TaxTMI Updates e-Newsletter
May 04,2024

Principles of natural justice - quashing of assessment order - opportunity of personal hearing - reconsideration on merits - Corrigendum to notice under DRC-01 - payment of percentage of disputed tax as pre-deposit

Principles of natural justice - quashing of assessment order - opportunity of personal hearing - Impugned assessment orders for the Assessment Years 2017-2018 and 2018-2019 were set aside on the ground of violation of principles of natural justice and inadequate consideration of the petitioner's submissions and documents. - HELD THAT: - The Court found that amounts paid by the petitioner were ignored and that the assessing authority confirmed tax in terms of proposals contained in DRC-01 without properly considering the petitioner's replies and documents produced at the personal hearing. The orders under challenge did not reflect adequate reasoning for rejecting the petitioner's submissions. In view of these deficiencies, the Court exercised its supervisory jurisdiction to quash the impugned orders and to afford the petitioner an opportunity to be heard afresh.

Impugned orders quashed and set aside; petitioner granted fresh opportunity to substantiate the case.

Corrigendum to notice under DRC-01 - reconsideration on merits - payment of percentage of disputed tax as pre-deposit - The matter was remanded to the assessing authority with specific procedural directions: the impugned order to operate as a corrigendum to the DRC-01 notice; petitioner to file a detailed reply and make a partial payment; and the authority to hold a fresh hearing and decide on merits within fixed timelines. - HELD THAT: - The Court directed that the quashed order be treated as a Corrigendum to the notice issued under DRC-01 and ordered the petitioner to file a detailed reply within 30 days of receipt of the order. The petitioner is required to pay 10% of the disputed tax for the respective Assessment Years as a pre-deposit. For Assessment Year 2017-2018, the amount already paid by the petitioner as tax is to be excluded while computing the 10% pre-deposit. After receipt of the reply and pre-deposit, the assessing authority shall fix a hearing, permit the petitioner to produce all records, and endeavour to pass fresh orders on merits within 30 days of the hearing.

Matter remanded to the first respondent with directions for filing detailed reply, specified pre-deposit, fresh hearing and decision on merits within prescribed timeframes.

Final Conclusion: The writ petitions are allowed: the impugned assessment orders for AY 2017-2018 and AY 2018-2019 are quashed for breach of principles of natural justice and remitted to the assessing authority to be treated as corrigendum to DRC-01, with directions for a detailed reply, prescribed pre-deposit (10% of disputed tax, adjusting prior payment for AY 2017-2018), fresh hearing and decision on merits within stipulated periods.

Failure to consider statutory reply - unsustainable order for non-consideration of reply - remand for reconsideration - opportunity of personal hearing - relevance of reply in Form ASMT 10/Form ASMT 11

Failure to consider statutory reply - unsustainable order for non-consideration of reply - Impugned order unsustainable as the petitioner's reply to the notice in Form ASMT 10 was not taken into account - HELD THAT: - The Court noted that the notice in Form ASMT 10 was recorded in the impugned order but the petitioner's reply thereto was not considered. The tax proposal was confirmed on the stated ground that the petitioner did not respond to notices or attend personal hearing; however, because the petitioner's reply to Form ASMT 10 was not taken into consideration, the confirmation could not stand. The Court therefore set aside the impugned order and remanded the matter for fresh consideration, directing that the petitioner's reply be received and considered. [Paras 5, 6]

Impugned order dated 20.11.2023 set aside and remitted for reconsideration because the petitioner's reply to Form ASMT 10 was not taken into account

Remand for reconsideration - opportunity of personal hearing - relevance of reply in Form ASMT 10/Form ASMT 11 - Procedure to be followed on remand - receipt of reply, grant of hearing and timeline for fresh order - HELD THAT: - The Court permitted the petitioner to submit a reply to the show cause notice within 15 days from receipt of the order. Upon receipt of that reply, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter to pass a fresh order. The fresh adjudication is to be completed within three months from the date of receipt of the petitioner's reply, ensuring that the previously unconsidered reply and any representations in Form ASMT 11 are taken into account. [Paras 6]

Petitioner permitted to file reply within 15 days; respondent to grant hearing and pass fresh order within three months after receipt of the reply

Final Conclusion: The writ petition is allowed in part: the impugned order is set aside and the matter is remitted for fresh consideration after due opportunity to the petitioner; the petitioner may file a reply within 15 days, a personal hearing must be afforded, and a fresh order issued within three months.

Failure to afford opportunity of hearing before rejecting refund - requirement to record reasons for rejection of refund - mandate to follow Rule 92(3) read with Section 75(4) of the GST Act

Failure to afford opportunity of hearing before rejecting refund - requirement to record reasons for rejection of refund - mandate to follow Rule 92(3) read with Section 75(4) of the GST Act - Impugned order rejecting refund was without hearing and reasons and therefore liable to be quashed and remanded for fresh adjudication in accordance with law. - HELD THAT: - The Court observed that the respondent authority did not grant the petitioner an opportunity of hearing prior to taking an adverse view, contrary to the protective mandate embodied in Rule 92(3) read with Section 75(4) of the GST Act. The impugned rejection was also passed without assigning any reasons. In these circumstances the Court set aside the order dated 01.12.2023 passed in FORM GST RFD-06 and remanded the matter to Respondent No.2 for de novo adjudication. The respondent authority was directed to comply with Rule 92(3) of the Gujarat Goods and Services Tax Rules and Section 75(4) of the GST Act by issuing notice, affording the applicant an opportunity to reply/hearings as required, considering the reply and then passing a reasoned order available electronically to the applicant. [Paras 2, 4]

Impugned refund denial quashed and set aside; matter remitted for fresh adjudication after giving opportunity of hearing and assigning reasons in conformity with Rule 92(3) read with Section 75(4) of the GST Act.

Final Conclusion: The petition is allowed; the order dated 01.12.2023 in FORM GST RFD-06 is quashed and set aside and the matter is remanded to the respondent authority for de novo adjudication after affording opportunity of hearing and assigning reasons as directed; notice discharged.

Seizure and detention under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 - Penalty assessment under Section 122 of the Act - Non-download of e-way bill and technical non-compliance - Absence of intention to evade tax - Effect of successive notifications and substitution of rule 138 on field compliance - Quashing of administrative orders under Article 226 of the Constitution

Seizure and detention under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 - Non-download of e-way bill and technical non-compliance - Effect of successive notifications and substitution of rule 138 on field compliance - Validity of the seizure and consequential order passed under Section 129(3) where non-download of e-way bill was a technical non-compliance in the context of rapid successive changes to rule 138 and related notifications. - HELD THAT: - The Court found that the record showed the invoice, address and goods description matched and that the alleged defect was of a technical nature. The Division Bench's earlier decisions were held to be applicable: frequent and rapid legislative changes and successive substitutions of rule 138 caused confusion for field authorities and taxpayers alike, so that insistence on specific forms of e-way-bill (E-way Bill-01/02) which were never effectively operative was erroneous. There was no finding of deliberate disobedience of law by the petitioner; the authorities acted under a misconception arising from the pace of changes in notifications and rules. In these circumstances the seizure and the order under Section 129(3) were not sustainable. [Paras 6, 7, 8]

Impugned seizure and order under Section 129(3) quashed and set aside.

Penalty assessment under Section 122 of the Act - Absence of intention to evade tax - Quashing of administrative orders under Article 226 of the Constitution - Legitimacy of imposing maximum penalty where neither the show-cause notice nor the Section 129(3) order alleged intent to evade tax and the statutory scheme contemplates lesser penalties. - HELD THAT: - The Court noted that neither the show-cause notice nor the impugned order contained any allegation of intention to evade tax. Despite that, respondent authorities imposed the maximum penalty whereas the law provides for lesser penal consequences under Section 122. Given the absence of any finding of dishonest intent or evasion, and having regard to the technical nature of the non-compliance, imposition of the maximum penalty was found unjustified. [Paras 6, 8]

Imposition of maximum penalty set aside; matter resolved in favour of the petitioner.

Final Conclusion: Writ petition allowed; impugned orders dated January 15, 2018 and March 27, 2019 quashed and set aside, with consequential reliefs to follow, since the seizure and maximum penalty were unsustainable in light of technical non-compliance, absence of any intention to evade tax and confusion caused by successive substitutions of rule 138.

Reopening of concluded assessment - reconciliation of GSTR-1 and GSTR-3B - ineligible input tax credit - invalid input tax credit under Section 16(4) - show cause notice pursuant to scrutiny - assessment order

Reopening of concluded assessment - reconciliation of GSTR-1 and GSTR-3B - assessment order - Impugned show cause notice could not reopen the issue of difference in output tax liability between GSTR-1 and GSTR-3B already determined by the assessment order dated 23.12.2023. - HELD THAT: - The Court examined the earlier assessment order dated 23.12.2023 and the subsequent show cause notice dated 28.12.2023 and found that both related to assessment period 2018-19 and that the first issue in the show cause notice was the same matter already determined by the assessment order. Having been finally dealt with by the assessment order, that issue could not be reopened by issuance of the impugned show cause notice. The Court therefore set aside the show cause notice insofar as it sought to revive or reassess the reconciliation dispute between GSTR-1 and GSTR-3B which had been the subject of the earlier assessment order. [Paras 5, 6]

Impugned show cause notice set aside only insofar as it seeks to reopen the reconciliation issue between GSTR-1 and GSTR-3B already decided by the assessment order dated 23.12.2023.

Show cause notice pursuant to scrutiny - ineligible input tax credit - invalid input tax credit under Section 16(4) - Petitioner was directed to respond to the remainder of the show cause notice concerning under-declaration of ineligible ITC and invalid ITC under Section 16(4). - HELD THAT: - The Court recognised that the impugned show cause notice issued after scrutiny covered three issues. While the reconciliation issue was set aside, the Court allowed the show cause notice to remain operative in respect of the other two issues - alleged under-declaration of ineligible input tax credit and allegation of invalid input tax credit under Section 16(4). The Court expressly left all contentions open to the petitioner when responding to those parts of the notice, thereby permitting adjudication on those issues in accordance with law. [Paras 6]

Petitioner directed to respond to the show cause notice only in respect of alleged under-declaration of ineligible ITC and invalid ITC under Section 16(4); all contentions left open.

Final Conclusion: Writ petition disposed: show cause notice dated 28.12.2023 set aside insofar as it attempts to reopen the reconciliation of GSTR-1 and GSTR-3B already concluded by the assessment order dated 23.12.2023; petitioner permitted to respond to the remaining allegations of ineligible or invalid input tax credit for assessment period 2018-19; connected petitions closed, no costs.

Denial of opportunity of hearing - service of notice by uploading on GST portal - failure to consider earlier representation - quashing and remand of administrative order - conditional remand on part-payment - right to personal hearing

Failure to consider earlier representation - denial of opportunity of hearing - Impugned order set aside because the petitioner's earlier reply in Form GST ASMT 11/ASMT 10 was not taken into account and the petitioner was not afforded an effective opportunity to contest the show cause proceedings. - HELD THAT: - The Court noted that the petitioner had replied to the initial notice in Form GST ASMT 10 and had submitted documents to contest the alleged discrepancy, but the impugned order confirms tax liability on the ground that the petitioner did not respond to the subsequent show cause notice. The failure to consider the petitioner's prior representation and the absence of an effective opportunity to be heard rendered the adjudicatory process defective. In these circumstances the Court found it just to set aside the impugned order and permit fresh consideration after affording the petitioner an opportunity to reply and be heard.

Impugned order dated 08.12.2023 set aside and matter remitted for fresh consideration after giving the petitioner an opportunity to reply and be heard.

Service of notice by uploading on GST portal - right to personal hearing - conditional remand on part-payment - quashing and remand of administrative order - Remand directed on terms: petitioner to remit 10% of disputed demand, permitted to submit reply, and entitled to a reasonable opportunity including personal hearing; fresh order to be passed within two months thereafter. - HELD THAT: - Although the respondent points to intimation and show cause notice and contends that two personal hearing opportunities were provided, the Court exercised its supervisory jurisdiction to ensure procedural fairness by placing the petitioner on terms. The Court directed that the impugned order be set aside subject to the petitioner remitting 10% of the disputed tax demand within two weeks of receipt of the order and submitting a reply within the same period. Upon receipt of the petitioner's reply and confirmation of the part-payment, the respondent is to provide a reasonable opportunity, including a personal hearing, and pass a fresh order within two months from receipt of the reply. This course preserves the right to be heard while permitting the authority to proceed afresh.

Matter remitted for fresh adjudication on the stated conditions; respondent to grant personal hearing and pass fresh order within two months of receipt of the petitioner's reply.

Final Conclusion: Impugned Order-in-Original dated 08.12.2023 quashed and remitted for fresh consideration; remand conditional on petitioner remitting 10% of disputed demand and submitting a reply within two weeks, after which the respondent shall afford a reasonable opportunity including personal hearing and pass a fresh order within two months.

Exemption from GST - educational institution - conduct of entrance examination - clarificatory explanation - prospective versus retrospective application - power to grant exemption under Section 11 of the CGST Act

Clarificatory explanation - interpretation of exemption notification - prospective versus retrospective application - Validity and effect of Circular No.151/07/2021-GST dated 17.06.2021 (the impugned circular) vis-a -vis Notification No.12/2017-CT(R) (the 2017 Notification). - HELD THAT: - The impugned circular is a clarification of the scope of the 2017 Notification and does not amend or curtail the substantive entries of that notification. Paragraph 4 of the circular confines the 18% tax clarification to specified services (use of the word 'namely') and expressly refers to Serial No.66 of the 2017 Notification; it does not claim legislative power to change the notification. The circular therefore cannot be read as introducing a new substantive exemption or as limiting an existing exemption prospectively. Section 11 of the CGST Act authorises exemptions by notification or special order and permits insertion of explanations to clarify scope of an exemption notification within one year; the impugned circular was not issued under the statutory mechanism for granting or explaining exemptions. Consequently, the petitioner's challenge to the impugned circular is rejected: the circular is a clarification consistent with the 2017 Notification and does not operate to deprive past benefits or to create prospective-only entitlement where the underlying notification already applies. [Paras 35, 37, 38, 40, 41]

Challenge to the impugned circular rejected; the circular is a clarificatory statement consistent with the 2017 Notification and does not operate as a substantive prospective amendment.

Conduct of entrance examination - educational institution - exemption from GST - clarificatory explanation - Whether fees for conducting NEET (entrance examinations) and fees connected with DNB/FNB courses are exempt from GST and the temporal scope of that exemption. - HELD THAT: - Serial No.66(aa) of the 2017 Notification (introduced by Notification No.2/2018 dated 25.01.2018) expressly exempts services by an educational institution by way of conduct of entrance examination against consideration in the form of an entrance fee. Clause (iv) of Paragraph 3 (inserted by Notification No.14/2018 dated 26.07.2018) clarifies that Central and State Educational Boards shall be treated as educational institutions for the limited purpose of providing services by way of conduct of examination to students. That explanation is clarificatory (its opening words are 'for removal of doubts') and was adopted to remedy an identified anomaly; it therefore clarifies that the exemption in Serial No.66(aa) applies to boards for conduct of examinations. NEET is an entrance examination covered by Serial No.66(aa), and the petitioner, being the designated authority conducting NEET, is entitled to the exemption thereunder. Separately, the DNB and FNB courses are structured curricula with enrolment, practical training, assessments (FAT), thesis and final examinations managed by the petitioner; for services rendered to students enrolled in those courses (including course examinations and related academic services), the petitioner falls within the definition of 'educational institution' for the purposes of the 2017 Notification and such services are chargeable at Nil rate. The explanation in Paragraph 3(iv) was intended as a clarification and is to be read so as to give effect to the exemption as contemplated by the GST Council and the enabling provisions; it is not limited to prospective operation from the date of the impugned circular. [Paras 50, 51, 70, 84, 85]

Fees for NEET (entrance examinations) are exempt under Serial No.66(aa) from its operative date; fees and examination services connected with DNB/FNB courses are exempt as services by an educational institution to its students under Serial No.66(a). The clarification in Paragraph 3(iv) is clarificatory and does not restrict retrospective application of the exemption where the notification so provides.

Screening tests not part of curriculum - accreditation services - exemption from GST - Whether fees for screening tests (e.g., FMGE/FDST) and accreditation fees charged by the petitioner are exempt from GST under the 2017 Notification. - HELD THAT: - Serial Nos.66(a) and 66(aa) exempt services provided by an educational institution to its students and services by way of conduct of entrance examination. Screening tests conducted for recognition of foreign qualifications and accreditation services charged to institutions do not constitute services to the petitioner's students as part of a curriculum nor are they entrance examinations within the meaning of Serial No.66(aa). Screening tests are for recognition of foreign qualifications and accreditation fees are charged to institutions for authorisation; candidates for screening tests are not students enrolled in a course run by the petitioner. Therefore these services fall outside the exempt entries and are not chargeable at Nil rate under the 2017 Notification. [Paras 30, 31, 32, 43, 88]

Fees for screening tests and accreditation services are not exempt under the 2017 Notification and are chargeable to GST.

Refund claims remand - reconsideration in light of legal conclusions - Relief to be afforded in light of the Court's conclusions on exemption and scope of services. - HELD THAT: - The impugned orders rejecting the petitioner's refund claims are set aside. Given the Court's determinations on which services are exempt and which are not, the matter is remitted to the appropriate authority to consider the petitioner's refund applications afresh and in accordance with the legal observations and conclusions in this judgment. [Paras 89]

Rejection orders set aside and matters remanded for fresh consideration in light of this decision.

Final Conclusion: The petition is disposed of. The impugned circular is a clarificatory statement consistent with the 2017 Notification and not a substantive prospective amendment; NEET (entrance) fees and services connected with DNB/FNB courses to students are exempt under the 2017 Notification, whereas screening-test fees and accreditation fees are not exempt; the orders rejecting the petitioner's refund applications are set aside and the matter is remanded to the appropriate authority for fresh consideration in accordance with this judgment.

