TaxTMI Updates e-Newsletter
May 05,2023

Input Tax Credit - quashing of administrative order - remand for fresh adjudication - opportunity of hearing - GST paid by supplier - abandonment of constitutional challenge

Input Tax Credit - GST paid by supplier - quashing of administrative order - remand for fresh adjudication - opportunity of hearing - Impugned order dated 27.12.2021 returning Input Tax Credit was quashed and matter remanded for fresh adjudication after affording hearing and taking into account that GST on supplied items had been paid by suppliers. - HELD THAT: - The Court noted that the order under challenge was passed without regard to the fact, now admitted by the revenue's counsel, that GST on the materials supplied had already been paid by the suppliers. As learned counsel for the revenue conceded that fresh consideration was appropriate, the Court set aside the impugned order and directed the assessing authority to pass a fresh order. The fresh adjudication must be preceded by giving the petitioner an opportunity of hearing and must take into consideration the payment of GST by the suppliers when determining the claim of Input Tax Credit.

Order dated 27.12.2021 quashed; matter remanded to respondent No.2 to decide afresh after providing opportunity of hearing and considering that GST was paid by the suppliers.

Abandonment of constitutional challenge - quashing of administrative order - Petitioner's challenge to the constitutional validity of Sections 16(2)(aa), 16(2)(c) of the CGST Act, 2017 and Rule 36(4) of the CGST Rules, 2017 was not pressed and therefore was not adjudicated. - HELD THAT: - Counsel for the petitioner expressly declined to press the reliefs seeking declaration of unconstitutionality of the cited provisions. In view of that abandonment, the Court refrained from considering the constitutional challenge and confined its order to quashing the impugned adjudication and directing fresh consideration by the assessing authority.

Constitutional challenge not adjudicated as petitioner did not press those reliefs; Court limited its order to quashing and remand.

Final Conclusion: Impugned order dated 27.12.2021 is quashed and set aside; respondent No.2 is directed to pass a fresh order after affording the petitioner an opportunity of hearing and considering the admitted fact that GST on the supplied items has been paid by the suppliers. The constitutional challenge to the specified provisions was not pressed and is not decided.

Rectification of orders under Section 161 - error apparent on the face of the record - show cause notice under Section 73 - opportunity of hearing - stay on enforcement pending decision - no expression of opinion on merits

Rectification of orders under Section 161 - error apparent on the face of the record - opportunity of hearing - The rectification application dated 20.8.2019 filed under Section 161 is to be decided afresh by the competent authority after affording opportunity to both parties. - HELD THAT: - The court found that the petitioner had filed a rectification application invoking Section 161 alleging an apparent error on the face of the record in the order dated 14.8.2019 arising from discrepancies in submitted returns and explanations given by the petitioner. Rather than adjudicating the merits, the court directed that the competent authority of the respondent decide the rectification application within a stipulated time-frame, after giving both sides an opportunity to be heard. The direction contemplates a fresh decision by the authority on the rectification application and does not amount to any adjudication on the correctness of the petitioner's contentions. [Paras 4, 5]

Rectification application remitted to the competent authority for fresh decision on merits after hearing both parties within eight weeks.

Stay on enforcement pending decision - no expression of opinion on merits - The impugned order dated 14.8.2019 shall not be enforced until the rectification application is decided. - HELD THAT: - The court stayed enforcement of the order of demand subject to the outcome of the rectification application, thereby preserving the status quo to enable effective consideration of the rectification plea. The court expressly refrained from expressing any view on the merits of the underlying controversy and limited its intervention to directing the authority to decide the rectification application within the specified period. [Paras 5, 6]

Interim non-enforcement of the impugned order until disposal of the rectification application; no opinion expressed on merits.

Final Conclusion: The writ petition is disposed by directing the respondent authority to decide the rectification application dated 20.8.2019 within eight weeks after hearing both parties and, meanwhile, the impugned order dated 14.8.2019 shall not be enforced; the court has not expressed any view on the merits.

Suspension of GST registration - show-cause notice in Form GST REG-17 - failure to pay tax beyond three months - lack of quantification of demand - right to personal hearing - revocation of suspension if not warranted - Article 19(1)(g) - freedom of trade and business

Show-cause notice in Form GST REG-17 - lack of quantification of demand - suspension of GST registration - Impugned show-cause notice is deficient for want of particulars and the suspension of registration cannot be sustained without adjudication based on quantified demand. - HELD THAT: - The court observed that the show-cause notice dated 21.02.2023 did not specify the tax period, the amount of tax, interest or penalty alleged to be unpaid, and therefore lacked the requisite detail to enable the petitioner to make an informed reply. No adjudication order had been passed by the proper officer as on the date of the order and the petitioner's registration remained suspended since issuance of the notice. The deficiency in particulars rendered the notice cryptic and precluded effective exercise of the right to respond or to pay the alleged liability prior to adjudication. [Paras 7]

The court held that the notice was deficient in particulars and that adjudication could not proceed without proper quantification; it refused to decide the merits and directed fresh consideration by the proper officer.

Right to personal hearing - revocation of suspension if not warranted - Matter remitted to the proper officer for fresh decision after opportunity to reply and personal hearing, within a stipulated short timeframe. - HELD THAT: - Rather than entertain the writ on merits, the court directed the petitioner to appear before the proper officer on a specified date with his reply and all grounds of fact and law. The proper officer was mandated to decide the show-cause notice in accordance with law after affording personal hearing if any adverse order was contemplated, and to do so within one week of the petitioner's appearance. If the officer found the suspension unwarranted or accepted the petitioner's explanation, the suspension was to be revoked within the same timeframe. The court expressly refrained from making any merit-based observation that would prejudice future proceedings. [Paras 7]

The court remanded the matter for fresh adjudication by respondent No.3 after giving the petitioner opportunity to reply and personal hearing, and directed a decision within one week, with revocation of suspension if not warranted.

Final Conclusion: Writ petition disposed by directing the petitioner to furnish a reply and appear before the proper officer on the specified date; the proper officer shall decide the show-cause notice in accordance with law after hearing within one week of appearance, and revoke the suspension if the action is found unwarranted; no adjudication on merits was undertaken by the court.

Statutory limitation on filing appeal under the GST appellate regime - condonation of delay beyond statutory three-month period - remand for fresh adjudication on merits subject to pre-deposit - pre-deposit as condition for adjudicatory relief - classification of supply and applicable tax rate for government contractors

Statutory limitation on filing appeal under the GST appellate regime - condonation of delay beyond statutory three-month period - Whether the appellate authority was justified in dismissing the appeal as barred by limitation. - HELD THAT: - The Court noted that the appeal was filed with an overall delay of 297 days and, even after extending the benefit of the Supreme Court's order, remained delayed by 114 days. The appellate authority is not empowered to condone delay beyond a period of three months because of the statutory embargo in the GST appellate regime. On that legal basis the appellate authority's dismissal of the appeal for want of limitation was held to be justified.

Appellate authority rightly dismissed the appeal on the ground of limitation; the dismissal on that legal basis is sustainable.

Remand for fresh adjudication on merits subject to pre-deposit - pre-deposit as condition for adjudicatory relief - classification of supply and applicable tax rate for government contractors - Whether the assessee should be afforded an opportunity to establish entitlement to the lower tax rate and the manner in which such opportunity should be granted. - HELD THAT: - Although the appeal was dismissed for delay, the Court observed that the substantive controversy concerned the proper tax rate - the assessee having paid at 12% as a government contractor while the assessing officer determined tax at 18% because proof of registration as a government contractor was not produced earlier. In exercise of supervisory jurisdiction the Court granted the assessee one further opportunity to produce documentary proof that he was a registered government contractor, but made this opportunity conditional. The Court required payment of an additional pre-deposit of Rs.1 lakh within the stipulated time, directed the Assistant Commissioner to consider the documents produced, afford personal hearing, and pass fresh orders on merits and in accordance with law. The Court further provided that if the condition is complied with within two weeks from receipt of the order's service copy, the attachment on the bank account shall be lifted; failure to comply will result in automatic dismissal of the appeal without further reference to the Court.

Matter remanded to the Assistant Commissioner for fresh adjudication on merits upon compliance with the conditional pre-deposit and within the stipulated timeframe; bank attachment to be lifted on compliance and appeal to stand dismissed on failure to comply.

Final Conclusion: The appellate authority's dismissal on limitation grounds is upheld as legally sustainable, but in the exercise of supervisory jurisdiction the matter is remitted to the assessing authority for fresh consideration of the assessee's entitlement to the 12% rate subject to the conditional pre-deposit and timelines specified; compliance will lead to lifting of the bank attachment and non-compliance will result in automatic dismissal.

Inspection and exchange of information between Vigilance & Enforcement Department and Tax Department for protection of Government revenue - assistance to proper officers under Section 72 in aid of tax administration - scope of Section 67 relating to inspection, search and seizure vis-a -vis scrutiny under Section 61 and Rule 99 - requirement of authorization of the "Proper Officer" to exercise functions under Section 61/Rule 99

Inspection and exchange of information between Vigilance & Enforcement Department and Tax Department for protection of Government revenue - assistance to proper officers under Section 72 in aid of tax administration - Lawfulness of inspection by Vigilance & Enforcement Department and forwarding of alert note to Commercial Tax Department and competence of the Commercial Tax authority to act on such alert note. - HELD THAT: - The Government Orders constituting the Vigilance & Enforcement (V&E) Department assign enforcement functions including prevention of leakage of Government revenue and empower V&E officers to inspect premises and share information with the Tax Department. That exchange of information between two statutory authorities for safeguarding revenue is lawful and not inconsistent with Section 72(2). The V&E Department's independent mandate under the cited Government Orders enables its officers to inspect and forward alert notes to the Commercial Tax authorities without a prior requisition by the Chief Commissioner; such cooperation aids tax administration. Consequently, the contention that the 2nd respondent lacked statutory authority to inspect premises and forward the alert note, and that the 3rd respondent could not act upon it, is rejected. [Paras 9, 10, 11]

The inspection by the V&E Department and forwarding of the alert note to the Commercial Tax authority was lawful and the 3rd respondent was entitled to act on that information.

Scope of Section 67 (inspection/search/seizure) vis-a -vis scrutiny under Section 61 and Rule 99 - requirement of authorization of the "Proper Officer" to exercise functions under Section 61/Rule 99 - Validity of the impugned notices issued under Rule 99 r/w Section 61 for want of authorization under Section 67 and whether any authorization was required for issuing the notices under Section 61/Rule 99. - HELD THAT: - Section 67 deals with inspection, search and seizure and requires prior authorization by a Proper Officer not below the rank of Joint Commissioner when such coercive actions are to be undertaken; it is inapplicable where only scrutiny of returns and a call for explanation under Section 61/Rule 99 is contemplated. The impugned notices were issued under Rule 99 r/w Section 61 and not under Section 67, hence the petitioner's contention that Section 67 authorization was required is untenable. However, the definition of "Proper Officer" in Section 2(91) requires that functions under the Act be performed by the Chief Commissioner or an officer of State Tax assigned that function by the Chief Commissioner. The impugned notices, though issued by the Deputy Commissioner (ST), contain no reference to any authorization by the Chief Commissioner nor was such authorization placed on record. For that reason the notices suffer from lack of requisite assignment of function by the Proper Officer and are liable to be set aside; this does not bar re-issuance of notices by the Chief Commissioner or by an officer duly authorized by the Chief Commissioner under Section 2(91). [Paras 12, 13]

Section 67 authorization was not required for notices under Section 61/Rule 99, but the impugned notices are quashed for want of assignment/authorization by the Proper Officer; fresh notices may be issued by the Chief Commissioner or an officer authorized by him.

Final Conclusion: Writ petitions allowed; impugned notices dated 28.02.2023 set aside because they were not issued by the Proper Officer or by an officer authorized by the Chief Commissioner, but the V&E Department lawfully inspected and forwarded the alert note and the authorities are permitted to issue fresh notices under Rule 99 r/w Section 61 through the Chief Commissioner or an officer duly authorized by him, furnishing the relevant documents and affording the petitioner opportunity of hearing.

Valuation of composite supply involving transfer of land - deeming fiction for bifurcation of consideration - deemed value of land as one third of total amount - obligation to furnish bifurcation and supporting evidence - assessment under Section 62 (non-filer) - deemed withdrawal by Notification No.6 of 2023 - de novo assessment on production of records

Valuation of composite supply involving transfer of land - deeming fiction for bifurcation of consideration - deemed value of land as one third of total amount - obligation to furnish bifurcation and supporting evidence - Whether Notification 11/2017 (para 2) mandating a deemed bifurcation (one third deemed as land) applies mandatorily or only where the assessee is unable to furnish actual bifurcation of consideration between land and construction services. - HELD THAT: - The Court held that the methodology in the Notification operates as a deeming fiction to be applied for bifurcation of total consideration only when the assessee is unable to supply the actual bifurcation of amounts attributable to land and to construction services. If the assessee can produce credible evidence of the actual consideration attributable to each component, the deeming fiction need not be applied. Conversely, where the assessing officer finds the attribution unsupported by hard evidence or inconsistent with business practices, he may reject the attribution, seek further particulars, or apply the deeming fiction; however, he cannot proceed on the premise that the Notification's formula is the sole method of assessment in all property-development cases. [Paras 8, 9, 10, 11, 12]

Notification 11/2017 (para 2) is not mandatorily applicable where the assessee can furnish a proper bifurcation; assessments premised on automatic application of the Notification were set aside on merits.

Assessment under Section 62 (non-filer) - deemed withdrawal by Notification No.6 of 2023 - Validity and effect of assessments framed under Section 62 on the ground of non-filing, and effect of subsequent Notification No.6 of 2023 withdrawing such assessments where returns were filed by specified date. - HELD THAT: - The Court noted that assessments in several writ petitions were made under Section 62 because the petitioner had not filed returns at the relevant time; there was nothing inherently impermissible in framing assessments on that ground. However, by dint of Notification No.6 of 2023 (31.03.2023), which provides that orders of assessment passed under Section 62(1) shall be deemed to have been withdrawn if returns were filed on or before 30.06.2023, the orders impugned in the listed writ petitions stood withdrawn. The Court allowed those petitions accordingly. [Paras 12, 13]

Assessments under Section 62 made for non-filing were validly framed, but where returns were subsequently filed within the timeframe stipulated by Notification No.6 of 2023, those assessment orders are deemed withdrawn and the related petitions are allowed.

