TaxTMI Updates e-Newsletter
May 07,2022

Ad-interim bail - Bail under Section 439 CrPC - Continuation of interim bail on fulfilment of deposit conditions - Security and surety to remain operative as condition of bail - Deposit to await final adjudication - Misuse of liberty as ground for withdrawal of bail

Bail under Section 439 CrPC - Ad-interim bail - Continuation of interim bail on fulfilment of deposit conditions - Security and surety to remain operative as condition of bail - Deposit to await final adjudication - Misuse of liberty as ground for withdrawal of bail - Continuation of the appellant's interim bail on the same conditions previously imposed, including operative securities and deposits awaiting final orders. - HELD THAT: - The appellant, arrested in connection with offences under the Central Goods and Services Tax, 2017, had been granted ad interim bail by this Court subject to staged deposits aggregating the sum ordered and furnishing of security and surety. The Court, after hearing counsel, allowed the appeal and directed that the appellant continue on bail on the same conditions which had been imposed when ad interim bail was granted. The security and surety documents furnished at that stage are to remain operative as conditions of bail. The deposits already made are to remain with the concerned authorities and shall await final orders at the conclusion of the complaint proceedings. The Court cautioned that any misuse of liberty would attract withdrawal of the benefit conferred by its orders. [Paras 5, 6, 8, 9, 10]

Appeal allowed; appellant to continue on bail on the same conditions previously imposed, with security and surety remaining operative and deposited amounts to await final adjudication; liberty subject to restraint against misuse.

Final Conclusion: The Supreme Court allowed the appeal and directed continuation of the appellant's interim bail on the existing conditions (including operative security and surety); the deposited amounts are to remain with the authorities pending final disposal of the complaint, and misuse of liberty may result in withdrawal of bail.

Maintainability of writ petition in presence of statutory alternate remedy - exercise of extraordinary jurisdiction under Article 226-exceptional circumstances - violation of principles of natural justice - appeal under Section 107 of the CGST/SGST Act - notice under Section 61/Form GST ASMT-10 and show-cause under Section 73

Maintainability of writ petition in presence of statutory alternate remedy - exercise of extraordinary jurisdiction under Article 226-exceptional circumstances - appeal under Section 107 of the CGST/SGST Act - Whether the writ petition challenging the adjudicating authority's order under Section 73(9) is maintainable in view of the statutory remedy of appeal under Section 107 of the GST Act. - HELD THAT: - The Court found that the adjudicating authority issued Form GST ASMT-10 under Section 61 followed by show-cause proceedings under Section 73, and ultimately passed the impugned order determining tax, interest and penalty under Section 73(9). Section 107 provides a statutory appellate remedy against orders of the adjudicating authority. The petitioner had not availed the statutory remedy but approached the High Court by way of writ. Reliance on the Supreme Court's guidance in M/s Commercial Steel Limited was applied: the High Court's extraordinary jurisdiction under Article 226 is discretionary and to be exercised only in exceptional circumstances such as breach of fundamental rights, violation of principles of natural justice, excess of jurisdiction, or challenge to vires. The Court examined the facts and proceedings, noting that the petitioner had been issued the statutory notices and did not provide explanation to the Form GST ASMT-10; the show-cause notice and summary were issued thereafter. The Court held that no such exceptional circumstances existed in this matter to justify bypassing the statutory appellate remedy, and that the grounds raised in the writ could be considered by the appellate authority under Section 107. [Paras 5, 6, 7]

Writ petition is not maintainable in the presence of an efficacious statutory remedy; no exceptional circumstances warranting exercise of Article 226 jurisdiction were found.

Final Conclusion: Writ petition dismissed for lack of substance; petitioner granted liberty to pursue remedy by filing an appeal under Section 107 of the GST Act, 2017.

Writ of Mandamus - Restoration of GSTIN - Grant of time to file tax return

Restoration of GSTIN - Petition for restoration of the petitioner's GSTIN was disposed of on the respondents informing the Court that the GSTIN has been restored and the petitioner's counsel affirming the position. - HELD THAT: - The respondents informed the Court that the grievance underlying the petition - the deactivation of the petitioner's GSTIN - had been addressed by restoring the GSTIN. The petitioner's counsel confirmed that restoration. Having recorded this factual position, the Court proceeded to dispose of the writ petition in light of the restoration without entertaining further argument on that prayer. [Paras 7]

The Court recorded that the GSTIN has been restored and disposed of the petition insofar as the restoration prayer is concerned.

Grant of time to file tax return - Petitioner was permitted a limited period to upload the tax return following restoration of the GSTIN. - HELD THAT: - The Court queried whether the petitioner should be afforded leeway to file the return after restoration. Respondents' counsel indicated that a reasonable period could be granted. Acting on that representation, the Court exercised its discretion to permit a specific limited extension for compliance, specifying the commencement of the period from receipt of the order copy. [Paras 8]

The petitioner was granted three months from receipt of a copy of the order to upload the return on the web-portal.

Final Conclusion: The writ petition was disposed of: the GSTIN was recorded as restored and the petitioner was granted three months from receipt of the order to upload the return; the claim for damages was not pressed by the petitioner.

Mandamus to compel restoration of access to tax portal for filing returns - GST registration cancellation and revival of registration - liability to pay tax despite company dissolution for realization of dues - availability of alternate remedy by appeal against cancellation of registration under GST enactments

Mandamus to compel restoration of access to tax portal for filing returns - GST registration cancellation and revival of registration - Whether the petitioner is entitled to relief directing restoration/revival of GST registration and access (user ID and password) to enable filing of returns and payment of tax for Unit B. - HELD THAT: - The Court found that one unit of the company (Unit B) under the control of the petitioner was carrying on business and that the purpose of the GST enactments is to ensure collection of tax on every supply. The respondents' contention that the petitioner had an alternate remedy under the GST appeal provisions or that the company stood dissolved so as to bar relief was rejected on the facts. The Court recorded that the private respondents had deliberately forced default and, on that basis, allowed the writ petition and directed the petitioner to take steps to revive the cancelled GST registration so as to enable compliance and payment of taxes. The Court also earlier observed that temporary provision of user ID and password to facilitate filing of GST-R1 and GST-R3B returns was appropriate to enable the petitioner to pay tax and comply with the Act for Unit B.

Writ petition allowed; petitioner directed to take steps to revive the cancelled GST registration and to be enabled to file returns and pay taxes for Unit B.

Liability to pay tax despite company dissolution for realization of dues - Whether the company is to be treated as dissolved such that Section 250 consequences would preclude relief or recovery of tax from the petitioner. - HELD THAT: - The Court examined the statutory grounds for removal of a company's name from the register and held that none of the stipulated conditions for striking off the name applied on the material before the Court because Unit B continued to carry on business. Consequently, the argument that Section 250 consequences (effect of dissolution) applied and barred relief was found to be without merit. The Court emphasised that the respondents remained free to initiate proceedings against the company to recover tax and impose penalties in accordance with law, and the petitioner could defend such proceedings.

Respondents' contention that the company stood dissolved and that Section 250 consequences precluded relief rejected; contention has no merit.

Availability of alternate remedy by appeal against cancellation of registration under GST enactments - Whether the existence of an alternate remedy by way of appeal under GST law precluded grant of writ relief. - HELD THAT: - While the respondents relied on the availability of statutory appeal mechanisms to challenge cancellation of registration, the Court concluded that the objective of GST law to ensure tax collection and the conduct of the private respondents (deliberate default) warranted exercise of writ jurisdiction to secure compliance and revival of registration for the operating unit. The Court therefore proceeded to grant relief notwithstanding the availability of alternate remedies, observing that the respondents could still pursue statutory remedies against the company.

Availability of statutory appeal did not preclude exercise of writ jurisdiction to direct revival of registration in the circumstances of the case.

Final Conclusion: The writ petition was allowed: the petitioner was directed to take steps to revive the cancelled GST registration so as to enable filing of returns and payment of taxes for Unit B; contentions that the company stood dissolved or that statutory appeal remedies barred relief were rejected; respondents remain free to pursue recovery and penalties in accordance with law, and the Court requested the NCLT to conclude the pending company proceedings expeditiously.

Violation of principles of natural justice - ex parte order - non-speaking order - quashing of assessment and appellate orders - remand for fresh decision on merits - direction to pass a speaking order - opportunity of hearing and right to place documents - deposit as condition precedent for hearing of appeal - stay on coercive recovery - de-freezing of bank accounts

Violation of principles of natural justice - ex parte order - non-speaking order - quashing of assessment and appellate orders - Impugned assessment and appellate orders were quashed. - HELD THAT: - The High Court found that the orders impugned were ex parte in nature and failed to afford the petitioner a fair opportunity of hearing, thereby violating the principles of natural justice. The orders also did not contain sufficient or decipherable reasons to show how the amount due was determined. For these defects the Court concluded the orders were bad in law and liable to be set aside, without expressing any opinion on merits.

Impugned orders dated 03.03.2020, 05.03.2020, 25.02.2021, 26.02.2021 and 04.10.2021 and the Form GST DRC-07 summary were quashed and set aside.

Remand for fresh decision on merits - direction to pass a speaking order - opportunity of hearing and right to place documents - Proceedings remitted to the Assessing Authority for fresh adjudication in accordance with law. - HELD THAT: - The Court directed that the Assessing Authority shall decide the case afresh on merits after affording adequate opportunity of hearing to the parties, including the petitioner, permitting production of essential documents and materials, and after passing a speaking order assigning reasons. The Court left all substantive issues open for determination by the Assessing Authority and expressed no view on the merits. A timeline for expeditious disposal was indicated (preferably within two months from appearance).

Matter remanded to the Assessing Authority for fresh decision on merits with directions to comply with principles of natural justice and to pass a speaking order.

Deposit as condition precedent for hearing of appeal - stay on coercive recovery - de-freezing of bank accounts - Interim measures were granted in favour of the petitioner pending fresh adjudication. - HELD THAT: - The Court accepted the petitioner's statement that ten per cent of the total amount required as a condition precedent for hearing of the appeal had been deposited and directed that, if not already deposited, the same be deposited before the next date. The petitioner further undertook to deposit an additional ten per cent of the demand within four weeks. The deposit was ordered to be without prejudice to parties' rights and to be refunded if found excessive. The Court also directed immediate de-freezing/de-attachment of the petitioner's bank account(s), if attached in relation to the proceedings, and restrained the authorities from taking coercive recovery steps during the pendency of the matter.

Interim reliefs granted: stay on coercive recovery, directions on deposit of specified amounts, and de-freezing of bank accounts subject to conditions and further adjudication.

Final Conclusion: The High Court quashed the impugned ex parte and non-speaking assessment and appellate orders for violation of natural justice, remitted the matter to the Assessing Authority for fresh adjudication after affording a hearing and passing a speaking order, and granted interim protective measures including deposit directions, stay on coercive recovery and de-freezing of bank accounts; all substantive issues were left open for decision by the authority on merits.