Failure to provide reasonable opportunity - discrepancy between GSTR-3B and auto-populated GSTR-2A - conditional remand subject to deposit - personal hearing as part of reasonable opportunity - compliance with Circular No.183

Failure to provide reasonable opportunity - personal hearing as part of reasonable opportunity - discrepancy between GSTR-3B and auto-populated GSTR-2A - compliance with Circular No.183 - conditional remand subject to deposit - Whether the impugned assessment orders should be set aside for lack of a reasonable opportunity and whether the matters should be remitted for fresh consideration on terms - HELD THAT: - The assessment demands arose entirely from discrepancies between the petitioner's GSTR-3B returns and the auto-populated GSTR-2A. The petitioner asserted unawareness of proceedings because notices and orders were uploaded under the portal's "view additional notices and orders" tab and placed on record willingness and ability to produce documents in accordance with Circular No.183. The respondent relied on the record to contend that intimation, show cause notice and personal hearing notice had been issued. The court recognised that the core controversy relates to documentary compliance with the auto-populated mismatch and that the petitioner was in a position to place relevant material before the assessing authority. In the exercise of supervisory jurisdiction and in the interest of fair opportunity, the court held that it was just to set aside the impugned orders and remit the matters for fresh consideration, while placing the petitioner on terms to ensure seriousness of prosecution of the proceedings. The terms imposed require the petitioner to remit 10% of the disputed tax demand for each assessment period within two weeks and permit the petitioner to file a reply to the show cause notice within the same period. Upon receipt of the reply and satisfaction that the stipulated deposit has been made, the respondent must provide a reasonable opportunity including a personal hearing and pass fresh orders within two months from receipt of the petitioner's reply. The court thus balanced the procedural fairness owed to the assessee with the public interest in securing a portion of the disputed demand before remand.

Impugned assessment orders set aside and matters remitted for fresh consideration on condition that the petitioner deposits 10% of the disputed tax demand within two weeks and is permitted to submit a reply; respondent to provide a reasonable opportunity including personal hearing and pass fresh orders within two months of receipt of the reply and verification of the deposit.

Final Conclusion: Writ petitions disposed by setting aside the impugned assessment orders and remitting the matters for fresh adjudication on the petitioner's complying with the conditional deposit and filing a reply; no order as to costs.

Principles of natural justice - set aside and remand for fresh consideration - opportunity of personal hearing - discrepancy between GSTR-3B and GSTR-2A - availment of Input Tax Credit

Principles of natural justice - discrepancy between GSTR-3B and GSTR-2A - availment of Input Tax Credit - Impugned assessment order set aside on account of breach of principles of natural justice and remitted for fresh consideration. - HELD THAT: - The Court found that the impugned order relates to a discrepancy between the petitioner's GSTR-3B and auto-populated GSTR-2A and that the petitioner had placed documents on record to show entitlement to Input Tax Credit. The petitioner was not heard prior to issuance of the impugned order, which engages principles of natural justice. In view of absence of an effective opportunity to contest the demand and the petitioner's production of supporting documents (and partial payment of 10% of the disputed demand prior to filing the petition), interference was warranted. The High Court therefore set aside the impugned order and remanded the matter for fresh consideration so that the petitioner may be heard and the issues concerning the disparity between returns and the entitlement to ITC can be examined afresh. [Paras 7, 8]

Impugned order set aside and matter remitted for reconsideration.

Opportunity of personal hearing - remand for fresh consideration - Directions for further proceedings on remand: filing of reply, personal hearing, and timeline for fresh order. - HELD THAT: - The Court permitted the petitioner to file a reply to the show cause notice within fifteen days from receipt of a copy of the order. The respondent is directed, upon receipt of that reply, to provide a reasonable opportunity to the petitioner including a personal hearing, and thereafter to pass a fresh order within two months from the date of receipt of the petitioner's reply. These directions narrow the scope of the remand to reconsideration after affording the petitioner an opportunity to be heard and do not amount to an adjudication on the merits of the tax demand. [Paras 8]

Petitioner permitted to file reply within 15 days; respondent to afford personal hearing and pass fresh order within two months.

Final Conclusion: The writ petition is allowed to the extent that the impugned order dated 03.05.2023 is set aside and the matter is remitted for fresh consideration; the petitioner may file a reply within fifteen days, shall be afforded a personal hearing, and the authority shall pass a fresh order within two months of receiving the reply.

Levy of GST on by-products - consideration for milling services - writ of mandamus - principles of natural justice

Levy of GST on by-products - consideration for milling services - setting aside assessment order - Assessment treating by-products (broken rice, bran and husk) as part of the consideration for milling and levying GST thereon was invalid. - HELD THAT: - The Division Bench earlier in W.P.No.45971/2018 was held to cover the same subject-matter and, following that precedent, the petition succeeds. For the reasons recorded in the said order, the impugned Assessment Order dated 24.09.2019 insofar as it levied GST on the value of the by-products by treating them as consideration paid to the petitioner for milling of paddy is set aside. The Court proceeded by applying the earlier decision and allowed the writ petition without awarding costs.

The impugned assessment dated 24.09.2019 is set aside insofar as it relates to levy of GST on the by-products retained by the processor.

Final Conclusion: Writ petition allowed; assessment order dated 24.09.2019 quashed in respect of GST demand on by-products (broken rice, bran and husk) treated as consideration for milling for the period July 2017 to November 2018; interlocutory applications, if any, closed.

Non-speaking order - Failure to consider material evidence - Right to personal hearing - Quashing and remand for fresh assessment - Reversal of Input Tax Credit - Turnover mismatch - Sundry creditors and Rule 37

Non-speaking order - Failure to consider material evidence - Turnover mismatch - Reversal of Input Tax Credit - Sundry creditors and Rule 37 - Impugned assessment order is non-speaking and was passed without considering material placed on record by the assessee - HELD THAT: - The Court examined the assessment order and found that across multiple heads the assessing officer merely recorded conclusions (for example, stating that the dealer's reply was "not acceptable" in respect of turnover mismatch) without stating reasons or engaging with the evidence filed. The assessing officer's conclusion that ITC was partly used for exempt supplies was taken despite the assessee's clear submission that ITC was used exclusively for taxable and zero-rated supplies. Similarly, although the assessee's reply of 09.10.2023 annexed the sundry creditors' list, payment dates and bank statement, the order records that bank statements were not produced. These findings demonstrate ipse dixit conclusions and a failure to consider or deal with relevant material and submissions, rendering the order unreasoned and non-speaking.

Impugned order quashed for being non-speaking and for failing to consider relevant material and submissions of the assessee.

Right to personal hearing - Quashing and remand for fresh assessment - Matter remanded for fresh consideration with directions to afford personal hearing and decide within a prescribed time - HELD THAT: - Having quashed the assessment order for want of reasoned consideration, the Court directed remand to the assessing officer for fresh adjudication. The assessing officer is to give the assessee a reasonable opportunity, including a personal hearing, and is required to pass a fresh assessment order after considering the materials and submissions already placed on record. The Court imposed a timeline, directing completion of the fresh assessment within two months from receipt of the copy of the order.

Assessment remanded for fresh consideration after affording opportunity including personal hearing; fresh order to be passed within two months.

Final Conclusion: The assessment order dated 28.12.2023 is quashed for being non-speaking and for failure to consider material evidence; the matter is remitted to the assessing officer for fresh assessment after providing a reasonable opportunity including a personal hearing, to be completed within two months.

Imposition of GST on royalty payments - Challenge to assessment orders under GST - Interference with administrative action - Judicial precedent and stare decisis

Imposition of GST on royalty payments - Challenge to assessment orders under GST - Judicial precedent and stare decisis - Validity of show cause notice/assessment orders raising demand of GST on royalty paid to the Mining Department towards mining lease. - HELD THAT: - The petitioner challenged the departmental show cause notice and assessment orders seeking GST on royalty paid to the respondent Mining Department. Learned counsel for the petitioner acknowledged that the question raised had been earlier considered by this Court in Shree Basant Bhandar Int Udyog and in the Division Bench decision in Sudershan Lal Gupta, wherein the Division Bench held that the respondents' action in imposing GST on royalty was not liable to be interfered with. Having regard to those precedents, the Court proceeded to dismiss the writ petition and declined to grant interim relief. [Paras 2, 3, 4, 5]

Writ petition dismissed; challenge to imposition of GST on royalty not sustained and stay petition dismissed.

Final Conclusion: The petition challenging GST demands on royalty was dismissed, the Court following earlier Division Bench decisions which upheld the respondents' imposition of GST and declining interference.

Condonation of delay - appellate authority's power to condone delay - statutory limitation for filing appeal under Section 107 of APGST Act - exercise of writ jurisdiction to do complete justice - appeal as a valuable statutory right

Condonation of delay - appellate authority's power to condone delay - exercise of writ jurisdiction to do complete justice - appeal as a valuable statutory right - Whether the delay of 128 days in filing the appeal against cancellation of GST registration can be condoned by the High Court notwithstanding that the statutory appellate authority lacks power to condone delay beyond the prescribed condonable period. - HELD THAT: - The petitioner's appeal against cancellation of GST registration under Section 107 of the APGST Act was filed beyond the statutory condonable period by 128 days. The appellate authority has no power to condone delay beyond the statutory condonable period, and the impugned cancellation order did not suffer from any illegality on its face. The petitioner, however, furnished affidavit evidence and Form GST APL-01 recording that the delay was due to serious health reasons (surgery and bed rest) and non-communication of the cancellation order, which the Court found to constitute sufficient cause. Recognising that an appeal is a valuable statutory right and that writ jurisdiction may be exercised to do complete justice and afford an opportunity to be heard on the merits, the High Court exercised its writ jurisdiction to condone the delay. As a condition for exercising that discretion, the Court imposed costs and directed that the appeal be considered and decided on merits by the appellate authority expeditiously after deposit of the costs within the prescribed time.

Delay condoned in writ jurisdiction on showing of sufficient cause; direction to deposit costs of Rs. 20,000 and remit the appeal to the appellate authority for expeditious decision on merits.

Final Conclusion: Writ petition allowed: delay in filing appeal condoned by the High Court in exercise of writ jurisdiction on account of sufficient cause (health-related incapacity), subject to payment of costs; appeal remitted to the appellate authority to be decided on merits expeditiously.

Agricultural income - income from other sources - burden of proof for agricultural income - maintenance of books of account by small farmers - addition treated as income under assessment where agricultural origin is disputed - use of bank statements and mill/payment statements to establish source of cash deposits

Agricultural income - burden of proof for agricultural income - use of bank statements and mill/payment statements to establish source of cash deposits - addition treated as income under assessment where agricultural origin is disputed - Addition of Rs.7,22,810 treated as income from other sources on account of alleged agricultural receipts was unjustified and liable to be deleted. - HELD THAT: - The Assessing Officer brought the entire agricultural receipts to tax as income from other sources on the ground that the assessee had not maintained quantitative production records or contemporaneous vouchers for agricultural expenditure. The Tribunal accepted that small farmers are often unable to maintain formal books of account and that the assessee furnished the Bardoli Sugar Factory statement, the cooperative mill statement and bank statements showing withdrawal and subsequent deposit of cash. The Tribunal held that these documents satisfactorily established the source of the cash deposits as agricultural receipts (including redeposited unused cash withdrawn earlier) and that, on the facts and circumstances of this small farmer, the addition was not warranted. The Tribunal therefore deleted the addition. [Paras 6, 11, 12, 13]

Addition of Rs.7,22,810 brought to tax as income from other sources is deleted.

Penalty proceedings - non-pressed grounds in appeal - Ground challenging initiation of penalty proceedings under section 270A was not pressed by the assessee and is dismissed as not pressed. - HELD THAT: - The Tribunal recorded that the ground relating to initiation of penalty proceedings was not argued or pressed by the assessee before it. In the absence of any contention or supporting argument, the Tribunal declined to adjudicate the penalty issue and dismissed that ground as not pressed. [Paras 14]

Ground challenging initiation of penalty proceedings is dismissed as not pressed.

Final Conclusion: The appeal is allowed in part by deleting the addition of Rs.7,22,810 treated as income from other sources for AY 2017-18; the challenge to penalty proceedings is dismissed as not pressed.

Time limit for filing Form No. 10AB under clause (iii) of the first proviso to section 80G(5) - application for final registration under section 80G(5) - directory versus mandatory character of procedural timelines - effect of CBDT circulars extending due dates for electronic filing of Form No.10A/10AB - remand to the Commissioner of Income Tax (Exemptions) for fresh decision on merits

Time limit for filing Form No. 10AB under clause (iii) of the first proviso to section 80G(5) - effect of CBDT circulars extending due dates for electronic filing of Form No.10A/10AB - directory versus mandatory character of procedural timelines - Maintainability of the application in Form No.10AB filed for final registration under section 80G(5) where filing was after the strict timeline in clause (iii) but within the extended timeline applied by CBDT for related forms. - HELD THAT: - The Tribunal examined the transitional amendments which introduced electronic filing and changed timelines for registration/approval with effect from 01.04.2021 and noted the genuine hardship recognized by CBDT in multiple circulars extending due dates for filing Form No.10A/10AB. The Tribunal found no principled reason to treat the timeline in clause (iii) to the first proviso to section 80G(5) differently from the timeline extended for filing Form No.10AB for registration under section 12A; treating procedural timelines within the same provision inconsistently would be anomalous. In view of the recognized systemic hardship and the objective of the amendments, the Tribunal held that the timeline in clause (iii) should be treated as directory rather than mandatory in the transitional context, and that rejection of the application solely on the ground of technical non-compliance with that timeline was not appropriate. Applying that reasoning to the present facts, the Tribunal observed the assessee filed Form No.10AB within the extended timeline adopted for analogous filings and therefore the order rejecting the application as time-barred could not stand. The Tribunal accordingly set aside the rejection and remitted the matter to the CIT(Exemption) for fresh consideration on merits. [Paras 8, 9, 11]

Order rejecting the Form No.10AB application as time-barred set aside; matter remanded to the CIT(Exemption) to decide the application on merits.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes, held that the clause (iii) timeline to the first proviso to section 80G(5) should be treated as directory in the transitional circumstances and in light of CBDT circulars, set aside the rejection of Form No.10AB as time-barred, and remanded the matter to the CIT(Exemption) for fresh adjudication on merits.

Maintainability of Form No. 10AB - approval under clause (iii) of first proviso to section 80G(5) - provisional approval under clause (iv) of first proviso to section 80G(5) - timeline for conversion of provisional approval to regular approval - effect of CBDT circulars and timeline extensions - directory versus mandatory character of filing timelines - remand for fresh consideration on merits

Maintainability of Form No. 10AB - approval under clause (iii) of first proviso to section 80G(5) - effect of CBDT circulars and timeline extensions - directory versus mandatory character of filing timelines - remand for fresh consideration on merits - Order rejecting Form No. 10AB filed for approval under clause (iii) of first proviso to section 80G(5) as not maintainable on the ground of delay - HELD THAT: - The Tribunal held that the CIT(Exemption)'s rejection of the assessee's Form No. 10AB as time barred could not stand. Relying on the coordinate bench decision in M/s. Shri Ramajayam Charitable Trust and on the CBDT circulars extending timelines, the Tribunal held that the timeline for filing Form No. 10AB in the transitional period should be treated as directory rather than mandatory, particularly in view of the recognized genuine hardship and the uniform treatment reflected in CBDT circulars. The Tribunal therefore set aside the rejection and remanded the application to the CIT(Exemption) for fresh adjudication on merits, directing reconsideration of the application for approval under clause (iii) of the first proviso to section 80G(5) as per law. [Paras 5]

Order of CIT(Exemption) dated 30.08.2023 rejecting Form No. 10AB is set aside and the matter is remanded to the CIT(Exemption) to decide the application on merits.

Provisional approval under clause (iv) of first proviso to section 80G(5) - academic nature of proceedings - Appeal against provisional approval granted under clause (iv) of first proviso to section 80G(5) - HELD THAT: - Having decided the maintainability and remand of the Form No. 10AB application, the Tribunal held that the appeal challenging the provisional approval granted under clause (iv) had become academic. No adjudication on the merits of the provisional approval was required once the primary matter was remitted for reconsideration. [Paras 6]

Appeal ITA No.1006/CHNY/2023 is dismissed as academic.

Final Conclusion: The order of CIT(Exemption) rejecting the assessee's Form No.10AB under clause (iii) to the first proviso to section 80G(5) is set aside and remitted for fresh decision on merits; the appeal against provisional approval under clause (iv) is dismissed as academic.

Reopening of concluded assessment - finality of assessment - treatment of notices issued under Section 148 as show cause notices under Section 148A(b) - scope and application of Union of India v. Ashish Agarwal - jurisdiction to recommence reassessment proceedings

Reopening of concluded assessment - finality of assessment - scope and application of Union of India v. Ashish Agarwal - proceedings under Section 148/148A of the Income Tax Act - Validity of issuing fresh proceedings under Section 148/Section 148A after reassessment for the same Assessment Year had attained finality - HELD THAT: - The Court examined whether the decision in Union of India v. Ashish Agarwal authorised the Revenue to reopen reassessment proceedings which had already been concluded. The facts show an initial notice under Section 148 (dated 31 March 2021, digitally signed 1 April 2021) led to a final assessment order dated 31 March 2022 that made an addition on the same alleged escapement. Thereafter the Revenue issued a notice under Section 148A(b) on 1 June 2022 and passed an order under Section 148A(d) on 16 July 2022, relying solely on Ashish Agarwal. The Court, following its earlier reasoning in Anindita Sengupta, held that Ashish Agarwal was directed to treat extant Section 148 notices (issued in the window 1 April-30 June 2021) as show cause notices under Section 148A(b) so as to salvage notices that were struck down on procedural grounds; it was not intended to, nor did it, mandate reopening of assessments which had attained finality. Where the reassessment had been completed and no new material or additional grounds of escapement were relied upon, the Supreme Court's decision could not be construed as permitting the Revenue to rewind final orders and recommence concluded reassessment proceedings. Applying these principles to the present facts, the impugned proceedings were without jurisdictional basis and procedurally impermissible. [Paras 12, 17, 19, 20]

Impugned notices dated 1 June 2022 and 16 July 2022 and the order dated 16 July 2022 under Section 148A(d)/Section 148 are quashed.

Final Conclusion: The writ petition is allowed; relying on Ashish Agarwal to reopen an assessment which had already been finally concluded was impermissible and the impugned notices and order for AY 2015-16 are quashed.