De novo assessment on production of records - obligation to furnish bifurcation and supporting evidence - Whether the matter should be remitted for fresh consideration and assessment after the petitioner produces records evidencing turnover and bifurcation. - HELD THAT: - The Court directed that the petitioner shall appear before the respondent with all records supporting its turnover. After hearing and considering any materials submitted, the assessing authority is to pass assessment orders de novo for all periods in question within a specified short time-frame. This direction contemplates fresh adjudication in accordance with law, permitting the officer to seek particulars and to accept or reject the assessee's attribution on the basis of evidence. [Paras 14]

Matter remitted for de novo assessment: petitioner to produce records on the stated date and the assessing authority to pass fresh orders within the prescribed period.

Final Conclusion: The Court held that the Notification's deeming rule for bifurcation applies only where no acceptable bifurcation is furnished; assessments premised on automatic application of the Notification were set aside, certain assessments made under Section 62 were deemed withdrawn in view of Notification No.6 of 2023 where returns were filed, and the remaining matters were remitted for de novo assessment after production of records.

Entertainment of writ petition owing to non-constitution of the second appellate tribunal - admission of appeal under Section 107 of the Odisha Goods and Services Tax Act, 2017 - interim stay of tax demand subject to deposit of disputed tax - condonation of delay in preferring statutory appeal and limitation on appellate authority's discretion

Entertainment of writ petition owing to non-constitution of the second appellate tribunal - admission of appeal under Section 107 of the Odisha Goods and Services Tax Act, 2017 - Whether the High Court may entertain the writ petition challenging non-admission of the first appeal where the second appellate tribunal under the GST law has not yet been constituted. - HELD THAT: - The Court entertained the writ petition as an exceptional measure because the statutory second appellate forum (the Second Appellate Tribunal) has not been constituted, leaving the petitioner without the alternative remedy of statutory second appeal. The petition challenges the order of the first appellate authority which refused to admit the appeal under the statutory scheme. In these circumstances the High Court proceeded to consider interim relief until the appellate infrastructure is in place, rather than leaving the petitioner remediless.

The writ petition is entertained by the High Court because the second appellate tribunal has not been constituted, making adjudication by the High Court appropriate for interim relief.

Interim stay of tax demand subject to deposit of disputed tax - condonation of delay in preferring statutory appeal and limitation on appellate authority's discretion - Whether interim protection of the remainder of the tax demand should be granted and on what conditions pending the writ petition when the petitioner seeks to approach the yet-to-be-constituted second appellate tribunal. - HELD THAT: - The Court declined to extend unconditional stay. Noting the department's contention as to delay in filing the appeal and the limited power of the appellate authority to condone delay beyond prescribed periods, the Court granted an interim stay of the remainder of the tax demand during the pendency of the writ petition on the condition that the petitioner deposit the entire tax demand within fifteen days. The order preserves departmental rights while affording the petitioner interim protection in absence of the second appellate forum; earlier deposit of a portion of the demand before the first appellate authority was recorded but the Court required full deposit for the stay.

Interim stay of the balance of the tax demand granted during pendency of the writ petition subject to the petitioner depositing the entire tax demand within fifteen days.

Final Conclusion: The High Court entertained the writ petition because the second appellate tribunal has not yet been constituted, and granted an interim stay of the remaining tax demand during the pendency of the petition on the condition that the petitioner deposit the entire tax demand within fifteen days; other procedural directions for service and filing of pleadings were also issued.

Conditions for disallowing debit under Rule 86A - movement of goods as factual burden for claiming input tax credit - requirement of receipt of goods under Section 16(2) - power of assessing officer under Sections 73/74 to reopen assessment - lifting of restriction under Rule 86A(2) and its effect on subsequent assessment

Lifting of restriction under Rule 86A(2) and its effect on subsequent assessment - conditions for disallowing debit under Rule 86A - power of assessing officer under Sections 73/74 to reopen assessment - Whether an order lifting a block on electronic credit ledger under Rule 86A(2) prevents a subsequent assessing officer from initiating assessment proceedings or discharging his powers under Sections 73/74. - HELD THAT: - The Court held that while Rule 86A(2) empowers the Commissioner or an authorised officer to lift a restriction upon being satisfied that conditions for disallowing debit no longer exist, such an order does not fetter the statutory powers of a subsequent assessing officer. The assessing officer retains wide powers under Sections 73/74 to initiate assessment if it appears that the claim of input tax credit is incorrect. The fact that an earlier officer accepted explanations and lifted the block is relevant material but does not preclude reassessment or independent adjudication by another officer. [Paras 6, 7, 8, 16, 17]

An order under Rule 86A(2) lifting the block does not oust or curtail the assessing officer's power under Sections 73/74 to examine and assess the correctness of claimed input tax credit.

Movement of goods as factual burden for claiming input tax credit - requirement of receipt of goods under Section 16(2) - Whether the petitioner discharged the burden of proof regarding movement and receipt of goods so as to sustain the claimed input tax credit. - HELD THAT: - The Court accepted the assessing officer's conclusion that the petitioner failed to establish movement or receipt of goods. The assessing officer called for documentary particulars such as weighment slips, vehicle receipts, freight documents and other inward movement records, which were not produced. In this factual matrix the officer concluded the transactions were fictitious and that the statutory requirement of receipt of goods under Section 16(2) was not satisfied. As the question of movement of goods is one of fact and the requisite documents were not furnished, the Court was not inclined to interfere with the finding. [Paras 12, 13, 14, 15, 18]

The finding that the petitioner did not discharge the burden to prove movement/receipt of goods was upheld and the assessment confirmed.

Procedural insufficiency vis-a -vis precedential order - assessing officer's duty to consider earlier orders - Whether failure of the assessing officer to expressly refer to an earlier order lifting the block was a fatal flaw vitiating the assessment. - HELD THAT: - The Court observed that R3 ought to have referred to the earlier order dated 16.07.2021 but treated this omission as a procedural flaw which was not fatal. The substantive powers and duties of the assessing officer to independently examine the correctness of claimed credits under assessment provisions were emphasised. Given that the impugned order proceeded on available facts and records and reached a conclusion on the merits, the omission to expressly notice the earlier order did not invalidate the assessment. [Paras 11, 16, 17]

The omission to refer to the prior order is a flaw but not a fatal defect; it does not vitiate the assessment which was confirmed on merits.

Final Conclusion: The writ petition is dismissed. The High Court upheld the assessment for 2017-18, holding that (i) an earlier lifting of a Rule 86A restriction does not preclude independent assessment under Sections 73/74, (ii) the petitioner failed to prove movement/receipt of goods required for claiming input tax credit, and (iii) the assessing officer's omission to refer to the earlier order was not a fatal defect. Leave to file an appeal within four weeks was permitted subject to statutory compliances.

Principles of natural justice - opportunity to be heard - quashing and remand for fresh consideration - validity of show cause notice

Principles of natural justice - opportunity to be heard - validity of show cause notice - Whether the impugned assessment order should be set aside because the second show cause notice gave the petitioner an unconscionably short period to reply (issued at night and requiring reply by next morning), thereby violating principles of natural justice and denying effective opportunity to be heard. - HELD THAT: - The court found the relevant facts undisputed: the second show cause notice was issued on 27.03.2023 at 19:10:33 and required a reply by 9:00 a.m. on 28.03.2023. The time afforded - effectively overnight - did not permit the petitioner to file the detailed explanation and voluminous records already sought to be uploaded, and the portal adjournment request was rejected on the ground that the time for completion of assessment was approaching. On these findings the court held that such a limited and inconvenient time-frame, imposed during night hours, amounted to a clear violation of the principles of natural justice because it deprived the petitioner of an effective opportunity to be heard. The court therefore did not decide the merits of the assessment but concluded that the impugned order could not stand in view of the procedural infirmity and required fresh consideration after affording proper opportunity to the petitioner. [Paras 4, 5]

Impugned order dated 30.03.2023 set aside; matter remanded to the respondents to consider afresh after providing opportunity to the petitioner and to pass appropriate orders within four weeks from receipt of this order.

Final Conclusion: Writ petition allowed; impugned assessment order quashed on procedural grounds for breach of natural justice and remitted to the respondents for fresh consideration after affording adequate opportunity to the petitioner within four weeks.

Reopening of assessment under Section 147/148 - preliminary proceedings under Section 148A(d) - search and survey as basis for reassessment - circular/fictitious transactions and bogus invoices - exercise of writ jurisdiction at pre reassessment stage

Reopening of assessment under Section 147/148 - preliminary proceedings under Section 148A(d) - search and survey as basis for reassessment - exercise of writ jurisdiction at pre reassessment stage - Validity of reopening assessment proceedings for assessment year 2018-2019 and whether writ intervention was warranted at the preliminary stage after initiation under Section 148A and issuance of notice under Section 148. - HELD THAT: - The petitioner had undergone a scrutiny assessment under Section 143(3) with an order dated 15.07.2021. Thereafter, a search and survey on an associate (M/s APCO Infratech Private Limited) on 15.09.2021 produced material which, on post search analysis, raised prima facie suspicion of circular transactions and raising of bogus invoices involving the petitioner for the relevant year. The jurisdictional authority issued notice under Section 148A(b), afforded the petitioner opportunity to be heard, considered the petitioner's detailed reply and passed a reasoned order under Section 148A(d), recording material to form a reason to believe that income chargeable to tax had escaped assessment and thereafter issued notice under Section 148. The Court applied established precedent holding that the correctness or sufficiency of the material relied upon for forming a tentative belief is to be examined in the assessment/reassessment proceedings and that the writ court should not ordinarily intervene at a premature stage where statutory remedies remain available. The Division Bench found no asserted procedural infirmity in initiation of proceedings or in the conduct of the Section 148A process which would justify quashing the notice at this stage, and relied on binding and persuasive authorities to refuse interference while preserving the petitioner's right to raise objections during reassessment. [Paras 7, 9, 10, 18, 19]

Writ petition dismissed; no interference with reopening at the preliminary stage and liberty granted to the petitioner to raise all objections during reassessment proceedings.

Final Conclusion: The petition challenging reopening of assessment for assessment year 2018-2019 is dismissed as premature; the Court finds that statutory pre reassessment steps under Section 148A were followed and reserves the petitioner's right to agitate objections in the reassessment process.

Fair market value of unquoted shares - Net Asset Value method under Rule 11UA - treatment of share premium in reserves and surplus - valuation under liability and asset approaches - deeming fiction under section 56(2)(viib) - limits on AO's power to alter balance sheet figures

Net Asset Value method under Rule 11UA - treatment of share premium in reserves and surplus - valuation under liability and asset approaches - deeming fiction under section 56(2)(viib) - limits on AO's power to alter balance sheet figures - Validity of addition under section 56(2)(viib) based on AO's valuation which ignored or re-characterised share premium and determined FMV at a lower value leading to addition of excess share premium. - HELD THAT: - The Tribunal held that Rule 11UA prescribes methods (including NAV) for determining the fair market value of unquoted shares and does not permit the AO to ignore or re-characterise share premium already reflected in the books. The valuation must proceed from figures shown in the balance sheet prepared under the Companies Act, and the AO cannot 'tinker' with those figures; only reserves set aside for depreciation would be excluded as they partake the character of liability. The AO's valuation was inconsistent: under the liability approach he ignored the share premium reflected in reserves and under the asset approach he treated the same share premium as a liability. Both treatments were held to be incorrect and not in conformity with Rule 11UA or company law principles. The assessee's NAV-based valuation was one of the recognized methods under Rule 11UA and no error was found in the valuation adopted by the assessee. Consequently the addition computed by treating the excess over the assessee's valuation as income under section 56(2)(viib) was not sustainable and was deleted. The Tribunal further observed that because the addition was deleted on this ground, remaining contentions on non-applicability of section 56(2)(viib) were left open. [Paras 9, 10]

Addition of Rs. 1,75,00,000 made by the AO under section 56(2)(viib) is deleted as the AO's valuation wrongly ignored and re-characterised share premium and the NAV valuation adopted by the assessee under Rule 11UA is acceptable.

Final Conclusion: Appeal allowed; the addition made under section 56(2)(viib) based on the AO's flawed valuation is deleted and the assessee's NAV valuation under Rule 11UA is upheld.

Penalty imposed on a deceased person is void - proceedings against deceased may be continued against legal representative under section 159(2) - requirement to bring legal representative on record and to issue notice/show-cause to legal representative

Penalty imposed on a deceased person is void - proceedings against deceased may be continued against legal representative under section 159(2) - requirement to bring legal representative on record and to issue notice/show-cause to legal representative - Validity of penalty order levied under the Income-tax Act when the order was passed in the name of the assessee after his death. - HELD THAT: - The Tribunal noted the admitted fact that the assessee died on 18.03.2021 and that the legal representative entered the record by a letter of indemnity dated 01.10.2021, whereas the penalty under section 271D was passed on 28.01.2022 in the name of the deceased. Applying section 159(2), the court held that mere initiation of proceedings during the life of the assessee is insufficient; such proceedings, if to be continued after death, must be continued in accordance with section 159(2) against the legal representative. A penalty order expressed in the name of a deceased person, where the proceedings were not completed in the name of the legal representative and no show-cause was addressed to the legal representative, is invalid. The Tribunal relied on consistent judicial precedents holding that notices and consequential orders issued or concluded in the name of a dead person are void and non est, and that liability cannot be imposed on a legal representative without issuing requisite notice or show-cause. Although factual contentions on the merits of levy under section 271D were raised before lower authorities, the Tribunal quashed the penalty on the ground of invalidity of the proceedings for being passed on a deceased person rather than deciding the substantive applicability of the penalty on merits. [Paras 7, 8, 9]

The penalty order passed in the name of the deceased is quashed as invalid and non est; the appeal is partly allowed.

Final Conclusion: The penalty imposed under section 271D, insofar as it was passed in the name of the deceased assessee after his death and without completing proceedings against the legal representative in accordance with section 159(2) (including issuing notice/show-cause to the legal representative), is quashed; the appeal is partly allowed.

Refund of TDS credit - rectification under section 154 of the Income Tax Act, 1961 - application under section 119(2)(b) of the Income Tax Act, 1961 - inadvertent omission in return - obligation of tax authorities to remedy over-assessment - consideration of merits despite procedural defaults

Refund of TDS credit - inadvertent omission in return - rectification under section 154 of the Income Tax Act, 1961 - application under section 119(2)(b) of the Income Tax Act, 1961 - obligation of tax authorities to remedy over-assessment - consideration of merits despite procedural defaults - Assessee entitled to refund/credit of TDS inadvertently not claimed in the original return and the AO directed to allow the TDS credit. - HELD THAT: - The Tribunal considered whether the assessee, who inadvertently omitted to claim TDS credit in the return, could be granted the benefit of that tax credit despite earlier rejection of a belated claim under the administrative route. The authorities below (PCIT and CPC/AO) had rejected the belated claim and the rectification application, and the CIT(A) sustained that view on the ground that the PCIT had earlier rejected the claim and that order was not challenged. The Tribunal applied the principle that authorities must act in accordance with law and should not allow over-assessment to stand merely because of a taxpayer's mistake, relying on the approach in S.R. Koshti Vs. CIT which enjoins that State/authorities should not take technical pleas to defeat lawful rights and must assist taxpayers to ensure only legitimate taxes are collected. The Tribunal also noted the need to examine merits so that a meritorious claim is not thrown out on procedural technicalities, citing Vareli textile industry v. CIT . In view of these principles and the undisputed fact that TDS credit was reflected and legitimately belonged to the assessee but was inadvertently not claimed, the Tribunal set aside the CIT(A)'s finding and directed the AO to allow the TDS credit in accordance with law.