Composite supply of works contract - concessional rate under Sr. No. 3(vi) of Notification No. 11/2017-Central Tax (Rate) - amendment omitting "Governmental Authority" and "Government Entity" with effect from 01.01.2022 - residuary classification under Sr. No. 3(xii) Heading 9954 (Construction Services) - applicable GST rate 18% (CGST 9% + SGST 9% or IGST 18%)

Composite supply of works contract - concessional rate under Sr. No. 3(vi) of Notification No. 11/2017-Central Tax (Rate) - amendment omitting "Governmental Authority" and "Government Entity" with effect from 01.01.2022 - Eligibility of the applicant to avail the concessional rate under Sr. No. 3(vi) of Notification No.11/2017 for the construction of staff quarters - HELD THAT: - The Authority found that the supply in question is a composite works contract for construction of residential staff quarters provided to UPRNN for use by ESIC employees. However, Notification No.11/2017 was amended by Notification No.15/2021 (effective 01.01.2022) whereby the words "Governmental Authority" and "Government Entity" were omitted from the description in item (vi) of Sr. No.3. The applicant confirmed that the construction activity is to commence in the future. In view of the amendment which removes coverage of supplies to Governmental Authorities/Government Entities effective 01.01.2022, the impugned future supplies cannot be treated as eligible for the concessional entry under Sr. No.3(vi). Consequently the applicant is not entitled to the concessional rate under that entry. [Paras 5]

Answered in the negative; the applicant is not eligible to avail the concessional rate under Sr. No.3(vi) for the impugned construction services.

Residuary classification under Sr. No. 3(xii) Heading 9954 (Construction Services) - applicable GST rate 18% (CGST 9% + SGST 9% or IGST 18%) - Appropriate classification and rate of GST for the impugned construction services if Sr. No.3(vi) is inapplicable - HELD THAT: - Since the impugned services are not covered by Sr. No.3(vi) in view of the amendment effective 01.01.2022, the Authority held that the services fall under the residuary clause (xii) of Sr. No.3 for Heading 9954 (Construction Services). Consequently, the correct rate applicable to the impugned supply is 18% (CGST 9% and SGST/UTGST 9% or IGST 18%), as provided under the residuary entry. [Paras 5]

The impugned activity is classifiable under Heading 9954, Sr. No.3(xii) of Notification No.11/2017 and is taxable at 18%.

Final Conclusion: The Authority held that the applicant is not entitled to the concessional rate under Sr. No.3(vi) of Notification No.11/2017 for the proposed construction (amendment omitting Governmental Authority/Government Entity effective 01.01.2022) and directed that the services be classified under the residuary entry Sr. No.3(xii) Heading 9954, attracting GST at 18%.

Composite supply of works contract - concessional rate under Sr. No. 3(vi) of Notification No. 11/2017-Central Tax (Rate) - amendment deleting "Governmental Authority" and "Government Entity" from Sr. No. 3(vi) with effect from 01.01.2022 - explanation excluding government activity from "business" for the purposes of Sr. No. 3(vi) - classification under Heading 9954 (Construction Services) - residuary entry Sr. No. 3(xii) of Notification No. 11/2017-Central Tax (Rate) attracting 18% rate

Composite supply of works contract - concessional rate under Sr. No. 3(vi) of Notification No. 11/2017-Central Tax (Rate) - amendment deleting "Governmental Authority" and "Government Entity" from Sr. No. 3(vi) with effect from 01.01.2022 - explanation excluding government activity from "business" for the purposes of Sr. No. 3(vi) - Applicant is not eligible to avail the concessional rate under Sr. No. 3(vi) of Notification No. 11/2017-Central Tax (Rate) for the impugned construction services provided to UPRNN. - HELD THAT: - The Authority examined the claim that the composite works contract for construction of a clinical establishment supplied to UPRNN (a Government Entity) attracted the concessional rate under Sr. No. 3(vi). The Rate Notification No. 11/2017 originally covered composite works contracts provided to Central/State/Union territory/local authority/Governmental Authority/Government Entity for specified structures. However, Notification No. 15/2021-CTR dated 18.11.2021 substituted the description in Sr. No. 3 to omit the words "Governmental Authority" and "Government Entity", with effect from 01.01.2022. Consequently, services to Governmental Authorities or Government Entities are no longer covered by Sr. No. 3(vi) effective from that date. The applicant conceded that their activity would commence in the future and agreed that the amended notification affects applicability. On this basis the Authority concluded that the applicant is not eligible for the concessional rate under Sr. No. 3(vi) for the impugned services. [Paras 5]

Concessional rate under Sr. No. 3(vi) is not available to the applicant for the impugned construction services.

Classification under Heading 9954 (Construction Services) - residuary entry Sr. No. 3(xii) of Notification No. 11/2017-Central Tax (Rate) - applicability of 18% GST rate - Appropriate classification and rate for the impugned activity is under Heading 9954, Sr. No. 3(xii) of Notification No. 11/2017-Central Tax (Rate), attracting 18% GST. - HELD THAT: - Having held that Sr. No. 3(vi) does not apply to the proposed activity in view of the amendment effective 01.01.2022, the Authority examined the residual classification. The impugned service falls within construction services and therefore is classifiable under Heading 9954. In the absence of coverage under Sr. No. 3(vi), the activity is governed by the residuary entry Sr. No. 3(xii) of Notification No. 11/2017 and the applicable rate is 18% (CGST and SGST/UTGST or IGST as appropriate). The Authority recorded that the activity was to commence in future but concluded the legal position on classification and rate in light of the amended notification. [Paras 5]

Impugned activity is classifiable under Heading 9954, Sr. No. 3(xii) and taxable at 18% GST.

Final Conclusion: The Advance Ruling answers that the applicant is not entitled to the concessional rate under Sr. No. 3(vi) of Notification No. 11/2017 as amended (negative), and that the construction services are classifiable under Heading 9954, Sr. No. 3(xii) of the Notification and taxable at 18% GST (CGST+SGST or IGST) in view of the amendment effective 01.01.2022.

Stay of recovery - pre-deposit of 20% of disputed demand - adjustment of refunds - pre-decisional hearing - direction to decide appeal within a specified time

Pre-deposit of 20% of disputed demand - adjustment of refunds - pre-decisional hearing - Validity of the respondents' adjustment of refunds in excess of 20% of the disputed tax demand without following the procedure for stay of recovery and without providing pre-decisional hearing - HELD THAT: - The Court applied the principle that where an assessee challenges additions/disallowances by appeal and deposits 20% of the disputed outstanding demand, the Assessing Officer is ordinarily required to grant stay of recovery of the balance demand pending disposal of the first appeal as prescribed in the Office Memorandums. The Court observed that adjustment of refunds in excess of 20% was effected without any recorded reasons showing applicability of the exception in paragraph 4(B) of the Office Memorandum and without affording notice or an opportunity of pre-decisional hearing to the petitioner. Relying on its earlier decision in Skyline Engineering Contracts (India) Pvt. Ltd. v. Deputy Commissioner of Income Tax Circle 22(2) , the Court held that respondents were entitled to seek only the pre-deposit of 20% in the normal course and that any amount adjusted in excess of 20% must be refunded if the facts stated by the petitioner are found to be correct. The Court therefore directed verification of the petitioner's factual allegations and refund of amounts adjusted in excess of 20%, together with the Rs.30,000 set off indicated in the Section 245 intimation, within four weeks if verification confirms the petitioner's claim. [Paras 8, 9]

Respondents must verify the petitioner's assertions and, if found correct, refund the amount adjusted in excess of 20% of the disputed demand for Assessment Year 2012-13 and the Rs.30,000 set off within four weeks.

Direction to decide appeal within a specified time - Whether the Appellate Authority should be directed to decide the petitioner's appeal against the order dated 27th November, 2019 within a fixed time-frame - HELD THAT: - The Court noted the pendency of the petitioner's appeal against the assessment order and, in the exercise of its supervisory jurisdiction to ensure expeditious disposal of appeals, directed the Appellate Authority to decide the appeal within one year. This direction is administrative and aimed at ensuring timely adjudication of the first appeal. [Paras 9]

The Appellate Authority is directed to decide the petitioner's appeal within one year.

Final Conclusion: Writ petition disposed of with directions that the respondents verify the petitioner's claim and refund any amounts adjusted in excess of 20% of the disputed demand for Assessment Year 2012-13 (and the Rs.30,000 set off) within four weeks if verification confirms the claim, and that the Appellate Authority decide the appeal against the order dated 27th November, 2019 within one year.

Principle of natural justice - opportunity of hearing - reassessment under Section 148 of the Income Tax Act - void ab initio - notice issued to non-existing company - remand for fresh adjudication - reasoned order

Principle of natural justice - opportunity of hearing - show cause notice - reasoned order - Impugned assessment orders, demand and penalty notices set aside for violation of the principle of natural justice and remanded for fresh adjudication. - HELD THAT: - The Court found that the petitioner was not given adequate opportunity to respond to the show cause notice-cum-draft assessment orders and that the time allowed (less than a day) was insufficient. Even assuming the Respondents' contention on the identity of the assessee, the Court held that the deficiency in affording a fair opportunity to be heard constituted a jurisdictional defect warranting setting aside of the assessment orders. Consequently the assessment orders and associated demand and penalty notices were quashed and the matter was remanded to the Assessing Officer for fresh adjudication. The Court directed the petitioner to file its response within two weeks and directed the Assessing Officer to fix the hearing after four weeks and decide the matter by a reasoned order in accordance with law, keeping the rights and contentions of the parties open. [Paras 7, 8]

Assessment orders, and demand and penalty notices set aside for breach of natural justice; matter remanded to Assessing Officer for fresh adjudication with directions to afford opportunity and pass a reasoned order.

Notice issued to non-existing company - void ab initio - reassessment under Section 148 of the Income Tax Act - question of fact - Allegation that notices/orders were issued in the name of a non-existing (pre-amalgamation) company and whether income had escaped assessment left open for fresh adjudication. - HELD THAT: - The Court noted the petitioner's contention that notices and orders were issued in the name of a non-existing entity (the pre-amalgamation company) and reliance on authority holding issuance to a non-existing company to be a substantive illegality. The Respondents indicated that the assessment orders were in the name of the amalgamated entity and that factual questions as to escapement of income could be agitated in appeal. The Court did not decide these contentions on merits; instead it left the rights and contentions of the parties open and remitted the matter to the Assessing Officer for fresh consideration in the light of submissions to be filed and after affording an opportunity of hearing. [Paras 6, 8]

Contentions regarding issuance of notices to a non-existing company and whether income escaped assessment not decided; left open and to be considered afresh by the Assessing Officer.

Final Conclusion: Writ petitions disposed of by quashing the impugned assessment, demand and penalty orders for breach of natural justice; matter remitted to the Assessing Officer for fresh adjudication with directions to afford opportunity, receive the petitioner's response and pass a reasoned order, while leaving substantive contentions regarding identity of the assessee and escapement of income open for fresh consideration.

