign exchange gains, insurance receipts and write backs supported these conclusions. [Paras 7]

The specified items of other income are connected to core/incidental shipping activities and the portion attributable to qualifying ships (36.44%) is part of relevant shipping income and hence to be treated as exempt under the tonnage tax scheme; the addition of Rs. 1,83,32,362 is deleted.

Claim for refund and effect of revised return filed in response to notice under section 148 - limits on assessed income not to go below originally returned income - Whether the assessee's claim for refund arising from filing a revised return in response to the notice under section 148 should be considered and how to give effect to the Tribunal's decision without placing assessed income below the originally returned income. - HELD THAT: - The Tribunal accepted that the assessee filed a revised return in response to the notice under section 148 seeking to capitalise certain foreign exchange gains and claim refund. While observing that reassessment proceedings are concerned with escapement issues, the Tribunal, having held that the questioned receipts form part of relevant shipping income, directed the AO to work out the refund entitlement of the assessee. This direction is subject to the assessee's stated proposition in the statement of facts that, after giving effect to the Tribunal's order, the assessed income should in no case fall below the originally returned income; the AO was directed to give effect to the decision and compute the consequential refund accordingly. [Paras 7, 8]

Assessee's entitlement to refund is recognised in principle; AO directed to compute refund consistent with the Tribunal's findings and the assessee's undertaking that assessed income shall not be reduced below the originally returned income.

Final Conclusion: The appeal is partly allowed: the Tribunal upheld the validity of the reassessment notice under section 148, but on merits set aside the additions by holding that the specified items of other income are connected with the operation of ships and the portion attributable to qualifying ships (36.44%) forms relevant shipping income exempt under the tonnage tax scheme; the addition of Rs. 1,83,32,362 is deleted and the case is remitted to the AO to work out the consequential refund in accordance with the Tribunal's directions and the assessee's undertaking regarding the floor of originally returned income.

Unexplained credit u/s 68 - burden of proof on assessee to reconcile sundry creditors - requirement of enhancement notice - natural justice and remand procedure - estimation of income in absence of evidence

Requirement of enhancement notice - natural justice and remand procedure - Whether the Commissioner (Appeals) enhanced the addition without issuing enhancement notice and whether principles of natural justice were complied with - HELD THAT: - The Tribunal examined the assessment and appellate orders and found that the Assessing Officer had originally made an addition of Rs. 47,64,594/- and the Commissioner (Appeals) confirmed a lesser addition of Rs. 25,50,000/-, thereby granting part relief. Consequently there was no enhancement of addition by the Commissioner (Appeals) which would attract the requirement of an enhancement notice. The Tribunal also noted that the written submissions of the assessee were forwarded to the AO, the remand report was furnished to the assessee for objections and the assessee was given opportunity to be heard; hence the Commissioner (Appeals) followed remand procedure and principles of natural justice. [Paras 6, 7]

No enhancement was made by the Commissioner (Appeals) and no enhancement notice was required; procedural requirements and principles of natural justice were complied with.

Unexplained credit u/s 68 - burden of proof on assessee to reconcile sundry creditors - Whether the addition of Rs. 25,50,000/- in respect of excess credit balance in the account of M/s Sri Venkateswara Iron Corporation is justified as unexplained credit - HELD THAT: - The Tribunal recorded that there was an undisputed excess credit balance of Rs. 25,50,000/- in the creditor's account which the assessee failed to reconcile before the AO and before the Commissioner (Appeals). The assessee's explanations-non-traceability of vouchers, non-recording of certain sales, inflated stock for bank purposes-were not supported by purchase books, sales registers or stock registers, and the assessee did not produce documentary proof despite opportunities at remand and appellate stages. Given the failure to discharge the onus to explain and reconcile the creditor balance, the Commissioner (Appeals) correctly treated the excess as unexplained credit and confirmed the addition. [Paras 3, 7]

Addition of Rs. 25,50,000/- as unexplained credit is upheld.

Estimation of income in absence of evidence - burden of proof on assessee to reconcile sundry creditors - Whether the assessee's alternative plea for assessing gross profit @5.58% on the unreconciled difference should be accepted in lieu of the addition - HELD THAT: - The Tribunal held that estimation of gross profit on the unreconciled difference is impermissible in the absence of proper reconciliation and supporting evidence of purchases, sales and sources. The assessee had suggested acceptance of gross profit @5.58% before lower authorities but failed to produce necessary records or satisfactorily explain the source of the difference when given opportunity; consequently estimation on that basis was rejected. [Paras 7]

Claim for assessment by estimating gross profit @5.58% is rejected; estimation is inappropriate without corroborative evidence.

Final Conclusion: The appeal is dismissed and the order of the Commissioner (Appeals) confirming the addition of Rs. 25,50,000/- as unexplained credit is upheld; no enhancement notice was required and the assessee's alternative plea for estimation of gross profit is rejected.

Allowability of bad debts written off under section 36(1)(vii) - requirement of prior inclusion of the debt in assessee's income under section 36(2)(i) - accounting write off as sufficient evidence of irrecoverability (TRF Ltd. principle) - genuineness of creditors and evidentiary burden to disprove existence of debtors

Allowability of bad debts written off under section 36(1)(vii) - accounting write off as sufficient evidence of irrecoverability (TRF Ltd. principle) - genuineness of creditors and evidentiary burden to disprove existence of debtors - Assessee's claim of deduction for bad debts written off during the year was allowable. - HELD THAT: - The Tribunal found that the assessee had shown the amounts as income in earlier years and had written off the debts in the accounts for the year under appeal, thereby satisfying the conditions for deduction under section 36(1)(vii) read with section 36(2)(i). The Court relied on the settled principle in TRF Ltd that after the 1989 amendment an accounting write off is sufficient and it is not necessary for the assessee to establish as a factual matter that the debt became irrecoverable in the year of write off. The AO's attempt to disbelieve the debts because notices under section 133(6) sent to six randomly selected debtors could not be served was held to be insufficient to impugn the existence of all forty one debtors, particularly where the assessee had offered the amounts as income in earlier years and produced the debtor list and addresses. The Tribunal therefore allowed the write off as a deductible bad debt.

Claim for bad debts written off during the year is allowed as a deduction.

Credit of tax deducted at source - verification by Assessing Officer - Credit of TDS claimed by the assessee was not decided on merits and was directed to be verified by the AO. - HELD THAT: - The Tribunal observed that the question whether the assessee had been given credit of TDS required factual verification. It directed the AO to examine records and grant the TDS credit to the assessee in accordance with law if it was found not to have been allowed.

TDS credit issue is remanded to the Assessing Officer for factual verification and appropriate action.

Final Conclusion: Appeal partly allowed: deduction for bad debts written off allowed; the question of short credit of TDS is remanded to the Assessing Officer for verification and rectification if required.

Natural justice - patent mistake apparent on record - reliance on precedent not placed on record - parameters for reimbursement - recall of appellate order - rehearing before a regular Bench

Natural justice - patent mistake apparent on record - reliance on precedent not placed on record - Impugned order suffers from a patent mistake apparent on record by relying on a precedent not brought to the parties' notice, warranting recall. - HELD THAT: - The Bench had relied on the decision in Bovis Lend Lease (I) Pvt. Ltd. in setting out parameters for treating payments as 'reimbursements'. That decision was not cited by either party, nor was it mentioned to the parties at any stage of the original hearing or when the appeal was re-fixed for clarifications. Applying the principle in the Bombay High Court decision cited in the judgment, a finding founded on a precedent not brought to the notice of the parties amounts to a breach of natural justice. The failure to inform the parties of that precedent was inadvertent but material, and therefore the impugned order contains a patent mistake apparent on the face of the record which justifies recalling the order. [Paras 4, 5]

Order dated 07.10.2019 recalled on grounds of violation of natural justice arising from reliance on a precedent not placed before the parties.

Parameters for reimbursement - recall of appellate order - rehearing before a regular Bench - Proceedings are to be re-fixed for hearing before a regular Bench after informing the parties. - HELD THAT: - While the impugned order had earlier set aside the CIT(A)'s order and directed restoration to the file of the AO for de novo adjudication because certain documents were not filed completely, the present Bench found it necessary to recall the impugned order for the reason stated above and to direct fresh adjudication. The appropriate remedial step adopted is to recall the earlier order and direct the Registry to place the matter for hearing before a regular Bench, giving both parties notice so that the issues (including the parameters for reimbursement) may be adjudicated with the parties having the opportunity to address any precedent relied upon. [Paras 5, 6]

Registry directed to fix the case for hearing before a regular Bench after informing both parties; MAs allowed.

Final Conclusion: The Miscellaneous Applications are allowed; the Tribunal's order dated 07.10.2019 is recalled for having relied on a precedent not placed before the parties, and the Registry is directed to list the appeals for hearing before a regular Bench after informing both parties (matters relate to AYs 2013-14 to 2016-17).