Appeal allowed; the AO directed to grant the benefit of the TDS credit to the assessee.

Final Conclusion: The Tribunal allowed the appeal, holding that the assessee should not be deprived of legitimately available TDS credit due to inadvertent omission; the matter is remitted to the AO for giving credit/ refund as per law.

80P deduction for cooperative societies - interest from deposits with cooperative banks - revision under section 263 erroneous and prejudicial to revenue - non-debatable error test

80P deduction for cooperative societies - interest from deposits with cooperative banks - Eligibility of deduction under section 80P for interest earned on deposits made by the assessee-cooperative with other cooperative banks - HELD THAT: - The Tribunal held that interest earned by the assessee from deposits with cooperative banks qualifies for deduction under the provisions of section 80P(2)(a)(i) and section 80P(2)(d) of the Act, following the coordinate-bench precedents which have applied the view taken by the Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. and subsequent decisions of the benches of this Tribunal. The Tribunal observed that the interest in question is attributable to the activities of the society and therefore falls within the ambit of exemption/deduction recognised by those authorities. Relying on these precedents and the recent decision of the jurisdictional High Court cited by the Revenue, the Tribunal concluded that the claimed exemption was supportable on a plausible view of law. [Paras 4, 6, 7]

Interest earned on deposits with cooperative banks is eligible for deduction under section 80P and the benefit allowed in assessment is sustainable.

Revision under section 263 erroneous and prejudicial to revenue - non-debatable error test - Validity of the Pr. CIT's exercise of revisionary jurisdiction under section 263 in setting aside the assessment for allowing the section 80P deduction - HELD THAT: - The Tribunal applied the settled principle that invocation of section 263 requires the assessment to be rendered "erroneous and prejudicial to the interests of the revenue" by an error that is not a debatable or plausible view. Because the claim of exemption for the interest was examined and is covered by binding/co-ordinate decisions in favour of the assessee, the assessment could not be characterised as erroneous in the non-debatable sense required to sustain revision. Accordingly, the exercise of revisionary power by the Pr. CIT was held to be unsustainable. [Paras 4, 6, 7]

Pr. CIT's revision under section 263 is not sustainable and must be quashed; the regular assessment is restored.

Final Conclusion: The Tribunal allowed the assessee's appeal for Assessment Year 2018-2019, holding that interest on deposits with cooperative banks is eligible for deduction under section 80P and that the Pr. CIT's revision under section 263 was unsustainable; the original assessment dated 10.02.2021 is restored.

Rectification under section 154 - interest under section 234A for default in furnishing return - defective/invalid return under section 139(9) Explanation (c)(i) - valid return filed under section 139(4) - re-opening of assessment under section 147

Defective/invalid return under section 139(9) Explanation (c)(i) - interest under section 234A for default in furnishing return - rectification under section 154 - Whether the order under section 154 rectifying the reassessment to levy interest under section 234A was sustainable where the assessee's earlier return filed on 08.02.2013 was not accompanied by payment of self-assessment tax. - HELD THAT: - The Tribunal held that Explanation (c)(i) to section 139(9) treats a return as defective only where the return claims payment of tax (at source, in advance or on self-assessment) but proof of such payment is not attached and the defect is not remedied. Where the assessee had not claimed any payment of tax with the earlier return filed on 08.02.2013, that return could not be held to be defective under section 139(9) merely because tax was not paid. Consequently, the Assessing Officer's rectification under section 154 to levy interest under section 234A - on the premise that the earlier return was null and void - was not sustainable. The Tribunal relied on the distinction drawn in its coordinate decisions and observed that the statutory code (including section 140A and the Explanation to section 139(9)) demonstrates that non-payment of tax does not automatically convert a return into a defective/invalid return under section 139(9). Applying that legal test to the facts, the Tribunal found the levying of section 234A interest by way of section 154 rectification to be incorrect and set aside the action of the lower authorities. [Paras 5, 6, 7, 8]

The section 154 rectification to levy interest under section 234A was quashed because the earlier return filed on 08.02.2013 was not a defective return under section 139(9) Explanation (c)(i).

Final Conclusion: The appeal is allowed: the Assessing Officer's section 154 rectification order levying interest under section 234A (based on treating the earlier return as defective) is set aside because the earlier return did not fall within the scope of a defective return under section 139(9) Explanation (c)(i).

Levy of late fee under section 234E - Intimation under section 200A(1) - Prospective effect of statutory amendment - Power of Assessing Officer to levy fees while processing TDS statements

Levy of late fee under section 234E - Intimation under section 200A(1) - Prospective effect of statutory amendment - Power of Assessing Officer to levy fees while processing TDS statements - Validity of levying late fee under section 234E by intimation issued under section 200A(1) for periods prior to 01/06/2015. - HELD THAT: - The Tribunal held that the Assessing Officer was not empowered to levy fee under section 234E by issuing an intimation under section 200A(1) in respect of TDS statements for periods prior to 01/06/2015. The Bench applied earlier decisions of the ITAT Pune and the Karnataka High Court which construed the amendment to section 200A(1) as prospective and observed that substitution of clauses enabling computation/intimation for payment of fee under section 234E could not be read as having retrospective effect. Consequently, intimation under section 200A(1) insofar as it sought to compute or demand fee under section 234E for periods before 01/06/2015 was beyond the statutory power of the Assessing Officer and invalid. Following those precedents, the Tribunal directed deletion of the late fee levied for the relevant quarters in the assessment years before 01/06/2015 and applied the same reasoning mutatis mutandis to the other consolidated appeals where the levy related to periods prior to 01/06/2015. [Paras 4, 5, 6]

Levy of late fee under section 234E by intimation under section 200A(1) for periods prior to 01/06/2015 is invalid; the late fee is deleted and the appeals are allowed.

Final Conclusion: Following precedent, the Tribunal held that amendments enabling levy of fee under section 234E could not be applied retrospectively via section 200A intimations for periods before 01/06/2015; the late fees levied in the consolidated appeals for those periods are set aside and the appeals are allowed.

State under Article 12 of the Constitution of India - Instrumentality/agency test for 'State' under Article 12 - Immunity from taxation of State instrumentalities - Exemption under section 10(46) of the Income-tax Act - Characterisation of receipts as non-commercial / regulatory activity

State under Article 12 of the Constitution of India - Instrumentality/agency test for 'State' under Article 12 - Immunity from taxation of State instrumentalities - Whether Maharashtra State Board of Technical Education (MSBTE) falls within the meaning of 'State' under Article 12 and is therefore immune from income-tax. - HELD THAT: - The Tribunal examined the MSBTE's statutory scheme under the Maharashtra State Board of Technical Education Act, 1997 and applied the tests articulated by the Supreme Court (e.g., Som Prakash Rekhi) concerning government ownership, deep and pervasive control, functions of public importance and transfer of governmental functions. The Act establishes the Board by State legislation, composes its membership predominantly of ex-officio and government-nominated officials, subjects the Board to State supervision and directions (including powers under sections 22, 23 and 24), requires accounts, reports and audit, and vests property and income for use only in furtherance of statutory objectives. The Tribunal concluded that these features demonstrate complete administrative and financial control by the State and that the Board's functions are regulatory and for public utility rather than commercial. Applying the cumulative indicia of instrumentality/agency, the Board was held to be an instrumentality of the State within Article 12 and consequently entitled to the immunity from taxation applicable to the State. [Paras 9, 10, 11]

MSBTE is a 'State' under Article 12 and entitled to immunity from income-tax.

Exemption under section 10(46) of the Income-tax Act - Characterisation of receipts as non-commercial / regulatory activity - Whether the receipts and surplus claimed by the Board are taxable as commercial income and whether the deletions of additions/disallowances by the CIT(A) were justified. - HELD THAT: - The Assessing Officer treated the Board's surplus and various receipts (exam fees, project fees, interest on deposits, receipts from printed material and other government bodies) as taxable commercial income and made additions including disallowance for failure to deduct TDS. The Tribunal reviewed earlier decisions in the assessee's own matters for adjacent years and the statutory framework governing the Board's activities, and held that the receipts arise from statutory regulatory and educational functions rather than trade or commerce. The Tribunal also noted the CBDT notification dated 29.03.2016 granting specified exemptions under clause (46) of section 10 for FY 2015-16 to 2018-19, and observed that the Board's overall control by the State supports exemption/immunity. On that basis the CIT(A)'s deletions of the additions/disallowances were upheld. [Paras 5, 11, 33, 34]

The characterisation of the Board's receipts as non-commercial was upheld and the deletions of additions/disallowances by the CIT(A) are sustained.

Final Conclusion: The Tribunal, following prior consistent decisions, held that MSBTE is an instrumentality of the State within Article 12 and thus immune from income-tax; the Tribunal further upheld the CIT(A)'s deletions of the additions and disallowances, and dismissed the Revenue's appeal for A.Y. 2012-13.

Taxability under applicable Double Taxation Avoidance Agreements - obligation to deduct tax at source under section 195 - disallowance under section 40(a)(i) - chargeability under the charging provisions of the Act (sections 4, 5 and 9) - remand for fresh adjudication on taxability - grant of TDS credit after verification - interest under section 234C is consequential

Taxability under applicable Double Taxation Avoidance Agreements - obligation to deduct tax at source under section 195 - disallowance under section 40(a)(i) - chargeability under the charging provisions of the Act (sections 4, 5 and 9) - remand for fresh adjudication on taxability - Whether the payments made by the assessee to specified non-resident entities are chargeable to tax in India and whether the AO/DRP properly analysed treaty and charging provisions before disallowing the payments under section 40(a)(i) and treating them as exigible to TDS under section 195. - HELD THAT: - The Tribunal observed that the legal obligation to deduct tax under section 195 arises only if the sum is chargeable to tax in India, and that section 195(2) provides a mechanism to determine the appropriate proportion so chargeable. The AO's stand that the assessee should have filed an application under section 195(2) was rejected in light of settled law. More importantly, the Tribunal found that neither the AO nor the DRP had undertaken the requisite analysis to establish that the remittances fell within the scope of taxable categories (such as fees for technical services, royalties or other sums) by applying the charging provisions of the Act and the relevant treaty provisions; detailed submissions and party-wise contentions on treaty applicability were not examined. In consequence, the Tribunal held that the question of TDS deduction and disallowance under section 40(a)(i) could not be adjudicated without a fresh determination on whether the amounts are taxable in India, and therefore remitted the matter to the AO for de novo consideration of taxability in accordance with law (including treaty analysis), to be followed, if applicable, by appropriate action on section 195 compliance and section 40(a)(i) disallowance. [Paras 10, 11, 12]

Matter remitted to the file of the Assessing Officer for fresh adjudication on whether the payments to the listed non-resident entities are taxable in India; only thereafter to decide TDS obligation under section 195 and potential disallowance under section 40(a)(i).

Grant of TDS credit after verification - Whether the assessee was entitled to credit for TDS claimed in respect of pre-paid taxes. - HELD THAT: - The Tribunal restored the issue of short grant of TDS credit to the file of the AO with a direction to grant TDS credit in accordance with law after conducting necessary verification. No final adjudication on merit was recorded by the Tribunal; the AO is to verify and act in accordance with statutory provisions. [Paras 13]

Issue restored to the Assessing Officer for verification and grant of TDS credit in accordance with law.

Interest under section 234C is consequential - Whether interest under section 234C should be sustained as charged in consequence of the additions. - HELD THAT: - The Tribunal treated the question of interest under section 234C as consequential to the tax determination and, since the substantive additions were set aside for de novo adjudication, allowed the ground pertaining to section 234C for statistical purposes without deciding the substantive merit of interest liability. [Paras 14]

Ground relating to interest under section 234C allowed for statistical purposes.

Final Conclusion: The appeal is allowed for statistical purposes: the assessment order is set aside and remitted to the Assessing Officer for fresh consideration on whether the payments to specified non-resident entities are taxable in India (with consequent determination of TDS obligation and section 40(a)(i) disallowance), the TDS credit issue is restored to the AO for verification and appropriate action, and the challenge to section 234C interest is allowed for statistical purposes.

Arm's length price of intra-group management service charges - aggregation of international transactions and applicability of TNMM - Comparable Uncontrolled Price (CUP) benchmarking of intra-group services - onus on assessee to prove receipt and benefit of intra-group services - deduction under section 80IB(4) - scope of "manufacture" under definition - transformation test - different name, character and use - treatment of uninterrupted power supply (UPS) for depreciation - block of assets - electrical installation as part of electrical fittings (depreciation rate)

Arm's length price of intra-group management service charges - Comparable Uncontrolled Price (CUP) benchmarking of intra-group services - onus on assessee to prove receipt and benefit of intra-group services - Determination of ALP for management and sales & marketing service charges paid to associated enterprises - HELD THAT: - The Tribunal upheld the Transfer Pricing Officer's rejection of the assessee's aggregation/TNMM approach and the separate benchmarking of the impugned services under CUP, observing that aggregation is permissible only where transactions are closely linked and belong to a particular class. The onus lay on the assessee to demonstrate actual rendering and receipt of services and the economic benefit such that an independent enterprise would have paid for them. The assessee's documentary material comprised many general emails and documents largely from other years; it failed to establish receipt of specialised services in the year under consideration or explain why no separate payments were made in earlier higher profit years. In the absence of satisfactory evidence of receipt and benefit, the TPO's determination of ALP as "Nil" for the questioned services could not be faulted and was confirmed by the DRP and Tribunal. [Paras 5, 6, 9, 13]

Appeal dismissed on this issue; the TP adjustment in respect of management and sales & marketing services was confirmed (ALP determined as Nil).