Reopening of assessment - reasons recorded for reopening - opportunity to be heard on objections - quashing of order disposing objections - remand for fresh consideration - requirement of a reasoned order

Reasons recorded for reopening - quashing of order disposing objections - requirement of a reasoned order - Validity of the Assessing Officer's order disposing of the objections to the notice issued under Section 148 for A.Y. 2014-15. - HELD THAT: - The Court found that the order disposing of the objections does not meaningfully address the objections raised by the writ applicant and does not consider material explanations now relied upon by the Revenue before the Court. The reasons on which reopening was initiated, as recorded by the Assessing Officer, are on a different footing from the transaction details produced by the Revenue before this Court; those additional materials were not part of the reasons earlier communicated and therefore the assessee had no opportunity to respond to them. In these circumstances the Court concluded that the disposal order fails to apply independent mind to the objections and does not constitute a properly reasoned decision disposing of the objections to the notice. [Paras 7, 8, 9]

Order disposing of objections is quashed for lack of meaningful consideration and reasoned discussion and set aside.

Remand for fresh consideration - opportunity to be heard on objections - requirement of a reasoned order - Relief to be granted in consequence of the defective disposal - whether matter should be remitted to the Assessing Officer and on what terms. - HELD THAT: - The Court directed that the matter be remitted to the Assessing Officer to undertake a fresh exercise considering all objections already on record and any objections the writ applicant may file in respect of the additional transaction documents placed before the Court. The Assessing Officer is to give the writ applicant an opportunity of hearing, apply his mind to all objections and pass a fresh reasoned order disposing of the objections. The Court imposed a timeline of two months for completion of this exercise and made clear that it expressed no opinion on merits; if the fresh order is adverse, the writ applicant may challenge it by filing a fresh writ petition. [Paras 9, 10, 11, 12]

Matter remitted to the Assessing Officer for fresh consideration of objections, affording opportunity of hearing and passing a fresh reasoned order within two months; no expression of opinion on merits.

Final Conclusion: The Court quashed the Assessing Officer's order disposing of objections to the Section 148 notice for A.Y. 2014-15 and remitted the matter to the Assessing Officer to reconsider all objections (including in relation to additional transaction documents recently placed before the Court), afford the writ applicant an opportunity to be heard, and pass a fresh reasoned order within two months; the Court did not express any opinion on the merits.

Interest on compensation awarded by Motor Accident Claims Tribunal - Taxability of interest (income versus compensation) - Deduction of tax at source under Section 194A - Deeming of year of taxability (Section 145B / Section 145A) - Post-award interest (interest for delay in depositing awarded amount)

Interest on compensation awarded by Motor Accident Claims Tribunal - Taxability of interest (income versus compensation) - Whether interest awarded by the Motor Accident Claims Tribunal (from date of claim petition till passing of the award or until the High Court judgment on appeal) is taxable under the Income Tax Act, 1961. - HELD THAT: - The Court reviewed statutory provisions (including Section 2(28A), Section 56(2)(viii), Section 145B/145A and Section 194A) and judicial authorities, and concluded that interest awarded by the MACT as compensation for delay is compensatory in nature and not 'income' for the period from the date of the claim petition until the award or, in appeals, until the High Court judgment. The Court held that the deeming provision as to the year of taxability (Section 145A/145B) affects timing but does not convert a non-taxable compensatory receipt into taxable income. The provision for TDS (Section 194A) is a mechanism for collection and does not itself render a non-income receipt taxable. Consequently, interest of the character awarded by the MACT for delay in adjudication (from claim petition to award/judgment) is not exigible to tax. [Paras 48, 51, 52, 74, 75]

Interest awarded by the MACT from the date of the claim petition till the passing of the award, or in an appeal until the High Court judgment, is not taxable under the Income Tax Act.

Deduction of tax at source under Section 194A - Interest on compensation awarded by Motor Accident Claims Tribunal - Whether Insurance Companies/vehicle owners are required to deduct TDS under Section 194A on the interest component of MACT awards (for the period from claim petition to award/judgment). - HELD THAT: - Having held that the MACT interest (from claim petition to award/judgment) is not income, the Court reasoned that liability to deduct tax at source under Section 194A arises only when the payment is in the nature of income of the payee. Section 194A is a collection provision and cannot create taxability where none exists. Therefore insurance companies should not deduct TDS on the MACT interest component and must deposit the full awarded amount with the Tribunal for disbursement to claimants. [Paras 52, 73, 74, 75]

Insurance Companies shall deposit the full award with the Tribunal and shall not deduct tax under Section 194A on the MACT interest awarded for the stated pre-award period.

Post-award interest (interest for delay in depositing awarded amount) - Taxability of interest (income versus compensation) - Whether interest paid for delay in depositing the awarded amount (i.e., interest after the award for late deposit) forms part of the compensatory interest exempted from tax or is taxable as income. - HELD THAT: - The Court distinguished between interest awarded as part of the compensatory relief from the date of the claim petition till award (which is compensatory and non-taxable) and interest that accrues after the award on account of delay in depositing or paying the awarded amount. The latter does not form part of the compensatory interest package for the pre-award period and therefore has character of ordinary interest income taxable under the normal provisions. [Paras 76]

Interest payable for delay in depositing the awarded amount (post-award interest) is not part of the compensatory MACT interest and is taxable as ordinary interest income.

Hansaguri guidelines - Deduction of tax at source under Section 194A - Whether the Court's prior guidelines in Hansaguri Prafulchandra Ladhani apply where the MACT interest is held to be non-taxable. - HELD THAT: - The Court observed that Hansaguri proceeded on an assumption that the MACT interest was taxable and provided a mechanism (spreading interest over years and limited TDS) to deal with TDS consequences. Because the present Court has held MACT interest (pre-award) non-taxable, the Hansaguri guidelines are inapplicable to interest of that compensatory character; insurers must deposit the full award without deducting TDS. Where interest is not taxable, the Hansaguri mechanism for spreading or segregating TDS does not arise. [Paras 36, 53]

The Hansaguri guidelines are inapplicable to MACT interest that is held to be non-taxable; insurers should deposit full award amounts without deducting TDS.

Remand for further factual issues - Disposition of other factual issues arising in the matter. - HELD THAT: - The Court concluded the legal issues addressed above and directed that the matter be listed along with allied matters for further hearing on other factual issues arising in the proceedings. Those factual issues were not decided on merits in this order and are to be considered at the continued hearing. [Paras 77]

Other factual issues are left open for further hearing and consideration; the matter is listed for further proceedings.

Final Conclusion: The High Court held that interest awarded by the Motor Accident Claims Tribunal from the date of the claim petition until the award (or until the High Court judgment on appeal) is compensatory and not taxable; consequently insurers shall deposit the full award with the Tribunal without deducting TDS under Section 194A. Interest that accrues for delay in depositing the awarded amount after the award is taxable as ordinary interest. Hansaguri's procedural guidelines do not apply to pre-award compensatory interest. Remaining factual issues have been reserved for further hearing.

Exemption under section 10(37) of the Income-tax Act - characterisation of interest awarded under section 28 of the Land Acquisition Act - interest as part of compensation v. interest as income from other sources - classification of acquired land as agricultural land for tax exemption - chargeability under the head Capital Gains

Characterisation of interest awarded under section 28 of the Land Acquisition Act - interest as part of compensation v. interest as income from other sources - exemption under section 10(37) of the Income-tax Act - Whether interest awarded under section 28 of the Land Acquisition Act on enhanced compensation is part of compensation (and therefore not taxable) or is income chargeable under the head 'Income from Other Sources', and whether such interest qualifies for exemption under section 10(37). - HELD THAT: - The Tribunal examined the statutory scheme of the Land Acquisition Act, the differing pronouncements of various High Courts and the Supreme Court, and subsequent fiscal amendments which treat interest on compensation as taxable income. Noting the divergent judicial views, the Tribunal applied the territorial principle that where a favourable High Court ratio exists for the assessee and there is no binding contrary decision of the jurisdictional High Court, that view may be followed. On the facts of the present case (and in view of precedents considered), the Tribunal held that the interest awarded under section 28 formed part of the compensation here and was not exigible as income from other sources. The Tribunal therefore concluded that the interest partakes the character of compensation and is eligible for exemption under section 10(37) when the award relates to agricultural land acquired by the State. [Paras 16, 17, 18, 20, 22]

Interest awarded under section 28 is part of compensation in the present case and is not taxable as income from other sources; consequently it qualifies for exemption under section 10(37).

Classification of acquired land as agricultural land for tax exemption - exemption under section 10(37) of the Income-tax Act - chargeability under the head Capital Gains - Whether the land acquired by the State was agricultural land such that compensation (including interest under section 28) is exempt under section 10(37) rather than chargeable as capital gains. - HELD THAT: - The Tribunal reviewed the documentary evidence on record - the Land Acquisition Collector's award describing the land as 'Chahi' (irrigated), the presence of tubewells, trees and standing crop, Form D signed by the Land Acquisition Officer with Patwari and Kanungo certifying agricultural status, jamabandi entries and historical income-tax returns showing agricultural income. The Tribunal found no basis in the first appellate authority's contrary conclusion, which rejected these documents without independent inquiry. Given that the competent land acquisition authorities and revenue records treated the land as agricultural and the assessee produced consistent documentary proof of agricultural use, the Tribunal held the land to be agricultural and not a capital asset attracting capital gains treatment. [Paras 7, 21, 22]

The acquired land is agricultural; compensation (including the interest under section 28) is covered by the exemption under section 10(37) and is not chargeable as capital gains.

Final Conclusion: The assessee's appeal is allowed: the acquired land is held to be agricultural and the interest awarded under section 28 is treated as part of the compensation; accordingly the amount is exempt under section 10(37) for Assessment Year 2016-17.

Disallowance under section 14A read with Rule 8D - application of Rule 8D requires Assessing Officer's recorded satisfaction - disallowance limited to the amount of exempt income - presumption of investments financed out of own funds (no interest disallowance) - capitalization of administrative expenses to CWIP and depreciation under section 32 - allowability of ESOP compensation as business expenditure under section 37(1) - follow-on application of findings across assessment years

Disallowance under section 14A read with Rule 8D - application of Rule 8D requires Assessing Officer's recorded satisfaction - disallowance limited to the amount of exempt income - presumption of investments financed out of own funds (no interest disallowance) - Validity and quantum of disallowance under section 14A read with Rule 8D in respect of income exempt from tax - HELD THAT: - The Tribunal held that the earlier decisions in the assessee's own case, where Rule 8D was held inapplicable because the AO had not recorded dissatisfaction with the assessee's suo-moto computation, are distinguishable where, as in the years before the Tribunal, the assessee had not made any suo-moto disallowance. In the absence of a suo-moto disallowance by the assessee, the AO was entitled to apply Rule 8D after recording satisfaction. On facts the Tribunal drew a presumption that investments were made out of the assessee's own funds (own funds exceeding investments), and therefore no disallowance of interest was warranted. However, administrative expenses relating to the investments were held to be properly disallowable under Rule 8D; the Tribunal nevertheless applied the principle that any disallowance under section 14A/read with Rule 8D cannot exceed the exempt income earned, and restricted the disallowance accordingly. The net conclusion was that interest disallowance was rejected, administrative expense disallowance sustained but limited to the exempt income. [Paras 13]

Disallowance under section 14A/read with Rule 8D partly sustained: no disallowance of interest (investments out of own funds); administrative expense disallowance sustained but restricted by the amount of exempt income.