One time membership/entrance fees - taxable by spreading over the period for which membership is granted - amortization of lease premium - revenue v. capital character of expenditure - payment of additional premium on behalf of lessor - not a revenue deduction where no obligation under lease and no enduring benefit to assessee - disallowance under section 14A and Rule 8D(2)(iii) - computation to consider only investments yielding exempt income - deductibility of professional fees - nexus and genuineness where services integral to business

One time membership/entrance fees - taxable by spreading over the period for which membership is granted - Treatment of non refundable one time membership/entrance fees received for specified term - HELD THAT: - The Tribunal applied its earlier order in the assessee's own case and directed that where membership is granted for a specified period (here 25 years), the receipt is not to be taxed as a revenue receipt in the year of receipt in full but is to be spread over the period of membership. Following the coordinate bench decision, the Assessing Officer was directed to tax 1/25th of the fee in each year instead of taxing the entire sum in the year of receipt. The same direction was applied mutatis mutandis to the subsequent assessment years covered by these appeals. [Paras 7, 8, 31]

Directed AO to spread the one time membership fees over the period of membership (1/25th each year) and follow Tribunal's earlier order.

Amortization of lease premium - revenue v. capital character of expenditure - payment of additional premium on behalf of lessor - not a revenue deduction where no obligation under lease and no enduring benefit to assessee - Claim of amortization of additional premium paid for release of surplus land under Urban Land Ceiling Act - HELD THAT: - The Tribunal examined the lease deed and the factual matrix and held that there was no obligation on the assessee under the lease to pay the additional premium; the land released by UDA was not shown to be in the assessee's occupation or part of its business asset. The payment was therefore made on behalf of the lessor and did not confer an enduring capital advantage on the assessee. The Supreme Court authorities relied upon by the assessee were held distinguishable on facts. Consequently the claim for amortization of the premium was rejected and the ground of appeal dismissed. [Paras 15, 16, 18, 19]

Claim for amortization of the additional premium disallowed; ground of appeal dismissed.

Disallowance under section 14A and Rule 8D(2)(iii) - computation to consider only investments yielding exempt income - Validity and computation of disallowance under section 14A read with Rule 8D(2)(iii) - HELD THAT: - Having regard to the Special Bench decision in Vireet Investment (as applied by the Tribunal), the Assessing Officer was directed to recompute the disallowance under Rule 8D(2)(iii) by considering only those investments which actually yielded exempt income during the relevant assessment year. The Tribunal made clear that AO must grant the assessee an opportunity before recomputation, and investments in group concerns that yielded exempt income are to be included if they produced exempt income in the relevant year. [Paras 21, 22]

Disallowance under Rule 8D(2)(iii) to be recomputed by AO considering only investments that yielded exempt income; matter remitted for recomputation with opportunity to assessee.

Deductibility of professional fees - nexus and genuineness where services integral to business - Disallowance of professional fees paid to a civil engineer - HELD THAT: - The Assessing Officer and CIT(A) disallowed the fees on the basis that no project commenced during the year and that nexus was not established. The Tribunal noted the assessee's engagement in construction activities and that services of a civil engineer are integral to such activities. In absence of any adverse evidence regarding genuineness or nexus, the Tribunal found the disallowance unsustainable and directed the Assessing Officer to delete the addition. [Paras 25]

Addition on account of professional fees deleted; ground of appeal allowed.

One time membership/entrance fees - taxable by spreading over the period for which membership is granted - disallowance under section 14A and Rule 8D(2)(iii) - computation to consider only investments yielding exempt income - Application of the Tribunal's directions to other assessment years in the group appeals - HELD THAT: - The Tribunal applied the same conclusions and directions given for A.Y. 2010 11 and 2011 12 to the other assessment years (A.Y. 2012 13 to A.Y. 2015 16) where identical grounds were raised: (i) one time membership fees are to be spread over the membership period as directed; and (ii) issues under section 14A were either remitted for recomputation or not pressed by the assessee, as recorded. Consequently the orders were applied mutatis mutandis to those years. [Paras 27, 31, 33]

Orders/directions given for lead years applied mutatis mutandis to the other assessment years; appeals partly allowed accordingly.

Final Conclusion: The Tribunal partly allowed the appeals: (i) directed that one time membership/entrance fees granted for a specified period be spread and taxed proportionately (1/25th per year) following earlier Tribunal orders; (ii) dismissed the assessee's claim for amortization of additional premium paid on release of land under ULCA; (iii) set aside the section 14A/Rule 8D(2)(iii) disallowance for recomputation by the Assessing Officer considering only investments that yielded exempt income; (iv) deleted the addition of professional fees for lack of adverse evidence; and (v) applied these directions to the other assessment years in the group of appeals.

Reopening of assessment under section 147/148 - bogus purchases - addition under section 69C - taxation of profit element only - estimation by reference to gross profit ratio - reasonable disallowance of disputed purchases

Reopening of assessment under section 147/148 - Reopening of assessment was not pressed by the assessee and the ground challenging reopening was dismissed. - HELD THAT: - The assessee did not pursue arguments on the validity of reopening before the Tribunal. The Tribunal therefore treated the ground as not pressed and dismissed the challenge to reopening. No substantive adjudication on the merits of the validity of reopening was undertaken. [Paras 6]

Ground challenging reopening dismissed as not pressed.

Bogus purchases - addition under section 69C - taxation of profit element only - estimation by reference to gross profit ratio - reasonable disallowance of disputed purchases - Addition on account of alleged bogus purchases sustained in part; only the profit element embedded in unverifiable purchases was held taxable and a reasonable disallowance of 12.5% of disputed purchases was directed. - HELD THAT: - The Assessing Officer relied on information from the sales-tax department and disallowed the entire amount of purchases from the alleged hawala/entry providers without rejecting the assessee's books or disputing sales. The Tribunal held that where transactions are not verifiable or parties fail to prove genuineness, taxation should be confined to the profit element embedded in such purchases rather than the entire purchase amount. Having regard to the nature of the assessee's business and the failure to produce sufficient evidence, the Tribunal considered a limited disallowance appropriate to prevent revenue leakage while avoiding an excessive addition. Applying this approach, the Tribunal restricted the disallowance to 12.5% of the disputed purchases and directed the Assessing Officer to give effect accordingly. The same view was applied mutatis mutandis to the other two assessment years which are pari materia. [Paras 13, 14, 15]

Addition confirmed only to the extent of profit element; disallowance restricted to 12.5% of disputed purchases and appeals partly allowed.

Final Conclusion: The Tribunal dismissed the challenge to reopening as not pressed and, on the principal issue, partly allowed the appeals by directing that where purchases from alleged accommodation entry providers are not verifiable, only the profit element be subjected to tax; consequently the disallowance was restricted to 12.5% of the disputed purchases for AYs 2009-10, 2010-11 and 2011-12 and the appeals were partly allowed.

Long term capital gains - computation - fair market value as on 01-04-1981 - Admissibility of valuation report by chartered engineers as basis for fair market value - Principle of consistency in taxation - identical treatment of co-owners - Reliance on guideline values and CPWD rates versus contemporaneous valuation reports

Long term capital gains - computation - fair market value as on 01-04-1981 - Admissibility of valuation report by chartered engineers as basis for fair market value - Principle of consistency in taxation - identical treatment of co-owners - Acceptance of the assessee's computation of long term capital gains based on valuation reports, and consequent rejection of the Assessing Officer's computation. - HELD THAT: - The Tribunal examined competing approaches to determine the fair market value (FMV) as on 01-04-1981 for land, building and improvements: the assessee relied on valuation reports of two chartered engineers while the Assessing Officer relied on guideline values from the Sub-Registrar and CPWD rates. The Tribunal found the engineer valuations to be a legitimate basis for arriving at FMV. Crucially, the Tribunal noted that in respect of one co-owner an identical computation of long term capital gains (LTCG) was accepted by the Assessing Officer in a scrutiny assessment, and held that liability for LTCG cannot differ between co-owners on the same facts. Applying the principle of consistency in taxation, and having found no convincing evidence in appeal to displace the assessee's valuation, the Tribunal concluded that the assessee's computation of LTCG should be accepted. The Tribunal also observed that the assessee did not press any entitlement to deduction under the investment provision relied upon, and therefore the limited dispute before it was confined to adoption of FMV and computation of LTCG. [Paras 8, 9]

The long term capital gains computation submitted by the assessee is accepted and the Assessing Officer's computation is set aside.

Final Conclusion: The appeal is allowed and the assessee's computation of long term capital gains for AY 2006-07 based on the valuation reports is accepted.