Deduction under section 80IB(4) - scope of "manufacture" under definition - transformation test - different name, character and use - relevance of Central Excise recognition and tariff classifications - Allowability of deduction under section 80IB(4) in respect of Jammu unit (whether activities amount to 'manufacture') - HELD THAT: - The Tribunal examined the statutory definition of "manufacture" and the factual matrix including the excise department's acceptance, tariff classifications of inputs and outputs, and the earlier judicial determination quashing reassessment/reopening. It found that Jammu unit's processes (blending/mixing of multiple raw materials to produce dry mixes and liquid flavouring essences) resulted in an irreversible transformation such that the finished products fell under different excise tariff headings and the raw materials could not be traced back, thereby satisfying the statutory tests (transformation into a new and distinct object with different name, character or use). The Tribunal distinguished precedents relied upon by revenue on their facts and held that suspicion about old machinery, absence of books at factory premises or lack of R&D at the unit did not negate manufacturing where excise recognition and factual transformation supported manufacture. Consequently the assessee succeeded on this issue. [Paras 15, 16, 17, 21]

Appeal allowed on this issue; deduction under section 80IB(4) with respect to Jammu unit was held to be allowable.

Treatment of uninterrupted power supply (UPS) for depreciation - block of assets - integration of UPS with computer system - Appropriate depreciation treatment for UPS - whether to treat as part of computers block or as electrical installation - HELD THAT: - The Tribunal directed that UPS used integrally with computer systems should form part of the computer block and attract the depreciation rate applicable to that block; where UPS are used otherwise, the rate applicable to electrical installations should apply. The DRP had directed rectification where duplication of disallowance was found; the AO was directed to rework the depreciation taking into account whether UPS formed part of computers block or belonged to electrical installations and to rectify any double disallowance. [Paras 22]

Grounds allowed for statistical purposes and AO directed to rework depreciation/rectify double disallowance accordingly.

Electrical installation as part of electrical fittings (depreciation rate) - Whether electrical installations claimed at higher rate qualify as Plant & Machinery or as electrical fittings - HELD THAT: - The Tribunal held that electrical installations constitute part of electrical fittings and do not qualify as Plant & Machinery for the purpose of higher depreciation rates. The AO's treatment of electrical installations as electrical fittings attracting the lower rate was upheld. [Paras 23]

Appeal dismissed on this issue; depreciation at the lower rate for electrical installations sustained.

Final Conclusion: The appeal is partly allowed: the Tribunal confirmed the TP adjustments (ALP Nil) in respect of intra-group management and sales & marketing service charges; allowed the assessee's claim of deduction under section 80IB(4) for the Jammu unit; directed the AO to rework UPS depreciation treating UPS as part of computer block where applicable and to rectify any duplication; and upheld the lower depreciation rate for electrical installations.

Arm's length price - Transfer Pricing Officer's jurisdiction - Transaction Net Margin Method (TNMM) as Most Appropriate Method - Comparable Uncontrolled Price (CUP) method - Benefit test in transfer pricing - Shareholder/stewardship activities - Section 14A disallowance

Transfer Pricing Officer's jurisdiction - Arm's length price - Benefit test in transfer pricing - Whether the TPO exceeded his jurisdiction by treating the management fee paid to the AE as having an arm's length price of nil by questioning receipt of services and commercial expediency. - HELD THAT: - The Tribunal held that the TPO's mandate is limited to determining the arm's length price by applying one of the methods prescribed under the Act and not to determine whether services were actually received or whether the expense was commercially expedient - factual verification of genuineness and benefit being within the AO's domain. The TPO's conclusion that ALP was 'nil' based on a bald assertion of non-receipt of services and absence of benefit was held to be beyond his jurisdiction because he did not demonstrate, by appropriate comparable analysis under the statutory methods, that independent parties would have paid nil. The Tribunal relied on the absence of any pointed defect in the assessee's benchmarking and on precedents recognising the limited role of the TPO and the irrelevance of the 'benefit test' for determining ALP. [Paras 9, 11]

TPO exceeded jurisdiction in treating ALP as nil by questioning receipt/benefit; CIT(A)'s deletion of the addition was upheld.

Transaction Net Margin Method (TNMM) as Most Appropriate Method - Comparable Uncontrolled Price (CUP) method - Whether the TPO was justified in discarding the assessee's TNMM benchmarking and adopting CUP without identifying comparable uncontrolled transactions. - HELD THAT: - The Tribunal found that CUP was inapplicable because the TPO did not follow the statutory prerequisites for applying CUP - he failed to identify comparable uncontrolled transactions or demonstrate comparable prices as required by the Rules. In the absence of any defects pointed out in the assessee's TNMM benchmarking (OP/OC comparables) and given that TNMM was applied as the MAM with no valid contrary comparable data produced by the TPO, the tribunal held that the TPO's adhoc adoption of CUP and rejection of TNMM was unjustified. The Tribunal also observed that CUP requires real comparable transaction prices and cannot be resorted to on the TPO's perception of commercial expediency. [Paras 5, 9, 10]

Discarding TNMM in favour of CUP without identifying comparable uncontrolled transactions was improper; TNMM as applied by the assessee could not be rejected on the record before the TPO.

Shareholder/stewardship activities - Section 14A disallowance - Whether the services paid to the AE were in the nature of shareholder/stewardship activities and whether the section 14A disallowance made by the AO was sustainable. - HELD THAT: - On the shareholder/stewardship contention, the Tribunal agreed with the CIT(A) that the services described in the agreement and evidenced on record were operational/management and quality-control services, not shareholder activities; therefore they were chargeable and not to be treated as stewardship services that should be uncharged. Regarding section 14A, the Tribunal accepted the CIT(A)'s finding that the assessee's investments were in instruments yielding taxable income (debt mutual funds) and that income from such investments had been offered to tax; consequently no exempt income was shown to exist and the AO's disallowance under section 14A (and the consequential adjustment to book profits under section 115JB) was unsustainable and was correctly deleted by the CIT(A). [Paras 9, 12, 13]

Services were not shareholder/stewardship activities; section 14A disallowance was deleted and that deletion was upheld.

Final Conclusion: Both departmental appeals for AY 2012-13 and AY 2013-14 are dismissed; the Tribunal upholds the CIT(A)'s deletion of the transfer pricing adjustment in respect of management/brand fees paid to the AE and the deletion of the section 14A disallowance.

Rectification under section 254(2) limited to mistake apparent from record - Rectification of an order passed in a miscellaneous application not maintainable - Scope of Tribunal's power to recall or amend its orders

Rectification of an order passed in a miscellaneous application not maintainable - Scope of Tribunal's power to recall or amend its orders - Miscellaneous application filed under section 254(2) seeking recall of an earlier miscellaneous application is not maintainable and must be dismissed. - HELD THAT: - The Tribunal held that a second miscellaneous application under section 254(2) cannot be entertained where it seeks to recall or rectify an order passed in a prior miscellaneous application. The court applied established precedent that section 254(2) permits rectification only of an order passed under section 254(1) (i.e., an order on an appeal) and is confined to correcting a mistake which is obvious and patent on the face of the record, not an error of judgment requiring argument or re-appraisal. Reliance was placed on authoritative decisions holding that the Tribunal is not empowered to use section 254(2) to revisit or recall orders made in earlier rectification/miscellaneous applications and that the remedy against such orders is by way of appeal rather than filing a subsequent rectification application. Applying these principles to the present facts (where the Revenue sought recall of MA No.97/PUN/2021 arising out of ITA No.1672/PUN/2017), the Tribunal found the present application was impermissible and without jurisdictional basis and therefore rejected it. [Paras 3, 4, 6, 7, 8]

The miscellaneous application filed by the Revenue under section 254(2) to recall the earlier miscellaneous application is dismissed as not maintainable.

Final Conclusion: The Revenue's application to recall the Tribunal's earlier miscellaneous order is dismissed; section 254(2) is confined to rectifying obvious mistakes in orders passed under section 254(1) and does not permit filing a miscellaneous application against an order made in another miscellaneous application.

International transaction - Provision of corporate guarantee and guarantee commission-transfer pricing/arm's length principle - Interest saving / yield method for benchmarking guarantee commission - Shareholders' activity doctrine - Section 14A disallowance-requirement of exempt income - Disallowance under Section 14A not to be added to book profits under Section 115JB - Foreign exchange gain/loss-treatment for inventory / project cost - Section 43CA-stamp duty value versus sale consideration and retrospective applicability of tolerance band - Section 43CA(2) / Section 50C(2)-reference to valuation officer - Section 40(a)(i) and TDS under Section 195-'make available' test under DTAA Article 12 - MAT credit on amalgamation-treatment of unutilised MAT as asset - Penalty under Section 270A-prematurity

Provision of corporate guarantee and guarantee commission-transfer pricing/arm's length principle - Interest saving / yield method for benchmarking guarantee commission - Shareholders' activity doctrine - Whether corporate guarantees issued by the assessee to associated enterprises constitute an international transaction requiring benchmarking and, if so, the appropriate arm's length rate of guarantee commission - HELD THAT: - The Tribunal rejected the assessee's contention that the corporate guarantee is not an international transaction or is a shareholders' activity. Reliance on Madras High Court authority and factual analysis led to the conclusion that guarantees carry inherent risk and confer creditworthiness benefits to the beneficiary, bringing them within the definition of an international transaction. The Tribunal examined competing benchmarking approaches: both the assessee and the TPO used an interest saving (yield) methodology, with differences confined to tenor/currency adjustments and attribution of savings. The DRP had applied a fixed 0.5% rate by following precedent but did not engage with the benchmarking methodology or economic analysis. The Tribunal held that, where no comparable CUP is available and no direct cost to guarantor is shown, the yield/interest saving method is a permissible benchmarking technique; it upheld the assessee's alternative benchmarking by the yield method and found the appropriate ALP for the senior bonds (and related guarantees) to be 0.35%, and directed adoption of 0.35% for analogous guarantees in the subsequent year as well. [Paras 71, 72, 73, 74, 75]

Corporate guarantees qualify as international transactions; the arm's length guarantee commission is fixed at 0.35% on the facts of these years (AY 2017 18 and Assessment Year 2018 19), and the assessee's yield/interest saving benchmarking is upheld in preference to the DRP's blanket application of 0.5%.

Section 14A disallowance-requirement of exempt income - Disallowance under Section 14A not to be added to book profits under Section 115JB - Whether disallowance under section 14A is warranted where no exempt income was earned, and whether any disallowance under section 14A can be added to book profit for MAT under section 115JB - HELD THAT: - The Tribunal held that where the assessee did not earn exempt income in the relevant year, disallowance under section 14A is not warranted; the judgment follows the Delhi High Court authority treating the 2022 amendment as prospective. Separately, the Tribunal applied binding High Court/coordinate bench precedents to hold that amounts disallowed under section 14A pertain to normal provisions and cannot be added to book profits under section 115JB; Explanation 1 to section 115JB(2) does not mandate inclusion of section 14A disallowances in MAT book profit computation. Consequential directions were given to delete the section 14A disallowance (AY 2017 18) and to restrict/adjust disallowance in Assessment Year 2018 19 (not exceeding exempt income and not to be added to book profit). [Paras 32, 33, 76, 80, 81]

Section 14A disallowance deleted where no exempt income was earned; in any event section 14A disallowance shall not be added to book profits under section 115JB and cannot exceed the exempt income actually earned.

Foreign exchange gain/loss-treatment for inventory / project cost - Whether foreign exchange loss on settlement of sundry creditors arising from purchase of materials must be capitalised as part of project cost/inventory or allowed as revenue expenditure - HELD THAT: - Relying on Ind AS 21 and Accounting Standard 2, the Tribunal found that foreign exchange gain/loss arising on monetary items (sundry creditors) on settlement is not directly attributable to the cost of inventory and therefore is not to be capitalised into project cost. The Tribunal held that such foreign exchange loss is revenue in nature and allowable in the year of incurrence; earlier coordinate bench authorities were noted in support. Consequently the addition of the foreign exchange loss to inventory/project cost was deleted. [Paras 34, 35, 36]

Foreign exchange loss on settlement of sundry creditors is revenue expenditure and shall not be capitalised as part of project cost or inventory; the disallowance is deleted.

Section 43CA-stamp duty value versus sale consideration and retrospective applicability of tolerance band - Section 43CA(2) / Section 50C(2)-reference to valuation officer - Whether additions under section 43CA are justified where stamp duty value marginally exceeds sale consideration, whether the increased tolerance band (to 10%) applies retrospectively, and whether the AO should have referred disputed values to a valuation officer under section 43CA(2)/50C(2) - HELD THAT: - The Tribunal reviewed authority and coordinate bench decisions and held that the uplift of the tolerance band (from 5% to 10%) effected w.e.f. 1 4 2021 is a beneficial amendment that applies retrospectively; where the difference between stamp duty value and sale consideration is within the tolerance (10%), no addition is warranted. Further, where the assessee furnished valuation reports and specifically requested a reference under section 43CA(2) read with section 50C(2), the AO was obliged to consider referral to a valuation officer; the DRP's rejection based on an asserted failure to show non dispute of stamp valuation was not sustained. On these bases the Tribunal directed deletion of additions for AY 2017 18 and remand/recomputation with benefit of the tolerance band and valuation referral for Assessment Year 2018 19 as appropriate. [Paras 46, 97, 98, 105, 108]

Stamp duty tolerance band of 10% is applied retrospectively; differences within that band do not attract section 43CA addition. Where the assessee has claimed that stamp duty value exceeds FMV and submitted valuation reports, the AO should consider reference to a valuation officer under section 43CA(2)/50C(2); additions deleted or directed to be recomputed accordingly.

Section 40(a)(i) and TDS under Section 195-'make available' test under DTAA Article 12 - Whether amounts paid to foreign (Singapore) consultants are taxable in India as 'fees for technical services' under Article 12 of the India-Singapore DTAA (i.e., whether the 'make available' condition is satisfied) and whether disallowance under section 40(a)(i) is justified for failure to deduct tax at source - HELD THAT: - The Tribunal examined the nature of services (architectural, landscape, lighting and related consultancy) and the contractual and factual matrix. It emphasised that 'making available' technology/know how requires evidence that the non resident enabled the assessee to apply the technology independently and derive enduring benefits; mere rendition of services or project specific deliverables is insufficient. The DRP and AO had relied on prima facie possibilities without documentary evidence of 'make available': no training, transfer of know how or capability to apply the technology independently was shown. Coordinate bench decisions (including the assessee's own earlier years) were noted to support the conclusion that the make available test fails. Accordingly, the Tribunal held the payments were not FTS chargeable under Article 12 and directed deletion of the section 40(a)(i) disallowances. [Paras 49, 53, 56, 57, 58]

The 'make available' condition under Article 12 is not satisfied on the facts; the payments to the Singapore consultants are not taxable as FTS in India, and no TDS under section 195 was required-hence disallowances under section 40(a)(i) are deleted.