Capitalization of administrative expenses to CWIP and depreciation under section 32 - Entitlement to depreciation on written down value of administrative expenses capitalized in earlier years - HELD THAT: - The Tribunal noted that the AO had in earlier years capitalized 1% of specified administrative expenses as attributable to CWIP (following earlier ITAT direction) and had allowed depreciation in the assessment year under consideration. The assessee claimed depreciation on the WDV of amounts capitalized in prior years; the CIT(A) accepted that claim but inadvertently recorded a larger figure. The Tribunal held that the assessee is entitled to depreciation on the WDV of those earlier capitalised administrative expenses to the extent claimed (the claim being supported by earlier orders and by the AO's own acceptance of capitalization and depreciation treatment), and that the typographical error in the CIT(A) order did not invalidate the admitted claim. [Paras 14, 15, 17, 18, 21]

Depreciation on WDV of administrative expenses capitalized in earlier years allowed as claimed (order of CIT(A) sustained subject to correct amount claimed).

Allowability of ESOP compensation as business expenditure under section 37(1) - follow-on application of findings across assessment years - Allowability of ESOP compensation expense debited in profit & loss (deduction claim) - HELD THAT: - Relying on the coordinate-bench decision in the assessee's own case and the Special Bench precedent in Biocon Ltd., the Tribunal observed that ESOP compensation is not a notional expense but an allowable business expenditure. The Tribunal, following its coordinate bench which remitted the matter to the AO for verification, allowed the claim for statistical purposes in the appeals before it. The Tribunal accordingly permitted the deduction for ESOP compensation for the years under consideration subject to verification in line with the precedent and remittance practice adopted by the coordinate bench. [Paras 23, 24, 27]

ESOP compensation deduction allowed for statistical purposes (remitted/accepted subject to verification in accordance with precedent).

Final Conclusion: Both appeals (AY 2014-15 and AY 2015-16) are partly allowed. The Tribunal upheld a limited disallowance under section 14A/Rule 8D (administrative expenses restricted by exempt income) but rejected disallowance of interest on the ground that investments were out of own funds; depreciation on WDV of earlier capitalised administrative expenses is allowable as claimed; ESOP compensation deduction is allowed for statistical purposes in accordance with precedents.

Prior approval under section 153D - application of mind - mechanical approval - vitiation of assessment for want of valid approval - quashing of assessment under section 153A

Prior approval under section 153D - application of mind - mechanical approval - vitiation of assessment for want of valid approval - quashing of assessment under section 153A - Validity of the approval given under section 153D and the consequence of any invalidity on the assessment framed under section 153A r.w.s. 143(3). - HELD THAT: - The Tribunal held that the power to grant prior approval under section 153D requires an independent application of mind by the competent authority and is not a mere formality. The Addl. CIT's approval was given mechanically and without proper scrutiny: the draft order was approved on the same day despite glaring internal inconsistencies (for example, incorrect figures for returned income and assessed income) and without the assessment records or seized material being placed before the approving authority. Reliance was placed on High Court and Tribunal precedents establishing that an approval which records or demonstrates no independent consideration amounts to no application of mind and is invalid. Given that validity of the approval goes to the root of jurisdiction to pass an assessment under section 153A, the mechanical approval vitiates the assessment proceedings. The Tribunal found that, in the present case, had the Addl. CIT applied his mind he would not have approved the draft order in its submitted state; accordingly the approval under section 153D was invalid and the consequent assessment under section 153A r.w.s. 143(3) was vitiated. [Paras 16, 17, 18]

Approval under section 153D held invalid for lack of application of mind; assessment order passed under section 153A r.w.s. 143(3) is quashed.

Final Conclusion: The Tribunal allowed the appeal, holding the prior approval under section 153D to be invalidly granted mechanically and, as a consequence, quashed the assessment order passed under section 153A r.w.s. 143(3) for AY 2017-18.

Credit for tax deducted at source - tax deducted in the PAN of a deceased person - legal representative / sole legal heir filing return - proviso to section 143(1) - intimation and opportunity before adjustment - Section 199 and Rule 37BA - mechanism for giving TDS credit to person other than deductee - consequential relief on interest under sections 234B and 234C

Credit for tax deducted at source - tax deducted in the PAN of a deceased person - legal representative / sole legal heir filing return - Section 199 and Rule 37BA - mechanism for giving TDS credit to person other than deductee - Whether TDS deducted in the name and PAN of the assessee's deceased father can be allowed as credit to the assessee who filed the income of the deceased as sole legal heir - HELD THAT: - The Tribunal found that the assessee, as the sole legal heir, had offered the income of the deceased father in his return for AY 2018-19 and paid self-assessment tax. The Tribunal observed that although Chapter XVIIIB and Rule 37BA provide a mechanism for credit to be given to a person other than the deductee, the facts warranted relief: the income had been offered and accepted, and the TDS was reflected in the PAN of the deceased. The Tribunal also noted the first proviso to section 143(1) requiring intimation and an opportunity before adjustments, and observed that CPC, Bengaluru had not given effect to the TDS credit in these circumstances. Applying the reasoning in the cited jurisdictional decision and the statutory mechanism, the Tribunal held that denial of TDS credit on the ground of mismatch of PAN of the deceased father was not tenable where the assessee, being sole legal heir, had declared and paid tax on that income. The Tribunal set aside the CIT(A)'s finding and directed CPC Bengaluru to grant the TDS credit in the name of the deceased father to the assessee. [Paras 7]

TDS of Rs.1,34,220 deducted in the PAN of the deceased father to be allowed as credit to the assessee (sole legal heir) and CPC Bengaluru directed to provide such credit.

Consequential relief on interest under sections 234B and 234C - Whether interest under sections 234B and 234C should be adjusted consequent to allowing the TDS credit - HELD THAT: - The Tribunal treated the claims as consequential to the primary relief of allowing the TDS credit. Since the principal tax response was allowed, the Tribunal allowed the grounds relating to interest under sections 234B and 234C as consequential, without separate adjudication, and directed relief accordingly. [Paras 8]

Interest charged under sections 234B and 234C adjusted consequentially and the related grounds of appeal allowed.

Final Conclusion: Appeal allowed: the Tribunal set aside the CIT(A)'s order and directed CPC Bengaluru to grant the TDS credit (originally reflected in the deceased father's PAN) to the assessee who, as sole legal heir, declared and paid tax on that income for AY 2018-19; consequential adjustments to interest under sections 234B and 234C were also allowed.

Explanation under Section 68 - reopening of assessment under Section 147/148 - admission of additional evidence - principle of natural justice

Explanation under Section 68 - admission of additional evidence - principle of natural justice - Whether loans aggregating to Rs. 10 lakhs claimed to have been received by the assessee from two lenders were satisfactorily explained and admissible, and whether the matter requires fresh adjudication in view of additional evidence filed before the Tribunal. - HELD THAT: - The Tribunal noted that the reassessment was framed after reopening under reopening of assessment under Section 147/148 and that the Assessing Officer had made additions under explanation under Section 68 for amounts totalling Rs. 10 lakhs on account of loans from two persons, on the finding that the assessee had not proved the creditworthiness of the lenders, genuineness of the transactions, or produced lenders' bank statements. The assessee produced copies of the cheques and a notarised affidavit of the son of one lender before the Tribunal, which were not considered below and which the Tribunal regarded as additional evidence warranting verification. In the interests of fairness and in view of the passage of time making it difficult for the assessee to obtain lender bank statements, the Tribunal directed that the issue be restored to the file of the Commissioner (Appeals) for fresh adjudication. The Tribunal emphasised that the lower authority must admit and verify the additional evidence, give adequate opportunity of hearing in accordance with the principle of natural justice, and pass a reasoned and speaking order; the Tribunal expressly refrained from commenting on the merits and kept all contentions open. [Paras 5, 6]

Matter remanded to the Commissioner (Appeals) for fresh adjudication on merits of the loans aggregating to Rs. 10 lakhs, with directions to admit and verify additional evidence, provide adequate hearing in accordance with law, and pass a reasoned and speaking order; merits kept open.

Final Conclusion: The appeal is allowed for statistical purposes: the Tribunal has set aside the appellate decision only insofar as loans aggregating to Rs. 10 lakhs are concerned and has remitted that issue to the Commissioner (Appeals) for de novo consideration in accordance with law; all contentions on merits are left open.

Addition under Section 68 - Creditworthiness of lenders - Burden on assessing authority to make enquiries from lenders - Suspicion alone insufficient to sustain addition - Deletion of addition where banking channel receipts and explanations not properly examined

Addition under Section 68 - Creditworthiness of lenders - Burden on assessing authority to make enquiries from lenders - Suspicion alone insufficient to sustain addition - Validity of addition of Rs. 5,70,000 made under Section 68 as unexplained cash credits - HELD THAT: - The AO treated sums received as unsecured loans from certain identified persons as unexplained income by relying on records of cash deposits in the lenders' bank accounts shortly before or on the date the loans were allegedly advanced, without making direct enquiries from those lenders about the source of their deposits. The CIT(A) upheld the addition on the basis that the assessee failed to substantiate the creditworthiness of the lenders. The Tribunal examined the material and noted the assessee's explanations that some amounts were actually credited by account-payee cheques but were recorded by the AO as cash, and that lenders had explained cash withdrawals as from salary, rental or professional receipts. The AO and the CIT(A) did not put these explanations to the lenders or make adequate inquiry to verify the source of deposits, and proceeded on suspicion. Absent proper verification and enquiry of the lenders and given that amounts were received through banking channels and explanations were on record, the impugned addition was found to be made mechanically and based on conjecture rather than established facts; accordingly the addition could not be sustained. [Paras 8, 9, 10]

Addition of Rs. 5,70,000 made under Section 68 is deleted and the appeal is allowed.

Final Conclusion: The Tribunal deleted the addition of Rs. 5,70,000 treated as unexplained credit under Section 68 for AY 2015-16, observing that the assessing authorities failed to make requisite enquiries from the lenders and proceeded on suspicion despite banking channel receipts and explanations on record; the appeal is allowed.

Reopening of assessment and validity of reassessment proceedings - Transfer of jurisdiction under section 127 of the Act - Issuance of notice under section 143(2) and sequence of statutory notices - Taxability of capital gains on transfer of shares determined by completion/registration of change in shareholding - Benefit of cost of acquisition and indexation in computing capital gains

Reopening of assessment and validity of reassessment proceedings - Reopening of assessment under notice issued was valid and reopening sustained. - HELD THAT: - The Tribunal recorded that the Assessing Officer reopened the assessment on the basis of information regarding sale of shares and concealment of income. The assessee failed to place any supporting evidence to impugn the reopening. The Revenue's factual basis for initiating proceedings under section 148 was accepted and, in the absence of contrary material from the assessee, no interference with the findings of the CIT(A) was warranted. [Paras 6]

Ground against reopening dismissed; reopening held to be justified on the material before the Assessing Officer.