Deemed dividend under section 2(22)(e) - advances for commercial and business purposes - possession as intended buyer and not as tenant - annual value of house property and assessment under sections 22 to 27

Deemed dividend under section 2(22)(e) - advances for commercial and business purposes - Whether sums advanced by the company to the shareholder-assessee in connection with a sale agreement for factory land and building are taxable as deemed dividend under section 2(22)(e) or are advances in the nature of commercial/business transactions. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) finding that the impugned advances were made pursuant to a bona fide sale agreement for the company to acquire the assessee's factory premises and were applied to expand the company's manufacturing base. The appellate authority considered the commercial rationale for the purchase, contemporaneous board approvals, banking correspondence indicating the company's use of the premises for manufacture without payment of rent, the treatment of the sums in the company's books as loans/advances for property purchase, subsequent investment in plant and machinery and improved operating performance, and the repayment of advances when the alternate property was acquired. On these facts the Tribunal held that the payments conferred a business benefit on the company and did not constitute a payment for the individual benefit of the shareholder; therefore the provisions of section 2(22)(e) were not attracted and the addition was correctly deleted. The Tribunal also noted that the Revenue failed to dislodge the contemporaneous materials and the CIT(A)'s finding that the transaction was commercial in nature. [Paras 5]

Addition under section 2(22)(e) of Rs. 2,31,00,000/- deleted; Revenue's ground on deemed dividend dismissed.

Possession as intended buyer and not as tenant - annual value of house property and assessment under sections 22 to 27 - Whether the Assessing Officer was justified in estimating and taxing the annual value of the property as income from house property for AY 2014-15 on a presumptive basis. - HELD THAT: - The Tribunal found that during the assessment year the company was in possession of the premises as an intended purchaser under a sale agreement and the assessee had received advances; possession was not in the nature of a tenancy entitling the assessee to rent. The CIT(A) had recorded that no rent was payable during the sale agreement period and that the company's use of the premises followed from the sale transaction. However, the Tribunal observed that the AO relied on the rent actually realised in the succeeding year as the reasonable expected letting value for 2014-15 and that the assessee did not place material to show the AO's estimate was unreasonable. On this basis the Tribunal upheld the AO's assessment of annual value under the house property provisions and allowed the Revenue's appeal on this point. [Paras 6]

AO's assessment of annual value of the property for AY 2014-15 upheld; Revenue's appeal allowed to this extent.

Final Conclusion: The Revenue's appeal is partly allowed: the addition under section 2(22)(e) is deleted as the advances were commercial in nature, but the AO's estimate of annual value of the property for AY 2014-15 is upheld; appeal otherwise dismissed.

Excess physical stock versus book stock - classification of finished (saleable) goods and sub-grade material - valuation of unexplained stock - sale (net realizable) value v. cost - addition under sections 69A/69B/69C by reference to excess stock - application of gross profit rate for quantification of escapement - threshold value and beneficiability/marketability of minerals

Classification of finished (saleable) goods and sub-grade material - threshold value and beneficiability/marketability of minerals - Whether the physical stock found by technical agencies constitutes finished (saleable) iron ore or sub-grade material for the purpose of comparing book-stock with physical stock. - HELD THAT: - The Tribunal analysed the mining and processing sequence, the IBM/MECL technical reports and the assessee's monthly returns and approved mining plans. It observed no dispute on measured quantities but emphasised that the determinative question is the correct categorisation of material as finished goods or sub-grade. The Tribunal held that the processed iron ore quantified by IBM (1,35,681.6 MT) with Fe grade in the 50.12%-54.32% range is to be treated as finished (saleable) iron ore, noting the assessee's own practice of paying royalty on sales in the below-55% grade class. The Tribunal rejected the assessee's approach of conflating ROM, sub-grade dumps and finished stock by applying an 85% iron-recovery figure from the Mining Plan (which refers to ROM composition) to sub-grade dumps; it held that the Mining Plan's 85% figure refers to ROM mineral composition and not to iron content of sub-grade material. The Tribunal also accepted that threshold values and beneficiability/marketability are relevant and that grades below the notified threshold (45%) are waste and may be used for site works. On these bases the Tribunal concluded that the technical categorisation adopted by the Revenue (IBM/MECL) as to finished and sub-grade stocks is correct for the comparison purpose. [Paras 4]

The Tribunal held that the IBM/MECL classification of processed stock as finished (saleable) ore is correct and the assessee's attempt to aggregate sub-grade/ROM into finished stock by applying the 85% figure is unsustainable.

Addition under sections 69A/69B/69C by reference to excess stock - excess physical stock versus book stock - application of gross profit rate for quantification of escapement - Whether an addition under sections 69A/69B (and in valuation aspects section 69C) is maintainable in principle on the facts where a difference between physical and book-stock of finished iron ore exists. - HELD THAT: - The Tribunal accepted the Revenue's premise that a positive difference (excess physical stock) vis-a -vis book records gives rise to an inference of escapement of income and, in principle, is a basis for addition under the relevant undisclosed income provisions. It also analysed the converse situations and observed that excess book-stock (short physical stock) indicates unaccounted disposal. However, on the facts of these appeals the Tribunal found that the discrepancies between category-wise physical and book figures, and the assessee's admitted use of waste/sub-grade/overburden for site works, together with ambiguities in classification and pricing, made reconciliation impracticable on the record then before it. Considering the totality, the Tribunal concluded that no reliable addition could be sustained and that the first appellate authority's partial acceptance of the assessee's explanation was arbitrary, yet overall neither side's figures supported any definitive addition. The Tribunal therefore set aside the Revenue's additions and allowed the assessee's appeals, while cautioning the assessee to maintain proper records for future assessments. [Paras 4, 5]

In principle additions on account of excess physical stock are maintainable, but on the material before it the Tribunal found no dependable basis to uphold the additions and directed deletion of the additions made by the lower authorities.

Valuation of unexplained stock - sale (net realizable) value v. cost - application of gross profit rate for quantification of escapement - At what value are any additions, if sustained, to be made - whether at sale (net realizable) value or at cost, and whether the gross profit rate is the proper measure of escapement. - HELD THAT: - The Tribunal examined competing contentions. It rejected the assessee's contention that excess stock should be valued at nil or merely at cost because excavation/production cost was already absorbed in accounts. The Tribunal held that where physical stock in excess of book-stock is found, the entire sale (net realizable) value of such stock is generally liable to be brought to tax to the extent it exceeds book-stock; however, where the excess arises from undisclosed disposal reflected within books of closed earlier years, adjustments may be made with reference to those years. The Tribunal adopted the settled approach that the quantifiable income escaping assessment is the gross profit on the sale value of the excess book-stock (not the entire sale value where cost has already been reflected in books), because cost of the goods is already accounted for in the books. It further held that the gross profit rate used must be adjusted to add back royalty (if gross profit was computed net of royalty) and that the correct sale rate to be applied is the average realisation for the relevant period (April-October 2014) as reflected in accounts; arbitrary rates (such as the CIT(A)'s unexplained adoption of a lower figure) are impermissible. [Paras 4]

If an addition were sustained it would be quantified by applying the year's gross profit rate (appropriately adjusted for royalty) to the sale (realisation) value based on average rates for the relevant period; cost alone is not the proper basis where cost is already absorbed in books.

Final Conclusion: For AY 2015-16 the Tribunal held that, although additions based on differences between physical and book stocks are in principle sustainable, on the material before it (classification ambiguities, price variability and lack of reliable records) there was no dependable basis to sustain the additions made by the Assessing Officer/CIT(A); consequently the Tribunal deleted the additions and allowed the assessees' appeals, while advising better record-keeping for future assessments.

Condonation of delay - sufficient cause - rectification under section 154 - disallowance under section 14A - application of Rule 8D for disallowance - limitation for filing first appeal

Condonation of delay - sufficient cause - rectification under section 154 - limitation for filing first appeal - disallowance under section 14A - Whether the delay in filing the first appeal against the assessment order for AY 2009-10 was liable to be condoned. - HELD THAT: - The Assessing Officer completed assessment under section 143(3) on 31.10.2011 and made a disallowance under section 14A (applying Rule 8D) which the assessee did not appeal within the prescribed period. The assessee subsequently filed an application under section 154 which was dismissed on 02.06.2015 and thereafter filed the appeal before the First Appellate Authority on 27.02.2017, after an inordinate delay. The CIT(A) declined to condone the delay on the ground that the assessee failed to provide a satisfactory explanation or documentary evidence justifying the long delay even after dismissal of the rectification application. The Tribunal examined the written submissions and case law relied upon by the assessee and found them inapplicable on the facts: the assessee was aware of the disallowance and neither pursued the statutory appeal in time nor furnished sufficient cause for belated filing. In the absence of any explanation or supporting documents before the Tribunal, the Tribunal concurred with the CIT(A)'s conclusion that there was no justifiable reason to condone the delay. [Paras 5, 6]

Delay in filing the appeal was not condoned and the appeal was dismissed for lack of sufficient cause.