Loan processing fee-deductibility under section 36(1)(iii) - Whether loan processing fees charged to profit and loss account (partly capitalised) are deductible revenue expenditure or must be capitalised as project cost - HELD THAT: - The Tribunal examined the borrower/usage facts and followed Bombay High Court authorities that where borrowing is incidental to the business of construction and the loans are used in relation to stock in trade/projects, interest and related borrowing costs are allowable under section 36(1)(iii). Applying that principle, the Tribunal held that the portion of loan processing fees charged to the profit and loss account in the year was allowable as revenue deduction and directed the AO to allow the claimed amount. [Paras 82, 83, 85, 86]

Loan processing fee charged to profit and loss account is deductible under section 36(1)(iii); the assessed disallowance is to be deleted.

MAT credit on amalgamation-treatment of unutilised MAT as asset - Whether unutilised MAT credit of amalgamating companies is available to the amalgamated company after sanctioned amalgamation - HELD THAT: - The Tribunal accepted that on amalgamation (effective date 1 4 2017) assets and liabilities of amalgamating companies vest in the amalgamated company; it observed accounting guidance recognising MAT credit as an asset and noted coordinate bench precedents. In absence of a specific statutory bar, the Tribunal directed that unutilised MAT credit of amalgamating companies be allowed to the assesseee after verification. A similar direction was given for TDS credits of merged entities. [Paras 112, 113, 114]

Unutilised MAT credit and TDS credits of amalgamating companies shall be granted to the amalgamated company after verification; the AO is directed to allow such credits.

Penalty under Section 270A-prematurity - Whether penalty proceedings under section 270A should be adjudicated at this stage - HELD THAT: - The Tribunal found the initiation of penalty proceedings to be premature in the facts of the assessments before it and declined to adjudicate the penalty issue. [Paras 59, 115]

Penalty proceedings under section 270A were held to be premature and the related grounds dismissed.

Final Conclusion: Both appeals were partly allowed. Key outcomes: corporate guarantees were held to be international transactions and, on the facts, an arm's length guarantee commission of 0.35% was accepted for the senior bonds and related guarantees; section 14A disallowance deleted where no exempt income and in any event not to be added to MAT book profits; foreign exchange loss on settlement of creditors treated as revenue and not capitalised; section 43CA additions deleted or to be recomputed with retrospective benefit of the 10% tolerance and valuation officer referral where claimed; payments to foreign consultants did not satisfy the DTAA 'make available' test so no TDS liability and related section 40(a)(i) disallowances deleted; loan processing fees charged to P&L allowed under section 36(1)(iii); MAT and TDS credits of amalgamating entities to be granted after verification; penalty/interest issues treated as premature.

Penalty under section 271(1)(c) - Adhoc addition - Estimation of gross profit rate - Concealment of income - Dismissal for delay on limitation grounds

Penalty under section 271(1)(c) - Adhoc addition - Concealment of income - Estimation of gross profit rate - Deletion of penalty levied under section 271(1)(c) in respect of adhoc GP-rate additions made on account of alleged bogus purchases - HELD THAT: - The Assessing Officer made adhoc additions by applying a gross profit rate to purchases based on information from Sales Tax authorities alleging purchases from suspicious parties. The assessee filed purchase details and corresponding sales which were not doubted; sources of purchases were reflected in books and overall trading results were accepted. The only allegation against the assessee was use of accommodation bills to suppress profits. Where the addition is founded on an adhoc estimate and has been reduced by the Tribunal (by applying a lower GP rate in the related quantum proceedings), the element of deliberate concealment of income necessary to sustain penalty under section 271(1)(c) is absent. Applying this reasoning, the Tribunal deleted the penalty on merits.

Penalty under section 271(1)(c) deleted for the assessment years under appeal.

Dismissal for delay on limitation grounds - Penalty under section 271(1)(c) - Set aside of the CIT(A)'s dismissal of the assessee's appeal for AY 2009-10 on the ground of delay and consideration of the appeal on merits - HELD THAT: - For AY 2009-10 the CIT(A) additionally dismissed the assessee's appeal as time-barred. The assessee explained delay by reference to severe financial distress and personal hardships which prevented timely filing. Having deleted the penalty on merits, the Tribunal rejected the CIT(A)'s dismissal for delay and proceeded to decide the appeal on merits, thereby setting aside the limitation-based dismissal.

Dismissal of the appeal for AY 2009-10 on limitation grounds set aside; appeal decided on merits.

Final Conclusion: All appeals filed by the assessee for AY 2009-10, AY 2010-11 and AY 2011-12 are allowed; the penalties under section 271(1)(c) are deleted and the limitation-based dismissal in respect of AY 2009-10 is set aside so the appeal is disposed of on merits.

Discretion to grant option to pay fine in lieu of confiscation - Absolute confiscation of smuggled goods - Conscious concealment as indicium of culpable intention - Deterrence as a consideration for confiscation - Scope of writ jurisdiction in review of administrative discretion

Absolute confiscation of smuggled goods - Deterrence as a consideration for confiscation - Conscious concealment as indicium of culpable intention - Scope of writ jurisdiction in review of administrative discretion - Validity of the Revisional Authority's restoration of absolute confiscation and maintenance of penalty - HELD THAT: - The Revisional Authority examined the factual matrix and concluded that the quantity of gold was large, the goods were consciously concealed and the surrounding circumstances raised serious doubts as to ownership, supporting an inference that the petitioner was carrying the goods for monetary consideration. The Revisional Authority applied relevant precedents and recorded reasons that absolute confiscation would serve as a deterrent. Given that both the Original Authority and the Revisional Authority considered the material facts, applied legal tests and reached a view permissible on the record, the court held that interference in writ jurisdiction was not warranted. The court emphasised that where an administrative authority has exercised discretion after taking relevant factors into account and its view is a possible one, the view cannot be set aside as perverse. [Paras 8, 9, 10]

Revisional Authority's restoration of absolute confiscation and maintenance of penalty upheld; no interference in writ jurisdiction.

Discretion to grant option to pay fine in lieu of confiscation - Requirement for cogent reasons when permitting redemption - Validity of the Commissioner (Appeals) order permitting redemption of the goods on payment of fine - HELD THAT: - The Commissioner (Appeals) granted redemption by placing reliance on a precedent while stating that each case must be decided on its facts, but failed to address material aspects of the record-most notably the subsequent statement by the petitioner which reinstated his original admission. The appellate order did not furnish cogent reasons addressing the core factual findings of the Original and Revisional Authorities. In consequence the Commissioner (Appeals) order was found to be inadequately reasoned and was set aside by the Revisional Authority, a conclusion the High Court endorsed. [Paras 8, 9]

Commissioner (Appeals) order permitting redemption set aside for lack of cogent reasons; Revisional Authority's reversal upheld.

Final Conclusion: Writ petition dismissed; the order of absolute confiscation and penalty as restored by the Revisional Authority is sustained and the appellate order permitting redemption is set aside.

Classification of goods - means of propulsion - parts and accessories of vessels - Chapter note exclusion by material - HSN Explanatory Notes - sports craft exclusion from Chapter 95 - articles of carbon fibres

Parts and accessories of vessels - HSN Explanatory Notes - sports craft exclusion from Chapter 95 - Whether the impugned classification of the imported paddles as canoes under Chapter 89 (heading 89039990 / 89039910) is sustainable. - HELD THAT: - The Tribunal held that Chapter 89 and its HSN Explanatory Notes exclude separately presented parts and accessories of vessels (other than hulls) from classification in Chapter 89 and require such parts to be classified in the appropriate headings elsewhere in the Nomenclature. In view of that chapter note, paddles-being parts/means of propulsion of a canoe-cannot be classified under Chapter 89. The order in Customs Appeal No. 50179 of 2020 classifying the goods under heading 89039990 was therefore set aside, and the appellant's contention to class the goods under 95062900 was not accepted for reasons given elsewhere in the judgment. [Paras 4]

The classification of the paddles under Chapter 89 (89039990 / 89039910) is not sustainable; the order in Customs Appeal No. 50179 of 2020 is set aside.

Classification of goods - Chapter note exclusion by material - means of propulsion - articles of carbon fibres - Whether the imported paddles made of carbon fibres are classifiable under Chapter 68 (heading 68151090) or under Chapter 95 (heading 95062900). - HELD THAT: - The Tribunal analysed Chapter Notes to Chapters 95, 44 and 68. Chapter Note 1(p) to Chapter 95 excludes sports craft and their means of propulsion from Chapter 95 and indicates that means of propulsion fall in the chapter relevant to the material of which they are made (Chapter 44 is cited by way of example for wooden propulsion means). Chapter Note 1(l) to Chapter 68 excludes articles of Chapter 95 from Chapter 68. Reading these notes together, the Tribunal concluded that means of propulsion of sports craft are excluded from Chapter 95 and are to be classified in the chapter corresponding to their material. As the paddles in issue are made of carbon fibres, they fall within the ambit of Chapter 68 and are correctly classifiable under heading 68151090. Consequently, the appeal seeking classification under Chapter 95 was dismissed and the revenue's classification under 68151090 was upheld. [Paras 6]

The paddles made of carbon fibres are classifiable under Chapter 68 (heading 68151090); the appeal seeking classification under Chapter 95 is dismissed and Customs Appeal No. 51051 of 2020 is dismissed.

Final Conclusion: Paddles imported made of carbon fibres are not classifiable under Chapter 89 as parts of vessels nor under Chapter 95 as sports requisites; they are correctly classifiable by reference to the material in Chapter 68 and the Tribunal upholds classification under heading 68151090, sets aside the classification under Chapter 89, and dismisses the appellant's claim for classification under Chapter 95.

Reverse burden of proof under Section 123 of the Customs Act - admissibility of statements recorded under Section 108 of the Customs Act as substantive evidence - confiscation of smuggled or prohibited goods under Section 111 including concealment - penalty liability for possession or dealing with goods known or reasonably believed to be liable for confiscation under Section 112(b) - evidential significance of 999 purity and FT (remelted) gold in smuggling enquiries

Reverse burden of proof under Section 123 of the Customs Act - admissibility of statements recorded under Section 108 of the Customs Act as substantive evidence - Invocability of Section 123 of the Customs Act in the facts of the case - HELD THAT: - Section 123 shifts the burden of proof to the person in whose possession seized goods are found where goods have been seized in the reasonable belief that they are smuggled. At interception and Panchanama the two possessors admitted the recovered metal to be remelted gold of foreign origin and that they had no bills; those statements recorded under Section 108 are admissible as substantive evidence. The admissions thus furnished a prima facie basis to invoke reverse burden under Section 123 and placed on the possessors the onus of proving the gold was not smuggled. Reliance on precedent (Labhchand Dhanpat Singh Jain and related authorities) supports treating the recorded admissions as sufficient to attract Section 123. The Tribunal finds no reason to reject the adjudicating authorities' conclusion that Section 123 was rightly invoked. [Paras 6]

Section 123 was rightly invoked and the burden to prove the gold was not smuggled lay on the possessors.

Confiscation of smuggled or prohibited goods under Section 111 including concealment - evidential significance of 999 purity and FT (remelted) gold in smuggling enquiries - Whether the recovered gold was of foreign origin and liable to confiscation under Section 111 - HELD THAT: - The appellants' retractions were delayed and uncorroborated. Melters examined by DRI stated they returned remelted gold in uniform pieces and that FT gold normally ranges below 999 purity; the recovered pieces bore 999 marks and uneven shapes, photographed and recorded in the Panchanama. There was no documentary proof the gold was imported by designated agencies or that duty had been paid. Concealment in waist pouch/newspaper wrappings further attracts confiscation under the provision addressing concealed dutiable or prohibited goods. Given the admissions, absence of adequate proof to the contrary, the mismatch between invoices and recovered pieces, and the purity/shape evidence, the Tribunal upholds the adjudicating authority's finding that the gold was of foreign origin or otherwise liable for confiscation under the provisions relating to prohibited/dutiable and concealed goods. [Paras 7]

The recovered gold was liable to confiscation under Section 111 and related provisions.

Penalty liability for possession or dealing with goods known or reasonably believed to be liable for confiscation under Section 112(b) - Whether appellants are liable to penalties - HELD THAT: - Having acquired possession of gold which they failed to prove to be of Indian origin and having purchased/ dealt in gold at cheaper rates (a circumstance consistent with possession of smuggled goods), appellants fell within the scope of liability under the penal provision that covers persons who have possession of, or deal with, goods they know or have reason to believe are liable for confiscation. Precedents and purposive construction of the relevant provisions support imposing penalties to suppress the mischief of gold smuggling. The Tribunal finds no infirmity in the imposition of penalties by the authorities below, including as against the owner of the vehicle used in carriage. [Paras 8, 9]

Penalties under the relevant penal provision were rightly imposed on the appellants.

Final Conclusion: All three contested legal questions are decided in favour of the Revenue: Section 123 was rightly invoked, the recovered gold was rightly held liable for confiscation under the relevant provisions governing prohibited/ concealed goods, and penalties were properly imposed; consequently, all six appeals are dismissed.

Interpretation of 'importer' under Section 2(26) of the Customs Act, 1962 - claim of exemption under Notification No. 01/2011-Cus. for solar power generation projects - status of a person who 'holds himself out' as importer by filing Bill of Entry - relevance of High Sea Sale agreements to importer status and entitlement to exemption - authority of department to determine ownership or set aside a certificate issued by Ministry of New and Renewable Energy

Interpretation of 'importer' under Section 2(26) of the Customs Act, 1962 - status of a person who 'holds himself out' as importer by filing Bill of Entry - claim of exemption under Notification No. 01/2011-Cus. for solar power generation projects - Whether a person who holds himself out as importer by filing the Bill of Entry and produces the certificate from the Ministry of New and Renewable Energy is entitled to claim exemption under Notification No. 01/2011-Cus notwithstanding subsequent departmental allegations as to ownership. - HELD THAT: - The Tribunal examined the scope of Section 2(26) and the conditions of Notification No. 01/2011-Cus. and held that the legislative scheme contemplates that the importer may be either the owner or any person who holds himself out as importer by filing the Bill of Entry and complying with the notification conditions. Condition (1) of the notification requires production of a certificate to the Deputy/Assistant Commissioner and condition (2) imposes a post-import undertaking as to use; neither condition confines entitlement to only an owner nor requires self-use of the goods. In the absence of any competing claim by another party to title, and where the Ministry continued to recognise the appellant as the importer and the notification certificate was not cancelled, the department could not, after clearance, treat the claimed importer as not entitled to the exemption merely by asserting that underlying High Sea Sale agreements were not genuine. The Tribunal relied on the principle that a person who elects to file the Bill of Entry as importer cannot later be permitted to resile from consequences of that election and that the department has no freestanding power to re-characterise ownership to deprive the declared importer of the notification benefit where no party contests title and no post-import breach of condition is shown. The Tribunal distinguished authorities relied upon by the department on their facts (forgery, conflicting ownership claims, or different statutory regimes) and relied upon decisions recognising the right of the person filing the Bill of Entry to be treated as importer for customs purposes. [Paras 4, 5, 6]

The appellant, having held itself out as importer and produced the Ministry certificate which was not cancelled, was entitled to the exemption under Notification No. 01/2011-Cus; the departmental finding denying importer status on the basis of alleged non-genuine High Sea Sale agreements was not maintainable.