Transfer of jurisdiction under section 127 of the Act - Allegation that the case was transferred without opportunity under section 127 was not proved and was rejected. - HELD THAT: - The assessee alleged non-provision of an opportunity of being heard before transfer of the case from one ward to another. No evidence was produced to substantiate this allegation before the Tribunal, and no such material had been placed before the CIT(A). In the absence of documentary proof, the Tribunal found no merit in the plea and declined to interfere with the orders below. [Paras 9]

Ground alleging improper transfer without opportunity dismissed for want of supporting evidence.

Issuance of notice under section 143(2) and sequence of statutory notices - Issuance of notice under section 143(2) after issue of notice under section 148 was held to be in order; complaint that 143(2) was issued prior to filing of return was unfounded. - HELD THAT: - The record showed that notice under section 148 was issued on 30.03.2017 and that notice under section 143(2) was issued subsequently on 13.09.2017. The Assessing Officer recorded that the authorised representative attended and filed a copy of the ITR in response to an earlier notice. The Tribunal therefore held that there was no instance of section 143(2) being issued before the filing of the return in response to the section 148 notice, and the assessee's objection lacked merit. [Paras 11]

Ground alleging improper issuance of section 143(2) notice rejected.

Taxability of capital gains on transfer of shares determined by completion/registration of change in shareholding - Benefit of cost of acquisition and indexation - The Tribunal upheld the CIT(A)'s factual finding that the transfer of shares was completed in the financial year 2009-10 (AY 2010-11) on registration/change in shareholding, sustained the addition (subject to allowing cost and indexation) and directed the Assessing Officer to give effect to the appellate order. - HELD THAT: - The CIT(A) found on facts that although an earlier unregistered agreement dated 26.11.2008 existed, the change in shareholding was registered and finalised by deed on 26.06.2009; shares were transferred by transfer form dated 20.04.2009 and the assessee resigned as director on 20.04.2009. On this factual matrix the CIT(A) inferred that the transfer attained finality in the relevant financial year 2009-10, making the capital gain taxable in AY 2010-11. The Tribunal noted that the assessee did not controvert these factual findings or place contrary material on record. The CIT(A) had, however, directed the Assessing Officer to allow benefit of cost of acquisition and indexation after verification; the Tribunal endorsed this direction and refused to interfere with the factual conclusion. [Paras 13, 14]

Addition sustained as held by CIT(A) to the extent indicated; benefit of cost of acquisition and indexation to be allowed by the Assessing Officer on verification.

Final Conclusion: Assessee's appeal dismissed in entirety: reopening of assessment and procedural steps upheld; allegation of improper transfer of jurisdiction and premature notice under section 143(2) rejected; addition for long-term capital gain sustained subject to allowing cost of acquisition and indexation as directed by the CIT(A).

Disallowance under section 40(a)(ia) of the Income Tax Act - second proviso to section 40(a)(ia) - deemed deduction where payee files return - first proviso to section 201(1) - Form No.26A certificate - admission of additional evidence and remand for verification

Admission of additional evidence and remand for verification - Form No.26A certificate - Additional evidence in the form of Form No.26A certificates was admitted and the matter was remitted to the Assessing Officer for verification. - HELD THAT: - The Tribunal admitted the additional evidences (Form No.26A certificates) produced by the assessee in respect of all three NBFCs, noting that such documents were not before the learned CIT(A) for all payees and are material to the claim under the second proviso to section 40(a)(ia). Having admitted the documents, the Tribunal directed verification by the Assessing Officer to ascertain whether the payees had taken the receipts into account while computing their taxable income in the returns filed. The admission was held to render the appropriate course one of de novo adjudication by the Assessing Officer rather than sustaining the disallowance without verification. [Paras 11, 12]

Additional evidence admitted; matter restored to the Assessing Officer for verification and de novo adjudication.

Disallowance under section 40(a)(ia) of the Income Tax Act - second proviso to section 40(a)(ia) - deemed deduction where payee files return - Whether the interest payment disallowance under section 40(a)(ia) could be avoided by application of the second proviso where payees have included the interest in their returns. - HELD THAT: - The Tribunal explained the legal effect of the second proviso to section 40(a)(ia) (w.e.f. 01.04.2013) which deems that tax has been deducted and paid on the date of furnishing of the return of income by the payee if the assessee is not an assessee in default under the first proviso to section 201(1). Because the assessee produced Form No.26A certificates asserting that the NBFC payees had taken the interest into account in their returns, the Tribunal could not sustain the disallowance without verification. Consequently, rather than deciding the merits on the record before it, the Tribunal set aside the learned CIT(A)'s order upholding the disallowance and directed the Assessing Officer to examine whether the payees had indeed included the interest in their returns; if so, relief to the assessee is to be granted in accordance with the second proviso. [Paras 10, 11, 12]

Disallowance under section 40(a)(ia) set aside and remitted to the Assessing Officer for verification; if payees included the interest in their returns, relief to be granted as per the second proviso.

Final Conclusion: The Tribunal admitted the additional Form No.26A evidence, set aside the CIT(A)'s confirmation of the disallowance under section 40(a)(ia) and remitted the issue to the Assessing Officer for de novo verification; if the NBFCs are found to have included the interest in their returns, the assessee is to be granted relief under the second proviso to section 40(a)(ia).

Reopening of assessment - Reason to believe - Change of opinion - Tangible material - Reassessment versus review - Disallowance under section 14A r.w. Rule 8D - Disallowance under section 36(1)(iii)

Reopening of assessment - Reason to believe - Change of opinion - Tangible material - Disallowance under section 14A r.w. Rule 8D - Disallowance under section 36(1)(iii) - Reassessment versus review - Validity of reopening the assessment under section 147 and consequent reassessment completed under section 143(3) r.w.s. 147 - HELD THAT: - The Tribunal examined whether the Assessing Officer possessed 'tangible material' amounting to a valid 'reason to believe' that income had escaped assessment, or whether the reopening merely reflected a change of opinion in relation to disallowance under section 14A r.w. Rule 8D and the computation linked to investments and interest. The record showed that the Assessing Officer had already considered and adjusted disallowance under section 14A in the original assessment and subsequently re-opened the assessment to recast the interest disallowance and invoke disallowance under section 36(1)(iii) on the same material. Following the principles laid down in CIT v. Kelvinator of India Ltd., and the decisions relied on by the Tribunal (including the reasoning in Marico Ltd. upheld by the Supreme Court), reassessment cannot be sustained where the reopening is occasioned by mere change of opinion and no fresh tangible material has surfaced after completion of the original assessment. The Assessing Officer's rebuttal and reasons were held to amount to an impermissible review of the original assessment rather than establishment of new material justifying reopening. Applying these principles, the Tribunal found the reassessment invalid and quashed the order passed under section 143(3) r.w.s. 147. [Paras 6, 7]

Reopening was invalid as it amounted to change of opinion without fresh tangible material; the reassessment under section 143(3) r.w.s. 147 is quashed and the assessee's appeal is allowed, the Revenue's appeal being academic is dismissed.

Final Conclusion: The Tribunal quashed the reassessment completed under section 143(3) read with section 147 for assessment year 2013-14 as being based on change of opinion without fresh tangible material; the assessee's appeal is allowed and the Revenue's cross-appeal is dismissed as academic.

Application of MAP/APA determined transfer pricing margins to comparable domestic transactions not covered by the MAP/APA - Arm's Length Price determination in relation to intra group ITES services - Use of MAP/APA outcomes as binding benchmark for related but separately contracted low volume cross border transactions - Notional interest on delayed receivables - benchmark rate derivation from MAP Resolution - Valuation of imported fixed assets - acceptance of customs valuation as fair market value - Levy of interest under sections 234B/234C on additional income declared pursuant to APA/modified return

Application of MAP/APA determined transfer pricing margins to comparable domestic transactions not covered by the MAP/APA - Arm's Length Price determination in relation to intra group ITES services - Whether the margin accepted in MAP/APA for ITES services should be applied to benchmark low volume transactions with an associated enterprise (Colt Luxembourg) not separately covered by the MAP/APA. - HELD THAT: - The Tribunal accepted the assessee's submission that there is no distinction in the nature of services rendered to the UK and Luxembourg AEs, that the TPO made no factual distinction, and that cost apportionment in the MAP/APA was on a revenue basis. Relying on precedents of co ordinate benches (including Amazon Development Centre and others) where MAP/APA margins were applied proportionately to residual low volume transactions when no factual distinction existed, the Tribunal directed AO/TPO to apply the MAP determined margin of 15.50% to the ITES transactions with Colt Luxembourg and allowed the assessee's grounds relating to these adjustments. [Paras 11, 12, 13]

Apply 15.50% (MAP/APA margin) as the ALP benchmark for ITES transactions with Colt Luxembourg; Grounds relating to ITES benchmarking allowed.

Notional interest on delayed receivables - benchmark rate derivation from MAP Resolution - Arm's Length Price determination in relation to intra group receivables - Whether the interest rate agreed in the MAP Resolution (3 months average Euribor plus 200 basis points for UK) should be applied to outstanding receivables from Colt Luxembourg beyond 90 days. - HELD THAT: - The Tribunal noted that under the MAP Resolution the interest for UK receivables was settled at 3 months average Euribor plus 200 bps for receivables beyond 90 days. Applying the same reasoning and the judicial approach of extending MAP/APA outcomes to similar low volume transactions where no factual distinction exists, the Tribunal directed AO/TPO to apply 3 months average Euribor plus 200 bps to receivables from Colt Luxembourg received beyond 90 days and allowed the relevant grounds for statistical purposes. [Paras 15, 16]

Direct AO/TPO to apply 3 months average Euribor plus 200 basis points on receivables from Colt Luxembourg received beyond 90 days; grounds on interest on receivables allowed (for statistical purpose).

Valuation of imported fixed assets - acceptance of customs valuation as fair market value - Arm's Length Price determination for intra group asset transfers - Whether value of fixed assets imported from associated enterprises can be taken as nil, or whether customs valuation/book value should be treated as fair value for transfer pricing purposes. - HELD THAT: - The Tribunal examined the invoices, the chartered engineer certificate and the fact that customs authorities had assigned values to the imported used equipment. Relying on authority that customs valuations employ scientifically formulated methods to determine fair value, and observing that the disputed assets formed a small percentage of turnover and fixed assets, the Tribunal held that the assets could not be treated as nil and that the customs assigned values represent fair value. Accordingly, the assessee's grounds on fixed asset valuation were allowed. [Paras 17, 18, 20, 21]

Reject taking asset value as nil; accept customs assigned values as fair value for the imported fixed assets; grounds on fixed asset valuation allowed.