Final Conclusion: The Tribunal upheld the CIT(A)'s refusal to condone the delay in filing the first appeal against the assessment for AY 2009-10 and dismissed the assessee's appeal.

Refund of duty paid under protest - reassessment of Bill of Entry after protest - cess vis-a -vis duty of excise - binding effect of Board circular

Refund of duty paid under protest - reassessment of Bill of Entry after protest - Whether marking protest at the time of payment of duty on Bill of Entry precludes refund in absence of a separate request for reassessment and whether decisions requiring reassessment apply. - HELD THAT: - The Tribunal held that marking a protest at the time of payment of duty on the Bill of Entry conveys to the department that reassessment is required and therefore the assessment under Section 17 of the Customs Act cannot be treated as final. Where protest is duly marked, the department is expected to initiate proceedings to vacate the protest and pass a speaking order for reassessment; failure to do so cannot be used to deny a refund claim. Accordingly, precedents relied upon by the department to the effect that a taxpayer must seek reassessment (where duties were paid voluntarily without protest) are not applicable to the present facts where payment was made under protest. [Paras 7]

Marking protest while paying duty on the Bill of Entry prevents the assessment from being treated as final and the respondents are not disentitled to claim refund on that ground.

Cess vis-a -vis duty of excise - binding effect of Board circular - Whether sugar cess paid on imported raw sugar is leviable (i.e., constitutes a duty of excise) or is not leviable on imports in view of the Board's clarification that such cess is not a duty of excise. - HELD THAT: - The Commissioner (Appeals) relied on earlier tribunal decisions and on the Board's letter dated 10.08.2004 which clarified that certain cesses (including sugar cess) are not duties of excise, even if collected by the Department of Revenue. The Tribunal accepted that, notwithstanding contrary decisions treating sugar cess as a duty of excise, the Board's clarification is binding on the department and that sugar cess is levied by the Ministry of Consumer Affairs and not as an excise duty by the Ministry of Finance. Applying that reasoning, the Tribunal concluded that sugar cess is not leviable on imported raw sugar and thus the respondents' payment of sugar cess on import was refundable. [Paras 8, 9]

Sugar cess is not a duty of excise for the purposes of levy on imported raw sugar and the cess paid on import is eligible for refund in the facts of this case.

Final Conclusion: The departmental appeal is dismissed; respondents' refund claim is sustainable because protest at the time of payment precluded finalisation of assessment and sugar cess is not leviable on imported raw sugar in view of the Board's clarification.

Principles of natural justice - Right to documents relied upon in show cause notice - Remand for de novo consideration - Duty to provide relied upon documents before adjudication - Direction for expeditious disposal on remand

Principles of natural justice - Right to documents relied upon in show cause notice - Order-in-original and order-in-appeal were passed in violation of principles of natural justice because documents relied upon in the show cause notice were not supplied to the appellant. - HELD THAT: - The appellants had specifically requested copies of shipping bills and test reports relied upon in the show cause notice (para E.6 of their submissions). The adjudicating authority proceeded to confirm the demand without supplying those relied-upon documents or recording any finding on the request. The Tribunal accepts the appellants' submission that reliance in the adjudicating order upon a clarification not disclosed to the appellant amounted to a breach of natural justice and therefore the orders of the lower authorities cannot be sustained (see the Tribunal's agreement recorded at para 4.5). [Paras 4]

Finding of violation of principles of natural justice and that the impugned orders cannot be sustained.

Remand for de novo consideration - Duty to provide relied upon documents before adjudication - Direction for expeditious disposal on remand - Matter remanded to the adjudicating authority for de novo consideration after supplying the relied upon documents to the appellant, with a direction to conclude proceedings within a stipulated time. - HELD THAT: - Having found a breach of natural justice, the Tribunal remitted the case for fresh adjudication. The adjudicating authority is to provide the documents relied upon in the show cause notice to the appellant and conduct de novo proceedings. In view of the age of the matter, the Tribunal directed that the adjudicating authority endeavour to dispose of the matter within four months from receipt of the order (para 5.1). The remand requires fresh consideration rather than an affirmance on merits. [Paras 5]

Appeal allowed and matter remanded for de novo consideration after furnishing relied-upon documents; disposal to be attempted within four months.

Final Conclusion: The Tribunal allowed the appeal, held that the impugned orders were passed in breach of principles of natural justice for non-supply of documents relied upon, and remanded the matter to the adjudicating authority for de novo consideration after providing the relied-upon documents to the appellant, directing expeditious disposal within four months.

Admission of application under section 9 of the Code - service and sufficiency of demand notice in Form 3/4 - absence of notice of dispute - plausibility test (Mobilox standard) - limitation for operational debt - computation from contractual due date - moratorium under section 14 of the Code - appointment of Interim Resolution Professional under section 16 of the Code

Service and sufficiency of demand notice in Form 3/4 - absence of notice of dispute - plausibility test (Mobilox standard) - The demand notice in Form 3/4 was duly delivered to the corporate debtor and no notice of dispute was communicated within the statutory period. - HELD THAT: - The Tribunal found that the operational creditor served the demand notice dated 04-01-2018 and produced the tracking report showing delivery (Annexure D) and the supporting affidavit. The corporate debtor did not reply to the demand notice within the stipulated period, and therefore did not bring to the operational creditor's notice any dispute in the prescribed manner. Applying the standard that the Adjudicating Authority must reject only a dispute that is bona fide and plausible (as explained in Mobilox), the Tribunal held that absence of a reply amounted to no notice of dispute and supported admission of the application. [Paras 5, 14]

Demand notice was delivered and no notice of dispute was received; this condition under section 9(5)(i) is satisfied.

Absence of notice of dispute - plausibility test (Mobilox standard) - effect of debit notes as evidence - The debit notes relied on by the corporate debtor do not constitute sufficient evidence of a plausible dispute to defeat the petition. - HELD THAT: - The corporate debtor produced debit notes allegedly adjusting losses; the operational creditor denied receipt. The Tribunal examined the material and concluded the debit notes were insufficient to establish a credible dispute at the admission stage. Further, even if the debit notes were accepted, after deducting their effect the admitted claim would still exceed the statutory threshold required for admission. The Tribunal therefore treated the debit notes as inadequate to vitiate admission under section 9. [Paras 12, 13, 14]

The debit notes do not amount to a plausible dispute that would require rejection of the application.

Limitation for operational debt - computation from contractual due date - The petition is within limitation; limitation begins from the contractual due date of payment and not merely from the dates of earlier invoices. - HELD THAT: - The Tribunal relied on the ledger and bank statement to infer that the last payment relevant to the invoices was on 22-07-2015 and that the due date for the last invoice dated 23-07-2015 was 22-08-2015. Accordingly, the period of limitation commenced from 22-08-2015, and the petition filed on 17-08-2018 was held to be within the limitation period for initiating proceedings under section 9. [Paras 15]

Limitation period commenced on 22-08-2015 and the petition filed on 17-08-2018 is within time.

Admission of application under section 9 of the Code - The application under section 9 is admitted and the Corporate Insolvency Resolution Process is ordered to be initiated against the corporate debtor. - HELD THAT: - Having found that the operational debt remained unpaid, that the demand notice was delivered and no effective notice of dispute was received, and that the petition was within limitation, the Tribunal held that the conditions of section 9(5)(i) were satisfied. In consequence the petition was admitted and the Tribunal proceeded to direct initiation of CIRP. [Paras 17, 18]

The petition under section 9 is admitted and CIRP is initiated against the corporate debtor.

Moratorium under section 14 of the Code - A moratorium under section 14 is declared with effect from the date of the order until completion of the CIRP or further order. - HELD THAT: - On admission of the section 9 application the Tribunal declared the moratorium in terms of section 14(1), restraining institution or continuation of suits, transfer or disposal of assets, enforcement of security interests and recovery of property by lessors, and directed that supply of essential goods or services not be terminated during the moratorium subject to statutory exceptions. [Paras 19, 20, 21]

Moratorium under section 14 is declared from the date of the order until completion of CIRP or further order.

Appointment of Interim Resolution Professional under section 16 of the Code - Mr. Ashok Kumar Singla is appointed as Interim Resolution Professional in terms of the Code and directions are issued regarding his functions and duties. - HELD THAT: - As the operational creditor did not propose an IRP, the Tribunal acted pursuant to section 16(3)(a) and the Board's recommendation. The Tribunal selected Mr. Ashok Kumar Singla from the approved panel, verified there was nothing adverse on record, and appointed him as Interim Resolution Professional. The Tribunal specified the scope and duration of his role, directed public announcement, inventory and claim collation, constitution of the committee of creditors, and regular progress reporting to the Tribunal. [Paras 22, 23, 24, 25]

Mr. Ashok Kumar Singla is appointed as Interim Resolution Professional with specified duties and directions.