Relevance of High Sea Sale agreements to importer status and entitlement to exemption - authority of department to determine ownership or set aside a certificate issued by Ministry of New and Renewable Energy - Whether the department may, of its own motion after clearance, investigate and re-determine ownership to deny the benefit of the exemption where there is no third-party claim to title and no cancellation of the issuing certificate. - HELD THAT: - The Tribunal held that where there is no contest of title by any other party and the certificate issued by the Ministry of New and Renewable Energy remains in force, the department cannot, post-clearance, proceed to substitute its own view on ownership merely by questioning the genuineness of High Sea Sale agreements. The existence or otherwise of High Sea Sale agreements is irrelevant to the entitlement of the person who has validly held himself out as importer under Section 2(26) and complied with the notification conditions. The Tribunal observed that the department's approach effectively amounted to declaring the certificate bad in law without any authority to do so and applied authorities distinguishing cases of forgery or competing ownership claims. Consequently the Commissioner's adverse finding on ownership and the consequent denial of exemption were set aside. [Paras 4, 5, 6]

The departmental exercise to re-determine ownership and negate the importer's entitlement on the ground of allegedly non-genuine High Sea Sale agreements was unsustainable; the Commissioner's contrary finding was set aside with consequential relief.

Final Conclusion: The Tribunal allowed the appeal: the appellants who filed the Bill of Entry and produced the Ministry certificate were rightly treated as importers entitled to the exemption under Notification No. 01/2011-Cus; the Commissioner's finding that High Sea Sale agreements were not genuine and that the appellants were not importers was set aside, with consequential relief in penalty.

Provisional release of seized goods under Section 110A of the Customs Act, 1962 - Guidelines for provisional release and security requirements - Assessment and valuation of second-hand machinery per Board Circular dated 05.02.2020 - Role of Chartered Engineer appraisal in determination of assessable value - Reasonableness of bond and bank guarantee to protect revenue while allowing provisional release

Provisional release of seized goods under Section 110A of the Customs Act, 1962 - Guidelines for provisional release and security requirements - Assessment and valuation of second-hand machinery per Board Circular dated 05.02.2020 - Reasonableness of bond and bank guarantee to protect revenue while allowing provisional release - Modification of conditions for provisional release of seized imported used machinery and the quantum of bond and bank guarantee required. - HELD THAT: - The seized goods had been assessed by the appraising group in accordance with the procedure laid down in Board Circular dated 05.02.2020 and duty on that assessed value was paid. Section 110A permits provisional release on taking a bond with such security and conditions as the adjudicating authority may require, and the Board's guidelines dated 16.08.2017 prescribe that a bond for full value and a bank guarantee/security deposit to cover differential duty, redemption fine and penalties may be taken, subject to reasons. The Tribunal found no reasons on record to justify enhancement of the value over and above the Chartered Engineer's appraisal. Given that the charge of undervaluation requires investigation and the assessed value was determined following the Circular, the original security conditions were held to be unduly harsh. Balancing protection of revenue and the appellant's right to provisional release, the Tribunal concluded that reduced and reasoned security would suffice. The Tribunal therefore exercised its power to modify the provisional-release conditions, prescribing an indemnity bond and a specific bank guarantee, and directed expeditious finalization of adjudication within six months. [Paras 4, 5]

Seized used equipment (capital goods) except tyres ordered provisionally released against execution of an indemnity bond of Rs. 4,00,00,000 and a bank guarantee of Rs. 50,00,000, with adjudication to be finalised expeditiously (within six months).

Final Conclusion: The appeal is allowed by modifying the provisional-release conditions: seized used capital goods (except tyres) are to be released on execution of an indemnity bond of Rs. 4,00,00,000 and a bank guarantee of Rs. 50,00,000, and the adjudicating authority is directed to finalise the matter within six months.

Twin-conditions under section 212(6) of the Companies Act, 2013 - offence under section 447 of the Companies Act, 2013 - reasonable grounds for believing that the accused is not guilty - burden to establish foundational facts - reasoned opposition by the public prosecutor - presumption of innocence - bail on broad probabilities - requirement of opportunity to oppose bail

Twin-conditions under section 212(6) of the Companies Act, 2013 - burden to establish foundational facts - reasoned opposition by the public prosecutor - requirement of opportunity to oppose bail - Legal standard for considering bail where section 212(6) is attracted - HELD THAT: - The court held that section 212(6) raises the threshold for grant of bail but does not mandate an automatic rejection. In addition to the usual Cr.P.C. considerations, the court must be satisfied that there are reasonable grounds to believe the accused is not guilty and that he is not likely to commit an offence while on bail. The public prosecutor must be given an opportunity to oppose bail and, if opposition is raised, it must be a reasoned opposition establishing foundational facts against the accused. Only after the prosecution satisfactorily establishes foundational facts does the legal onus shift to the accused to meet the twin-conditions. The court emphasised that the prosecutor, not the investigating agency, must advance a reasoned case and that mere recital of allegations in the complaint is insufficient to displace the presumption of innocence. The statutory arrest safeguards in section 212(8) reinforce that prosecutorial opposition should be grounded in material and reasons recorded in writing. [Paras 21, 22, 23, 28, 30]

Section 212(6) must be applied by first requiring the prosecution to establish foundational facts by reasoned opposition; absent that, the court may be satisfied on broad probabilities that the accused is not guilty.

Offence under section 447 of the Companies Act, 2013 - bail on broad probabilities - presumption of innocence - Application of the legal standard to the petitioner's case and grant of regular bail - HELD THAT: - On broad probabilities the court found that (i) the petitioner joined ESL as an officer only after the major alleged siphoning (the petitioner became CFO w.e.f. 26.05.2014 while most siphoning was alleged to have occurred between FY 2012-13 and FY 2014-15); (ii) ESL's financial affairs during CDR were under the oversight of the consortium of banks/Monitoring Institution and later under a Resolution Professional; (iii) the forensic review by Grant Thornton (covering 01.04.2012 to 31.03.2016) did not make a clear adverse inference against induction of promoter funds; (iv) the prosecution's case against the petitioner relies substantially on statements (including ones later retracted) and on generalized allegations; and (v) co-accused key persons and procurement functionaries appear not to have been placed in custody while only two of 55 accused were arrested. Applying the principle that bail decisions are taken on broad probabilities and having regard to the need for the prosecution to establish foundational facts under the twin-conditions, the court was satisfied that there are reasonable grounds for believing that the petitioner is not guilty of the offence under the 2013 Act and that he is not likely to commit any offence while on bail. [Paras 34, 37]

Petitioner entitled to regular bail under section 212(6) read with section 439 Cr.P.C., the court being satisfied on broad probabilities as to the twin-conditions.

Bail conditions - look-out circular - Terms and conditions imposed on grant of bail - HELD THAT: - The court directed that bail be subject to specified conditions designed to secure attendance, prevent tampering and overseas travel, and to facilitate communication with the Investigating Officer. These included furnishing a personal bond with sureties, surrender of passport, prohibition on contacting prosecution witnesses or concerned officials, cooperation with investigation, provision of an active contact number, residence notification requirements, and a direction to the Investigating Officer to request a Look-Out Circular to prevent the petitioner leaving the country without permission. [Paras 38]

Bail granted subject to enumerated conditions, including personal bond with sureties, surrender of passport, non-contact and cooperation obligations, and initiation of a Look-Out Circular.

Final Conclusion: The petition for regular bail is allowed: the court, applying the twin-conditions of section 212(6) on broad probabilities and after noting the prosecution's reliance and the materials, was satisfied that there are reasonable grounds for believing the petitioner is not guilty of the offence under the Companies Act and that he is not likely to commit an offence while on bail; regular bail is granted subject to the conditions specified by the court.

Waterfall mechanism under Section 53 of the Insolvency and Bankruptcy Code, 2016 - non applicability of Sections 326 and 327 of the Companies Act, 2013 in liquidation under the IBC (Section 327(7)) - overriding preferential payments and workmen's dues priority under company law - exclusion of provident fund, pension fund and gratuity fund from the liquidation estate (Section 36(4) of the IBC) - judicial hands off qua economic legislation - reasonable classification and Article 14 challenges to the IBC waterfall - Article 21 challenge to Section 327(7) of the Companies Act, 2013

Non applicability of Sections 326 and 327 of the Companies Act, 2013 in liquidation under the IBC (Section 327(7)) - Article 21 challenge to Section 327(7) of the Companies Act, 2013 - judicial hands off qua economic legislation - Validity of sub section (7) of Section 327 of the Companies Act, 2013 which provides that Sections 326 and 327 shall not apply in the event of liquidation under the IBC. - HELD THAT: - The Court held that the insertion of sub section (7) in Section 327, rendering Sections 326 and 327 inapplicable to liquidations under the IBC, was a legislative consequence of creating a single, comprehensive insolvency code. The legislature consciously replaced the earlier winding up regime for insolvent companies with the IBC, which provides a distinct, time bound scheme focused on revival and value maximisation. Given the different objects and contexts of the Companies Act winding up provisions and the Code, excluding Sections 326/327 in IBC liquidations cannot be characterised as arbitrary or violative of Article 21. The Court emphasised judicial restraint in economic legislation and that the legislature is entitled to experiment and re order priorities for policy reasons, absent manifest arbitrariness. [Paras 6, 9, 18]

Section 327(7) of the Companies Act, 2013 is not arbitrary or violative of Article 21; in liquidations under the IBC distribution is governed by Section 53 of the IBC subject to Section 36(4) of the IBC.

Waterfall mechanism under Section 53 of the Insolvency and Bankruptcy Code, 2016 - overriding preferential payments and workmen's dues priority under company law - exclusion of provident fund, pension fund and gratuity fund from the liquidation estate (Section 36(4) of the IBC) - reasonable classification and Article 14 challenges to the IBC waterfall - Constitutionality of the waterfall under Section 53 of the IBC and whether the Code's scheme (including capping and pari passu treatment of workmen's dues) is arbitrary or discriminatory compared to the Companies Act regime. - HELD THAT: - The Court analysed legislative history, committee reports and the policy objectives of the IBC, observing that the Code embodies an evolved, consultative prioritisation aimed at revival, value maximisation and balancing stakeholder interests. Section 53 (with its non obstante clause) creates a comprehensive distribution code: liquidation costs are paid first; workmen's dues for 24 months preceding the liquidation commencement date rank pari passu with amounts due to secured creditors who relinquish security; provident/pension/gratuity sums are excluded from the liquidation estate under Section 36(4). The Court held that this scheme is a reasoned legislative classification in the economic domain and is not manifestly arbitrary; changes to the earlier company law priorities reflect policy choices permissible under Article 14 review, and safeguards (including Regulation 21A and treatment where secured creditors realise security) protect workmen's interests. [Paras 15, 16, 17]

Section 53 of the IBC and the waterfall it prescribes (including the 24 month cap and pari passu treatment with relinquishing secured creditors, and the exclusion under Section 36(4)) are constitutionally sustainable and do not offend Articles 14 or 21.

Final Conclusion: Writ petitions challenging Section 327(7) of the Companies Act, 2013 and the treatment of workmen's dues under the IBC lack merit; the Court upholds the applicability of the IBC distribution scheme (Section 53 read with Section 36(4)) to liquidations under the Code and dismisses the petitions, with no order as to costs.

Maintainability of Section 9 petition against a struck off company - restoration of company name under Section 252(3) of the Companies Act - effect of restoration on revival of proceedings under the Insolvency and Bankruptcy Code

Maintainability of Section 9 petition against a struck off company - restoration of company name under Section 252(3) of the Companies Act - effect of restoration on revival of proceedings under the Insolvency and Bankruptcy Code - Whether the Operational Creditor could revive the dismissed Section 9 petition after the Corporate Debtor's name was restored to the Register by an order under Section 252(3) of the Companies Act. - HELD THAT: - The Tribunal dismissed the original Section 9 application because the Corporate Debtor's name had been struck off the RoC Register prior to filing, rendering the petition not maintainable and resulting in no adjudication on merits. The Operational Creditor subsequently obtained restoration of the company's name under Section 252(3), thereby removing the bar created by the striking off. Once restoration was effected by the RoC order, the legal impediment to maintaining and adjudicating the Section 9 petition was removed, and revival of the main petition for adjudication on merits was permissible. The Tribunal correctly held that absence of an appeal against the dismissal was not fatal where the underlying reason for non-maintainability (striking off) was rectified by restoration, and the revived petition could be considered on merits. [Paras 7, 8]

The revival of the Section 9 petition after restoration of the Corporate Debtor's name was permissible; the Tribunal's order reviving the main petition is upheld and the appeal is dismissed.

Final Conclusion: The appeal is dismissed; the Tribunal correctly allowed revival of the Section 9 petition after the Corporate Debtor's name was restored, thereby removing the earlier bar to maintainability and permitting adjudication on merits.

Initiation of corporate insolvency resolution process - existence of default - adjudicating authority's limited scope in admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - acknowledgement of debt - RBI guidelines on priority sector lending not determinative at Section 7 stage - pending proceedings before Debt Recovery Tribunal not a bar to CIRP

Existence of default - adjudicating authority's limited scope in admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - acknowledgement of debt - pending proceedings before Debt Recovery Tribunal not a bar to CIRP - RBI guidelines on priority sector lending not determinative at Section 7 stage - Validity of admission of the Section 7 application and correctness of initiation of CIRP against the corporate debtor - HELD THAT: - The Appellate Tribunal examined whether the Adjudicating Authority erred in admitting the Financial Creditor's Section 7 application. Under Section 7 the Adjudicating Authority's function at the admission stage is limited to ascertaining existence of a default from records of an information utility or other evidence, and ensuring the application is complete and no disciplinary proceeding is pending against the proposed interim resolution professional. The Tribunal relied on the admitted materials, including the supplementary affidavit specifying the date of default and consecutive balance-sheets showing acknowledgement of debt, and found the Adjudicating Authority acted within its limited statutory role in admitting the application. Allegations of breach of RBI guidelines on priority sector lending, disputes over interest periodicity, margin requirements, unilateral debiting between accounts, and other banking practice/contentions pertain to contractual or regulatory remedies and do not defeat admission under Section 7; such contentions must be pursued in appropriate fora and do not obviate the limited inquiry at the admission stage. The Tribunal further held that a pending adjudication before the Debt Recovery Tribunal does not preclude admission of a Section 7 application. Applying these principles to the record, the Tribunal found that the date of default (as stipulated in the supplementary affidavit) and the recurring acknowledgements of liability furnished sufficient evidence of default to justify admission of the Section 7 petition. [Paras 34, 35, 36, 37, 38]

The admission of the Section 7 application and initiation of CIRP was correct; the appeal is without merit and is dismissed.