Jurisdiction under Section 147 for income escaping assessment - failure to disclose fully and truly all material facts - change of opinion doctrine in reassessment - prima facie reasons to believe based on fresh tangible material - Explanation 1 to Section 147 - production of books not amounting to disclosure

Jurisdiction under Section 147 for income escaping assessment - failure to disclose fully and truly all material facts - Explanation 1 to Section 147 - production of books not amounting to disclosure - Validity of reopening assessment for AY 2011-12 on the ground that the assessee failed to disclose fully and truly all material facts. - HELD THAT: - The Court examined the scope of Section 147 and its proviso, as well as Explanation 1, and applied the settled meaning of 'full and true disclosure' articulated by higher courts: mere production of books or material discoverable by the Assessing Officer does not necessarily constitute full and true disclosure. The Assessing Officer relied on fresh information from the Investigation Wing showing bank entries involving the assessee and transactions with a third party (Mr. Manoj Sethi), and recorded reasons stating that the third party could not explain source, genuineness, identity and creditworthiness relating to the entries, which in the AO's view indicated escapement of income. The assessee conceded the transactions but maintained they were loan transactions effected by cheque/RTGS and contended that the reopening was a mere change of opinion. The Court applied established authorities holding that reopening is impermissible when it is only a change of opinion where the AO has previously applied mind and formed a decision on the same issue; conversely, where the earlier assessment order did not address the relevant aspect or was silent, reopening may be valid. Here, the record did not demonstrate that the AO in the original assessment had examined or formed any opinion on the specific transactions or issues now relied upon; the reasons recorded demonstrated existence of fresh and tangible material which could lead to a prima facie belief of escapement. Consequently, the Court held that the AO did not exceed its jurisdiction in assuming jurisdiction under Section 147 and that the reassessment could not be struck down as being merely a change of opinion. [Paras 22, 23, 25, 26, 27]

Assumption of jurisdiction under Section 147 for AY 2011-12 upheld; petition dismissed.

Final Conclusion: The writ petition challenging reopening of assessment for AY 2011-12 was dismissed: the Assessing Officer had recorded prima facie reasons based on fresh information and the reassessment could not be characterised as a mere change of opinion, and therefore jurisdiction under Section 147 was validly exercised.

Admission of additional evidence in appellate proceedings - burden of proof and inadmissibility of additions based on guesswork - application of Section 14A to disallow expenditure relating to exempt income - prospective effect of statutory amendment

Burden of proof and inadmissibility of additions based on guesswork - admission of additional evidence in appellate proceedings - Deletion of addition of Rs. 3,79,85,854/- made by the Assessing Officer in respect of operating expenses, cost of material consumed, employee benefits and other expenses - HELD THAT: - The High Court upheld the findings of the CIT(A) and the ITAT that the AO had made additions without appreciating the documentary evidence placed on record. The appellate authorities found that documents and confirmations were filed and forwarded to the AO for verification, that the AO remained silent on the merits of those documents and did not conduct adequate inquiry, and that the assessment was based on assumptions and guesswork which the law does not permit. The Court agreed that no addition can be sustained as a 'leap in the dark' and approved the deletion of the addition by the CIT(A), as affirmed by the ITAT. [Paras 4, 5, 11, 19, 21]

Addition of Rs. 3,79,85,854/- deleted by CIT(A) and upheld by ITAT; High Court affirms deletion and dismisses revenue appeal.

Admission of additional evidence in appellate proceedings - Admissibility of additional evidence (confirmations of creditors/lenders and related documents) relied upon by the assessee before the CIT(A) - HELD THAT: - The Court accepted the appellate authorities' conclusion that the additional evidence filed before the CIT(A) went to the root of the additions and had been forwarded to the AO for comments/verification. The AO objected in remand but did not address the merit of the documents or conduct further inquiry; on that basis the CIT(A) admitted the evidence in the interests of natural justice. The High Court found the CIT(A)'s approach and the subsequent appellate endorsement by the ITAT to be well reasoned and not vitiated by error. [Paras 4, 5, 11, 19]

Admissibility of the additional evidence upheld; reliance on that evidence to delete additions affirmed.

Application of Section 14A to disallow expenditure relating to exempt income - prospective effect of statutory amendment - Deletion of disallowance of Rs. 1,29,26,925/- under Section 14A for AY 2013-14 and the relevance of the 2022 amendment to Section 14A - HELD THAT: - The Court examined the amendment to Section 14A introduced by the Finance Act, 2022, including the inserted non-obstante clause and explanatory provision. It noted the legislative memorandum and the express effective date of 1 April 2022. The Court held that the amendment operates prospectively and therefore does not apply to assessment year 2013-14. In light of this, and having regard to High Court precedents construing Section 14A as not attracting disallowance where no exempt income was received in the relevant year, the deletion of the Section 14A disallowance by the CIT(A) (and its affirmation by the ITAT) was held to be justified. [Paras 14, 15, 16, 18, 19]

Disallowance under Section 14A deleted for AY 2013-14; the 2022 amendment is prospective and not applicable to the year in issue.

Verification of liabilities and documentary proof for claimed liabilities - burden of proof and inadmissibility of additions based on guesswork - Deletion of addition of Rs. 1,68,64,954/- made on account of difference in current and long term liabilities and statutory liabilities - HELD THAT: - The CIT(A) found that the assessee had filed confirmations and documentary evidence explaining the increase in liabilities (including amounts from directors and relatives), and that these documents were not properly considered by the AO. The ITAT endorsed the view that the AO had not controverted the factual findings recorded by the CIT(A) nor conducted adequate verification. The High Court approved these findings, concluding that the additions were premised on insufficient inquiry and impermissible assumption. [Paras 4, 5, 11, 19]

Addition of Rs. 1,68,64,954/- deleted by CIT(A) and upheld by ITAT; High Court affirms deletion.

Final Conclusion: The appeal is dismissed. The High Court affirms the CIT(A)'s order dated 03.06.2022 and the ITAT's order of 30.05.2023 deleting the additions challenged by the revenue for assessment year 2013-14; the 2022 amendment to Section 14A has prospective effect from 01.04.2022 and is not applicable to the year under consideration.

Re-opening of assessment - reason to believe - failure to disclose fully and truly all material facts - borrowed information from other government agencies - material must have a live link to escapement of income - twin conditions for re-opening beyond four years - third report of Justice M.B. Shah Commission as non-authoritative opinion - inadmissibility of supplemental material filed after issuance of notice

Re-opening of assessment - twin conditions for re-opening beyond four years - failure to disclose fully and truly all material facts - material must have a live link to escapement of income - Validity of re-opening assessments beyond four years where reasons rely on alleged failure to disclose material facts - HELD THAT: - The Court applied the settled principle that reopening beyond four years requires satisfaction of the twin conditions: (i) reason to believe that income chargeable to tax has escaped assessment; and (ii) the escapement was occasioned by the assessee's failure to disclose fully and truly all material facts (paras 33-36, 48). For the matters relating to assessment years 2009-10 and 2010-11 where notices were issued beyond four years, the reasons supplied primarily copied material from the Directorate of Revenue Intelligence (DRI) and related show-cause proceedings but did not demonstrate how the assessee knew and deliberately withheld the material facts when filing returns (paras 37-41, 42-43). The Assessing Officer failed to record independent reasons or demonstrate a live link between the borrowed information and formation of belief that income had escaped assessment; mere receipt of material from another department does not substitute for the Assessing Officer's independent application of mind (paras 42-47). Applying the precedents cited, the Court held that the twin conditions were not satisfied and such re-openings are impermissible (paras 46-47, 59). [Paras 42, 43, 46, 47, 59]

Re-opening notices issued beyond four years for the specified assessment years are unsustainable and require interference.

Borrowed information from other government agencies - material must have a live link to escapement of income - re-opening of assessment - Whether reasons copied from DRI without independent application of mind can sustain re-opening within or beyond four years - HELD THAT: - The Court found that where the Assessing Officer's reasons merely reproduce information from DRI (or other agencies) without demonstrating independent consideration, nexus or explanation as to how that material establishes escapement of income, such reasons are legally inadequate (paras 41-46, 51-52). The assessing officer must form his own reasoned belief; pasted or borrowed charts and calculations from another department do not fulfill the statutory requirement that reasons must evidence a live link to escapement of income (paras 42, 46). Accordingly, re-opening founded solely on such borrowed material is invalid (paras 46-47, 51). [Paras 43, 44, 46, 47, 51]

Re-opening predicated solely on material borrowed from DRI without independent reasoning is impermissible and warrants quashing of the re-opening.

Third report of Justice M.B. Shah Commission as non-authoritative opinion - re-opening of assessment - Whether the Justice M.B. Shah Commission's third report by itself furnishes a valid basis for re-opening assessments - HELD THAT: - The Court endorsed the Coordinate Bench's view that the third report of the Justice M.B. Shah Commission is an expression of opinion lacking finality and authoritativeness, and cannot by itself furnish a prima facie basis for forming a reason to believe that income has escaped assessment (paras 52-55). In the present matters Assessing Officers relied on that report without independent material or application of mind; such reliance is inadequate to justify re-opening (paras 53-55). [Paras 52, 53, 54, 55]

The Shah Commission's report, standing alone, does not constitute sufficient material to reopen assessments.

Failure to disclose fully and truly all material facts - knowledge of assessee at time of filing return - Whether assessee could be held to have failed to disclose material facts concerning legality of leases before the Supreme Court's decision - HELD THAT: - The Court reiterated that an assessee cannot be said to have failed to disclose facts of which he had no knowledge when filing returns (paras 34-35, 56-58). The Apex Court's decision in Goa Foundation was rendered on 21.04.2014; before that date neither the assessee nor the Assessing Officer could be taken to have knowledge that leases beyond 2007 were illegal. The illegality of lease-hold tenure is distinct from conduct of business in ordinary course; payment of royalties and duties contemporaneously further supports absence of deliberate suppression. Consequently, notices alleging non-disclosure of illegality prior to the Supreme Court ruling are unsustainable (paras 56-59). [Paras 35, 56, 57, 58, 59]

Allegations of failure to disclose the illegality of leases prior to the Supreme Court decision do not satisfy the requirement of deliberate non-disclosure and cannot justify re-opening.

Inadmissibility of supplemental material filed after issuance of notice - re-opening of assessment - Admissibility of additional affidavits and documents filed by Revenue after issuance of re-opening notices - HELD THAT: - The Court held that material or documents sought to be introduced by Revenue after issuance of the notice (by additional affidavit in adjudicatory proceedings) cannot be considered to supply or cure deficiencies in the reasons recorded at the time of issuing the Section 148 notice (paras 30-32, 60). The statutory scheme requires that the Assessing Officer's reasons recorded contemporaneously with the notice must disclose the material basis; subsequent supplementation in Court cannot validate an otherwise defective notice (paras 31-32, 60). [Paras 30, 31, 32, 60]

Additional affidavits and documents filed after issuance of notice cannot be looked into to validate the re-opening; they do not cure defective reasons.

Final Conclusion: The Court quashed and set aside the impugned notices under Section 148 and the orders rejecting objections in the grouped petitions: re-openings based on borrowed DRI material without independent application of mind, reliance solely on the Shah Commission's report, allegations of non-disclosure prior to the Apex Court's decision, and supplementation by additional affidavits after notice issuance are legally unsustainable; petitions are allowed and notices/orders are quashed.

Reopening of assessment - reason to believe - third proviso to Section 147 - subject matter of an appeal - reassessment under Sections 147/148 - assessment under Section 153A/C - search and seizure under Section 132

Third proviso to Section 147 - subject matter of an appeal - reopening of assessment - assessment under Section 153A/C - reassessment under Sections 147/148 - Whether the notice under Section 148 for A.Y. 2008-09 was barred by the third proviso to Section 147 because the issue sought to be reopened was the subject matter of an appeal. - HELD THAT: - The Court examined the reasons recorded for reopening which expressly referred to the denial of deduction under Section 80-IB(10) in the assessment order dated 29th October 2010 and noted that the identical claim of deduction was specifically made the subject of appeal before the CIT(A). The third proviso to Section 147 bars reassessment of income "involving matters which are the subject matter of any appeal, reference or revision." The CIT(A)'s order of 30th March 2015 reproduced the grounds of appeal including the challenge to disallowance of the Section 80-IB(10) deduction and related factual/legal contentions. While the Court acknowledged the principle in Abhisar Buildwell that where a Section 153A order is set aside the Revenue's remedy may lie in reassessment under Sections 147/148 subject to fulfilment of those sections' conditions, that principle is qualified by the statutory bar in the third proviso to Section 147. Applying the proviso to the admitted position that the deduction issue was the subject matter of appeal, the Court held that reassessment in respect of that income was impermissible on the present facts. [Paras 12, 13, 14, 15]

The Section 148 notice insofar as it seeks reassessment of the income attributable to the claim of deduction under Section 80-IB(10) for A.Y. 2008-09 is barred by the third proviso to Section 147 and is quashed.

Final Conclusion: Writ petition allowed; the notice under Section 148 for A.Y. 2008-09 quashed in so far as it seeks reassessment of the deduction under Section 80-IB(10) which was the subject matter of an appeal, the reopening being contrary to the third proviso to Section 147.

Error apparent on the face of record - rectification under Section 154 - Article 265: taxes not to be imposed save by authority of law - refund of tax paid beyond authority of law / double taxation - writ jurisdiction for pure question of law where no disputed facts

Error apparent on the face of record - rectification under Section 154 - refund of tax paid beyond authority of law / double taxation - Whether the petitioner's payment of tax on the same 'retention money' in A.Y.2015-16 and again in A.Y.2016-17 to A.Y.2018-19 constituted an error apparent on the face of the record rectifiable under Section 154 and warranting refund. - HELD THAT: - The Court held that an error of law or fact which is glaring, obvious and does not require prolonged argument falls within the expression error apparent on the face of record and is amenable to rectification under Section 154. The admitted factual position - that retention money was taxed in A.Y.2015-16 and again in later years - was ascertainable from the record and established an over-collection contrary to Article 265. The authorities show that taxes collected beyond legal authority must be refunded and that such an overpayment, when clear from the record, need not be left to elaborate inquiry. The respondent's characterization of the mistake as not arithmetic or as a matter fit for revision was rejected as unduly technical; the error was clear, apparent and palpable and thus rectifiable under Section 154. [Paras 11, 12, 15, 16, 20]

The error in taxing the retention money twice is an error apparent on the face of record, rectifiable under Section 154, and respondent No.2's rejection was erroneous.

Writ jurisdiction for pure question of law where no disputed facts - Article 265: taxes not to be imposed save by authority of law - Whether the petition should be relegated to the statutory appellate remedy or whether the High Court could entertain the writ petition given that the controversy was a pure question of law with admitted facts. - HELD THAT: - The Court applied the principle that where the controversy raises a purely legal question and the material facts are admitted, the High Court may, in its discretion, entertain writ jurisdiction without insisting on exhaustion of alternative statutory remedies. Citing Supreme Court authority, the Court observed that requiring the petitioner to pursue the appellate route would serve no useful purpose because the dispute did not involve contested questions of fact but turned on the scope of Section 154 and the constitutional mandate of Article 265. Accordingly, the petitioner was not relegated to appeal. [Paras 18, 19]

Writ jurisdiction was properly exercised because the matter involved a pristine question of law on admitted facts; the petitioner need not be relegated to the appellate remedy.

Final Conclusion: Writ petition allowed. The impugned order dated 23.12.2021 is set aside; respondent No.2 is directed to examine and refund the excess tax paid on the retention money and pass appropriate orders within 60 days of production of a certified copy of this order.

Extinguishment of pre-Effective Date claims under an approved resolution plan - binding effect of an NCLT-approved resolution plan on government authorities - incompatibility of post-approval assessment proceedings with the Insolvency and Bankruptcy Code - clean slate principle in corporate insolvency resolution - use of assessment proceedings for investigation of ex-promoters versus propriety of initiating proceedings against the corporate debtor

Extinguishment of pre-Effective Date claims under an approved resolution plan - binding effect of an NCLT-approved resolution plan on government authorities - incompatibility of post-approval assessment proceedings with the Insolvency and Bankruptcy Code - Validity of notices issued under Section 143(2) and Section 142(1) of the Income-tax Act insofar as they relate to periods prior to the Effective Date of the Resolution Plan - HELD THAT: - The court held that the NCLT-approved Resolution Plan and the Code operate to extinguish and bar claims, proceedings and liabilities in respect of periods prior to the Effective Date. The Resolution Plan expressly provides that liabilities and governmental claims in relation to periods until the Effective Date stand waived, extinguished or barred and that no governmental authority shall issue orders contrary to the Plan. In view of the binding effect of approval under Section 31 of the Code and the authority of the Supreme Court in Ghanshyam Mishra, assessment notices and consequential proceedings initiated against the corporate debtor for periods before the Effective Date are impermissible. The fact that the Revenue had not submitted claims during the CIRP public announcement further reinforces that such proceedings cannot be sustained. Applying these principles, the impugned notices under Section 143(2) and the subsequent notices under Section 142(1), insofar as they seek to initiate or continue assessment or inquiry for periods prior to the Effective Date, are bad in law. [Paras 16, 17, 19, 20]

The impugned notices under Section 143(2) and Section 142(1) and all consequential actions insofar as they relate to periods prior to the Effective Date are quashed as being contrary to the Resolution Plan and the Code.

Use of assessment proceedings for investigation of ex-promoters versus propriety of initiating proceedings against the corporate debtor - clean slate principle in corporate insolvency resolution - Whether the Revenue may proceed with assessment or inquiry against the corporate debtor for the purpose of collecting evidence or taking action against ex-promoters despite not seeking recovery from the corporate debtor - HELD THAT: - The court rejected the Revenue's contention that assessment proceedings could permissibly be continued merely as a fact-finding device to investigate ex-promoters while withholding recovery from the corporate debtor. The Resolution Plan explicitly bars inquiries, investigations, suits and other proceedings (including Tax Proceedings) in relation to any period up to the Effective Date, and states that governmental authorities shall waive non-compliances for that period. Consequently, initiating assessment notices against the corporate debtor for such period-regardless of alleged investigatory purposes-is inconsistent with the Resolution Plan and the Code. The court observed that the Revenue may, if legally permissible, pursue actions against former management or third parties by appropriate means of law, but not by issuing notices under provisions of the Act that require participation and compliance by the corporate debtor for pre-Effective Date periods. [Paras 14, 15]

The Revenue cannot justify notices and assessment proceedings against the corporate debtor for pre-Effective Date periods on the basis that such proceedings will aid investigation of ex-promoters; such notices are impermissible under the Resolution Plan and the Code.

Final Conclusion: Rule made absolute: the notices dated 31 May 2023 (Section 143(2)) and the consequential notices dated 28 August 2023, 8 January 2024, 29 January 2024 and 26 February 2024 (Section 142(1)) and all consequential actions pursuant thereto are quashed to the extent they relate to periods prior to the Effective Date of the NCLT-approved Resolution Plan; respondents remain free to pursue any action lawfully available against third parties or former management in accordance with law.