Final Conclusion: The Tribunal admitted the application under section 9, held the demand notice to be duly served and no plausible dispute established, found the petition within limitation, declared moratorium under section 14 and appointed Mr. Ashok Kumar Singla as Interim Resolution Professional to conduct the CIRP.

Liquidation under section 33(1)(a) - non-receipt of resolution plan within CIRP period - role of Resolution Professional as Liquidator under section 34(1) - replacement of RP by Adjudicating Authority under section 34(4) - appointment of liquidator from IBBI panel pursuant to section 34(5)-(7) - liquidation costs and contribution by committee under Regulation 39B - assessment of sale as a going concern under Regulation 39C - fixing fee of the liquidator under Regulation 39D - public announcement and submission of claims under Liquidation Process Regulations

Liquidation under section 33(1)(a) - non-receipt of resolution plan within CIRP period - Order for liquidation of the Corporate Debtor was to be passed as no resolution plan was received within the insolvency resolution process period. - HELD THAT: - The Adjudicating Authority noted that the corporate insolvency resolution process had expired and no resolution plan under section 30(6) was received before the expiry of the CIRP period. The statutory mandate in section 33(1)(a) requires that where no plan is received within the prescribed period, the Authority shall pass an order requiring the corporate debtor to be liquidated, issue a public announcement of liquidation and send the order to the authority with which the corporate debtor is registered. On the basis of the absence of any resolution plan by the relevant dates, the Authority directed that the Corporate Debtor be liquidated in accordance with Chapter III of the Code and issued the consequential directions required by section 33. [Paras 11]

Isolux Corsan India Engineering & Construction (P.) Ltd. ordered to be liquidated under section 33(1)(a); directions under section 33 issued.

Role of Resolution Professional as Liquidator under section 34(1) - replacement of RP by Adjudicating Authority under section 34(4) - appointment of liquidator from IBBI panel pursuant to section 34(5)-(7) - Resolution Professional did not give written consent to act as Liquidator and the Adjudicating Authority appointed a liquidator from the IBBI panel. - HELD THAT: - Section 34(1) provides that the RP shall act as liquidator upon submission of written consent, and section 34(4) empowers the Authority to replace the RP if such consent is not furnished. Having recorded that the RP did not submit written consent (and that the CoC had not approved appointment/fees), the Authority exercised its power under section 34(5)-(7) to direct the Board to propose and then appoint another insolvency professional. The Tribunal received the IBBI panel and selected Mr. Rajeev Bansal from the approved panel; his credentials were examined and found unexceptionable, and he was appointed as Liquidator. [Paras 13, 14, 15, 16, 17]

Mr. Rajeev Bansal appointed as Liquidator in place of the RP who did not give written consent.

Liquidation costs and contribution by committee under Regulation 39B - assessment of sale as a going concern under Regulation 39C - fixing fee of the liquidator under Regulation 39D - Committee of Creditors did not approve a contribution plan under Regulation 39B(3); the CoC approved sale of specified business as a going concern under Regulation 39C; Liquidator's fee not approved by CoC and shall be payable under Liquidation Process Regulations. - HELD THAT: - The Tribunal noted insertion of Regulations 39B-39D and examined the CoC's decisions in the 14th meeting. The CoC did not approve a plan under Regulation 39B(3) for contribution to meet any shortfall between estimated liquidation costs and liquid assets, preferring to sanction an initial corpus and allow quarterly contributions and stakeholder consultation under Regulation 2A of the Liquidation Process Regulations. Separately, the CoC approved sale of the EPC contract/business as a going concern in liquidation in accordance with Regulation 39C. As the CoC did not approve the appointment and fees of the Liquidator, the Tribunal directed that the Liquidator's fees shall be paid in accordance with Regulation 4(2) and 4(3) of the Liquidation Process Regulations, 2016. [Paras 19, 20, 21, 22]

No plan under Regulation 39B(3) approved; sale of specified business as a going concern approved; Liquidator's fee to be paid as per applicable Liquidation Process Regulations.

Public announcement and submission of claims under Liquidation Process Regulations - compliance with Chapter III of the Code - Directions issued concerning compliance with Chapter III, publication of public announcement, and the procedure and timeline for submission of claims and reports by the Liquidator. - HELD THAT: - The Authority directed strict compliance with Chapter III of the Code and the Liquidation Process Regulations. Specific directions included embargo on suits against the corporate debtor except as permitted, deemed discharge of employees, vesting of powers in the Liquidator, and cooperation by personnel. The Liquidator was directed to publish the public announcement in the prescribed manner within five days of receipt of the order, calling for claims as on the liquidation commencement date and fixing the last date for claims at thirty days from the liquidation commencement date. Further directions required filing of the preliminary report within 75 days and fortnightly progress reports thereafter. [Paras 23, 24, 25, 26]

Directions given for compliance with Chapter III and Liquidation Process Regulations, public announcement to be published within five days, claims to be submitted within 30 days of liquidation commencement date, and filing of requisite reports by the Liquidator.

Final Conclusion: The Tribunal ordered liquidation of Isolux Corsan India Engineering & Construction (P.) Ltd. under section 33(1)(a); appointed Mr. Rajeev Bansal as Liquidator in place of the RP who did not consent; recorded the CoC decisions (no contribution plan under Regulation 39B, approval of sale as a going concern under Regulation 39C) and directed that Liquidator's fees, publication, claims procedure and other steps be undertaken in accordance with the Liquidation Process Regulations and Chapter III of the Code.

Admission of petition under section 9 of the Insolvency & Bankruptcy Code, 2016 - default of operational debt - consent terms and breach - demand notice under section 8 of the IBC - moratorium under section 14 of the IBC - appointment of Interim Resolution Professional - management vesting with IRP under section 17 of the IBC - public announcement of Corporate Insolvency Resolution Process

Admission of petition under section 9 of the Insolvency & Bankruptcy Code, 2016 - default of operational debt - demand notice under section 8 of the IBC - Operational Creditor's petition under section 9 is admitted on the ground of established default of a debt due and payable. - HELD THAT: - The Tribunal found that invoices were issued for supply of goods and that the date of default is recorded. A Demand Notice in Form 3 was served and remained unanswered. The application complied with statutory requirements and the default exceeded the statutory monetary threshold. In the absence of any reply or representation by the Corporate Debtor and on the material placed on record, the Tribunal concluded that the statutory preconditions for admission under section 9 were satisfied and there was no reason to deny admission. [Paras 3, 5, 6, 8, 13]

Petition under section 9 admitted and CIRP ordered to be initiated against the Corporate Debtor.

Consent terms and breach - default of operational debt - Corporate Debtor had earlier admitted liability by Consent Terms and subsequently breached those terms leading to fresh default. - HELD THAT: - The Tribunal recorded that in prior proceedings the Corporate Debtor had admitted debt and entered into Consent Terms providing for payment in instalments. The Corporate Debtor made only the first instalment and failed to pay the balance, thereby violating the Consent Terms. This admission and subsequent non compliance formed part of the material establishing default in the present petition. [Paras 7, 9, 10, 11, 12]

The earlier admission and breach of Consent Terms corroborate the existence of default and support admission of the present petition.

Moratorium under section 14 of the IBC - A moratorium under section 14 is imposed with the scope and duration as set out in the order. - HELD THAT: - On admission of the petition and initiation of CIRP, the Tribunal directed the statutory moratorium to operate from the date of the order until completion of CIRP or until approval of a resolution plan or order for liquidation. The moratorium covers institution or continuation of suits, transfer or disposal of assets, enforcement of security interests, and recovery of property occupied by the Corporate Debtor, subject to the statutory exceptions. [Paras 15]

Statutory moratorium declared as part of the admission order.

Appointment of Interim Resolution Professional - management vesting with IRP under section 17 of the IBC - public announcement of Corporate Insolvency Resolution Process - An Interim Resolution Professional (IRP) is appointed, public announcement of CIRP is directed, and management of the Corporate Debtor vests in the IRP. - HELD THAT: - The Operational Creditor proposed a registered insolvency professional who filed the requisite Form 2 and certificate of registration. The Tribunal appointed the proposed professional as IRP, directed immediate public announcement of the CIRP as per the regulations, and stated that the IRP shall perform functions under the relevant provisions of the IBC. The order also records that management shall vest in the IRP and officers of the Corporate Debtor must furnish documents and information within one week. [Paras 14, 15]

Mr. Uday Shreeram Sakrikar appointed as IRP; public announcement directed; management vested in the IRP.