Final Conclusion: The Appellate Tribunal upheld the Adjudicating Authority's admission of the Financial Creditor's Section 7 application: the limited statutory test for admission (existence of default, completeness of application and absence of disciplinary proceedings against the proposed IRP) was satisfied on the record, RBI guideline complaints and pending DRT proceedings did not preclude admission, and the appeal is dismissed.

Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process (CIRP) initiation - Default and quantum of financial debt - Non-appearance and ex-parte order - Limitation for filing Section 7 application - Settlement between debtor and financial creditor

Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process (CIRP) initiation - Default and quantum of financial debt - Limitation for filing Section 7 application - Non-appearance and ex-parte order - Whether the NCLT was justified in admitting the Section 7 application and initiating CIRP. - HELD THAT: - The Appellate Tribunal found that the financial creditor had disbursed facilities to the corporate debtor and, as recorded in the impugned order, there remained an outstanding aggregate financial debt at the time of filing. The account was declared NPA and the Section 7 application was filed within the period of limitation. Despite valid service of notice the corporate debtor did not appear before the NCLT and the NCLT proceeded on the materials on record. In view of the undisputed debt, the limitation compliance and the corporate debtor's non-participation, the NCLT's admission of the petition and initiation of CIRP were held to be proper and not vitiated by any apparent error warranting interference. [Paras 2, 3, 8, 9, 10]

The NCLT order admitting the Section 7 application and initiating CIRP is upheld.

Settlement between debtor and financial creditor - Non-appearance and ex-parte order - Whether the appellant may be permitted to negotiate settlement despite the admission of CIRP. - HELD THAT: - Although the appeal was dismissed, the Tribunal noted the appellant's assertion of willingness to settle and that partial payments and communications with creditors had been made but were not reflected in the NCLT order. The Tribunal granted liberty to the appellant to approach the financial creditor with a reasonable settlement proposal and observed that the financial creditor may consider such proposal in accordance with law. This liberty was granted without reopening the NCLT's adjudication on merits. [Paras 11]

Liberty granted to the appellant to approach the financial creditor for settlement; no interference with the NCLT's admission.

Final Conclusion: The appeal is dismissed; the NCLT order admitting the Section 7 petition and initiating CIRP is affirmed, subject to liberty granted to the appellant to pursue settlement with the financial creditor.

Revival of proceedings - liberty to revive - withdrawal of Section 9 application and consequences - laches and acquiescence - discretionary denial of relief for undue delay

Revival of proceedings - liberty to revive - laches and acquiescence - discretionary denial of relief for undue delay - Validity of NCLT's refusal to revive CP No. 1441/2018 which had been withdrawn with liberty to revive, after a prolonged delay. - HELD THAT: - The Adjudicating Authority had previously permitted withdrawal of the Section 9 petition on the basis of a settlement and expressly granted liberty to revive in the event of default. The Court noted that the petition was withdrawn before admission and that revival was sought only about three and a half years after the withdrawal. The last alleged act of default relied upon by the appellant was the cheque dishonour dated 24.12.2020, yet no prompt steps were taken; the appellant approached the NCLT only in June 2022. The tribunal's discretion to refuse revival was exercised on grounds of prolonged inaction by the appellant, the fact that a substantial portion of the claimed debt had been represented as already cleared, and that it would be futile to entertain revival after such delay. The grant of liberty to revive at the time of withdrawal was not to be construed as an open-ended right to invoke revival after unreasonable delay; where the applicant sleeps over its rights and years elapse before seeking revival, the tribunal may decline relief as a discretionary measure. Applying these principles, the NCLT did not err in dismissing the revival application.

NCLT's dismissal of the application for revival of CP No. 1441/2018 is upheld as a proper exercise of discretion in view of undue delay, laches, and futility of revival.

Final Conclusion: The appeal is dismissed; the adjudicating authority's refusal to revive the withdrawn Section 9 petition was sustained as a valid discretionary exercise in light of inordinate delay, acquiescence and the futility of restoration after considerable lapse of time.

Determination of value of works contract service - Works contract (Composition Scheme for payment of service tax) - Vivisection of composite works contract into goods and service elements - CENVAT Credit admissibility in relation to works contract service - Rule 2A of Service Tax (Determination of Value) Rules, 2006 as specific valuation rule - Section 67 valuation scheme vis-a -vis specific valuation rules - Remand for re-computation and determination of extended period of limitation

Determination of value of works contract service - Vivisection of composite works contract into goods and service elements - CENVAT Credit admissibility in relation to works contract service - Rule 2A of Service Tax (Determination of Value) Rules, 2006 as specific valuation rule - Assessee cannot treat the total contract value (goods plus services) as the taxable value of works contract service and simultaneously avail CENVAT Credit on inputs for the entire contract value. - HELD THAT: - This Court held that for works contract the composite contract must be vivisected into the goods element (subject to VAT/sales tax) and the service element (subject to service tax). Rule 2A is the specific statutory mechanism for determining the value of the service portion of a works contract and embodies the service elements recognised by this Court in Gannon Dunkerly and Larsen & Toubro. The Composition Scheme provides an alternate, specified method of discharge but expressly operates "notwithstanding" Section 67 and Rule 2A. Allowing an assessee to treat the entire contract value as taxable service under Section 67 and concurrently avail CENVAT Credit would render Rule 2A and the Composition Scheme otiose and defeat the statutory scheme enacted to segregate goods and service components. Therefore the assessee is not entitled to pay service tax on the entire contract value and also claim CENVAT Credit on inputs in respect of that entire value; service tax must be computed on the service value in accordance with Rule 2A and CENVAT Credit, if any, permitted only in relation to that computation. [Paras 8, 9, 10]

Assessee's contention that it could tax the entire contract value as service and avail CENVAT Credit is rejected; service tax must be computed under Rule 2A and CENVAT Credit allowed only accordingly.

Section 67 valuation scheme vis-a -vis specific valuation rules - Works contract (Composition Scheme for payment of service tax) - The Composition Scheme and Rule 2A are not optional mechanisms that permit an assessee to bypass the statutory vivisection; the statutory scheme requires determination of service value under Rule 2A unless an assessee validly opts for the Composition Scheme. - HELD THAT: - The Composition Scheme expressly states it applies "notwithstanding anything contained in Section 67 and Rule 2A", indicating Parliament intended specific valuation rules and the composition option to govern works contract taxation. Rule 2A prescribes the method to determine the service portion and excludes VAT/sales tax paid on goods; the Composition Scheme permits an alternative specified payment but in that case disallows CENVAT Credit. The Court observed that construing Section 67 as permitting payment of service tax on the entire contract value with a concomitant right to CENVAT Credit would nullify the specific statutory framework introduced for works contracts. [Paras 8]

Rule 2A and the Composition Scheme must be given effect according to their terms; they cannot be circumvented by invoking Section 67 to achieve an inconsistent result.

Remand for re-computation and determination of extended period of limitation - The matter is remitted to the CESTAT for (a) re-computation of service tax demands in terms of Rule 2A for the period post 01.06.2007, and (b) determination of the issue of extended period of limitation which was not addressed below. - HELD THAT: - Having held that service tax must be computed in accordance with Rule 2A and that the assessee cannot claim CENVAT on the entire contract value, the Court did not itself quantify or recompute demands. The Tribunal had not adjudicated the question of extended period of limitation. Therefore the Court set aside the CESTAT order and remitted the case limited to re-computation under Rule 2A and deciding the limitation issue. The CESTAT is directed to complete the exercise within three months from the date of the order. [Paras 9, 10]

Matter remitted to the CESTAT for re-computation of demands under Rule 2A and for deciding the extended period of limitation; exercise to be completed within three months.

Temporal scope of works contract levy - Demand for the period January, 2007 to May, 2007 is unsustainable. - HELD THAT: - The definition of 'works contract service' and the relevant charging provisions became applicable from 01.06.2007. Relying on this Court's precedents, the appeal conceded that demands for the period before 01.06.2007 could not be sustained. The Court accordingly held that demands for January 2007 to May 2007 must be set aside. [Paras 4, 10]

Demand for January, 2007 to May, 2007 is unsustainable and is quashed.

Final Conclusion: Appeal allowed in part. The CESTAT judgment is quashed and set aside: assessee is not entitled to treat the entire contract value as taxable service and avail CENVAT Credit on that basis; service tax must be computed under Rule 2A and CENVAT Credit allowed accordingly. Demand for January 2007 to May 2007 is unsustainable. Matter remitted to the CESTAT limited to re-computation in terms of Rule 2A and decision on extended period of limitation, to be completed within three months.

Exemption under notification 22/2006-ST - taxable services provided by agents of the Reserve Bank of India - statutory agent under Section 45 of the Reserve Bank of India Act, 1934 - attribution of agent's acts to principal - interpretation of taxable services under the Finance Act, 1994

Exemption under notification 22/2006-ST - statutory agent under Section 45 of the Reserve Bank of India Act, 1934 - attribution of agent's acts to principal - interpretation of taxable services under the Finance Act, 1994 - Whether commission received by scheduled banks from the Reserve Bank of India for rendering services as statutory agents is exempt from service tax under notification 22/2006-ST. - HELD THAT: - The Tribunal held, and this Court concurs, that where scheduled banks perform functions as statutory agents of the Reserve Bank of India under Section 45 of the Reserve Bank of India Act, 1934, the services so rendered fall within the scope of the exemption in notification 22/2006-ST. The Tribunal's conclusion was guided by the legal principle that the acts of an agent, when performed in the statutory capacity of the agent for the principal, are attributable to the principal; that principle was applied in earlier precedent and is reflected in the statutory scheme (including the attribution embodied in the Finance Act). On that basis the Tribunal found such activities not taxable for purposes of the notification. The Court found no error in the Tribunal's reasoning and observed that the Tribunal's view was in accordance with this Court's authority that agent's acts may be treated as acts of the principal, and thus the exemption as framed applies to services performed by banks in their statutory agency role for the Reserve Bank of India.

The Tribunal's conclusion that commissions received by scheduled banks for activities performed as statutory agents of the Reserve Bank of India are covered by notification 22/2006-ST and are not taxable is upheld.

Final Conclusion: The appeals are dismissed; the order of the Tribunal holding that services/commissions received by scheduled banks for activities performed as statutory agents of the Reserve Bank of India are exempt under notification 22/2006-ST is sustained and requires no interference.

Refund of accumulated Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004 (post-amendment w.e.f. 01.04.2012) - Non availability of cash refund where Cenvat credit could not be utilized for any reason after amendment - Inapplicability of Section 11B of the Central Excise Act for cash refund of unutilized Cenvat credit on factory closure - Effect of non filing of TRAN 1 and operation of Section 140 of the CGST Act, 2017 - Time bar/limitation in refund claims and its application where factory closed prior to refund filing

Refund of accumulated Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004 (post-amendment w.e.f. 01.04.2012) - Non availability of cash refund where Cenvat credit could not be utilized for any reason after amendment - Whether Rule 5 of the Cenvat Credit Rules, 2004 (as amended w.e.f. 01.04.2012) permits cash refund of accumulated Cenvat credit where such credit remained unutilized on closure of the manufacturing unit. - HELD THAT: - The amended Rule 5 (post 01.04.2012) omitted the erstwhile saving clause permitting refund where adjustment had not been possible. After amendment, Rule 5 confines cash refund to credit arising from inputs/input services used in export of final/intermediate products under bond/LOU, where the assessee is unable to utilize the credit for payment of duty on home consumed/exports under rebate and where exports are not made under drawback or input duty rebate. In the present case none of these conditions are satisfied: the credit accumulated due to duty differential on finished goods; the factory closed in financial year 2016 2017; and the refund claim under Rule 5 was filed thereafter. Consequently, the amended Rule 5 does not permit the cash refund claimed by the appellant for unutilized Cenvat credit lying on closure.

Refund under Rule 5 is not available for the claimed unutilized Cenvat credit; Rule 5 does not permit such cash refund post amendment.

Inapplicability of Section 11B of the Central Excise Act for cash refund of unutilized Cenvat credit on factory closure - Time bar/limitation in refund claims and its application where factory closed prior to refund filing - Whether Section 11B of the Central Excise Act is available to grant cash refund of the unutilized Cenvat credit lying in the assessee's Cenvat account on closure of the factory, and whether the refund claim is time barred. - HELD THAT: - Section 11B deals with refund of duty paid in cash or by Cenvat credit or for wrongly reversed Cenvat credit; it is not a provision enabling cash refund of unutilized Cenvat credit lying on closure of a factory. The Tribunal relied on precedent holding that unutilized Cenvat credit lapses on factory closure unless production resumes. The appellant filed the refund claim years after closure; in these circumstances the timeline under the refund provisions cannot be disregarded. Pre amendment authorities holding limitation inapplicable do not govern where Rule 5 has been amended and the factual matrix includes migration to GST and delayed filing. Therefore Section 11B cannot be invoked to circumvent the statutory regime and the claim is barred by the applicable timelines in the given circumstances.

Section 11B is not available to grant the claimed cash refund of unutilized Cenvat credit on closure; the claim is not maintainable and is time barred in the present circumstances.

Effect of non filing of TRAN 1 and operation of Section 140 of the CGST Act, 2017 - Whether failure to file TRAN 1 and obtaining GST registration without surrendering service tax registration precludes invocation of Section 140 of the CGST Act for transfer or refund of unutilized Cenvat credit. - HELD THAT: - Section 140 of the CGST Act provides for transition of credit by filing TRAN 1. The appellant migrated to GST but did not file TRAN 1 and did not surrender service tax registration; therefore the unutilized Cenvat credit was not transferred to the GST regime. The Tribunal distinguished decisions where either TRAN 1 could not be uploaded due to technical glitch or where the assessee did not migrate; those precedents are inapposite where TRAN 1 was intentionally not filed despite migration. Consequently Section 140 cannot be invoked to claim cash refund or transfer of the unutilized Cenvat credit in such factual matrix.