Levy of interest under sections 234B/234C on additional income declared pursuant to APA/modified return - Compensatory nature of statutory interest - requirement of established default for levy - Whether interest under sections 234B and 234C is leviable on additional income declared in a modified return filed pursuant to an APA. - HELD THAT: - The Tribunal followed higher court authority holding that interest under sections 234B/234C is compensatory and arises only where there is a default in payment of advance tax as per estimates made under the law in force at the relevant time. Since the assessee could not reasonably have estimated the APA determined additional income at the time of advance tax payments and the modified return operates as a return filed under section 139 by virtue of section 92CD(2), the Tribunal held that levy of interest under sections 234B and 234C on the APA driven additional income was not sustainable and allowed the assessee's additional ground. [Paras 33, 36, 37]

Levy of interest under sections 234B and 234C on additional income declared pursuant to the APA/modified return is held illegal; additional ground allowed.

Consequential and general grounds - dismissal where non justiciable - Disposition of general or consequential grounds and penalty/interest grounds treated as consequential. - HELD THAT: - The Tribunal treated certain grounds as general or consequential and dismissed them without adjudication where they were dependent on other outcomes or too general in nature. Grounds 19 and 20 in the first appeal and Grounds 12-15 (consequential/general) in the second appeal were dismissed accordingly. [Paras 22, 32]

General and consequential grounds dismissed; penalty/interest grounds held consequential and not separately adjudicated where appropriate.

Final Conclusion: Both appeals were allowed in part: MAP/APA margins and MAP derived interest benchmark were applied to the small volume transactions with Colt Luxembourg (ITES) and related receivables; customs valuation of imported fixed assets was accepted as fair value; levy of interest under sections 234B/234C on APA determined additional income was held unsustainable. The remaining general or consequential grounds were dismissed where appropriate; appeals allowed for statistical purposes.

Allowability of employees' contribution to PF/ESI deposited before due date of filing return - application of amendment to Section 36(1)(va) and Section 43B introduced by Finance Act, 2021 - retrospective applicability of tax-amendments versus prospective effect from assessment year 2021-22 - binding effect of jurisdictional High Court decisions on appellate authorities - preferential application of a view favourable to the assessee where High Courts are in conflict

Allowability of employees' contribution to PF/ESI deposited before due date of filing return - application of amendment to Section 36(1)(va) and Section 43B introduced by Finance Act, 2021 - binding effect of jurisdictional High Court decisions on appellate authorities - Deletion of disallowance of employees' contribution to PF and ESI which was deposited belatedly under the respective statutes but before the due date of filing the return of income for AY 2019-20. - HELD THAT: - The Tribunal found that the employees' contributions to PF and ESI were deposited by the assessee before the due date for filing the return under section 139(1) for the assessment year 2019-20. It observed that prior to the Finance Act, 2021 amendments the view consistently taken by the jurisdictional Rajasthan High Court and followed by several Benches of the Tribunal was that amounts so deposited before the return-filing due date could not be disallowed under section 43B or section 36(1)(va). The Tribunal considered the explanatory memorandum to the Finance Act, 2021 which expressly states that the amendments take effect from 1 April 2021 and apply to assessment year 2021-22 and subsequent years. Applying the binding principle that appellate authorities within the territorial jurisdiction should follow the decisions of their High Court, and following coordinate Bench decisions that treated the 2021 amendments as prospective, the Tribunal held that the Finance Act, 2021 amendments were not applicable to AY 2019-20. For these reasons the Tribunal directed deletion of the disallowance made by CPC and confirmed by the CIT(A). [Paras 5, 6]

The disallowance of Rs.39,81,357/- on account of late deposit of employees' PF and ESI contributions (deposited before the due date of filing the return) is deleted and the appeal is partly allowed.

Final Conclusion: Following binding decisions of the jurisdictional High Court and coordinate Bench precedents, and on the view that the Finance Act, 2021 amendments operate from AY 2021-22, the Tribunal deleted the disallowance relating to employees' PF/ESI contributions paid before the return-filing due date for AY 2019-20 and partly allowed the appeal.

Benami transaction - onus of proof - Prohibition of Benami Property Transactions Act, 1988 (unamended provisions) - Binapani Paul guidelines

Benami transaction - onus of proof - Binapani Paul guidelines - Whether the appellants proved that the suit property was a benami transaction such that the counter-claim should have been allowed. - HELD THAT: - The Court applied the unamended provisions of the Prohibition of Benami Property Transactions Act, 1988 as they stood when the suit was filed and held that the appellants bore the onus to prove that the property was purchased with their funds and held in the name of others as benamdars. The Court examined the six circumstances identified in Paragraph 47 of Binapani Paul (source of purchase money; nature and possession after purchase; motive for benami character; relationship between parties; custody of title deeds; conduct of parties post-sale) and found that the appellants failed to establish them. There was no evidence that the purchase money came from the appellants, and the evidence adduced (including admissions by D.W.-1) indicated that Chanchal Kumar Dutta had paid funds by cheque and was treated as a co-sharer; D.W.-1 admitted receipt of funds from Chanchal Kumar Dutta for construction. These facts negatived the claim of exclusive ownership by the plaintiff and did not satisfy the required conditions to treat the transaction as benami. On that basis the trial court's rejection of the counter-claim was upheld.

The appellants failed to prove the benami character of the transaction; the counter-claim was rightly rejected and there is no ground to interfere with the trial court's preliminary decree.

Final Conclusion: Appeal dismissed; the preliminary decree in the partition suit rejecting the counter-claim stands affirmed. No order as to costs; certified copy to be issued on usual undertaking.

Definition of "benami transaction" under Section 2(9)(A) and Section 2(9)(C) - substantive versus procedural provisions - retrospectivity of penal statutes - provisional attachment under Section 24 - Article 20(1) protection against retrospective penal laws

Definition of "benami transaction" under Section 2(9)(A) and Section 2(9)(C) - substantive versus procedural provisions - retrospectivity of penal statutes - Article 20(1) protection against retrospective penal laws - Applicability of the amended definitions in Sections 2(9)(A) and 2(9)(C) to transactions that took place prior to 01.11.2016 - HELD THAT: - The Court examined the substituted definition of 'benami transaction' introduced by the 2016 Amendment and compared it with the earlier definition under the unamended Act. It held that Sections 2(9)(A) and 2(9)(C) effect a qualitative enlargement of the offence-creating scope of the statute by defining new substantive ingredients (including arrangements where the owner denies knowledge or where consideration is provided by another). Such provisions are substantive in character, not mere machinery or procedural provisions. In view of the presumption against retrospective operation of substantive and penal enactments, and having regard to Article 20(1) which bars conviction under a law that was not in force at the time of the act charged or imposition of a heavier penalty than was then applicable, the Court concluded that these substantive definitions cannot be given retrospective effect to reach transactions predating the notified commencement date of the Amendment Act (01.11.2016). [Paras 74, 76, 77, 78, 93]

Sections 2(9)(A) and 2(9)(C) are substantive, offence-defining provisions and cannot be applied retrospectively to the transaction dated 14.12.2011.

Provisional attachment under Section 24 - substantive versus procedural provisions - Validity of the show-cause notice, provisional attachment order and continuation order issued under Section 24 in respect of the 2011 transaction - HELD THAT: - The Court analysed Section 24 (notice and provisional attachment) as introduced by the Amendment Act and recognised it as a procedural provision concerning notice, provisional attachment and reference to the adjudicating authority. While procedural provisions may in general be capable of retrospective operation, the Court emphasised that the present attachment and continuation orders were founded on the amended substantive definitions (Sections 2(9)(A) and 2(9)(C)) which cannot be applied to the 2011 transaction. Because the substantive basis for treating the transaction as benami was inapplicable retrospectively, the show-cause notice dated 30.12.2019, the provisional attachment dated 31.12.2019 and the continuation order dated 30.03.2021 were rendered without jurisdiction. [Paras 56, 57, 76, 87, 93]

The show-cause notice and the provisional and continuation attachment orders insofar as they treat the 14.12.2011 transaction as falling under the amended substantive provisions are null and void and are set aside.

Final Conclusion: The Court held that the expanded definitions in Sections 2(9)(A) and 2(9)(C) of the Benami Transactions (Prohibition) Act as inserted by the 2016 Amendment are substantive and cannot be applied retrospectively to the transaction of 14.12.2011 (Financial Year 2011-12); accordingly the show-cause notice, provisional attachment and continuation order based on those amended provisions were without jurisdiction and are quashed. There shall be no order as to costs.

Confiscation for goods not included or in excess of those entered for export - redetermination of export value under the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 - redemption fine to correlate with profit margin and nature of goods - penalty under section 114(iii) limited to value of goods as declared or determined - penalty under section 114AA requiring proof of knowingly or intentionally making a false or incorrect declaration

Confiscation for goods not included or in excess of those entered for export - redetermination of export value under the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 - Validity of confiscation of the exported cargo - HELD THAT: - The appellant did not contest the redetermination of value of the goods and admitted excess quantity. The Tribunal therefore did not interfere with the order of confiscation under the provision dealing with goods not included or in excess of those in the export entry. The confiscation stood affirmed because the misdeclaration as to quantity was established and the redetermined value was not challenged by the appellant. [Paras 8]

Confiscation upheld; no interference with the order of confiscation.

Redemption fine to correlate with profit margin and nature of goods - Appropriateness and quantum of the redemption fine imposed for the excess quantity/value - HELD THAT: - Although the appellant admitted the excess quantity and the adjudicating authority redetermined value, the Tribunal found the redemption fine imposed to be disproportionately high relative to the likely profit margin on the perishable commodity. The Tribunal accepted that perishable nature of onions would result in a low profit margin and that no monetary benefit was proved by the Department. Exercising appellate discretion, the Tribunal reduced the redemption fine to a sum reflecting a reasonable estimate of profit and taking into account the nature of the goods. [Paras 9]

Redemption fine reduced to Rs. One lakh.

Penalty under section 114(iii) limited to value of goods as declared or determined - Sustainability of penalty imposed under section 114(iii) - HELD THAT: - Sectional provision permits a penalty not exceeding the value of the goods as declared or as determined under the Act, whichever is greater. On reviewing the impugned order, the Tribunal found no reason to interfere with the penalty imposed under section 114(iii), and upheld the penalty as falling within the statutory ceiling. [Paras 10, 11]

Penalty under section 114(iii) sustained.

Penalty under section 114AA requiring proof of knowingly or intentionally making a false or incorrect declaration - Validity of penalty imposed under section 114AA for knowingly or intentionally making false documents - HELD THAT: - Section 114AA penalises knowingly or intentionally making, signing or using false or incorrect declarations. The Tribunal observed that the authorities below failed to bring out any evidence to establish that the appellant acted knowingly or intentionally in making false documents. The explanation that excess quantity was loaded to compensate for drying loss in a perishable commodity was not disproved. In absence of proof of the requisite mens rea, the statutory requirement for imposing penalty under section 114AA was not satisfied. [Paras 12, 13]

Penalty under section 114AA set aside for lack of proof of knowingly or intentionally making false declarations.

Final Conclusion: Appeal partly allowed: confiscation sustained; redemption fine reduced to Rs. One lakh; penalty under section 114(iii) upheld; penalty under section 114AA set aside; consequential reliefs, if any, to follow.