Operational creditor's deposit towards CIRP expenses - Operational Creditor directed to deposit an amount to meet initial CIRP expenses with the IRP. - HELD THAT: - As part of directions incidental to initiation of CIRP, the Tribunal ordered the Operational Creditor to deposit a specified sum with the IRP to meet expenses arising from issuing public notice and inviting claims. The Tribunal recorded that such expenses will be subject to approval by the Committee of Creditors. [Paras 15]

Operational Creditor to deposit the directed sum with the IRP for CIRP expenses.

Final Conclusion: The Tribunal admitted the Section 9 petition on the basis of established default, recorded prior admission and breach of Consent Terms, initiated CIRP, imposed the statutory moratorium, appointed the proposed Interim Resolution Professional who will assume management, directed public announcement of the CIRP and required the Operational Creditor to deposit the specified amount for CIRP expenses.

Registration of FIR on complaint disclosing a cognizable offence - cognizable offence of forgery in document filed by opposing party - police power to investigate not circumscribed by Section 195 Cr.P.C. - Section 195 Cr.P.C. restricts court's cognizance, not police investigation - preliminary inquiry limited to existence of cognizable offence and not verification of merits - High Court's Article 226 jurisdiction not ordinarily to direct registration of FIR where alternate remedies exist

Registration of FIR on complaint disclosing a cognizable offence - cognizable offence of forgery in document filed by opposing party - police power to investigate not circumscribed by Section 195 Cr.P.C. - preliminary inquiry limited to existence of cognizable offence and not verification of merits - The validity of the respondent police authorities' refusal to register an FIR on the petitioner's complaint alleging forgery. - HELD THAT: - The court held that where a complaint alleges commission of forgery in respect of a ledger statement purportedly forged and produced by the opposite party, such complaint discloses a cognizable offence and the police are obliged to register an FIR and investigate under the Code. Section 195 Cr.P.C. bars a court from taking cognizance of certain offences except in specified circumstances, but it does not curtail the statutory power of the police to investigate cognizable offences. The constitutional bench authority explaining Section 195(1)(b)(ii) was applied to reject the view that offences allegedly committed prior to production of a document in court prevent police inquiry; a restrictive interpretation prevents victims being rendered remediless. The court further observed that preliminary inquiry by police is permissible only to ascertain whether the information discloses a cognizable offence and not to go into the veracity of the claim; the notice issued to the petitioner directing him to NCLT on the ground of a civil dispute did not record reasons showing absence of a cognizable offence and therefore was unjustified. Consequently, the police ought to have registered an FIR and proceeded to investigate under the Code. [Paras 13, 14, 16, 17, 18]

Respondent police should have registered an FIR on the petitioner's complaint alleging forgery and taken up investigation; their refusal on the ground that the matter is a civil dispute before NCLT was not legally tenable.

High Court's Article 226 jurisdiction not ordinarily to direct registration of FIR where alternate remedies exist - Section 154(3) and Section 156(3) Cr.P.C. and private complaint / magistrate remedy - precedent discouraging writ petitions for non-registration of FIR - Whether this High Court can, in exercise of its writ jurisdiction under Article 226, direct the respondent police to register an FIR. - HELD THAT: - Notwithstanding the conclusion that the police ought to have registered an FIR, the court applied binding Supreme Court precedents which caution against High Courts entertaining writ petitions seeking direction for registration of FIRs. The established practice requires an aggrieved person to first invoke statutory remedies - approach the Superintendent of Police under Section 154(3), or the Magistrate under Section 156(3), or file a private complaint - and only in appropriate cases seek extraordinary relief. The court relied on Sakiri Vasu and subsequent authoritative decisions which hold that High Courts should ordinarily refuse to interfere and relegate litigants to these alternate remedies. Thus, even though the action of the police was found erroneous, the High Court could not itself direct registration of the FIR in exercise of Article 226. [Paras 21, 22, 23, 24, 25]

The High Court will not direct registration of an FIR in this writ petition; the petitioner is left to pursue the statutory and alternate remedies available in law (such as Section 154(3), Section 156(3) Cr.P.C. or a private complaint).

Final Conclusion: The court found that the police erred in declining to register an FIR on the petitioner's complaint alleging forgery and should have carried out investigation, but, following binding Supreme Court precedents, the High Court nonetheless declined to direct registration of the FIR in this writ petition and left the petitioner to pursue the alternate remedies provided under the Code.

Provisional Attachment - Proceeds of Crime - Money Laundering - Possession of Proceeds of Crime - Adjudicating Authority's Findings - Modification of Order - Lessor Lessee Distinction

Provisional Attachment - Proceeds of Crime - Possession of Proceeds of Crime - Adjudicating Authority's Findings - Modification of Order - Lessor Lessee Distinction - Whether the Adjudicating Authority correctly included the appellant (lessor) within the findings that the defendants committed scheduled offences, generated proceeds of crime and laundered them, and whether the order required modification. - HELD THAT: - The Appellate Tribunal examined the impugned Provisional Attachment Order and the Adjudicating Authority's concluding observations and found no material or allegation by the Enforcement Directorate that the appellant had committed the scheduled offences, generated proceeds of crime or laundered them. The record shows the appellant was made a party because it was the lessor of the property over which others held lease rights. The ED itself stated it had no objection to modifying the Adjudicating Authority's order insofar as it implicated the appellant. In these circumstances the Tribunal held that the Adjudicating Authority's implication of the appellant along with the other defendants was not supported legally or factually and required correction. Consequently the Tribunal modified the impugned order by excluding the appellant from the observations and findings that the defendants were in possession of proceeds of crime or had committed the scheduled offences, while leaving the remainder of the attachment order intact as applicable to the others. [Paras 9, 12, 13]

The impugned order is modified to the extent that references to 'defendants' being in possession of proceeds of crime or having committed scheduled offences shall exclude the appellant (defendant no.4); the appeal is disposed of accordingly.

Final Conclusion: The Tribunal modified the Adjudicating Authority's order to exclude the appellant (the lessor) from the findings that the defendants had committed scheduled offences, generated proceeds of crime and laundered them, and disposed of the appeal accordingly.

Valuation of taxable service excluding cost of parts or materials - Deemed sale under Article 366(29A)(b) of the Constitution - Exemption under Notification No.12/2003 ST subject to documentary proof of value of goods - Exclusionary principle in Section 67 of the Finance Act in valuation of services - Retention of service component where material component is taxed under local/State law - Precedential effect of Safety Retreading Company judgment

Valuation of taxable service excluding cost of parts or materials - Deemed sale under Article 366(29A)(b) of the Constitution - Exclusionary principle in Section 67 of the Finance Act in valuation of services - In a contract for retreading of tyres, the material component used and transferred to the customer is to be excluded from the value of taxable service; the service component alone is taxable. - HELD THAT: - The Court held that the correct legal proposition is that an assessee is liable to pay service tax only on the service component and that costs of parts or other material sold or deemed sold to the customer in the execution of repairs/retreading are excluded from valuation under the statutory scheme. The judgment relies on the reasoning in Safety Retreading Company where the Supreme Court set aside the majority view of the Tribunal and held that Section 67 (and the Notification of 20.6.2003) contemplates exclusion of material/parts which are sold or deemed sold to the customer, subject to adequate proof. The Tribunal's reliance on the Larger Bench decision in the photography context was found distinguishable and not applicable to the retreading context; the Apex Court's analysis governs and requires exclusion of the material component where such component is taxed under the State/local law and adequately shown. [Paras 6, 11, 12]

Issue answered in favour of the assessee; impugned demand set aside insofar as it sought service tax on the material component and the appeal allowed.

Exemption under Notification No.12/2003 ST subject to documentary proof of value of goods - Scope of 'sale' in exemption: statutory sale versus deemed sale - The term 'sale' for the purpose of the exemption must be understood to cover the deemed sale of parts/materials transferred in execution of repairs/retreading and the benefit of the Notification applies subject to production of adequate and satisfactory proof of the value of goods. - HELD THAT: - The Court accepted that Notification No.12/2003 ST and the statutory scheme (as explicated in Section 67 and relevant circulars) permit exclusion of the goods/materials component when they amount to a sale or deemed sale to the service recipient, but such exclusion is conditional on documentary proof. The Court noted the clarificatory circulars but applied the ratio of the Supreme Court in Safety Retreading Company which recognised that where the material component is assessed under the local/State law (and appropriate evidence exists), that component is to be excluded from service tax valuation. The Tribunal's contrary approach was thereby set aside. [Paras 7, 11, 12]

Issue answered in favour of the assessee; exemption applicable to material component if adequately documented, and the Tribunal's order upholding tax on the material component is set aside.

Final Conclusion: The substantial questions of law are answered in favour of the assessee; the Tribunal's order is set aside and the appeal is allowed, applying the Supreme Court's decision in Safety Retreading Company to exclude the material component from service tax valuation where adequately established for the period 16.06.2005 to 31.03.2007.