Non filing of TRAN 1 (despite GST registration) precludes reliance on Section 140 for transfer/refund of the unutilized Cenvat credit; refund cannot be allowed on that ground.

Precedential distinction where TRAN 1 could not be filed versus intentional non filing - Whether decisions permitting relief where TRAN 1 could not be filed (technical issues) or where migration did not occur operate to entitle the appellant to refund where TRAN 1 was not filed despite migrating to GST. - HELD THAT: - The Tribunal examined earlier decisions relied upon by the appellant. In Nichiplast relief was granted because the assessee did not migrate to GST; in Uttaranchal Cable Network relief was given because TRAN 1 could not be uploaded due to technical glitch and the assessee attempted to file TRAN 1. Those circumstances differ materially from the present case, where the appellant obtained GST registration without surrendering service tax registration and did not file TRAN 1. The Tribunal therefore held those authorities distinguishable and not precedent for intentional non filing.

The appellant is not entitled to rely on the cited precedents; those decisions are distinguishable and do not mandate allowing refund where TRAN 1 was intentionally not filed after migration.

Final Conclusion: The Tribunal dismissed the appeal, holding that the amended Rule 5 does not permit the claimed cash refund of unutilized Cenvat credit on closure of the factory, Section 11B is not available for that purpose, Section 140 cannot be invoked where TRAN 1 was not filed despite migration to GST, and the claim is accordingly not maintainable.

Penalty under Section 11AC - extended period of limitation - suppression of facts - bonafide belief - confiscation and redemption fine - CENVAT credit and revenue neutrality

Penalty under Section 11AC - bonafide belief - Whether the revenue's appeal for enhancement of penalty under Section 11AC could be sustained after the tribunal had earlier set aside the penalty on findings of bona fide conduct. - HELD THAT: - The Tribunal noted in its earlier final order that there was no suppression of facts and that the assessee acted under a bonafide belief that the activities would not amount to manufacture; on those findings the Tribunal set aside the penalty imposed under Section 11AC. The present appellate review records and applies that earlier determination and holds that once the penalty was set aside by the Tribunal on those factual and legal conclusions, the revenue cannot now sustain its appeal for enhancement of the penalty. The adjudication therefore proceeds on the binding effect of the Tribunal's earlier order setting aside the penalty. [Paras 4, 5]

Revenue's appeal for enhancement of penalty under Section 11AC dismissed.

Extended period of limitation - suppression of facts - CENVAT credit and revenue neutrality - confiscation and redemption fine - Whether the demand for duty for the extended period, confiscation and imposition of redemption fine and penalties were sustainable in view of absence of suppression and availability of CENVAT credit. - HELD THAT: - The Tribunal, in the earlier order reproduced in the record, found that the appellants had informed the department and pursued clarification, there was no material of suppression with intent to evade duty, and the conduct was candid; relying on Supreme Court precedents and the principle of revenue neutrality where CENVAT credit is available, the Tribunal refused to invoke the extended period of limitation and set aside confiscation, redemption fine and penalties. The present order accepts and applies those conclusions, noting that the extended period and related punitive measures are not sustainable on the facts and law recorded by the Tribunal. [Paras 4, 5]

Demand for duty and interest for the extended period, confiscation, redemption fine and penalties set aside as unsustainable.

Final Conclusion: The revenue's appeal seeking enhancement of penalty is dismissed; the Tribunal's earlier findings that the extended period, confiscation and penalties are not sustainable in the absence of suppression (and having regard to CENVAT credit/revenue neutrality) are applied and upheld.

Reversal of Cenvat Credit at Appeal Stage - Condition of Exemption Notification regarding non-availment of Cenvat Credit - Adjustment of deposit against reversed credit and interest - Remand for fresh adjudication

Reversal of Cenvat Credit at Appeal Stage - Adjustment of deposit against reversed credit and interest - Condition of Exemption Notification regarding non-availment of Cenvat Credit - Whether the appeal can be disposed of by permitting reversal/payment of the cenvat credit with interest at the appellate stage and adjustment against the deposit already made, thereby meeting the condition of the exemption notification and avoiding adjudication on merits. - HELD THAT: - The Tribunal accepted the appellant's concession that the cenvat credit availed on ceramic rollers (claimed as capital goods) together with interest can be reversed/paid at the appellate stage and adjusted against the deposit of Rs. 2 lacs already made. Relying on decisions cited by the appellant, the Tribunal treated such reversal/payment and adjustment as sufficient to render the notification condition (prohibiting availment of cenvat credit on inputs) complied with for the purpose of disposal at the appellate stage. The Tribunal therefore declined to decide the departmental demand on merits and observed that if the adjudicating authority finds on fresh consideration that the amount of cenvat credit availed together with interest is covered by the deposit, the case may be decided accordingly. In view of these observations and the appellant's offer to effect reversal/payment, the Tribunal set aside the impugned order and remanded the matter to the adjudicating authority to pass a fresh order taking into account the possibility of adjustment of the reversed credit and interest against the deposit. [Paras 6, 7]

Impugned order set aside; appeal allowed by way of remand for fresh adjudication to consider adjustment of reversed/paid cenvat credit and interest against the deposit and pass consequential order.

Final Conclusion: The Tribunal remanded the matter to the adjudicating authority for fresh disposal on the limited basis that the appellant may reverse/pay the cenvat credit availed along with interest and have the same adjusted against the deposit already made; the Tribunal did not adjudicate the departmental demand on merits.

Definition of "input service" under Rule 2(l) of Cenvat Credit Rules - means clause - used, directly or indirectly, in or in relation to the manufacture of final products - place of removal - eligibility for CENVAT credit on free warranty/after sales services - extended period of limitation and suppression of facts - binding effect of departmental/tribunal orders on subsequent periods

Definition of "input service" under Rule 2(l) of Cenvat Credit Rules - means clause - used, directly or indirectly, in or in relation to the manufacture of final products - eligibility for CENVAT credit on free warranty/after sales services - CENVAT credit on service tax paid for in warranty repair and maintenance services provided by dealers for fulfilling the appellant's warranty obligations. - HELD THAT: - The Tribunal examined the 'means' clause of the definition of 'input service' in Rule 2(l) and held that services which are used, directly or indirectly, in or in relation to the manufacture of final products fall within the definition. The in warranty repair and maintenance services rendered by dealers were found to be linked to the sale and marketability of the final products, provided pursuant to contractual warranty obligations of the manufacturer, performed according to the manufacturer's checklist and paid for by the appellant. Such services were therefore held to be used indirectly in relation to manufacture and clearance of final products up to the place of removal and qualify as input services for the purpose of availing CENVAT credit. The Tribunal relied upon and applied the ratio of earlier tribunal decisions considered by it in reaching this conclusion. [Paras 17, 20, 22, 27, 28]

CENVAT credit claimed on the service tax paid for dealer rendered free warranty/after sales repair and maintenance services is allowable.

Place of removal - definition of "input service" under Rule 2(l) of Cenvat Credit Rules - Whether services rendered beyond the place of removal or after transfer of title to customers are excluded from being input services in the facts of this case. - HELD THAT: - The revenue argued that services rendered beyond the place of removal and after transfer of title cannot be treated as input services. The Tribunal examined the concept of 'place of removal' and the factual matrix, including that the warranty services were contractual obligations of the manufacturer and were integrally connected to sale and manufacture. On the facts before it, the Tribunal found the services to be used indirectly in relation to manufacture and clearance and that the decisions relied upon by the revenue were not directly on point or distinguishable; accordingly the contention that place of removal precluded credit was rejected. [Paras 8, 9, 22, 26]

The plea that services rendered beyond the place of removal or after transfer of title precludes input service treatment is not accepted on the facts; credit is allowable.

Binding effect of departmental/tribunal orders on subsequent periods - precedent binding on lower authority - Effect of the appellant's subsequent Commissioner (Appeals) order in the appellant's own case and absence of departmental challenge on the present period. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) had allowed identical CENVAT credit for the appellant for a subsequent period and that the department had not shown any appeal or stay against that order. In the absence of a challenge or stay, the decision for the subsequent period was treated as accepted by the department and binding on lower authorities. The Tribunal also observed other recent tribunal decisions on identical issues which remained unchallenged or unstayed, reinforcing the applicability of that ratio to the present appeals. [Paras 23, 24, 25]

The departmental order in the appellant's own subsequent period and the tribunal precedents favourable to the appellant are binding and operate against the revenue's contrary stand.

Extended period of limitation - suppression of facts - Validity of invoking the extended period of limitation for recovery of the CENVAT credit in the present case. - HELD THAT: - The Tribunal considered the revenue's plea that extended limitation was invocable due to suppression of material facts. It found no material on record to show suppression or intent to evade tax; further the audit which discovered the transactions had occurred in February/March 2007 while the show cause notice was issued in February 2009, making the substantive demand beyond the limitation period. Given that the legal issue was also covered by favourable tribunal decisions, the Tribunal concluded there was no justification for extended limitation. [Paras 6, 29]

Extended period of limitation is not invocable; demand beyond the limitation period is not sustainable.

Final Conclusion: The impugned orders denying CENVAT credit and invoking extended limitation are set aside. The appellant is entitled to CENVAT credit on service tax paid for dealer rendered in warranty repair and maintenance services; appeals are allowed with consequential relief as per law.

Condonation of delay - grant of leave to appeal - interim stay of judgment - interest on refund - interim relief pending final hearing

Interim stay of judgment - interest on refund - interim relief pending final hearing - Impugned High Court judgment and order stayed to the extent of interest on the amount of refund pending final disposal of the appeals. - HELD THAT: - The Court, while admitting the appeals, granted interim relief by staying the operation of the High Court's judgment insofar as it relates to payment of interest on the refund. The stay was made operative during the pendency of these appeals and reserves consideration of the circumstances under which the refund was ordered-specifically that the refund was executed pursuant to directions of the High Court and by departmental action called for by the High Court-for the final hearing. The stay is interlocutory and does not decide the merits of the entitlement to interest, which will be adjudicated at the final hearing.

Stay granted of the High Court's order only in respect of interest on the refund; the question of interest to be decided at final hearing.

Condonation of delay - grant of leave to appeal - Application for condonation of delay was allowed and leave to appeal was granted. - HELD THAT: - The Court exercised its discretion to condone the delay in filing and granted leave to bring the appeals before it. Notice was accepted on behalf of the respondent and the appeals were directed to be heard together with Civil Appeal No. 242 of 2018. These are procedural orders enabling adjudication on merits.

Delay condoned and leave to appeal granted; notice accepted for the respondent.

Final Conclusion: Interlocutory order: delay condoned and leave granted; notice accepted for respondent; impugned High Court judgment stayed only insofar as interest on the refund is concerned pending final hearing (to be heard with Civil Appeal No. 242 of 2018).

Entertainment of writ petition under Article 226 despite availability of alternative statutory remedy under the SARFAESI Act - availability and primacy of remedy under Section 17 of the SARFAESI Act - validity of sale-agreement entered during pendency of DRT proceedings and effect of DRT holding such transaction void - applicability of Section 13(8) of the SARFAESI Act to a sale agreement holder - rights of a successful auction purchaser vis-a -vis incomplete payment and issuance of sale certificate

Entertainment of writ petition under Article 226 despite availability of alternative statutory remedy under the SARFAESI Act - availability and primacy of remedy under Section 17 of the SARFAESI Act - High Court erred in entertaining the writ petition under Article 226 challenging the e-auction notice issued under Section 13(4) of the SARFAESI Act. - HELD THAT: - The Court held that steps taken by the Bank under Section 13(4) of the SARFAESI Act attract the statutory remedy of appeal under Section 17 to the DRT. Where such an efficacious statutory remedy exists, the High Court ought not to have entertained a writ under Article 226 to challenge the e-auction notice. The record showed that the e-auction had been conducted and the successful bidder declared before the writ was filed, and the High Court nevertheless entertained and allowed the writ petition - a serious error given the availability of the statutory forum and remedy under the SARFAESI Act. [Paras 8]

Impugned High Court order allowing the writ petition was unsustainable on the ground that an alternative remedy under Section 17 was available and therefore should not have been entertained.

Validity of sale-agreement entered during pendency of DRT proceedings and effect of DRT holding such transaction void - applicability of Section 13(8) of the SARFAESI Act to a sale agreement holder - The sale agreement in favour of respondent no.1, entered during pendency of DRT proceedings without permission, was void and respondent no.1 could not claim benefit under Section 13(8) based on that agreement. - HELD THAT: - The Court noted that the DRT had earlier declared transactions entered into without permission during the SARFAESI proceedings to be void. The respondent no.1 had entered into the agreement to sell while aware of pending DRT proceedings and contrary to the DRT's directions; therefore the transaction was tainted. The Court further observed that it was debatable whether Section 13(8) (which enables revival/redemption by payment of dues) applies to a mere sale agreement holder as distinct from the borrower who clears the debt; in any event, respondent no.1 could not derive equity from a transaction the DRT had already held void. [Paras 8]

Respondent no.1's sale agreement was void; respondent no.1 (and heirs) cannot be permitted to retain benefit of that void transaction or claim protection under Section 13(8) on that basis.

Rights of a successful auction purchaser vis-a -vis incomplete payment and issuance of sale certificate - Directed consequences as to completion of auction sale and return of amounts: quashing of High Court order and directions for completion of sale in favour of the successful auction purchaser upon full payment, with specified adjustments and time lines, and restoration of amounts paid by respondent no.1 to be returned to heirs with interest and vacating of possession. - HELD THAT: - The Court, having quashed the High Court order, provided final directions to resolve the competing equities: the successful auction purchaser (appellant) was directed to pay the remaining sale consideration (after adjusting the 25% already deposited) with interest at 9% from the date of auction within four weeks, whereupon the Bank was to issue the sale certificate in his favour. Amounts deposited by respondent no.1 (now his heirs) were to be returned with interest at 9% from the date of deposit within four weeks. The heirs were granted three months to vacate and hand over vacant possession to the auction purchaser. The directions embody the Court's practical resolution of rights arising from an auction sale where interim judicial intervention had improperly disturbed the sale process. [Paras 9]

High Court order quashed; auction purchaser to complete payment and be issued sale certificate; amounts deposited by respondent no.1 to be returned with interest; heirs given time to vacate.

Final Conclusion: The Supreme Court quashed the High Court's allowance of the writ petition, held that the statutory remedy under Section 17 of the SARFAESI Act should have been availed of, declared the sale agreement entered during the DRT proceedings to be void and without entitlement to benefit, and ordered completion of the auction sale in favour of the successful bidder upon payment with interest while directing refund to respondent no.1's heirs and timeline for vacating possession.