Deduction of tax at source under section 194I - rent - transit rent as hardship/rehabilitation/displacement allowance - revenue receipt versus capital receipt - interest payable as directed by the trial court - discretion of the Court of Small Causes

Interest payable as directed by the trial court - discretion of the Court of Small Causes - Clarification of paragraph No.10(viii) of the order dated 2 April 2024 regarding the phrase "with the interest". - HELD THAT: - The Court observed that paragraph No.10(viii) already specifies that any interest is to be as directed by the Court of Small Causes. The petitioner's contention that the words "with the interest" should be deleted because amounts withdrawn would be applied towards compensation/license fee was noted, but the Court held that such contentions can be advanced before the Judge hearing the R.A.D. suit. It is for the judge of the Court of Small Causes to decide, in the exercise of that Court's discretion, whether interest would be payable. [Paras 4]

The wording remains subject to the Court of Small Causes' direction; the question of interest is left to that Court's discretion and may be raised at the hearing of the R.A.D. suit.

Deduction of tax at source under section 194I - rent - transit rent as hardship/rehabilitation/displacement allowance - revenue receipt versus capital receipt - Whether TDS under section 194I is required to be deducted by the developer/builder from amounts payable as "transit rent" to the petitioner and respondents 1 and 2. - HELD THAT: - The Court examined section 194I and its Explanation defining "rent." It considered precedent of the Income Tax Appellate Tribunal in Delilah Mansukhani and Ajay Parasmal Kothari, which treated compensation paid on redevelopment as hardship/rehabilitation/shifting allowance and not as taxable revenue receipt. The Court agreed with the Tribunal's view that such payments (commonly called "transit rent" in these proceedings) are not revenue receipts but amounts akin to hardship/rehabilitation/displacement allowance; accordingly they do not fall within the taxable notion of rent under section 194I and are not subject to TDS deduction by the payer. [Paras 9, 10]

Transit rent characterised as hardship/rehabilitation/displacement allowance is not taxable as rent under section 194I; therefore no TDS is required to be deducted by the developer.

Final Conclusion: The High Court clarified that the question of interest specified in the earlier order is to be determined at the discretion of the Court of Small Causes, and held that amounts described as "transit rent" (hardship/rehabilitation/displacement allowance) are not rent within section 194I and hence not liable to TDS deduction by the developer.

Existence of 'arrangement' as condition precedent under Section 80IA(10) - onus on Revenue to prove arrangement - Transfer pricing adjustment under Section 92CA/92BA read with Section 80IA(10) - admission of additional evidence under Rule 29 of the ITAT Rules, 1963 - admission of additional ground under Rule 11 of the ITAT Rules, 1963 - deduction under Section 80G independent of Explanation 2 to Section 37(1) - weighted deduction under Section 35(2AB) - Rule 6(7A) - quantification of eligible R&D expenditure by prescribed authority (DSIR)

Admission of additional ground under Rule 11 of the ITAT Rules, 1963 - Admission of the additional ground filed under Rule 11 is allowed and the additional grounds are admitted for adjudication. - HELD THAT: - The Tribunal considered the assessee's application under Rule 11 seeking to admit additional legal grounds relating to deduction under Section 35(2AB). Having regard to precedents and the fact that the additional grounds raise legal questions emanating from the existing record, the Tribunal exercised its discretion to admit the additional grounds for adjudication. [Paras 4]

Additional grounds filed under Rule 11 admitted.

Admission of additional evidence under Rule 29 of the ITAT Rules, 1963 - Application for admission of additional documentary evidence under Rule 29 is allowed and the additional evidence is admitted. - HELD THAT: - Rule 29 permits the Tribunal, in its discretion, to admit additional evidence where it is required to enable it to pass orders or for any other substantial cause. The Tribunal found that the documentary comparative invoices and tabulations directly address the threshold question under Section 80IA(10) - namely, whether an arrangement existed that produced more than ordinary profits to the eligible units - and are therefore material to substantial justice. The Tribunal observed that the AO/TPO had not conducted transaction-level comparisons or called for such material, and that admission of the documents was necessary for a fair adjudication. [Paras 25, 35]

Additional documentary evidence admitted under Rule 29.

Existence of 'arrangement' as condition precedent under Section 80IA(10) - onus on Revenue to prove arrangement - Transfer pricing adjustment under Section 92CA/92BA read with Section 80IA(10) - The Transfer Pricing adjustments under Section 92CA/92BA read with Section 80IA(10) (reduction of deduction under Sections 80IC/80IE) cannot be sustained without a factual demonstration of an 'arrangement'; matter remitted to AO for verification and further action including application of CUP method if prima facie arrangement is found. - HELD THAT: - The Tribunal held that invocation of Section 80IA(10) requires existence of an 'arrangement' between the eligible unit and associated enterprises as a condition precedent; mere higher profits of eligible units vis-a -vis non-eligible unit do not, by themselves, establish such arrangement. The TPO/AO had proceeded on a presumption of arrangement based on comparative unit-level OP/OR without transaction-level analysis or consideration of the low quantum/percentage of specified domestic transactions. Having admitted additional evidences, the Tribunal found that those documents go to the root of the allegation and are material for testing whether transactions with AEs were at arm's length. The Tribunal therefore remitted the matter to the AO to verify the documentary material, determine whether a prima facie arrangement exists, and, if so, to refer relevant controlled transactions to the TPO for determination of ALP (permitted to apply CUP method) and to pass a reasoned order on the presence of arrangement and any adjustment. [Paras 30, 31, 40, 42, 43]

TP adjustment set aside and remitted to AO for verification of additional evidences and for making a reasoned determination on existence of arrangement; AO may refer to TPO for ALP determination (CUP method) if prima facie arrangement is found.

Deduction under Section 80G independent of Explanation 2 to Section 37(1) - Deduction under Section 80G in respect of contributions to funds/bodies registered under Section 12A is allowable notwithstanding that the same contributions are not deductible as business expenditure under Explanation 2 to Section 37(1), subject to statutory exceptions in Section 80G(2)(a). - HELD THAT: - The Tribunal observed that Explanation 2 to Section 37(1), which excludes CSR expenditures from business deduction, does not, by itself, preclude claim of deduction under Section 80G. Absent a non-obstante clause, the provisions of Section 80G operate independently; the statute itself carves out limited exceptions (e.g., clauses (iiihk) and (iiihl)) where specific CSR contributions are excluded. The contributions claimed were not shown to fall within those statutory exceptions. In line with coordinate bench decisions, the Tribunal allowed the claim under Section 80G. [Paras 46, 48, 49, 50]

Disallowance under Section 80G set aside and deduction under Section 80G allowed.

Weighted deduction under Section 35(2AB) - Rule 6(7A) - quantification of eligible R&D expenditure by prescribed authority (DSIR) - Claim for weighted deduction under Section 35(2AB) is restricted to the quantum of expenditure approved/quantified by the prescribed authority (DSIR) in terms of substituted Rule 6(7A); the unapproved portion is not eligible for weighted deduction for AY 2018-19. - HELD THAT: - The Tribunal examined the statutory provision and the substituted Rule 6(7A) (effective from 01.07.2016) which requires the prescribed authority to quantify expenditure eligible for weighted deduction in Part B of Form 3CL. The Tribunal held that Rule 6(7A) is procedural/machinery in nature and not repugnant to Section 35(2AB); therefore, for AY 2018-19 the weighted deduction is to be computed with reference to the expenditure quantified by DSIR. As the DSIR had approved a lower quantum than that claimed by the assessee, the Tribunal held that the AO was correct in restricting the weighted deduction accordingly. The Tribunal also observed that earlier decisions relied upon by the assessee related to pre-amendment years and therefore are distinguishable. [Paras 62, 63, 64, 65, 66]

Weighted deduction under Section 35(2AB) disallowed to the extent of unapproved expenditure; claim allowed only to the extent quantified/approved by DSIR in terms of Rule 6(7A).

Final Conclusion: The Tribunal admitted the additional ground under Rule 11 and admitted additional documentary evidence under Rule 29. The Transfer Pricing adjustment under Section 92CA/92BA read with Section 80IA(10) was set aside and remitted to the Assessing Officer for verification of the admitted documents and for a reasoned determination on the existence of an 'arrangement' (AO may refer to TPO and apply CUP method if prima facie arrangement is found). The disallowance under Section 80G was reversed and the deduction allowed. The assessee's claim for weighted deduction under Section 35(2AB) was allowed only to the extent of expenditure quantified/approved by DSIR in terms of Rule 6(7A); the unapproved portion was disallowed. Overall the appeal was partly allowed.

Applicability of Section 153C - Reopening under Section 147 - Validity of notice under Section 148 - Seized documents as incriminating material - Void ab initio

Applicability of Section 153C - Reopening under Section 147 - Validity of notice under Section 148 - Void ab initio - Assessment framed under section 147/notice under section 148 is void ab initio where assessment action was initiated on the basis of incriminating material found in search of a third party and the procedure under section 153C was not followed. - HELD THAT: - The Tribunal accepted the reasoning of the CIT(A) that the reassessment in the present case was initiated on the basis of material seized during search operations at the premises of a third party (Alankit Group). The seized material related to the assessee and, on analysis and on the basis of statements and contents of the seized paper, was held to be incriminating. The CIT(A) relied on coordinate-bench precedents holding that where incriminating material of a person is found during search of another person, the statutory procedure under section 153C applies and, being a special provision, excludes the operation of sections 147/148. As the AO proceeded by invoking section 147/148 without following the procedure under section 153C, the reassessment was held void ab initio. The Tribunal found no infirmity in the CIT(A)'s approach or reliance on the cited precedents and upheld the quashing of reassessment for the year under consideration.

Reassessment framed under section 147/notice under section 148 for A.Y. 2017-18 is void ab initio because proceedings were initiated on the basis of incriminating material found in search of a third party and the procedure under section 153C was not followed.

Seized documents as incriminating material - Applicability of Section 153C - The seized papers/contract-note related material were held to be incriminating material pertaining to the assessee, thereby attracting the remit to proceed under section 153C. - HELD THAT: - The CIT(A) examined the seized paper and compared its contents with the assessee's contract notes and statements recorded during the search. The seized document bore the name of the assessee, dealt with transactions in specified securities, contained additional columns describing commission and distribution, and was corroborated by statements (notably of a person involved in providing entries) describing the modus operandi. On this basis the seized paper was characterised as incriminating material which, being found during search of the third party, triggered the applicability of section 153C for assessment of the assessee rather than initiation of proceedings under section 147/148. The Tribunal concurred with this factual-legal conclusion and the consequent statutory consequence.

The seized documents were incriminating material pertaining to the assessee and hence any assessment should have proceeded under section 153C.

Final Conclusion: The Tribunal upheld the CIT(A)'s order quashing the reassessment framed under sections 147/148 for A.Y. 2017-18 on the ground that the assessment was initiated on the basis of incriminating material seized from a third party and the procedure under section 153C, which excludes sections 147/148, was not followed; the revenue's appeal is dismissed.

Business profits - royalty - Fees for Included Services - make available test - permanent establishment - Article 12 of India USA DTAA - Article 7 of India USA DTAA - software licensing as supply of a copyrighted article

Royalty - software licensing as supply of a copyrighted article - Article 12 of India USA DTAA - business profits - permanent establishment - Characterisation of software licensing receipts - whether taxable as royalty under Article 12 or business profits under Article 7 of the India USA DTAA - HELD THAT: - The Tribunal upheld the Dispute Resolution Panel's examination of the Software License Agreement and applied the ratio of the Hon'ble Supreme Court in Engineering Analysis Centre of Excellence Pvt. Ltd. The licence granted was non exclusive, non transferable, with restrictions on copying/modifying and the source code remained the assessee's proprietary trade secret; there was no material showing a right in the user to make copies or commercially exploit the copyright. On these Agreement specific facts the receipts for supply and licence of the software constitute consideration for use of a copyrighted article and not royalty under Article 12. In the absence of any permanent establishment of the assessee in India, such receipts constitute business profits under Article 7 and are not taxable in India. The Tribunal therefore adopted the DRP's conclusion and declined to interfere with it. [Paras 3, 8, 9]

Receipts of Rs. 4,35,39,550/- from supply/licence of software are business profits not taxable in India under Article 7 of the India USA DTAA in absence of PE.

Fees for Included Services - make available test - Article 12 of India USA DTAA - business profits - permanent establishment - Taxability of annual maintenance and support (AMC) receipts - whether they constitute Fees for Included Services (FTS/FIS) by satisfying the 'make available' test or, alternatively, are business profits not taxable in India - HELD THAT: - The Tribunal considered the Service Level/AMC terms (Annexure F) and the factual matrix. Although AMC services were ancillary to the licence, the Tribunal analysed the alternative contention and found that the 'make available' test under Article 12(4)(b) was not satisfied: the recipient is not put in a position to apply the technical knowledge/skill independently after the contract, nor is it at liberty to use the supplier's technology in its own right, and the recipient remains dependent on the supplier for the services. The Tribunal relied on doctrinal authorities and treaty interpretation (including the Protocol and judicial precedents) to hold that routine support, updates, troubleshooting and training as provided do not amount to making available technical knowledge so as to attract FIS. Consequently, AMC receipts cannot be taxed as FTS/FIS and, in absence of PE, constitute business profits not taxable in India. [Paras 3, 10, 11]

Receipts of Rs. 58,90,308/- for support and maintenance are not taxable as FTS/FIS under Article 12 and constitute business profits not taxable in India in absence of PE.

Dispute Resolution Panel directions - assessment under section 143(3) r.w. 144C(13) - implementation of DRP findings - Whether the Assessing Officer's assessment should give effect to the DRP's directions and whether the Tribunal should uphold DRP's findings - HELD THAT: - The assessee contended that the AO failed to follow the DRP directions; the DRP had examined and directed exclusion of software licence receipts from assessment and treated AMC receipts as FIS only after specific analysis. The Tribunal accepted the DRP's detailed findings on both software licence and AMC issues, found no reason to interfere with those findings, and directed the Assessing Officer to give effect to the DRP order when completing the assessment under the relevant provisions. [Paras 4, 11]

DRP directions are upheld; the AO is directed to give effect to the DRP's findings while completing the assessment.

Final Conclusion: The Tribunal allowed the appeal in full for AY 2019 20: the entire receipts from supply/licence of software and related AMC/support services are held non taxable in India - software licence receipts and AMC charges are business profits not taxable in India in absence of permanent establishment, and the Assessing Officer is directed to give effect to the DRP's directions.

Deduction under section 80P(2)(a)(i) - Interest on deposits forming Statutory Liquidity Ratio (SLR) - Precedent reliance on CIT vs. Karnataka State Cooperative Apex Bank and CIT vs. Nawanshahar Central Cooperative Bank - Substantial justice and condonation of delay

Deduction under section 80P(2)(a)(i) - Interest on deposits forming Statutory Liquidity Ratio (SLR) - Precedent reliance on CIT vs. Karnataka State Cooperative Apex Bank and CIT vs. Nawanshahar Central Cooperative Bank - Interest income of Rs. 2,85,982 forming part of deposits held as SLR qualifies for deduction under section 80P(2)(a)(i). - HELD THAT: - The Tribunal accepted the assessee's factual position that the impugned interest income represented interest on deposits maintained to comply with the statutory liquidity ratio (SLR) obligations of a co-operative society. Applying the binding precedents relied upon by the assessee, namely the decisions in CIT vs. Karnataka State Cooperative Apex Bank and CIT vs. Nawanshahar Central Cooperative Bank, the Tribunal held that interest derived from deposits constituting SLR funds is eligible for deduction under section 80P(2)(a)(i). The Revenue's contention that the amount was an excessive component of the deduction claim and the allegation of incorrect statements in lower proceedings were rejected insofar as they did not outweigh the settled legal position established by the cited authorities. The Tribunal thereupon allowed the assessee's substantive grievance. [Paras 5, 6]

Assessee's claim that the interest income represents SLR deposits is accepted and the interest is allowed as deductible under section 80P(2)(a)(i); appeal allowed.

Final Conclusion: Delay in filing the appeal (eight days) was condoned and, on the merits, the Tribunal allowed the appeal for Assessment Year 2020-21 holding that the impugned interest income on SLR deposits is eligible for deduction under section 80P(2)(a)(i), following the cited apex Court precedents.

Classification of waste/slop oil under Chapter 27 note 3 (requirement of >50% petroleum content) - double levy of customs duty on the same goods - commercial non-marketability of waste/slop oil and customs liability - conversion of foreign-going vessel to coastal run and attendant customs consequences

Classification of waste/slop oil under Chapter 27 note 3 (requirement of >50% petroleum content) - classification under tariff heading 2710 - Whether the waste/slop oil obtained by cleaning tanker interiors could be classified under heading 2710 (crude petroleum) in view of Chapter 27 note 3 - HELD THAT: - The Tribunal found as a factual and legal conclusion that the substance recovered by pressure-jet cleaning consisted of approximately 10% oil and 90% water. Chapter 27 note 3 requires that petroleum products covered by the relevant entries must contain more than 50% by weight of specified petroleum constituents. Given the predominance of water and the low oil content, the recovered waste/slop oil did not satisfy the threshold in note 3 and therefore could not be correctly classified as crude oil under tariff item 2710. The finding that the material lacked the requisite composition is determinative of classification and defeats the revenue's contention based on heading 2710. [Paras 4]

The waste/slop oil is not classifiable under heading 2710 in view of Chapter 27 note 3 and the demand based on such classification is unsustainable.

Double levy of customs duty on the same goods - conversion of foreign-going vessel to coastal run and attendant customs consequences - commercial non-marketability of waste/slop oil and customs liability - Whether customs duty could be demanded again on the waste/slop oil when duty had already been paid while converting the vessel from foreign-going to coastal run - HELD THAT: - The Tribunal accepted the uncontroverted fact that, on conversion of the vessel from foreign-going to coastal run, customs duty had already been discharged in respect of the entire quantity of foreign-origin oil on board. The recovered waste/slop oil constituted the same goods which had already suffered duty on conversion; consequently a second demand for customs duty, interest and penalty on the same goods was impermissible. The Tribunal also noted that the waste/slop oil had no commercial value as stated in the record, reinforcing that no fresh duty liability could be imposed on material which had already been cleared by payment of duty on conversion. [Paras 4]

Demand of customs duty, interest and penalty on the waste/slop oil is not sustainable because the goods had already borne customs duty on conversion of the vessel to coastal run; the impugned demand is set aside.

Final Conclusion: The appeal is allowed: the demand founded on classification under heading 2710 falls as the recovered material does not meet Chapter 27 note 3's threshold, and the revenue cannot levy duty again on goods that had already borne customs duty on conversion of the vessel; consequential interest and penalty are also set aside.