Composite service and ancillary transportation - Custom House Agent (CHA) services - exclusion of reimbursable transportation charges - stevedoring activity not being Port Services - penalty under Sections 76, 77 and 78 of the Finance Act, 1994

Composite service and ancillary transportation - Custom House Agent (CHA) services - exclusion of reimbursable transportation charges - Whether transportation charges collected and shown separately in CHA bills form part of taxable CHA composite service or are to be excluded as reimbursable transportation. - HELD THAT: - The Tribunal applied its earlier reasoning in the respondent's own preceding case and accepted documentary evidence showing transportation charges separately indicated in bills. The Tribunal held that where transportation is billed separately and represents reimbursement for services rendered in the assessee's own trucks, such amount cannot be aggregated as part of the CHA composite service for levy of service tax. The adjudicating authority's finding that separate accounts were not kept was rejected on the basis of the bills demonstrating distinct transportation charges; consequently those amounts must be excluded from the taxable value of CHA services.

Transportation charges separately shown in CHA bills are excluded from the taxable value of CHA composite service; demand based on including those charges set aside.

Stevedoring activity not being Port Services - Whether stevedoring charges collected by the assessee amount to taxable Port Services. - HELD THAT: - Relying on earlier Tribunal precedents cited in the reproduced earlier order, the Tribunal found that stevedoring - loading and unloading of cargo performed by the appellant on its own behalf under port licence - does not amount to Port Services for the purpose of service tax. The ratio of the cited decisions was applied to the facts, leading to the conclusion that the demand on account of stevedoring charges was unsustainable.

Stevedoring charges are not taxable as Port Services; corresponding demand set aside.

Penalty under Sections 76, 77 and 78 of the Finance Act, 1994 - Whether penalties imposed under Sections 76, 77 and 78 are justified once the primary demands are set aside. - HELD THAT: - The Tribunal reasoned that where the demands themselves are not sustainable - being set aside in respect of stevedoring and inclusion of transportation charges - there is no justification for the imposition of the penalties. Accordingly, the penalties imposed by the adjudicating authority were also found to be unsustainable.

Penalties under Sections 76, 77 and 78 set aside as there is no sustaining demand.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, sustained the order in favour of the respondent by setting aside demands relating to stevedoring and inclusion of separately billed transportation charges in CHA services, and quashed the penalties; appeal by Revenue is dismissed.

Refund of Swachh Bharat Cess on input services used for export of services - Cenvat credit of Swachh Bharat Cess - Section 119 of the Finance Act, 2015

Refund of Swachh Bharat Cess on input services used for export of services - Cenvat credit of Swachh Bharat Cess - Section 119 of the Finance Act, 2015 - Appellants are entitled to refund of Swachh Bharat Cess paid on input services used for providing export of services. - HELD THAT: - The Adjudicating Authority and the Commissioner (Appeals) rejected refund claims on the ground that no provision or Notification permits refund of Swachh Bharat Cess (SBC) paid on input services used for export of services. This Tribunal found the issue no longer res integra in view of earlier decisions in the appellant's own cases, namely State Street Syntel Services Pvt. Ltd. vs. Commr. of Central GST & Central Excise, Mumbai and M/s. State Street Syntel Services Pvt. Ltd. vs. Commr. of CGST, Navi Mumbai , in which the Tribunal, after discussing Section 119 of the Finance Act, 2015 and precedents, held that SBC paid on input services is available as Cenvat credit of Swachh Bharat Cess, can be utilized for discharge of service tax liability and is refundable in the context of export of services. Applying those decisions to the facts before it and considering the totality of circumstances, the Tribunal set aside the impugned order and held that the appellants are entitled to refund of SBC used for export of services. [Paras 4, 5]

Impugned order set aside; appeals allowed and appellants held entitled to refund of Swachh Bharat Cess used for export of services with consequential relief as per law.

Final Conclusion: Appeals allowed; refund of Swachh Bharat Cess paid on input services used for export of services granted to the appellants, following the Tribunal's earlier decisions, with consequential relief as per law.

Summary order. I.A. No.2484/2020 allowed; appeal dismissed as withdrawn with liberty to the appellant to file an application before the competent authority under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 for compounding, which shall be considered and decided in accordance with law by a reasoned and speaking order; appellant permitted to apply for revival of the appeal if grievance survives after the authority's order.

Manufacture - packing or repacking as manufacture - packing, labelling or relabelling under the Third Schedule - CENVAT credit availability where excise duty has been paid and returns filed - extended period of limitation - disclosure in returns and suppression - recovery of CENVAT credit - consequences for interest and penalty where credit cannot be recovered

Manufacture - packing or repacking as manufacture - packing, labelling or relabelling under the Third Schedule - Whether repacking and affixing MRP on imported DVDs amounted to 'manufacture' for the purposes of central excise. - HELD THAT: - The Court examined Section 2(f) and held that the statutory fiction treating packing, repacking, labelling or relabelling as 'manufacture' applies only to goods specified in the Third Schedule to the Central Excise Tariff Act, 1985. The imported DVDs were classifiable under tariff heading 85234080, which is not included in the Third Schedule, and the chapter heading invoked by the appellant (8708) is also not covered. Labelling or relabelling of these DVDs therefore did not convert them into excisable goods nor amount to 'manufacture' as defined in the statute. Consequently, the excise duty paid by the appellant treating the activity as manufacture was not supported by law. [Paras 9]

The repacking and affixing of MRP on the imported DVDs did not amount to 'manufacture' within the meaning of Section 2(f).

Extended period of limitation - disclosure in returns and suppression - Whether recovery of CENVAT credit could be sustained by invoking the extended period of limitation given the appellant's returns and disclosures. - HELD THAT: - The Court found that the appellant had disclosed the relevant clearances and duty payments in the statutory returns. Scrutiny of those returns by the department could have detected the erroneous payment of excise despite the appellant's use of CENVAT credit. As the required return details were filed, the department could not properly treat the matter as suppression to invoke extended limitation. The SCN issued in February 2015, well beyond the normal period, therefore could not sustain recovery on limitation grounds. [Paras 10]

Invocation of the extended period of limitation to recover CENVAT credit did not sustain because the appellant had filed the returns disclosing the transactions.

CENVAT credit availability where excise duty has been paid and returns filed - recovery of CENVAT credit - Whether CENVAT credit can be denied and recovered where the assessee treated the activity as manufacture, paid excise duty, and included the clearances in returns. - HELD THAT: - Relying on the ratio of the decision of the Hon'ble High Court of Karnataka in Vishal Precision Steel Tubes & Strips Pvt. Ltd., the Tribunal held that where the assessee has treated an activity as manufacture, paid excise duty accordingly and made the requisite disclosures in returns, CENVAT credit cannot subsequently be denied and recovered merely because the activity was later held not to be 'manufacture'. That precedent binds the Tribunal and mandates denial of recovery in such circumstances. [Paras 11]

CENVAT credit could not be recovered from the appellant where excise duty was paid and the transactions were disclosed in returns.

Consequences for interest and penalty where credit cannot be recovered - Whether interest and penalties could be sustained once recovery of CENVAT credit was held unsustainable. - HELD THAT: - Having held that recovery of CENVAT credit could not be sustained, the Tribunal proceeded that consequential demands for interest and imposition of penalties based on such recovery could not survive. The denial of the primary demand removes the foundation for the ancillary interest and penalty demands. [Paras 12]

The demands for interest and penalties do not survive once the recovery of CENVAT credit is set aside.

Final Conclusion: The impugned order confirming recovery of CENVAT credit, interest and penalties was set aside: the activity did not amount to 'manufacture' under Section 2(f)(iii) for the DVDs in question, the extended period of limitation could not be invoked because the returns disclosed the transactions, CENVAT credit could not be recovered where duty had been paid and returns filed, and consequently the interest and penalty demands failed.

Payment by demand draft deemed payment and discharges the payer - Power to withhold refund under Section 33-C of the APGST Act - Entitlement to interest on delayed refund under Section 33-F of the APGST Act - Withholding of refund for administrative failure not a permissible ground - Violation of Articles 14, 19, 265 and 300-A by arbitrary withholding of tax refund

Payment by demand draft deemed payment and discharges the payer - Handing over of two Demand Drafts by the petitioner for the assessed years 1979-80 and 1980-81 constituted payment, thereby discharging the petitioner of its liability and placing onus of realization on the respondents. - HELD THAT: - The respondents admitted receipt of DD Nos. 014826 and 014827 both dated 31.5.1988. Under the Negotiable Instruments Act and consistent precedents cited, presentation/handing over of a demand draft is equivalent to payment and completes the payer's obligation; encashment is the recipient's responsibility. The Court applied authorities holding that handing over DDs or posting cheques/money orders amounts to payment and the date/place of handing over is the operative event. Consequently any failure by the tax authorities to present or realise the drafts cannot be used to deny or withhold the refund due to the petitioner. [Paras 25, 26, 27, 28, 29]

The payment by the petitioner by means of the two Demand Drafts was complete and discharged the petitioner; respondents cannot rely on their failure to realize the drafts to withhold refund.