Confiscation and penalty for mis declared imported goods - seizure under section 110 of the Customs Act, 1962 - reliance on admissions and statements as evidence - principles of natural justice - requirement of cross examination - corroboration of statements by independent electronic evidence - appellate review of confirmation of confiscation and penalty

Confiscation and penalty for mis declared imported goods - reliance on admissions and statements as evidence - corroboration of statements by independent electronic evidence - Validity of confirming confiscation of goods and imposition of penalty on the appellant - HELD THAT: - The Tribunal upheld the confirmation of confiscation and penalty after finding that the appellant, a CHA, admitted handling customs clearance for the two consignees and acknowledged the contents of the panchnama showing concealment of firecrackers behind declared bicycle parts. Statements recorded during investigation, including those of the shipping company representative and of third parties, along with printouts retrieved from electronic devices seized from the appellant's premises, were found to corroborate knowledge of and involvement in the mis declared consignments. The Tribunal treated the appellant's admissions as reliable evidence in terms of the Indian Evidence Act and held that the combined effect of admissions and corroborating material rendered further proof unnecessary. On the record, proceedings against other mentioned persons were dropped or resulted in discharge, but the material specifically implicating the appellant remained. Applying appellate scrutiny to the findings of the Adjudicating Authority and Commissioner (Appeals), the Tribunal found no infirmity in treating the evidence and admissions as sufficient to sustain confirmation of confiscation and penalty.

Confirmation of confiscation and imposition of penalty on the appellant is upheld; appeal dismissed.

Principles of natural justice - requirement of cross examination - appellate review of confirmation of confiscation and penalty - Whether failure to allow cross examination of witnesses vitiated the proceedings - HELD THAT: - The Tribunal rejected the contention that absence of cross examination rendered the proceedings invalid. It noted that no request for cross examination was made by the appellant before the Adjudicating Authority, and further observed that the appellant's own admissions and the corroborative evidence recovered during investigation justified reliance on the recorded statements. In these circumstances the Tribunal held that the non cross examination did not cause prejudice requiring interference with the confirmation of confiscation and penalty.

Absence of cross examination does not vitiate the order in view of the appellant's admissions and corroborative material; no interference warranted.

Final Conclusion: The Tribunal found that the appellant, acting as CHA for the consignors/consignees, had admitted involvement and that investigative statements and electronic evidence corroborated his knowledge of the mis declared consignments; consequently the confirmation of seizure, confiscation and penalty was sustained and the appeal dismissed.

Refund of Special Additional Duty under Notification No. 102/2007-Cus - limitation period for refund claims - reckoning limitation from date of payment of duty - reckoning limitation from date of sale of goods - effect of provisional assessment on limitation for refund - remand for de-novo adjudication

Refund of Special Additional Duty under Notification No. 102/2007-Cus - limitation period for refund claims - reckoning limitation from date of payment of duty - reckoning limitation from date of sale of goods - Period of limitation for claiming refund of SAD under Notification No. 102/2007-Cus is to be reckoned from the date of payment of duty and not from the date of sale of goods. - HELD THAT: - The Tribunal noted the competing contentions: the appellant urged that limitation should run from the date of sale of goods (relying on a Delhi High Court decision), whereas the Revenue relied on a line of authorities holding that limitation for refund of SAD under the notification is computed from the date of payment. Having considered the authorities placed before it, the Tribunal observed that it is settled by earlier decisions that the limitation period for claiming refund under Notification No. 102/2007-Cus is to be reckoned from the date of payment of the duty. The Tribunal therefore accepted the legal proposition that limitation runs from payment rather than from the date of sale. [Paras 4]

Limitation for refund of SAD under Notification No. 102/2007-Cus is to be computed from the date of payment of duty.

Effect of provisional assessment on limitation for refund - remand for de-novo adjudication - Whether provisional assessment (with finalization after clearance) affects the applicability or computation of the limitation period for claiming refund was not adjudicated on merits but remitted for fresh consideration to the Adjudicating Authority. - HELD THAT: - The appellant asserted that clearances were under provisional assessment and that finalization occurred later, contending the refund claim filed before finalization was within time. The Tribunal observed that this specific factual and legal question had not been examined by the lower authorities. Although the question involves law, its resolution depends on verification of facts and documentary proof concerning provisional and final assessment. Consequently, rather than deciding the point on the existing record, the Tribunal set aside the impugned order and remitted the matter to the Adjudicating Authority for de-novo adjudication, directing that the appellant be afforded opportunity to place relevant documents and to be heard, and that the Authority decide the issue afresh. [Paras 4]

Matter remitted to the Adjudicating Authority for fresh decision on the effect of provisional assessment on limitation; de-novo adjudication to follow after verification and hearing.

Final Conclusion: The impugned order is set aside and the appeal is allowed to the extent that the question of provisional assessment affecting limitation is remitted to the Adjudicating Authority for de-novo adjudication; the Adjudicating Authority shall decide the matter after affording hearing and considering documents, within three months from the date of this order.

Refund of Special Additional Duty (SAD) on re-sale despite nil VAT/Sales Tax - equitable levy in lieu of sales tax - condition of payment of "appropriate" VAT/Sales Tax for refund - application of CBE&C Circular No.6/2008 para 5.3 on refund of additional duty

Refund of Special Additional Duty (SAD) on re-sale despite nil VAT/Sales Tax - application of CBE&C Circular No.6/2008 para 5.3 on refund of additional duty - Whether refund of balance SAD was rightly allowed though the rate of VAT/Sales Tax on re-sale was nil. - HELD THAT: - The Tribunal affirmed the Commissioner (Appeals) order allowing refund of the balance SAD paid on import despite the re-sale attracting nil VAT/Sales Tax. The court observed that SAD is an equitable levy imposed in lieu of sales tax to protect domestic industry and that the Customs Tariff regime provides for refund on re-sale. The refund mechanism under notification no.102/2007-Cus conditions refund on re-sale and payment of appropriate VAT/Sales Tax. Relying on the Tribunal's precedent in Gazal Overseas and para 5.3 of CBE&C Circular No.6/2008, the Tribunal held there is no stipulation that the rate of VAT/Sales Tax must be equal to or higher than the rate of SAD, nor that a lower or nil VAT rate mandates reduction of the refund. Consequently, the refund is admissible even if VAT/Sales Tax is nil. The Revenue's reliance on earlier decisions interpreting the word "appropriate" was considered but the Tribunal found no merit in the grounds of appeal and upheld the Commissioner (Appeals) order. [Paras 6, 7]

Appeal dismissed; impugned order allowing refund of SAD upheld.

Final Conclusion: The Tribunal dismissed the Revenue appeal and upheld the Commissioner (Appeals) decision allowing refund of the balance SAD on re-sale despite the rate of VAT/Sales Tax being nil, following Gazal Overseas and CBE&C Circular No.6/2008 para 5.3.

Fee of Interim Resolution Professional - reasonableness of remuneration and costs payable to IRP - effect of status quo order on functioning period of IRP - withdrawal of insolvency petition and consequential directions on costs - maintainability and scope of appeal against fee determination

Fee of Interim Resolution Professional - reasonableness of remuneration and costs payable to IRP - effect of status quo order on functioning period of IRP - Adjudicating Authority's direction to pay additional fee and CIRP cost to the Interim Resolution Professional was justified and reasonable. - HELD THAT: - The Adjudicating Authority admitted the Section 9 petition on 22.12.2021 and by order dated 04.01.2022 maintained status quo in respect of further CIRP proceedings, effectively limiting the IRP's functional period to 14 days. The Adjudicating Authority, after notice to and hearing the IRP, applied the principle that the Adjudicating Authority will fix the fee of the IRP for the period he has functioned and, having regard to the absence of detailed expenditure particulars and the short duration of the IRP's functioning, fixed additional fee and directed payment of the amount in question in addition to the CIRP cost already paid. Given that the IRP's active tenure was curtailed by the status quo order and the Adjudicating Authority exercised its discretion to fix a just and reasonable fee for that period, the Tribunal found no reason to interfere with the fee fixation and payment direction. [Paras 8, 15]

Direction for payment of the additional fee and CIRP cost to the IRP was reasonable and is upheld.

Maintainability and scope of appeal against fee determination - withdrawal of insolvency petition and consequential directions on costs - The appeal by the IRP raising grievance only about the fee fixed by the Adjudicating Authority is without merit and liable to be dismissed. - HELD THAT: - The Appellant (IRP) challenged only the quantum of fee though his functional period was limited by the Adjudicating Authority's status quo direction; the Tribunal observed that insolvency proceedings are not proceedings solely about the IRP's fee and that fee and cost claims are consequential to the main proceeding. The Appellant had no valid grievance warranting interference with the Adjudicating Authority's exercise of discretion in fixing a fair and reasonable fee for the limited period of functioning, and the appeal amounted to an attempt to treat the proceedings as pertaining only to fees and expenses. [Paras 9, 10]

Appeal dismissed as devoid of substance.

Final Conclusion: The Adjudicating Authority's order allowing withdrawal of the petition with directions for payment of additional fee and CIRP cost to the Interim Resolution Professional is sustained; the appeal by the IRP challenging the fee fixation is dismissed.

Requirement of show-cause notice under Rule 4(1) and Rule 4(2) of the Adjudication Rules - Formation and recording of opinion under Rule 4(3) before issuing notice for personal hearing - Two-tier adjudication procedure under Rule 4 - Mandatory compliance with procedural requirements in adjudication under FEMA - Prejudice principle not applicable where statutory procedure is mandatory - Duty to furnish recorded reasons to the noticee prior to personal hearing

Requirement of show-cause notice under Rule 4(1) and Rule 4(2) of the Adjudication Rules - Two-tier adjudication procedure under Rule 4 - Mandatory compliance with procedural requirements in adjudication under FEMA - Issuance of notice under Rule 4(3) without following Rule 4(1) and 4(2) is not permissible and the preliminary show-cause stage must be complied with. - HELD THAT: - The Court held that Rule 4 structures a two-tier process: an initial notice under sub-rules (1) and (2) requiring the person to show cause and indicating the nature of contravention, and only thereafter, upon considering the cause shown, can the adjudicating authority form an opinion under sub-rule (3) to issue a notice for personal appearance. Reliance was placed on the Supreme Court's reasoning in Natwar Singh that the authority is bound to follow the prescribed statutory procedure and cannot bypass the initial show-cause stage. The impugned practice of issuing a personal-hearing notice straightaway without issuing the sub-rule (1)/(2) notice was held to be inconsistent with the statutory mandate and the jurisprudence emphasizing that the procedure must be followed or not at all. [Paras 8, 9, 10, 14]

The show-cause process under Rule 4 must commence with the sub-rule (1) and (2) notice; issuing a sub-rule (3) notice without that preliminary stage is improper.