Certificate of origin - retroactive origin verification under Annexure-III of the AIFTA - regional value addition 35% threshold for origin - FTA benefit under Notification No.46/2011-Cus - limitation / time bar under proviso to Section 28(4) of the Customs Act, 1962 - requirement to request issuing authority before rejecting COO

Certificate of origin - retroactive origin verification under Annexure-III of the AIFTA - regional value addition 35% threshold for origin - FTA benefit under Notification No.46/2011-Cus - requirement to request issuing authority before rejecting COO - Denial of FTA benefit by displacing the certificate of origin without conducting the prescribed verification - HELD THAT: - The Tribunal found that the Customs authorities denied FTA benefit on the basis of an intelligence that the 35% value addition condition was not met, but did not carry out any verification specific to the appellant. Annexure III (rule 14) of the Customs Tariff (determination of Origin under the Preferential Trade Agreement) Rules, 2011 requires that where there is reasonable doubt as to authenticity of a certificate of origin, the importing Party's customs must request the issuing authority to perform a retroactive check and obtain a response. In the present case there is no record of such a request or of any retroactive check in respect of the appellant's certificate. Absent compliance with the verification procedure, the tribunal held that the certificate of origin issued by the Malaysian authority could not be displaced and the denial of benefit was unsustainable. [Paras 4]

Appeal allowed on merits insofar as rejection of the certificate of origin without the mandatory retroactive verification was concerned; FTA benefit could not be denied on that ground.

Limitation / time bar under proviso to Section 28(4) of the Customs Act, 1962 - FTA benefit under Notification No.46/2011-Cus - Sustainability of the demand on the ground of limitation where the show cause notice was issued beyond the normal period - HELD THAT: - The Tribunal noted that the importer had submitted the certificate of origin at the time of filing the bill of entry and had no control over facts underlying issuance by the exporting authority. If Customs had doubts, it ought to have initiated action within the normal limitation period by issuing a show cause notice or by invoking the retroactive verification process. In the absence of such contemporaneous action and given that the show cause notice was issued beyond the normal period, the Tribunal found the demand to be time barred. The tribunal relied on consistent earlier decisions holding similar demands barred where verification steps and limitation requirements were not complied with. [Paras 4]

Appeal allowed on the threshold ground of limitation; the demand is hit by time bar and set aside.

Final Conclusion: The impugned orders denying FTA benefit and confirming duty and penalty are set aside: the certificate of origin could not be displaced without the prescribed retroactive verification under Annexure III, and the demand was additionally time barred; appeal allowed.

Admissibility of electronic evidence retrieved from mobile devices (WhatsApp messages) under Section 138C of the Customs Act read with Section 65B of the Evidence Act - right to cross-examination in quasi judicial proceedings under Section 138B of the Customs Act (principles of natural justice) - evidentiary value of statements recorded under Section 108 of the Customs Act and retracted confessions requiring independent corroboration - penalty under the Customs Act for abetment, mis declaration and false declaration (Sections 112(a), 112(b) and 114AA) - requirement of independent corroborative evidence to sustain penal consequences

Admissibility of electronic evidence retrieved from mobile devices (WhatsApp messages) under Section 138C of the Customs Act read with Section 65B of the Evidence Act - Admissibility of WhatsApp messages and other electronic material recovered during investigation - HELD THAT: - The adjudicating authority had relied on WhatsApp messages and call records retrieved from mobile devices to establish involvement of the appellants. The Tribunal majority held that such electronic material is inadmissible unless the mandatory safeguards in Section 138C of the Customs Act (pari materia to Section 36B/36B analogues) and Section 65B of the Evidence Act are complied with. The impugned order did not record compliance with the statutory certificate/authorisation requirements for electronic evidence and the enhancement of value and penal conclusions based on un certified electronic prints stands vitiated. The majority relied on precedents holding that non compliance renders electronic extracts unreliable and inadmissible.

Electronic evidence in the form of WhatsApp messages/call records could not be relied upon in absence of compliance with Section 138C/Section 65B; such material is inadmissible for sustaining penalties.

Right to cross-examination in quasi judicial proceedings under Section 138B of the Customs Act (principles of natural justice) - Whether denial of cross examination of witnesses/statements recorded under Section 108 violated principles of natural justice - HELD THAT: - The adjudicating authority refused the appellants' request to cross examine persons whose statements were relied upon. The majority held that cross examination is a valuable right in quasi judicial proceedings which may have adverse consequences; where statements relied upon are retracted or are material, the appellants were entitled to test credibility by cross examination. The adjudicating authority did not supply cogent reasons recording objective satisfaction for denying cross examination, and reliance on untested statements caused prejudice to the appellants' defence.

Denial of opportunity for cross examination vitiated the proceedings and precluded reliance on the contested statements.

Evidentiary value of statements recorded under Section 108 of the Customs Act and retracted confessions requiring independent corroboration - requirement of independent corroborative evidence to sustain penal consequences - Whether the first appellant's statement (recorded under Section 108 and retracted) was sufficiently corroborated to uphold penalties - HELD THAT: - The first appellant's recorded statement was retracted soon after its recording. The majority held that a retracted confession cannot be the sole basis for imposing penalties; it must be substantially corroborated by independent and cogent evidence. Given that the electronic material was inadmissible for want of statutory compliance and cross examination was denied, there was no adequate independent corroboration to sustain the penal findings against the first appellant.

The retracted Section 108 statement lacked independent corroboration of admissible evidence and could not support imposition of penalties.

Penalty under the Customs Act for abetment, mis declaration and false declaration (Sections 112(a), 112(b) and 114AA) - Sustainability of penalties imposed on the second appellant in absence of his recorded statement and independent admissible evidence - HELD THAT: - The second appellant appeared before investigating officers but no statement under Section 108 was recorded from him; he was implicated mainly by call records and other persons' statements. In light of the inadmissibility of electronic evidence and the retraction and non tested nature of co noticees' statements, the majority found no independent admissible evidence connecting the second appellant to the alleged abetment or mis declaration. Abetment requires intentional aid; absent proof of knowledge and active aiding by admissible material, penalties could not be sustained.

Penal findings against the second appellant are unsustainable for want of admissible independent evidence and are set aside.

Final Conclusion: Majority holds that (1) electronic material (WhatsApp messages/call records) relied upon was inadmissible without compliance with Section 138C/Section 65B, (2) denial of cross examination violated principles of natural justice, and (3) the retracted Section 108 statement lacked independent admissible corroboration; accordingly, the penalties imposed on both appellants under the Customs Act (Sections 112(a), 112(b) and 114AA) are set aside and the appeals are allowed.

Rejection of transaction value - enhancement of assessable value - use of NIDB data for valuation - natural justice - supply of documents relied upon - misdeclaration of quantity - redemption fine and penalty - scope and applicability

Rejection of transaction value - enhancement of assessable value - use of NIDB data for valuation - natural justice - supply of documents relied upon - Enhancement of declared value by rejecting transaction value on the basis of NIDB data - HELD THAT: - The adjudicating authority purported to enhance the transaction value relying on NIDB data and stated that such data was enclosed as an annexure. The Tribunal was unable to find any such annexure and observed that the order and the Commissioner (Appeals) contain no discussion of the specific Bills of Entry or the particulars (place of import, foreign supplier, quantity and nature of goods) relied upon to justify rejection of the transaction value. Those details materially affect valuation and must be disclosed and addressed so that the importer can defend the declared value. In the absence of the annexure and of reasoned discussion linking the relied data to the present transaction, the enhancement cannot be sustained. [Paras 7]

Enhancement of value based on the NIDB data set aside for failure to furnish and discuss the relied materials and reasons.

Misdeclaration of quantity - redemption fine and penalty - scope and applicability - Validity of redemption fine and penalty imposed for alleged misdeclaration of quantity - HELD THAT: - The records show the quantity was declared in kilograms in the bill of entry, packing list and other documents, while duty was computed on measurement in meters. On examination the discrepancy was minor (declared 11,815 kg; found 11,900 kg). The Tribunal found such small variation explicable by normal loss/variation during transit and insufficient to infer intentional misdeclaration. Given the insignificant difference and absence of evidence of intent, the finding of misdeclaration cannot be sustained and the consequential redemption fine and penalty are not warranted. [Paras 8]

Redemption fine and penalty set aside for lack of sustainable finding of intentional misdeclaration of quantity.

Final Conclusion: The impugned order is set aside; the appeal is allowed and the enhancement of value, redemption fine and penalty are quashed with consequential relief, if any.

Dismissal for default - limits on adjournments under Section 35C of the Central Excise Act, 1944 - power under Rule 20 of CESTAT (Procedure) Rules, 1982 to dismiss or decide on merits when appellant absent - duty of appellant or authorised representative to appear on listed date - abuse of adjournments and delay in justice delivery

Dismissal for default - power under Rule 20 of CESTAT (Procedure) Rules, 1982 to dismiss or decide on merits when appellant absent - duty of appellant or authorised representative to appear on listed date - Whether the appeal should be dismissed for default on account of non-appearance of the appellant/its representative after multiple adjournments - HELD THAT: - The Tribunal noted that the appeal had been adjourned at the appellant's request on three earlier dates and that no one represented the appellant on the scheduled hearing. Reliance was placed on the statutory prescription limiting adjournments under Section 35C of the Central Excise Act, 1944 and on Rule 20 of the CESTAT (Procedure) Rules, 1982 which permits the Tribunal, in its discretion, to dismiss an appeal for default or decide it on merits where the appellant does not appear. The Tribunal observed that after filing an appeal the appellant or its authorised representative is under a duty to follow the cause list and be present when the matter is heard, and that repeated adjournments without sufficient justification amounts to an abuse of process that prejudices the opposite party and delays justice. Having considered the factual posture-multiple adjournments sought by the appellant and the absence of any substantiated reason or urgency to warrant further adjournment-the Tribunal concluded that continuation of the appeal would serve no purpose.

Appeal rejected for default in exercise of discretion under Rule 20 of the CESTAT (Procedure) Rules, 1982; disposed of accordingly.

Final Conclusion: The appeal was dismissed for default after the appellant failed to appear despite three earlier adjournments requested on its behalf; the Tribunal exercised its discretion under Rule 20 (CESTAT Procedure Rules, 1982) in light of the statutory restriction on adjournments and the duty of the appellant/representative to prosecute the appeal.

Professional misconduct - gross negligence and lack of due diligence - failure to obtain sufficient appropriate audit evidence - failure to comply with the Standards on Auditing - failure to evaluate going concern - failure to determine materiality - deficient audit documentation - failure to perform physical inventory verification - failure to obtain external confirmations of trade receivables - failure to communicate with Those Charged With Governance - failure to appoint an Engagement Quality Control Reviewer - sanctions under Section 132(4) of the Companies Act, 2013 - monetary penalty - debarment from appointment as auditor

Failure to report material misstatement - professional misconduct - failure to comply with SA 705 and SA 706 - Auditors failed to report non-recognition of liabilities classified as NPAs and thus committed professional misconduct by not appropriately modifying the audit opinion. - HELD THAT: - NFRA found that CMIL had not accounted for liabilities after their classification as NPAs, a misstatement under Ind AS 109 and Para 13(i) of SA 200. The auditors referenced the matter only by an Emphasis of Matter while their report qualified the opinion on going concern rather than on non-recognition of liabilities. Inclusion as an EoM where SA 705 required modification violated SA 706 and demonstrated lack of understanding, gross negligence and lack of due diligence. [Paras 17, 18, 19, 20, 21]

Charge of failing to report the material misstatement related to NPAs proved; auditors guilty of professional misconduct in this respect.

Failure to evaluate going concern - failure to comply with SA 570 - professional misconduct - Auditors failed to evaluate management's going concern assessment and to obtain or document required audit procedures, amounting to gross negligence. - HELD THAT: - Indicators (declining revenue, PAT, net worth, book value per share and negative working capital) were present for FY 2020-21 and 2021-22. The Audit File contained no evidence of management's going concern assessment nor of auditor evaluation such as cash flow analysis for 12 months, contrary to Paras 7, 12, A3, A7 and A9 of SA 570. Documents produced in reply were not part of the Audit File and did not demonstrate appropriate evaluation. NFRA therefore concluded gross negligence in breach of SA 570. [Paras 23, 24, 25, 26, 27]

Charge of failing to evaluate going concern proved; auditors were grossly negligent and in breach of SA 570.

Failure relating to revenue recognition - failure to identify and assess risk of material misstatement due to fraud - failure to comply with SA 200, SA 240 and SA 315 - Auditors did not perform or document adequate procedures to verify revenue recognition and failed to address ROMM in revenue, constituting gross negligence. - HELD THAT: - Despite asserting verification via GST returns and reconciliations, the Audit File lacked evidence of such work, revenue recognition policy, analytical procedures, cut-off testing or other procedures required under SA 315 and SA 240 (Paras 26 and 47). Documents submitted with the reply were not in the Audit File and were rejected as afterthoughts. NFRA finds failure to obtain sufficient appropriate audit evidence on revenue. [Paras 29, 30, 31, 32, 33]

Charge of inadequate audit of revenue recognition proved; auditors grossly negligent in breach of SA 200, SA 240 and SA 315.

Deficient audit documentation - failure to comply with SA 230 - audit file inadequacy - Audit documentation was insufficient and failed to meet SA 230 requirements, indicating that required audit work was not performed. - HELD THAT: - SA 230 requires documentation of nature, timing, extent, results and review of audit work. The Audit File lacked key working papers (inventory verification, loan agreements, external confirmations, materiality workings, EQC reviewer details, minutes) and bore no dates/signatures or firm seal. Documents later submitted were not part of the Audit File and, even if considered, were vague and insufficient. NFRA treats non-documentation as evidence that work was not performed, concluding gross negligence in breach of SA 230. [Paras 36, 37, 38, 39, 40]

Charge of deficient audit documentation proved; auditors grossly negligent and breached SA 230.

Failure to perform physical inventory verification - failure to comply with SA 501 - Auditors failed to perform physical inventory observation or adequate alternative procedures as required by SA 501, constituting gross negligence. - HELD THAT: - Where inventory was material, SA 501 requires attendance at physical counts or alternative procedures. The Audit File contained only stock statements prepared by CMIL and no evidence of auditor attendance or alternative procedures for counts as on 31.03.2020, 31.03.2021 and 31.03.2022. Documents later produced were not part of the Audit File and were inadequate. NFRA accordingly concluded violation of SA 501 and gross negligence. [Paras 45, 46, 47, 48, 49]

Charge of failure to obtain sufficient audit evidence for inventory proved; auditors grossly negligent in breach of SA 501.

Forming opinion without sufficient appropriate audit evidence - failure to comply with SA 700 - Auditors formed audit opinions without obtaining sufficient appropriate audit evidence, in breach of SA 700. - HELD THAT: - Para 11 of SA 700 requires sufficient appropriate evidence to support an opinion. Given the multiple deficiencies (inventory, revenue, trade receivables, materiality, documentation, going concern), NFRA found that the auditors could not have obtained sufficient appropriate evidence and that their affirmation of true and fair view (except going concern) reflected a casual approach and lack of understanding of SAs. [Paras 51, 52, 53, 54, 55]

Charge of issuing opinions without sufficient appropriate audit evidence proved; auditors grossly negligent and in breach of SA 700.

Failure to appoint Engagement Quality Control Reviewer - failure to comply with SA 220 - Auditors did not determine or evidence appointment of an EQC reviewer for a listed entity, contrary to SA 220, demonstrating gross negligence. - HELD THAT: - Para 19(a) of SA 220 requires determination that an EQC reviewer is appointed for audits of listed entities. The Audit File had no evidence of such determination or any EQC review work for CMIL (a listed company). The auditors did not respond to this charge. NFRA concluded gross negligence in failing to comply with SA 220. [Paras 57, 58, 59, 60, 61]

Charge of failing to ensure appointment and work of an EQC reviewer proved; auditors grossly negligent and breached SA 220.

Failure to determine materiality - failure to comply with SA 320 - Auditors failed to determine and document materiality and performance materiality as required by SA 320. - HELD THAT: - SA 320 requires determination and documentation of materiality and performance materiality when establishing audit strategy. The Audit File contained no working papers evidencing such determination; documents produced later were general/theoretical and unsigned. NFRA concluded auditors did not adhere to mandatory requirements of SA 320, amounting to professional misconduct. [Paras 63, 64, 65, 66, 67]

Charge of failing to determine and document materiality proved; auditors breached SA 320 and were negligent.

Failure to obtain external confirmations of trade receivables - failure to comply with SA 500 and SA 505 - Auditors did not obtain external confirmations or alternative sufficient procedures for trade receivables and failed to document rationale, constituting gross negligence. - HELD THAT: - Trade receivables formed a material part of CMIL's assets. The Audit File lacked external confirmations, ageing analysis or documented reasons for not obtaining confirmations. Reliance on negative confirmations sent by the company and deeming unreturned confirmations as accepted, with no alternative procedures, was inappropriate. NFRA found breaches of SA 200, SA 500 and SA 505 and gross negligence. [Paras 68, 69, 70, 71, 72]

Charge of inadequate audit of trade receivables proved; auditors grossly negligent and breached relevant SAs.

Failure to communicate with Those Charged With Governance - failure to comply with SA 260 and SA 265 - Auditors failed to identify and communicate with TCWG regarding responsibilities, planned scope, timing and internal control deficiencies, in breach of SA 260 and SA 265. - HELD THAT: - The Audit File contained no evidence that the auditors determined TCWG or communicated required matters under SA 260 and SA 265. Auditors did not respond to this charge. NFRA concluded that this failure amounted to lack of due diligence and gross negligence. [Paras 73, 74, 75, 76]

Charge of failing to communicate with TCWG proved; auditors grossly negligent and in breach of SA 260 and SA 265.

Failure to comply with Section 143(9) of the Companies Act, 2013 - failure to comply with the Standards on Auditing - Auditors breached Section 143(9) by failing to comply with applicable Standards on Auditing in multiple respects. - HELD THAT: - Section 143(9) mandates auditors to comply with SAs. Given the multiple proven departures (material misstatements, documentation failures, missing procedures on inventory, revenue, receivables, materiality, EQC reviewer and TCWG communication), NFRA concluded that auditors did not comply with SAs and thus violated Section 143(9). [Paras 78, 79, 80, 81]

Charge of violating Section 143(9) proved; auditors grossly negligent.

Audit firm quality control failures - failure to implement SQC 1 - firm responsibility for engagement deficiencies - The Audit Firm failed to establish and maintain appropriate quality control systems as required by SQC 1 and is responsible for the engagement failures. - HELD THAT: - SQC 1 and SA 220 require firms to have quality control policies and procedures. The Audit File contained only a checklist; no evidence of comprehensive quality control systems, policies or their application. The firm's general policies submitted were inadequate. NFRA concluded the firm failed in its responsibility to ensure audit quality and thus committed professional misconduct. [Paras 84, 85, 86, 87, 88]

Charge that the firm failed to maintain adequate quality control proved; firm guilty of professional misconduct.