Power to withhold refund under Section 33-C of the APGST Act - Withholding of refund for administrative failure not a permissible ground - Whether the respondents validly withheld the refund of the sum due to the petitioner under Section 33-C by relying on inability to cross-verify challan particulars and on administrative non-traceability of treasury challans. - HELD THAT: - Section 33-C permits withholding of refund only when an order giving rise to refund is subject matter of an appeal or further proceeding, or where other proceedings under the Act are pending, and then only if the authority forms an opinion that grant of the refund is likely to adversely affect the revenue and with previous approval of the Deputy Commissioner. In the present case there was no appeal or other proceeding pending against the petitioner; the stated reason - lack of challan particulars/cross-verification owing to departmental or treasury record lapse - is not a statutory ground under Section 33-C. The Court relied on precedent and statutory scheme to hold that discretion under Section 33-C must be exercised on relevant grounds germane to the statutory purpose and cannot be used to perpetually withhold refund for administrative lapses. Further, a withholding order must specify its period and cannot be indefinite; statutory provisions (Sections 33E/33F) prescribe temporal limits for verification and entitlement to interest on delayed refunds. [Paras 43, 44, 45, 46, 47]

Withholding of the refund on the ground of want of cross-verification details/unchallengeable treasury records was arbitrary, beyond the scope of Section 33-C and therefore illegal and without jurisdiction; the withholding order is set aside.

Entitlement to interest on delayed refund under Section 33-F of the APGST Act - Violation of Articles 14, 19, 265 and 300-A by arbitrary withholding of tax refund - Whether the petitioner was entitled to interest on the delayed refund and whether withholding violated constitutional provisions. - HELD THAT: - Sections 33E and 33F prescribe periods and rates for interest where refunds are delayed; Section 33F(2) specifically addresses refunds withheld under Section 33C and prescribes payment of interest @12% p.a. for the relevant delayed period once refund is ultimately determined to be due. The Court found that arbitrary and prolonged withholding (over a decade) on non-statutory grounds deprived the petitioner of timely use of funds and constituted a breach of the statutory scheme and the constitutional principles invoked. The Court held that respondents' conduct amounted to an abuse of power and infringed Articles 14, 19, 265 and 300-A by permitting the State to benefit from its own negligence. [Paras 39, 40, 41, 47, 48]

Petitioner entitled to refund of the withheld sum and to interest at 12% p.a. for the periods directed by the Court; respondents' action held violative of constitutional guarantees and amounts to abuse of power.

Final Conclusion: Writ petition allowed: the order withholding refund dated 5.5.2009 is declared arbitrary, illegal and without jurisdiction and is set aside; respondents directed to refund the withheld amount and to pay interest at 12% per annum for the periods specified by the Court; costs awarded to the petitioner.

Waiver of right to object under Section 4 - Competence of arbitral tribunal to rule on its jurisdiction under Section 16 - Place of arbitration and party autonomy to agree venue - Deemed waiver for failure to raise jurisdictional or venue objections during arbitral proceedings - Institutional appointment of arbitrator by CIAC

Waiver of right to object under Section 4 - Competence of arbitral tribunal to rule on its jurisdiction under Section 16 - Deemed waiver for failure to raise jurisdictional or venue objections during arbitral proceedings - Whether the respondent, having not taken objection to jurisdiction, composition or venue before the arbitral tribunal and having allowed the arbitral proceedings to conclude, is deemed to have waived those objections. - HELD THAT: - The Court examined Sections 4 and 16 and the authorities applying them. Section 16 permits the arbitral tribunal to rule on its own jurisdiction and requires pleas against jurisdiction to be raised not later than submission of statement of defence, while Section 4 treats as waived any objection known to a party which it proceeds with the arbitration without stating without undue delay. Applying these principles and the precedents (including Narayan Prasad Lohia), the Court found that the respondent never raised objections to jurisdiction or venue before the arbitrator, participated not at all in the proceedings and allowed an ex parte award to be passed. In these circumstances the respondent must be deemed to have waived the right to object to the tribunal's jurisdiction or to the venue of the arbitration, and is precluded from raising those objections subsequently under Section 34. [Paras 16, 23]

Respondent waived objections to jurisdiction/venue by failing to raise them before the arbitral tribunal and is precluded from raising them subsequently.

Place of arbitration and party autonomy to agree venue - Institutional appointment of arbitrator by CIAC - Deemed waiver for failure to raise jurisdictional or venue objections during arbitral proceedings - Whether the High Court at Calcutta was correct in setting aside the order of the Alipore Court that declined jurisdiction, and whether the award was vitiated because one agreement specified Kolkata as venue while proceedings took place at Delhi. - HELD THAT: - The Court observed that although one agreement specified Kolkata as venue and others provided for New Delhi, the arbitration was a domestic institutional arbitration where CIAC nominated the arbitrator under a common modality. The specification of place has different implications in international arbitrations; here substantive and curial law were the same. Given that the respondent did not challenge the arbitral tribunal's jurisdiction or venue during proceedings, and permitted an ex parte award, the Alipore Court's conclusion that jurisdiction for setting aside lay in New Delhi was correct. The High Court erred in setting aside the Alipore Court's order restoring the petition; the cause title by itself indicating amenability to Alipore was not decisive. [Paras 22, 24]

High Court erred in setting aside the Alipore Court's order; the Alipore Court's decision declining jurisdiction was correct in view of the respondent's waiver and the institutional arbitration by CIAC did not render the award invalid.

Final Conclusion: Appeal allowed. The judgment and order under challenge are set aside and the Order dated 13.08.2018 of the Court at Alipore in Misc. Case No.298 of 2015 is restored. No costs.

Power of Magistrate under Section 156(3) CrPC to order investigation and direct registration of FIR - High Court writ not a substitute for remedy under Section 156(3) CrPC - Magistrate's power to monitor investigation - Locus standi of complainant to file criminal complaint - Effect of interim judicial stay on registration and investigation

Power of Magistrate under Section 156(3) CrPC to order investigation and direct registration of FIR - High Court writ not a substitute for remedy under Section 156(3) CrPC - Magistrate's power to monitor investigation - Whether the High Court could direct registration of an FIR and order investigation when the statutory remedy under Section 156(3) CrPC to approach the Magistrate was available. - HELD THAT: - The Court held that the remedy of a complainant who alleges non-registration of an FIR or improper investigation is to approach the Magistrate under Section 156(3) CrPC, who may order registration and a proper investigation and monitor it. High Courts should not be entertained as a substitute forum for such writ petitions seeking direction for registration and investigation; the ratio in Sakiri Vasu and subsequent decisions was reiterated. Section 156(3) confers on the Magistrate powers necessary to ensure proper investigation, including directing registration of an FIR and supervising the progress of the inquiry, and thus the High Court's direction for registration was unsustainable. [Paras 5, 6]

The High Court's direction to register the FIR and order investigation is set aside; the complainant may approach the Magistrate under Section 156(3) CrPC, who can direct registration, ensure and monitor proper investigation.

Locus standi of complainant to file criminal complaint - Whether the first respondent lacked locus standi to file the criminal complaint. - HELD THAT: - The contention of the appellants that the first respondent had no locus to file the complaint was not accepted by this Court. The Court did not uphold the submission that the complaint was incompetent merely because of the civil dispute between the parties or previous employment issues alleged by the appellants. [Paras 4, 5]

The appellants' contention that the first respondent lacked locus standi is rejected.

Effect of interim judicial stay on registration and investigation - Whether registration of an FIR and commencement of investigation in violation of an interim stay order of this Court was proper. - HELD THAT: - The Court recorded concern that despite an earlier stay of the High Court order by this Court, the police had registered an FIR. While noting the impropriety of proceeding contrary to this Court's stay, the Court clarified that its order setting aside the High Court direction would not prevent the complainant from submitting material to the police or from approaching the Magistrate; if the police upon examination are satisfied a cognizable offence is made out they would have liberty to register an FIR. The Court emphasised that it had not expressed any view on merits and observed that civil disputes should not be clothed as criminal offences, nor should mere pendency of civil proceedings be a bar to registration if a criminal offence is established. [Paras 3, 7, 8, 9]

Registration of the FIR notwithstanding this Court's stay was improper; the High Court's direction is set aside, but the complainant remains free to present material to the police or to approach the Magistrate, and the Court has not expressed any opinion on merits.

Final Conclusion: The appeal is partly allowed: the Madras High Court's direction to register an FIR and order investigation is set aside; the first respondent remains free to place materials before the police or to approach the Magistrate under Section 156(3) CrPC for appropriate orders, and no opinion is expressed on the merits of the complaint.