Proof of multiple charges of professional misconduct - findings based on evidence in Audit File and submissions - All charges of professional misconduct in the SCN stand proved against the auditors based on the Audit File, audit reports, submissions and other material. - HELD THAT: - NFRA reviewed the Audit File, auditors' submissions and CMIL's annual reports and found systemic and material departures from SAs and the Act across the audits for FY 2019-2020, 2020-21 and 2021-22. The cumulative deficiencies-non-reporting of misstatements, deficient procedures and documentation, failure on materiality, going concern, inventory, receivables, EQC reviewer and TCWG communication-establish professional misconduct under Section 132(4) and related provisions of the CA Act. [Paras 92, 93, 94]

SCN charges of professional misconduct proved against the Audit Firm and the Engagement Partner.

Sanctions under Section 132(4) of the Companies Act, 2013 - monetary penalty - debarment - NFRA imposed monetary penalties and debarment as proportionate sanctions for the proved professional misconduct. - HELD THAT: - Exercising powers under Section 132(4)(c), and having regard to the nature and seriousness of the breaches, NFRA imposed a monetary penalty on the firm and on the individual Engagement Partner and debarred the Engagement Partner from appointment as auditor or undertaking audits for two years. The Order states that these sanctions take effect 30 days after issuance. [Paras 96, 97, 98, 100, 101]

Penalties and sanctions imposed: monetary penalties on the firm and engagement partner and two-year debarment of the engagement partner; Order effective after 30 days.

Final Conclusion: NFRA concluded that M/s Krishna Neeraj & Associates and CA Krishna Kr Neeraj committed professional misconduct by repeatedly failing to comply with applicable Standards on Auditing and quality control requirements in the statutory audits of CMI Limited for FY 2019-2020, FY 2020-21 and FY 2021-22, and accordingly imposed monetary penalties on the firm and the engagement partner and debarred the engagement partner for two years; the Order becomes effective 30 days after issue.

Authority of President of NCLT to constitute single Member benches under the proviso to Section 419(3) - validity of exercise of Tribunal's powers by a single Judicial Member when authorised by presidential order - jurisdictional effect of absence/presence of presidential notification on orders passed by single Member bench

Authority of President of NCLT to constitute single Member benches under the proviso to Section 419(3) - validity of exercise of Tribunal's powers by a single Judicial Member when authorised by presidential order - Validity of jurisdiction exercised by a Single Judicial Member bench in respect of admission under Section 9 where the President had by order authorised a Single Judicial Member to constitute the Special Bench. - HELD THAT: - The Court examined the proviso to Section 419(3) and held that it permits the President of the Tribunal to authorise Members to function as a Bench consisting of a single Judicial Member by a general or special order. The President of NCLT, New Delhi, by an order dated 12.02.2020 constituted a Special Bench for Court No. IV on 13.02.2020 and 14.02.2020 comprising a Single Judicial Member for the listed matters; that order was issued in exercise of the power under the proviso to Section 419(3). On that footing the Member (Judicial) who heard and admitted the Section 9 application on 14.02.2020 and pronounced orders on 17.08.2020 had been validly authorised to exercise the powers of the Tribunal. The appellate tribunal (NCLAT) had not had the benefit of the presidential order when it concluded that no such authorisation existed; the presence of the 12.02.2020 order decisively answers that jurisdictional objection. [Paras 10, 11, 12, 13, 14]

The exercise of the Tribunal's powers by the Single Judicial Member in the present matter was validly authorised by the President's order dated 12.02.2020; the jurisdictional objection to the admission under Section 9 therefore fails.

Jurisdictional effect of absence/presence of presidential notification on orders passed by single Member bench - Consequences of the NCLAT's setting aside of the admission order on the ground of lack of jurisdiction and the appropriate relief. - HELD THAT: - Having found that the presidential order existed and authorised the Single Judicial Member bench, the Court concluded that the NCLAT's order setting aside the adjudicating authority's admission order dated 17.08.2020 was unsustainable. The Supreme Court allowed the civil appeal, set aside the NCLAT order, and directed that the Corporate Insolvency Resolution Process (CIRP) commenced by the adjudicating authority's order continue to its logical conclusion. The Court expressly refrained from expressing any opinion on the merits of the underlying insolvency dispute and left further proceedings, including orders under Section 31 of the Code, to the adjudicating authority after affording opportunity to contesting parties. [Paras 14, 15, 16]

The NCLAT order setting aside the admission was set aside; the CIRP shall continue and be carried to its logical conclusion, with no expression on merits by this Court.

Final Conclusion: The Supreme Court held that the President's order dated 12.02.2020 validly authorised a Single Judicial Member to exercise the Tribunal's powers in the Special Bench; the NCLAT's order that quashed the admission on jurisdictional grounds was set aside and the CIRP commenced by the adjudicating authority's order of 17.08.2020 shall continue, the Court reserving comment on the merits.

Ineligibility under Section 29A(b) of the Insolvency and Bankruptcy Code, 2016 - willful defaulter declaration and its effect on eligibility - date of submission of the resolution plan as the cut off date for Section 29A - limited applicability of Section 240A exemption for MSME to clauses (c) and (h) of Section 29A - commercial wisdom of the Committee of Creditors in approving or rejecting a resolution plan - duty of the Resolution Professional to examine eligibility under Regulation 36A(8) and related provisions

Ineligibility under Section 29A(b) of the Insolvency and Bankruptcy Code, 2016 - willful defaulter declaration and its effect on eligibility - date of submission of the resolution plan as the cut off date for Section 29A - Appellant was ineligible to submit the resolution plan under Section 29A(b) on the date of submission of his plan. - HELD THAT: - The Tribunal applied Section 29A and authoritative guidance that the relevant cut off is the date of submission of the resolution plan. The appellant was declared a willful defaulter prior to submitting his plan on 12.05.2022. No judicial stay operated in his favour on that submission date. Consequently, the willful defaulter status rendered him ineligible under Section 29A(b) when he submitted the resolution plan, and the Adjudicating Authority's finding to that effect was upheld. [Paras 78, 80]

Appellant held ineligible under Section 29A(b) as of the date of submission of the resolution plan; finding upheld.

Limited applicability of Section 240A exemption for MSME to clauses (c) and (h) of Section 29A - application of Section 240A vis a vis Section 29A(b) - Section 240A's MSME exemptions do not relieve a resolution applicant from disqualification under Section 29A(b). - HELD THAT: - The Tribunal examined Section 240A and noted that the statutory exemption for micro, small and medium enterprises is expressly confined to clauses (c) and (h) of Section 29A. The exemption does not carve out clause (b) (wilful defaulter). Therefore, the appellant could not seek protection under Section 240A against disqualification arising from a willful defaulter declaration. [Paras 63, 68, 69]

MSME exemption under Section 240A does not apply to Section 29A(b); appellant not saved by Section 240A.

Commercial wisdom of the Committee of Creditors in approving or rejecting a resolution plan - judicial review of commercial decisions of the CoC - The CoC's decision not to consider the appellant's plan and to recommend liquidation fell within its commercial wisdom and was not demonstrably perverse. - HELD THAT: - The Tribunal reiterated that the CoC has authority and responsibility to take informed commercial decisions on approval or rejection of resolution plans, including consideration of eligibility under Section 29A. The record shows the CoC deliberated the appellant's eligibility and voted (66.37%) in the 21st meeting to treat him as ineligible and to recommend liquidation. Given the CoC's mandate and the factual matrix (including the willful defaulter status and the absence of an operative stay), the Tribunal found no ground to interfere with the CoC's commercial determination. [Paras 70, 71, 81]

CoC's commercial decision and resultant recommendation for liquidation affirmed; no interference warranted.

Duty of the Resolution Professional to examine eligibility under Regulation 36A(8) - principles of natural justice in CIRP - Resolution Professional complied with duties to examine eligibility and CoC adequately considered the appellant's pleadings; allegations of breach of natural justice were rejected. - HELD THAT: - The Tribunal addressed the appellant's contention that the RP failed under Regulation 36A(8) and that natural justice was violated. The RP had placed the willful defaulter proceedings and related material before the CoC and recorded eligibility concerns. The CoC deliberated on those matters across meetings and took a decision after considering the judicial developments. The Tribunal found that the RP discharged statutory duties and that the CoC's process did not infringe principles of natural justice in a manner warranting interference. [Paras 38, 71]

RP complied with obligations; no breach of natural justice found.

Final Conclusion: The appeal is dismissed. The Tribunal upheld the Adjudicating Authority's order: the appellant was ineligible under Section 29A(b) on the date of his plan submission; MSME exemption under Section 240A does not cover Section 29A(b); the CoC's decision and the RP's conduct were within permissible commercial and statutory bounds.

Deeming provision - assignment of financial assets - financial creditor - admissibility of inadequately stamped instrument - Section 7 admission (initiation of CIRP) - guarantee and mortgage as basis for claim

Deeming provision - assignment of financial assets - financial creditor - Section 7 admission (initiation of CIRP) - Respondent No.1, having acquired financial assets under the Assignment Deed, is a financial creditor and competent to file a Section 7 application against the corporate debtor. - HELD THAT: - The Tribunal applied the deeming fiction in Section 5(2) of the SARFAESI Act to hold that on lawful acquisition of assets by an asset reconstruction company the assignee is to be treated as the lender and all rights of the original bank vest in it. Reliance was placed on earlier Tribunal exposition and on the principles governing statutory deeming clauses which require treating the putative state of affairs as real and giving effect to its attendant consequences. In the present facts the Assignment Deed transferred the bank's rights to Respondent No.1; hence Respondent No.1 was entitled to invoke remedies available to a lender, including proceedings under Section 7 of the Code against the corporate debtor who had mortgaged assets and executed guarantees in respect of the loans.

Respondent No.1 is a financial creditor for purposes of Section 7 and was competent to file the Section 7 application.

Admissibility of inadequately stamped instrument - assignment of financial assets - Challenge to the Assignment Deed on grounds of insufficient stamping did not preclude the Adjudicating Authority from relying on the registered Assignment Deed when admitting the Section 7 application. - HELD THAT: - The Assignment Deed before the Adjudicating Authority was a registered document showing payment of stamp duty in accordance with the Maharashtra Stamp Act and applicable State notification capping duty. The Tribunal noted that objections to stamping may be pursued before the stamp authority, but a pending complaint to the Collector of Stamps filed after admission did not invalidate the Assignment Deed or prevent the Adjudicating Authority from considering it. The Court also treated the registration as giving a presumption that proper stamp duty had been paid and observed that the complaint filed subsequently had no bearing on the already-admitted Section 7 proceedings.

The Adjudicating Authority rightly relied upon the registered Assignment Deed; the pending stamp proceedings did not vitiate admission under Section 7.

Guarantee and mortgage as basis for claim - financial creditor - Section 7 admission (initiation of CIRP) - The corporate debtor's execution of guarantee (and the existence of registered mortgage deeds securing the underlying loans) rendered it liable and the guarantor/ mortgagor could be proceeded against under Section 7. - HELD THAT: - Distinguishing the facts from Anuj Jain, where mortgages did not render the corporate debtor liable for another entity's loan, the Tribunal noted that here the corporate debtor had executed express Deeds of Guarantee in addition to mortgage deeds. A guarantee gives rise to an obligation by the guarantor in respect of the underlying financial debt and, coupled with registered mortgage security and the assignment to the asset reconstruction company, sufficed to establish existence of debt and default for purposes of admission under Section 7.

Admission of the Section 7 application against the corporate debtor (as guarantor/mortgagor) was correct.

Section 7 admission (initiation of CIRP) - The appellant's repeated undertakings to settle the debt, subsequent failure to honour those undertakings, and conduct before the Tribunal justified dismissal of the appeal. - HELD THAT: - The Tribunal recorded that the appellant repeatedly represented readiness to pay the settled amount and obtained interim relief on that basis, but failed to make payments despite multiple opportunities. The course of conduct - making settlement offers, obtaining time, filing complaints afterwards, and not complying with the Tribunal's directions - was treated as evidence of acknowledgement of the debt and inability/ unwillingness to discharge it, supporting the view that insolvency resolution was warranted and that there was no ground to interfere with the admission order.

Appeal dismissed on merits and in view of appellant's conduct; interim order discharged.

Final Conclusion: The Tribunal upheld admission of the Section 7 application: the assignee (Respondent No.1) stood deemed to be the lender and was a financial creditor entitled to invoke Section 7; the registered Assignment Deed and the corporate debtor's guarantees and mortgages supported existence of debt and default; the appellant's failure to honour repeated settlement undertakings reinforced the correctness of admission. Appeal dismissed and interim relief discharged.

Business Auxiliary Services - promotion or marketing or sale of goods produced or service provided by the client - service tax liability on incentives/reimbursements received from brand owner - reimbursement of advertisement and publicity and sales target incentives - principal-to-principal/franchisee bottler relationship - confirmation of demand and imposition of penalties

Business Auxiliary Services - service tax liability on incentives/reimbursements received from brand owner - promotion or marketing or sale of goods produced or service provided by the client - reimbursement of advertisement and publicity and sales target incentives - principal-to-principal/franchisee bottler relationship - Whether amounts received by the appellant from the brand owner as sales incentives and reimbursement of advertisement/publicity are exigible to service tax as Business Auxiliary Services for April 2012 to March 2013. - HELD THAT: - The Tribunal applied its earlier Final Order No.70040 of 2024 and a line of precedents holding that where a franchisee/bottler manufactures and sells products bearing the brand owner's mark (having purchased concentrate) the amounts received from the brand owner as sales incentives or reimbursement of advertisement/publicity do not fall within the clause of Business Auxiliary Services covering 'promotion or marketing or sale of goods produced or service provided by the client'. The adjudicatory findings that the appellant was required to promote or market goods 'produced or provided' by the client were not tenable where the appellant itself manufactured and sold the branded product; at best the activities related to promotion of the brand name, which the Tribunal concluded cannot be equated with rendering BAS for promotion/marketing of the client's goods. On that basis the Tribunal set aside the confirmation of demand and the penalties imposed by the Commissioner(Appeals) to the extent they sought to tax such receipts for the period under adjudication, granting consequential relief. [Paras 8]

Appeal allowed; impugned order set aside to the extent of confirmation of demand and penalties relating to the taxation of the incentives/reimbursements; consequential relief granted.

Final Conclusion: The Tribunal allowed the appeal, holding that sales incentives and reimbursement of advertisement/publicity received from the brand owner are not exigible to service tax as Business Auxiliary Services for the period April 2012 to March 2013; the confirmation of demand and imposition of penalties in the impugned order are set aside with consequential relief.

Manpower Recruitment or Supply Agency Service - contract manufacturing - job work / production or processing of goods for or on behalf of the client - allocation of service tax liability between service provider and service recipient under Notification No.13/2012 ST

Manpower Recruitment or Supply Agency Service - contract manufacturing - job work / production or processing of goods for or on behalf of the client - Whether the appellants' activities amounted to provision of Manpower Recruitment or Supply Agency Service or were contract manufacturing / job work for the principal manufacturers - HELD THAT: - The Tribunal examined the contracts and the factual matrix and applied its earlier decisions on identical facts. The agreements were for execution of specified manufacturing/processing work at the principal's premises on a per piece or per weight basis, with payment determined by quantum of work performed. The personnel performing the work remained employed, controlled and paid by the appellants, and the appellants maintained statutory labour records and compliance. The Tribunal relied on its consistent precedents holding that where the contract is for contract manufacturing/job work and payment is for the work produced (per piece/weight) and the service provider retains control and responsibility for its workers, the activity is manufacture/job work and not supply of manpower. In those circumstances demands framed under the category of Manpower Recruitment or Supply Agency Service cannot be sustained, notwithstanding the departmental classification or Notification No.13/2012 ST which apportions liability between provider and recipient where manpower supply is established.

The activity of the appellants is contract manufacturing/job work and not Manpower Recruitment or Supply Agency Service; the impugned orders are set aside and the appeals are allowed.

Final Conclusion: The Tribunal, following its earlier orders on identical facts, held that the appellants performed contract manufacturing/job work and did not provide manpower supply services; the demands under Manpower Recruitment or Supply Agency Service were unsustainable, the impugned orders were set aside and the appeals allowed.

Reverse charge - manpower supply service - contract for manufacture or process versus manpower supply - service tax liability on contractor services - piece rate payment and incorporation of minimum wages

Reverse charge - manpower supply service - contract for manufacture or process versus manpower supply - piece rate payment and incorporation of minimum wages - Liability of the appellant to pay service tax under reverse charge on services received from a contractor engaged in packing loose cement - HELD THAT: - The Tribunal examined whether the services rendered by the contractor constituted manpower supply service attracting reverse charge or were packing services performed under a contract of manufacture/process. The appellant relied on the statement of its General Manager denying supply of manpower and stating that the contractor was obliged only to perform packing. The Tribunal accepted that payment on a piece-rate basis which incorporated minimum wage components did not convert the contract into a manpower supply service. It placed reliance on the Board circular and earlier Tribunal decisions which held that where the contract is admittedly for manufacturing or a process thereto, mere engagement of labour by the contractor does not convert the contract into a manpower supply contract. In view of the applicable circular and precedents, the Tribunal found the matter no longer res integra and concluded that the impugned service could not be treated as manpower recruitment and supply merely because of the basis of payment to the contractor.

Appeal allowed and demand set aside; consequential relief granted.

Final Conclusion: The Tribunal allowed the appeal, holding that the packing services performed by the contractor were not a manpower supply service attracting reverse charge for the period April, 2012 to March, 2014, and granted consequential relief.

Composite works contracts - Taxability of construction services - Classification under works contract service

Composite works contracts - Construction of Residential Complex Service - Commercial / Industrial Construction Service - Works contract service - Service tax demand under Construction of Residential Complex Service and Commercial / Industrial Construction Service on contracts involving both supply of materials and rendition of services was not sustainable. - HELD THAT: - The Tribunal found from the sample agreement and the relied upon documents that the contracts executed by the appellant were composite in nature, covering both supply of materials and execution of construction services. Applying the settled principle that such composite contracts are not taxable under the categories of Construction of Residential Complex Service or Commercial / Industrial Construction Service, and are to be treated under works contract service, the confirmed demand under the impugned taxable categories could not be sustained. [Paras 6, 8, 9]

The demand of service tax, with consequential liabilities under the impugned categories, was set aside.

Final Conclusion: The Tribunal held that the appellant's construction contracts were composite works contracts involving supply of materials as well as services, and therefore the service tax demand confirmed under Construction of Residential Complex Service and Commercial / Industrial Construction Service was unsustainable. The impugned order was accordingly set aside and the appeal was allowed.

Levy of service tax on club subscription and entrance fee prior to 01.07.2012 - Supply of Tangible Goods Service and freight charges-double taxation - Business Auxiliary Services-discounts and commissions versus sale consideration - Reimbursable expenses not taxable prior to 2015 - Sale of fleet cards-absence of mark-up/consideration - Extended period invocation-requirement of positive act of suppression - Penalty for non-registration under Section 77(1)(a) of the Finance Act, 1994

Levy of service tax on club subscription and entrance fee prior to 01.07.2012 - Subscription and entrance fees collected from members are not liable to service tax for the period prior to 01.07.2012. - HELD THAT: - The Tribunal followed the decision in State of West Bengal v. Calcutta Club Limited and held that subscription and entrance fees collected from existing and new members do not attract service tax for the relevant period because there was no service relationship between the appellant and its members. On this basis the confirmed demand under this head was set aside. [Paras 5]

Demand of service tax on subscription and entrance fees set aside.

Supply of Tangible Goods Service and freight charges-double taxation - Freight charges received for supply of lorries are not taxable under Supply of Tangible Goods Service where only freight was collected and service tax thereon was paid by the service recipient. - HELD THAT: - The Tribunal found that the appellant collected only freight charges from M/s. BPCL and did not levy any additional hire or markup. Since service tax on the freight charges had already been discharged by M/s. BPCL under GTA-type treatment and a closely analogous decision of the Tribunal in M/s. Erode Lorry Owners Association was relied upon, the demand under Supply of Tangible Goods Service amounted to impermissible double taxation and was therefore unsustainable. [Paras 5]

Demand under Supply of Tangible Goods Service set aside.

Business Auxiliary Services-discounts and commissions versus sale consideration - Amounts accounted as discount/commission by the appellant were in fact adjustments of price difference in sale of petrol and not taxable as Business Auxiliary Services. - HELD THAT: - On examination of records and appellant's explanation, the Tribunal concluded that the amounts in question represented reconciliation or repayment of price difference in fuel sales and constituted part of sale consideration rather than commission or discount for a service. Accordingly, these receipts could not be taxed as Business Auxiliary Services and the confirmed demand was set aside. [Paras 5]

Demand under Business Auxiliary Services in respect of such amounts set aside.

Reimbursable expenses not taxable prior to 2015 - Reimbursements received from M/s. BPCL for bank charges and demand draft commission are not liable to service tax for the relevant period prior to 2015. - HELD THAT: - The Tribunal held these receipts to be mere reimbursements of expenses incurred and not consideration for any taxable service. The decision in Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd. was applied to support that such reimbursable expenses are not taxable before 2015, and accordingly the confirmed demand was set aside. [Paras 5]

Demand in respect of reimbursed bank charges and DD commission set aside.

Sale of fleet cards-absence of mark-up/consideration - Amounts received by the appellant from sale of fleet cards on behalf of M/s. BPCL, without any mark up or profit, are not taxable as consideration for services. - HELD THAT: - The Tribunal found that the appellant acted as an agent in selling fleet cards and received only amounts reimbursed by M/s. BPCL without any additional consideration. In the absence of any mark up or service consideration, the amounts could not be subjected to service tax and the demand under this head was set aside. [Paras 5]

Demand in respect of sale of fleet cards set aside.

Extended period invocation-requirement of positive act of suppression - Invocation of the extended period of limitation based on alleged suppression of facts could not be sustained in absence of any established positive act of suppression by the appellant. - HELD THAT: - The Tribunal observed that the figures leading to the demand were obtained from the accounts maintained by the appellant and that the Department failed to show any deliberate concealment or positive act of suppression. Further, many of the amounts contested did not constitute taxable services. For these reasons, the extended period invocation was held not to survive. [Paras 5]

Invocation of extended period set aside.

Penalty for non-registration under Section 77(1)(a) of the Finance Act, 1994 - Penalties imposed in respect of Renting of Immovable Property Services and Mandap Keeper Services were set aside though demand and interest for those services were upheld. - HELD THAT: - The appellant had accepted and discharged the service tax liability for rental income and Mandap Keeper Services and was registered for those services. Having regard to these facts, the Tribunal found it appropriate to interfere with and set aside the penalties levied in respect of these services while leaving the substantive demand and interest undisturbed. [Paras 5]

Penalties in respect of Renting of Immovable Property Services and Mandap Keeper Services set aside; demand and interest for those services upheld.

Final Conclusion: The Tribunal partly allowed the appeal for the period April 2007 to March 2012: demands, interest and penalties except those relating to Renting of Immovable Property Services and Mandap Keeper Services were set aside; demand and interest in respect of Renting and Mandap Keeper Services were upheld while the penalties for those services were set aside, with consequential reliefs as per law.

Recovery of CENVAT credit wrongly taken or erroneously refunded - Interest liability on unutilized CENVAT credit - Eligibility of CENVAT credit and documentary compliance under Rule 9 of CENVAT Credit Rules, 2004 - Partial availment of credit on capital goods under Rule 4(2)(a) of CCR, 2004 - Invocation of extended period for recovery under the extended proviso to Section 73 of the Finance Act, 1994 - Imposition of penalty under Rule 15(3) read with Section 78 of the Finance Act, 1994 - Application of Rule 14 of CENVAT Credit Rules, 2004 for recovery with interest

Interest liability on unutilized CENVAT credit - Application of Rule 14 of CENVAT Credit Rules, 2004 - Interest is not demandable where CENVAT credit was merely taken as a book entry and was not utilized before reversal. - HELD THAT: - The Tribunal held that the question whether interest is demandable on CENVAT credit merely entered in the books but not utilized is no longer open; higher judicial fora have consistently held that mere taking of credit without its utilization, or where the entry is reversed before utilization, does not attract interest. The Tribunal relied on the reasoning in decisions of coordinate benches and High Courts (including Bill Forge, Strategic Engineering and subsequent Tribunals/LB decisions) which emphasise that a book entry of credit that is reversed amounts to non taking and that interest, being compensatory, is payable only where duty is actually withheld or unpaid. Applying those precedents to the facts-where the appellant did not utilize the excess credit on capital goods and reversed the customs cess credit before use-the Tribunal concluded recovery of interest was not sustainable. [Paras 9, 10, 11]

Recovery of interest in respect of the CENVAT credit that was only taken as a book entry and not utilized is not maintainable.

Eligibility of CENVAT credit and documentary compliance under Rule 9 of CENVAT Credit Rules, 2004 - Partial availment of credit on capital goods under Rule 4(2)(a) of CCR, 2004 - CENVAT credit availed on invoices addressed to other divisions/units of the same Government owned appellant is admissible where goods/services were received and installed for the appellant and there is no evidence of diversion. - HELD THAT: - The Tribunal examined the appellant's explanation and documentary material showing that the goods and services were received, installed and used in the appellant's premises and that the invoices related to other internal divisions or were routed through Input Service Distributor mechanisms. Given that the appellant is a Government owned entity with multiple circles/divisions, and absent any finding or evidence of diversion of capital goods outside the appellant's use, the Tribunal held that denial of credit on that ground was not proper. The Tribunal therefore allowed the credit claimed on such invoices, subject to absence of contrary proof of diversion or non receipt. [Paras 12, 13]

The CENVAT credit availed on the invoices addressed to other divisions/ISD is allowable in the facts of this case where the goods/services were received and used by the appellant.

Invocation of extended period for recovery under the extended proviso to Section 73 of the Finance Act, 1994 - Imposition of penalty under Rule 15(3) read with Section 78 of the Finance Act, 1994 - Extended period for recovery and penalty cannot be invoked where there is no evidence of deliberate suppression with intent to evade, particularly in respect of a wholly Government owned undertaking; the demand is time barred. - HELD THAT: - The Tribunal considered the appellant's submission that the show cause notice was issued beyond the normal limitation and that the appellant, being a Public Sector Undertaking, could not be imputed with mala fide suppression or intent to evade. Applying precedents (including Indian Oil, Nepa and similar Tribunal/High Court decisions), the Tribunal found absence of material demonstrating deliberate suppression with intent to evade duty. Consequently, invocation of the extended period proviso and imposition of penalty were not justified. On this basis the Tribunal held the demand to be time barred and illegitimate. [Paras 14, 16, 17, 18]

Invocation of the extended period and imposition of penalty are not justified; the demand is time barred and cannot be sustained.

Final Conclusion: The impugned Order in Original is set aside: interest recovery in respect of unutilized book entry CENVAT credit is not maintainable; credit on invoices addressed to other divisions/ISD is allowable on the facts; and invocation of the extended period and penalty is unjustified. The appeal is allowed with consequential reliefs as per law.

Input service - welfare perquisites not input service - proviso to Rule 9(2) of CENVAT Credit Rules - validity of invoice despite missing particulars - Rule 6(3) - reversal of CENVAT credit for exempt services - reverse charge - manpower recruitment and supply agency service - extended period of limitation - requirement of wilful suppression/malafide intention - penalty - malafide intention requirement - interest compensatory and automatic

Input service - welfare perquisites not input service - CENVAT credit on meal vouchers, accommodation and similar welfare perquisites - HELD THAT: - The Tribunal analysed the statutory definition of 'input service' across the relevant periods and the specific exclusions thereunder, and held that services provided primarily for personal use or welfare of employees (such as meal vouchers and accommodation provided as perquisites) are not input services. Meal vouchers were held to be a welfare activity and primarily for personal consumption and hence not eligible for credit. Similarly, accommodation provided to employees was characterised as a perquisite for comfort and welfare and lacking the requisite nexus with the business activity to qualify as an input service; therefore the adjudicating authority's denial of credit in respect of such welfare-related services was sustained. [Paras 5]

Credit on meal vouchers and accommodation (welfare perquisites) is not admissible as input service and the findings of the adjudicating authority in this regard are upheld.

Proviso to Rule 9(2) of CENVAT Credit Rules - validity of invoice despite missing particulars - Availment of CENVAT credit on invoices not bearing serial numbers - HELD THAT: - The Tribunal interpreted Rule 9(2) and its proviso and held that absence of some particulars in an invoice (such as serial number) does not render the document invalid for CENVAT credit if the invoice contains the critical particulars enumerated in the proviso (details of service tax payable, description of taxable service, assessable value, service tax registration number of the input service provider, and name and address of the provider) and the recipient has received and accounted for the services. In the present case the appellant established receipt of services and that service tax had been paid by the provider, and produced an affidavit from the seller; accordingly denial of credit on this ground was held to be erroneous. [Paras 6]

Credit denied solely on account of missing serial numbers is set aside and CENVAT credit on such invoices is allowed subject to satisfaction of the proviso to Rule 9(2).

Rule 6(3) - reversal of CENVAT credit for exempt services - Reversal under Rule 6(3)(i) in respect of services used for exempted outputs (Jammu & Kashmir services) - HELD THAT: - The Tribunal examined the facts that the appellant had made proportionate reversal of CENVAT credit attributable to services used in the provision of exempt services in Jammu & Kashmir and had produced calculations and correspondence evidencing reversal prior to issuance of the show cause notice. Relying on established principles and precedents, the Tribunal held that where proportionate credit has been reversed and the department has not challenged the quantum or method of reversal, liability under Rule 6(3)(i) cannot be fastened. Accordingly, the demand in respect of the said reversed credit was unsustainable. [Paras 7]

Demand under Rule 6(3)(i) in respect of CENVAT credit attributable to J&K services is set aside as the appellant had already reversed the proportionate credit.

Reverse charge - manpower recruitment and supply agency service - extended period of limitation - requirement of wilful suppression/malafide intention - penalty - malafide intention requirement - interest compensatory and automatic - Taxability and limitation for manpower recruitment/supply services received from overseas related entity; and consequence on interest and penalties - HELD THAT: - The Tribunal considered the secondment/secondment-like arrangements and the revenue's invocation of reverse charge and also the invocation of extended period of limitation and penalties. While the Tribunal accepted that secondment arrangements can attract service tax under reverse charge, it held - in light of the Supreme Court's exposition on extended limitation and wilful suppression - that the department had not established wilful suppression or malafide intention to justify invocation of the extended period; accordingly demands confirmed for the extended period were set aside and only the normal period demand can be sustained. The Tribunal further held that levy of interest is compensatory and automatic and upheld the demand for interest. However, on the facts the department failed to prove the necessary malafide intention for imposing penalties under the relevant provisions, and the penalties were therefore set aside. [Paras 8, 9, 10]

Demand in respect of manpower services confirmed for the normal period (extended period set aside); interest upheld; penalties quashed for lack of malafide/suppression.

Final Conclusion: The appeal is allowed partially: the impugned order is modified by (i) setting aside denial of credit on invoices lacking serial numbers insofar as the proviso to Rule 9(2) is satisfied, (ii) setting aside demands where proportionate reversal under Rule 6(3)(i) had been effected for J&K services, (iii) disallowing the extended period of limitation, and (iv) quashing penalties for lack of malafide; other findings (including tax liability for the normal period and interest) are sustained.

Levy of service tax on commission forming part of M.R.P. - Double taxation where service tax already paid on M.R.P. - Business Auxiliary Service - Revenue neutrality and Cenvat credit

Levy of service tax on commission forming part of M.R.P. - Double taxation where service tax already paid on M.R.P. - Business Auxiliary Service - Demand of service tax on the commission accounted by the appellant for installation and activation of DTH connections is not sustainable. - HELD THAT: - The appellant performed installation and activation of DTH connections and received commission from the DTH operator; the amounts collected from customers for installation/activation were inclusive of service tax and the appellant did not collect any additional amount from customers (paras 2, 8). The Tribunal applied the reasoning in Kumar's Electronics, which held that where the principal operator has discharged service tax on the M.R.P. (inclusive of the distributor's commission), imposing service tax again on the commission would result in double taxation (para 9). That approach accords with the principle of revenue neutrality because if the distributor/agent were separately taxed, the main operator could have availed Cenvat credit, altering the cash outflow of the operator (para 9). The Tribunal found the facts of the present case identical to Kumar's Electronics and, following its ratio and the authorities cited therein, concluded that the demand cannot be sustained (paras 10-11). [Paras 2, 8, 9, 10, 11]

Impugned demand of service tax on the commission is set aside and the appeal is allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, set aside the demand of service tax on commission for the period 2007 - 2008 to 2010 - 2011, and granted consequential relief, following the ratio in Kumar's Electronics that commission included in an M.R.P. on which service tax has been discharged is not liable to be taxed again.

Construction of Residential Complex Services - Works Contract Services - service simplicitor - composite contract - taxability of landowner's share

Construction of Residential Complex Services - Works Contract Services - composite contract - service simplicitor - Whether the demand of service tax under Construction of Residential Complex Services on the landowner's share for the period June 2005 to April 2009 is sustainable - HELD THAT: - The Tribunal examined the statutory definitions and concluded that the definition of "residential complex" contemplates a service simplicitor and does not encompass composite contracts involving transfer or use of materials. Contracts of a composite nature fall within the definition of Works Contract Services, which was introduced with effect from 01.06.2007. Consequently, where the contractual arrangement is composite (involving both services and supply/use of goods), the demand cannot be sustained under Construction of Residential Complex Services and must be considered only under the Works Contract Services regime. The Tribunal also relied on its earlier decisions to the same effect and noted that the decision in Jain Housing & Construction Limited, following the Tribunal's approach, was sustained by the Hon'ble Apex Court. Applying that reasoning to the facts, the demand under Construction of Residential Complex Services in respect of the landowner's share was held unsustainable.

Demand of service tax under Construction of Residential Complex Services in respect of landowner's share for the said period is not sustainable.

Final Conclusion: The impugned order is set aside and the appeal is allowed; consequential reliefs, if any, to follow as per law.

Levy of service tax on renting of immovable property used for accommodation - Definition of Renting of Immovable Property Service under Section 65(105)(zzzz) - Taxability of sale of shares as Business Auxiliary Service - Management, Maintenance and Repair Services-demand, interest and penalty

Levy of service tax on renting of immovable property used for accommodation - Definition of Renting of Immovable Property Service under Section 65(105)(zzzz) - Demand of service tax under Renting of Immovable Property Services in respect of premises let out for guest rooms and related facilities set aside. - HELD THAT: - The Tribunal examined the statutory definition of taxable 'renting of immovable property' and the exceptions which exclude buildings used for purposes of accommodation, including hotels, hostels and similar accommodation. The lease deed between the appellant and the occupier expressly stipulated exclusive use of the premises for guest rooms and connected facilities such as kitchen, dining and dedicated parking. Given that the premises were let out for accommodation and related activities, the levy under the renting service head is not attracted. Applying the statutory exclusion, the Tribunal held that the demand (including interest and penalties) cannot be sustained and must be set aside. [Paras 6]

Demand under Renting of Immovable Property Services set aside.

Taxability of sale of shares as Business Auxiliary Service - Demand of service tax under Business Auxiliary Services in respect of consideration received for sale of shares set aside. - HELD THAT: - The Department characterised the amount received on transfer of shares to the joint venture partner as consideration for promotion of the purchaser's business. The Tribunal applied the reasoning of its earlier final order in the appellant's own case, observing that the transaction was a sale of shares and not a service promoting the business of the purchaser. The receipts were treated as capital gains in income-tax records and booked as profit on sale of shares. On this basis, the activity cannot be classified as a taxable Business Auxiliary Service, and the demand is liable to be set aside. [Paras 7]

Demand under Business Auxiliary Services set aside.

Management, Maintenance and Repair Services-demand, interest and penalty - Demand and interest under Management, Maintenance and Repair Services upheld; penalty imposed under this count set aside. - HELD THAT: - The Tribunal noted that the appellant had discharged the service tax and interest on Management, Maintenance and Repair Services prior to the adjudication order. Consequently, the substantive demand and interest are sustained as having been legitimately leviable but already paid. In view of the pre-payment, and having regard to the submissions, the Tribunal exercised its discretion to set aside the penalty imposed in respect of this service. [Paras 8]

Demand and interest upheld (tax paid); penalty set aside.

Final Conclusion: The appeal is partly allowed: demands, interest and penalties under Renting of Immovable Property and Business Auxiliary Services are set aside; demand and interest under Management, Maintenance and Repair Services are upheld (subject to the fact of pre-payment) and the penalty relating to that count is set aside.

Definition of "newsprint" under Chapter Note 4 to Chapter 48 - benefit of exemption under Notification No. 23/1998-CE - requirement of supply against purchase order (direct supply v. through depot) - place of removal under Section 4 of the Central Excise Act, 1944 - classification under tariff heading 4801 - penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944

Definition of "newsprint" under Chapter Note 4 to Chapter 48 - benefit of exemption under Notification No. 23/1998-CE - requirement of supply against purchase order (direct supply v. through depot) - classification under tariff heading 4801 - Whether goods cleared from the factory to an outside depot and thereafter supplied to registered newspapers satisfy the notification requirement of being "supplied against a purchase order" so as to qualify as newsprint at nil rate under heading 4801 and Notification No. 23/1998-CE. - HELD THAT: - The Tribunal held that the goods manufactured by the appellant indisputably satisfied the definitional limbs of the notification: they were intended for printing of newspapers and manufactured by a manufacturer listed under the Newsprint Control Order, 2004. The Tribunal construed the phrase "supplied against a purchase order placed upon such manufacturer by a newspaper" to require that the ultimate supply to the newspaper be pursuant to the newspaper's purchase order, and not necessarily that the initial removal from factory be directly against that purchase order. Where the goods, after removal to a depot, were ultimately delivered to registered newspapers against their purchase orders, the condition in clause (b) stood fulfilled. Reliance was placed on the Tribunal's earlier decision in Sri Venkatesa Paper and Boards Ltd which accepted indirect supply through depots as meeting the purchase order requirement. The Tribunal therefore concluded that intermediate storage and transfer to an outside depot did not alter the character of the goods or disentitle the appellant from the nil rate under chapter heading 4801 and Notification No. 23/1998-CE. [Paras 4]

Benefit of nil rate under heading 4801 read with Notification No. 23/1998-CE was available as the supplies to registered newspapers were ultimately against their purchase orders, notwithstanding intermediate transfer to a depot.

Place of removal under Section 4 of the Central Excise Act, 1944 - requirement of supply against purchase order (direct supply v. through depot) - penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 - Whether transfer of goods from the factory to an outside godown/depot (unregistered as per revenue's contention) affects the place of removal concept or sustains a demand and penalty that were confirmed by the adjudicating authority. - HELD THAT: - The Tribunal observed that while the factory is a place of removal under Section 4, any other place from which the goods are sold after removal from the factory is also statutorily considered a place of removal. Consequently, sale from the appellant's godown to the newspapers after clearance from the factory does not change the nature or classification of the goods for purposes of the notification. Given that the substantive conditions of the notification were satisfied, the Department's demand of excise duty and imposition of penalty under Rule 25 read with Section 11AC could not be sustained. The Tribunal therefore set aside the adjudicating authority's demand and penalty order in entirety. [Paras 4, 5]

Transfer to an outside godown did not alter place of removal or defeat entitlement to the exemption; the demand and penalty confirmed by the adjudicating authority were set aside.

Final Conclusion: The Tribunal allowed the appeal, holding that the goods cleared to an outside depot and ultimately supplied to registered newspapers against their purchase orders qualified as newsprint under Chapter Note 4 and Notification No. 23/1998-CE for nil rate under heading 4801; consequently the demand and penalty imposed by the adjudicating authority were set aside.

Levy of central excise duty only on goods manufactured or produced in India - Duty payable on removal of goods, not on receipts - Excise duty cannot be levied on amounts received unless such receipts represent sale of excisable goods - Burden of proof on Revenue under Section 102 of the Evidence Act in excise proceedings - Demand beyond charging section and legislative competence

Duty payable on removal of goods, not on receipts - Excise duty cannot be levied on amounts received unless such receipts represent sale of excisable goods - Burden of proof on Revenue under Section 102 of the Evidence Act in excise proceedings - Validity of excise demand based on discrepancy between amounts recorded in Form 26AS and values declared in ER1 returns - HELD THAT: - The Tribunal held that central excise duty is chargeable only on excisable goods manufactured or produced in India and, as a matter of statutory and constitutional principle, on the value of goods cleared and not on amounts received by the assessee. Duties become payable on removal and payment timing or receipts are irrelevant to levy. Form 26AS records receipts and TDS under the Income Tax regime and cannot by itself fix excise liability. While receipts differing from declared ER1 values may justify investigation, the Revenue must establish that the receipts were payments for additional excisable goods cleared but undeclared. Applying Section 102 of the Evidence Act, the burden of proof in show cause proceedings lies on the Revenue; absent evidence from the department proving that the higher amounts in Form 26AS related to sales of excisable goods for which duty escaped assessment, the demand could not be sustained. Consequently the demand raised solely on the basis of amounts received as per Form 26AS was legally unsustainable. [Paras 13, 14, 15, 17, 18]

Demand of differential excise duty based on the difference between ER1 returns and Form 26AS receipts set aside.

Levy of central excise duty only on goods manufactured or produced in India - Demand beyond charging section and legislative competence - CENVAT recovery when inputs or capital goods are removed as such - Validity of demand of central excise duty on used capital goods sold by the appellant - HELD THAT: - The Tribunal observed that excise duty can be charged only under the charging provisions on goods manufactured or produced by the assessee. The SCN purported to demand central excise @12.5% on the commercial invoice value of capital goods sold, whereas the applicable remedy where inputs or capital goods are removed as such is a recovery equal to CENVAT credit availed (Rule 3(5) CCR) and not an excise levy on goods not manufactured by the seller. The demand as framed sought to impose central excise on goods not manufactured by the appellant and therefore exceeded the scope of the charging section and the Union's legislative competence. The appellant also asserted it had not availed CENVAT credit on those goods. For these reasons the demand against sale of capital goods could not be sustained. [Paras 19, 20, 21, 22]

Demand of central excise duty on capital goods sold by the appellant set aside.

Final Conclusion: The appeal is allowed; the impugned order confirming demands and penalty is set aside and consequential relief granted to the appellant.

Refund of CENVAT credit on inputs and input services involved in export - Determination of refundable amount by formula under Rule 5 of the CENVAT Credit Rules and Notification No.5/2006 C.E. (N.T.) - Restriction on refund where drawback or rebate has been availed - scope limited to the portion of exports covered by such schemes - Requirement of prescribed procedure and supporting documents (Form A, shipping bills, bank certificates, relevant extracts of records) - Burden on claimant to establish nexus and quantify input credit used in exported goods

Requirement of exports under bond/LUT for refund under Rule 5 - Scope of bar on refund where drawback or rebate is availed - Entitlement to claim refund under Rule 5 is confined to inputs/input services used in goods/services exported without payment of duty under bond/LUT; claim is not defeated by the fact that other consignments were cleared under drawback or rebate so long as the refund claimed relates only to goods exported under bond/LUT. - HELD THAT: - The Tribunal examined Rule 5 and the Notification and accepted that one condition for refund is that the final/intermediate product or output service must be exported without payment of duty under bond or Letter of Undertaking. The Tribunal also followed its earlier finding that Rule 5 and the Notification do not require that all exports be made under a single scheme; part consignments cleared under drawback or rebate do not render ineligible those goods exported under bond/LUT for which refund is claimed. Accordingly, the statutory proviso disallowing refund where drawback or rebate is availed applies only to that portion of exports where drawback or rebate has in fact been claimed; it does not operate to deny refund for goods legitimately exported under bond/LUT and claimed under Rule 5. [Paras 8]

Portion of refund claim relating to goods exported under bond/LUT is eligible despite other consignments being cleared under drawback or rebate.

Application of the Rule 5 formula and Notification procedure for quantification of refund - Requirement to submit prescribed supporting records and claimant's burden to establish nexus and input utilisation - Amount of refundable CENVAT credit for the period January, 2009 to March, 2009 is to be determined by applying the Rule 5 formula and the Notification's safeguards; the appellant satisfied conditions for certain components and the Tribunal re determined the eligible refund as Rs.4,22,558/-, setting aside the impugned order which denied that amount. - HELD THAT: - The Tribunal reviewed the five conditions distilled from Rule 5 and the Notification: export under bond/LUT, determination by formula, compliance with procedural safeguards (Form A and prescribed enclosures), inability to utilize credit for payment of duty/tax, and restriction of input service refund by the export/total turnover ratio. It accepted the original authority's verification that the goods claimed were exported under bond/LUT and that the average export clearances condition was met. The formula was applied to restrict input service refund to the export/total turnover ratio, yielding Rs.77,754/-, and the input credit balance after utilization was accepted as Rs.3,44,804/-. Combining these components produced the total admissible refund of Rs.4,22,558/-. The Tribunal rejected the Commissioner (Appeals)'s confirmation of demand and denial of the refund because those conclusions were contrary to the applicable formula, conditions and documentary verification. [Paras 8, 9, 11]

Refund quantified and allowed in terms of Rule 5 and Notification as Rs.4,22,558/-, and the impugned order upholding demands is set aside.

Final Conclusion: The appeal is allowed: the Tribunal held that the appellant was entitled to refund under Rule 5 read with Notification No.5/2006 C.E. (N.T.) for the period January, 2009 to March, 2009, re determined the admissible refund as Rs.4,22,558/-, and set aside the impugned order confirming demands and rejecting the refund.

Section 38(3) timeline for refund - Adjustment of refund against outstanding dues - Application of excess towards recovery before refund - Mandatory nature of refund timelines - Interest on delayed refund under Section 42 - Effect of notice under Section 58 / requisition under Section 59 on refund

Section 38(3) timeline for refund - Adjustment of refund against outstanding dues - Mandatory nature of refund timelines - Interest on delayed refund under Section 42 - Application of excess towards recovery before refund - Whether the statutory timeline in Section 38(3) must be complied with before adjusting a claimed refund against amounts alleged to be due under the Act. - HELD THAT: - The Court held that the language of Section 38(3) is mandatory and its object is to ensure timely processing and issuance of refunds. Sub section (2) permits application of excess only towards recovery of amounts that are "due under the Act." Where, as in the present case, the refund period prescribed by Section 38(3)(a)(ii) (two months for quarterly tax periods) expired before any demand crystallised, the department was not entitled to retain and thereafter adjust the refund against demands raised subsequently. The contention that the timeline in sub section (3) is concerned only with interest calculation under Section 42 and does not limit the power to adjust refunds was rejected as defeating the provision's object; permitting such a construction would allow indefinite retention of refundable amounts for future adjustment, contrary to the statute. The Court therefore affirmed the High Court's conclusion that the adjustment order was not maintainable and directed refund with interest as provided under Section 42. [Paras 7, 8, 9, 10, 11]

The statutory timeline in Section 38(3) is mandatory; the department cannot retain and adjust refunds against demands that crystallised after the refund period elapsed, and the adjustment order is quashed.

Statutory appeal under Section 74 - Disposition of the default notices issued to the respondent. - HELD THAT: - The High Court quashed the adjustment order but left the validity of the default notices to be challenged by the respondent by availing the statutory remedy. The Court recorded that liberty was given to the respondent to pursue an appeal under Section 74 of the Act in respect of those notices. [Paras 3]

Liberty granted to the respondent to avail statutory appeal under Section 74 against the default notices.

Final Conclusion: Appeal dismissed; High Court judgment affirmed quashing the adjustment order and directing refund of the claimed amounts for the 4th quarter of 2015-16 and the 1st quarter of 2017-18 with interest as provided under Section 42; the respondent permitted to challenge the default notices by statutory appeal under Section 74.

Ex parte order - arbitrariness of cryptic order - restoration of appeal - Order IX Rule 13 CPC - absence of vakalat - right to adjudication on merits - condonation of delay

Ex parte order - arbitrariness of cryptic order - absence of vakalat - Order IX Rule 13 CPC - right to adjudication on merits - Validity of the Appellate Tribunal's cryptic orders allowing Departmental appeals for assessment years 2008-09 and 2009-10 and the rejection of the petitioner's application to set aside the ex parte orders. - HELD THAT: - The Court found that the Tribunal's allowance of the Department's appeals by cryptic ex parte orders, arising from non-filing of vakalat for the petitioner, and the concurrent dismissal of the petitioner's application to set aside those orders (under Order IX Rule 13 CPC) lacked reasoned consideration. The High Court concluded that where a detailed order of the Appellate Commissioner exists, a peremptory and unexplained dismissal or allowance by a cryptic order amounts to arbitrariness and would deny the assessee's substantive right to adjudication on merits. The Court observed that the defect alleged (oversight in filing vakalat) and the procedural objection to the affidavit being sworn by the clerk did not justify summary disposal without application of mind. Accordingly, the impugned ex parte and cryptic orders were held to be arbitrary and were set aside to restore the petitioner's right to be heard on merits. [Paras 9]

Impugned cryptic ex parte orders set aside and the rejection of the application to set aside those orders found arbitrary.

Restoration of appeal - right to adjudication on merits - condonation of delay - Relief to be granted and directions regarding disposal of all four Departmental appeals (MTSA Nos.8,7,6,9 of 2016) pertaining to assessment years 2007-08, 2008-09, 2009-10 and 2010-11. - HELD THAT: - Having set aside the arbitrary ex parte orders, the Court directed restoration of all four appeals to the file of the Sales Tax Appellate Tribunal for joint disposal on merits and in accordance with law. The petitioner was directed to file vakalat and file notes and submissions as per the Tribunal's procedure. The Court, while noticing delay in approaching it, emphasised that substantive rights should not be defeated by summary orders and, in the exercise of its supervisory jurisdiction, allowed restoration despite delay, calling for expeditious disposal by the Tribunal. [Paras 11, 12]

All four appeals restored to the Appellate Tribunal; petitioner to file vakalat and submissions; Tribunal to dispose of appeals on merits expeditiously.

Final Conclusion: Writ petitions allowed: cryptic ex parte orders set aside as arbitrary; all four Departmental appeals (2007-08, 2008-09, 2009-10, 2010-11) restored to the Sales Tax Appellate Tribunal for fresh disposal on merits, petitioner to file vakalat and submissions, no costs.

Vicarious liability under Section 141 of the Negotiable Instruments Act - liability of a Company Secretary as key managerial personnel - being in charge of, and responsible for, the conduct of the business - consent, connivance or neglect under Section 141(2) - requisite averments for criminal liability under Section 138 read with Section 141

Vicarious liability under Section 141 of the Negotiable Instruments Act - being in charge of, and responsible for, the conduct of the business - liability of a Company Secretary as key managerial personnel - Petitioner, who was employed as Company Secretary, cannot be held vicariously liable under Section 141(1) NI Act as a person 'in charge of, and responsible for, the conduct of the business' of the company in relation to the subject transaction. - HELD THAT: - The Court analysed the statutory role and functions of a Company Secretary as key managerial personnel and noted that the statutory duties are primarily secretarial and compliance-oriented, not the overall control of day-to-day business required by Section 141(1). A Company Secretary's role under the Companies Act and related rules does not ordinarily equate to being 'in-charge of' the company's business as interpreted by precedent. The complaints do not aver that the petitioner had overall control of the company's day-to-day affairs or was responsible for conduct of the business in respect of the transaction giving rise to the cheque; accordingly, Section 141(1) cannot be invoked to fasten vicarious liability on the petitioner. [Paras 12, 15]

Petitioner is not vicariously liable under Section 141(1) NI Act; allegations do not establish she was in charge of and responsible for the conduct of the company's business.

Consent, connivance or neglect under Section 141(2) - requisite averments for criminal liability under Section 138 read with Section 141 - Complaints do not contain adequate averments of consent, connivance or neglect against the petitioner to attract liability under Section 141(2) NI Act. - HELD THAT: - The Court distinguished the liability under sub-section (2) which arises from holding an office coupled with consent, connivance or neglect, from sub-section (1) which requires actual control. While the prosecution must allege and prove consent/connivance/neglect for liability under Section 141(2), the complaints in this case only contain sweeping and bald averments that do not specifically attribute such conduct to the petitioner. Even if the petitioner is shown to have been Company Secretary, the pleadings fail to particularise any act or omission by her amounting to consent, connivance or neglect in relation to issuance or dishonour of the cheques; therefore the material is insufficient to sustain proceedings against her under Section 141(2) at the stage of summoning. [Paras 15, 16, 17]

Proceedings cannot be sustained against the petitioner under Section 141(2) as the complaints lack the necessary specific averments of consent, connivance or neglect.

Final Conclusion: Proceedings against the petitioner are quashed and the summoning orders set aside because she was impleaded only in her capacity as Company Secretary and the complaints fail to aver that she was in charge of and responsible for the company's business or that the offence occurred with her consent, connivance or neglect; continuation of proceedings would be an abuse of process.

Delay and laches - extraordinary writ jurisdiction under Article 226 - permissibility of offering alternate land under modified selection guidelines - judicial review of administrative discretion in selection of LPG distributorship

Delay and laches - extraordinary writ jurisdiction under Article 226 - Whether the writ petition ought to have been dismissed on account of delay and laches in instituting the challenge. - HELD THAT: - The Court held that inordinate delay and acquiescence are material considerations in exercising the discretionary extraordinary jurisdiction under Article 226. A rival applicant who participated in the selection process and remained passive after allotment cannot, after a long lull, invoke writ relief to upset subsequent administrative actions without satisfactory explanation. The Court reiterated settled principles that delay and laches may disentitle a litigant to equitable relief, and that the High Court should refuse to exercise writ jurisdiction where the delay is not reasonably explained and has caused prejudice or allowed the cause of action to drift. Applying these principles to the facts, the Court observed that the rival applicant was aware of the allotment in 2014 but did not challenge it until 2017 when construction on alternate land had been permitted; thus the petitioner slept over her rights and acquiesced in the Corporation's acts. [Paras 10, 11, 12, 13, 14]

Writ petition was properly to be dismissed on the ground of delay and laches and the Division Bench's allowance of the petition on merits was set aside.

Permissibility of offering alternate land under modified selection guidelines - judicial review of administrative discretion in selection of LPG distributorship - Whether the Corporation acted within its discretion in accepting alternate land and permitting construction in light of subsequent modification to selection guidelines. - HELD THAT: - The Court accepted the Corporation's factual and policy basis for permitting alternate land, noting that the appropriate government had amended guidelines to allow flexibility to offer alternate land where initial land was deficient. The Corporation conducted field verification and was satisfied with the bona fides and suitability of the alternate site; the Court declined to substitute its view for that of the experts where no strong illegality or mala fides was shown. Accordingly, the administrative decision to accept alternate land and permit construction was held to be within the Corporation's discretionary domain and consonant with changed policy. [Paras 7, 14, 15]

Acceptance of alternate land and consequent administrative permissions were within the Corporation's discretion and not vitiated by retrospective application of guidelines; no interference was warranted on that ground.

Final Conclusion: Appeal allowed. The Division Bench's order setting aside the allotment is set aside; the Single Judge's order dismissing the writ petition is restored on the ground of delay and latches. No order as to costs.