Formation and recording of opinion under Rule 4(3) before issuing notice for personal hearing - Duty to furnish recorded reasons to the noticee prior to personal hearing - Adjudicating authority must form and record an opinion under Rule 4(3) showing application of mind, and, if adverse, furnish that recorded opinion and reasons to the noticee before personal hearing. - HELD THAT: - Drawing on the decision of the Bombay High Court in Shashank Vyankatesh Manohar, the Court emphasised that the adjudicating authority must apply its mind to written objections and record its opinion to proceed further; such recording need not be elaborate but must demonstrate consideration of objections. Those recorded reasons, when adverse, must be supplied to the noticee so that the noticee has an opportunity at the personal hearing to correct any erroneous preliminary view. The requirement safeguards against arbitrary formation of opinion and protects the noticee's right to be heard before a final adjudication. [Paras 11, 12, 16]

The authority must record reasons when forming the opinion under Rule 4(3) and provide the recorded opinion and reasons to the noticee in advance of personal hearing.

Prejudice principle not applicable where statutory procedure is mandatory - Mandatory compliance with procedural requirements in adjudication under FEMA - The doctrine of requiring demonstrable prejudice for procedural non-compliance (as applied in service disciplinary contexts) is not applicable to dispense with the mandatory requirements of Rule 4(1) and (2) under FEMA. - HELD THAT: - The Court declined to apply the prejudice test relied upon from State Bank of Patiala since that principle arose in the context of disciplinary service law and cannot override the clear statutory mandate of Rule 4. Where the Rules prescribe a specific procedure for adjudication under FEMA, compliance is mandatory and cannot be excused merely by an absence of shown prejudice. The Natwar Singh and Bombay High Court precedents establish that statutory procedure must be followed. [Paras 15]

Non-compliance with Rule 4(1) and (2) cannot be validated by invoking a prejudice test; the statutory procedure must be followed.

Final Conclusion: The appeal is disposed of by directing the Special Director, Eastern Region, Enforcement Directorate to form and record his opinion under Rule 4(3) after due consideration of the preliminaries; if adverse, the recorded opinion and reasons must be furnished to the appellant at least fifteen days before the personal hearing, without quashing the show-cause notice itself.

Two-stage adjudication procedure under Rule 4 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - codification of principles of natural justice - requirement of demonstrable prejudice to vitiate proceedings - obligation of adjudicating authority to furnish a brief gist of its prima facie satisfaction where proceedings are initiated under Rule 4(3) - expeditious completion of adjudication proceedings

Two-stage adjudication procedure under Rule 4 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - codification of principles of natural justice - requirement of demonstrable prejudice to vitiate proceedings - Whether omission to follow the preliminary enquiry procedure under Rule 4(1) and 4(2) vitiates the adjudication proceedings initiated under the Foreign Exchange Management Act read with the Adjudication Rules of 2000. - HELD THAT: - The Court observed that the procedure under Rule 4 constitutes a two-stage process, reflecting codified principles of natural justice designed to meet the serious civil consequences of adjudication. However, not every infraction of that procedure will automatically vitiate proceedings. The petitioner must demonstrate actual and real prejudice caused by the procedural omission. Applying settled precedent, the Court held that absence of strict compliance with the preliminary enquiry stages will only invalidate proceedings where prejudice is shown; mere non-compliance, without demonstrable prejudice, is insufficient to set aside the adjudication.

Omission to follow Rule 4(1) and 4(2) does not ipso facto vitiate proceedings; the petitioner must demonstrate actual prejudice to succeed.

Obligation of adjudicating authority to furnish a brief gist of its prima facie satisfaction where proceedings are initiated under Rule 4(3) - requirement of disclosure of documents relied upon by the complainant - What procedural material the adjudicating authority must supply when the noticee contends the authority proceeded under Rule 4(3) and the noticee claims failure to receive documents relied upon by the complainant. - HELD THAT: - The Court noted the petitioner's contention that the adjudicating authority omitted the procedure in Rule 4(1)-(2) and that documents relied upon by the Assistant Director were not supplied. Given the petitioner's admission that the notice was issued under Rule 4(3), the Court directed the adjudicating authority to provide a brief gist explaining its satisfaction of a prima facie case together with copies of necessary documents relied upon by the complainant within fifteen days. Thereafter the petitioner was to respond to both the original notice and the supplied gist, following which the adjudication under Rule 4(3) would proceed.

Adjudicating authority must furnish a brief gist of its prima facie satisfaction and relevant documents within 15 days; the petitioner shall then show cause to the notice and the gist.

Expeditious completion of adjudication proceedings - Whether and in what timeframe the adjudication proceedings should be completed after furnishing the gist and documents. - HELD THAT: - Recognising the seriousness of the consequences and the need for timely resolution, the Court directed that the adjudication proceedings be completed expeditiously and preferably within two months from the date the gist and documents are supplied to the petitioner. This is a procedural direction to ensure prompt disposal once the requisite material is furnished and the petitioner has had an opportunity to respond.

Adjudication proceedings shall be concluded expeditiously, preferably within two months from the date of supply of the gist and documents.

Final Conclusion: Writ petition disposed with directions that the adjudicating authority shall, within 15 days, furnish a brief gist of its prima facie satisfaction and necessary documents where proceedings proceeded under Rule 4(3); the petitioner may then respond, and the adjudication shall be completed expeditiously (preferably within two months). The petitioners' challenge that mere procedural omission vitiates proceedings was rejected unless actual prejudice is demonstrated; no order as to costs.

Declared service under section 66E(e) of the Finance Act, 1994 - consideration for tolerating an act - liquidated damages/penalty as compensation not consideration - recovery on breach of contract not constituting a taxable service - interest and penalty under sections 75 and 78 of the Finance Act, 1994

Declared service under section 66E(e) of the Finance Act, 1994 - consideration for tolerating an act - liquidated damages/penalty as compensation not consideration - Whether amounts charged as delay in delivery (liquidated damages/penalty) constitute consideration for a declared service under section 66E(e) and are liable to service tax - HELD THAT: - The Tribunal applied the principle that a declared service under section 66E(e) requires an agreement which contemplates an activity of agreeing to refrain from an act, or to tolerate an act or situation, together with an identifiable flow of consideration for that specific obligation. The contractual intention must be read as a whole: when contracts are for supply of goods or services, penal clauses for breach operate as safeguards of commercial interest and are not the object of the contract nor are they consideration for tolerating a default. Recovery of liquidated damages or penalty arises only on non performance and cannot be treated as payment for a service of tolerating an act. The Tribunal's decision in South Eastern Coalfields Ltd. (followed by M.P. Poorva Kshetra Vidyut Vitran Co. Ltd.) was applied to hold that amounts recovered as penalties/liquidated damages do not amount to consideration for a declared service under section 66E(e) and therefore are not taxable as service tax. [Paras 6]

Amounts collected as delay in delivery (liquidated damages/penalty) are not consideration for a declared service under section 66E(e) and are not liable to service tax.

Interest and penalty under sections 75 and 78 of the Finance Act, 1994 - consequential relief where tax cannot be levied - Whether interest and penalty imposed consequent to the service tax demand can be sustained when the underlying demand is held not leviable - HELD THAT: - Since the primary demand for service tax on the amounts recovered as liquidated damages/penalty cannot be sustained, the consequential imposition of interest and penalty under the Finance Act lacks a foundation. Interest and penalty flow from an assessable tax liability; absent a valid tax demand, ancillary interest and penalty cannot survive. [Paras 9]

Interest and penalty imposed along with the service tax demand cannot be sustained and are set aside.

Final Conclusion: The order dated 10.10.2018 confirming service tax, interest and penalty is set aside; the appeal is allowed and consequential relief, if any, granted.

Declared service of agreeing to the obligation to refrain from an act or to tolerate an act - statutorily provided compensation under the Coal Mines (Special Provisions) Act, 2015 - consideration for toleration versus compensation by operation of law - taxability of compensation received pursuant to statutory re allocation of cancelled coal blocks - service tax liability and penalties on amounts received as compensation

Declared service of agreeing to the obligation to refrain from an act or to tolerate an act - statutorily provided compensation under the Coal Mines (Special Provisions) Act, 2015 - consideration for toleration versus compensation by operation of law - taxability of compensation received pursuant to statutory re allocation of cancelled coal blocks - Compensation received by the prior allottee under the CMSPA for investment in land and mine infrastructure is not consideration for the declared service of tolerating cancellation and is not liable to Service Tax. - HELD THAT: - The Tribunal found that the compensation was paid pursuant to the CMSPA to recoup investments made by prior allottees after their coal block allotments were cancelled by the Supreme Court. The legal elements necessary to treat a receipt as consideration for a toleration service-choice to tolerate, a deliberate election to tolerate, an agreement to tolerate for consideration, and the tolerance constituting a taxable service-were absent. The cancellation resulted from a judicial order and the compensation arose by operation of law rather than under any contract; it is analogous to statutory compensation such as land acquisition or leave encashment, which cannot be recharacterised as consideration for tolerating an act. Consequently, the amount received is not a taxable service receipt, and no Service Tax could be levied on it. Because the matter was decided on merits in favour of the appellant, the Tribunal did not examine limitation and set aside the penalties imposed. [Paras 10, 11, 12, 13, 14]

Demand for Service Tax and consequential penalties insofar as based on treating the statutory compensation as consideration for toleration are set aside; the appeal is allowed.

Final Conclusion: The impugned order confirming Service Tax demand and penalties is set aside; the appeal is allowed with consequential relief, the Tribunal holding that statutory compensation under the CMSPA is not consideration for a declared service of toleration and therefore not taxable.

Consideration - declared service under Section 66E(e) of the Finance Act, 1994 - liquidated damages / compensation / penalty not constituting consideration for taxable service - nexus between payment and taxable service - distinction between contractual conditions and consideration

Consideration - declared service under Section 66E(e) of the Finance Act, 1994 - liquidated damages / compensation / penalty not constituting consideration for taxable service - nexus between payment and taxable service - Whether the liquidated damages/compensation charges received for breach of the Minimum Guaranteed Tonnage under the Agreement dated 12.07.2011 constitute 'consideration' for a 'declared service' under Section 66E(e) of the Finance Act, 1994 and are therefore liable to Service Tax. - HELD THAT: - The Tribunal held that the impugned sum arises solely as a contractual remedy to compensate the appellant for financial damage resulting from the service recipient's failure to achieve the Minimum Guaranteed Tonnage and to deter breaches of the contract. There was no activity, refrainment or tolerance by the appellant for which consideration flowed; the compensation is triggered only upon non-fulfillment of the MGT and does not emanate from any obligation assumed by the appellant to tolerate or perform an act. Service Tax liability under the Finance Act requires that the amount charged be consideration for a taxable service; any amount lacking nexus with a taxable service does not form part of the value of service. The Tribunal applied the distinction between conditions of a contract and consideration for the contract and relied on consistent precedents holding that penalties, liquidated damages, cancellation charges and similar recoveries for breach or non compliance are not considerations for a declared service under Section 66E(e). On these grounds the demand and penalties confirmed by the Commissioner were held unsustainable.

The compensation/liquidated damages recovered for breach of the MGT are not 'consideration' for a 'declared service' under Section 66E(e) and are not liable to Service Tax; the impugned order is set aside.

Final Conclusion: The appeal is allowed: the demand and penalties confirming Service Tax on the compensation/liquidated damages under the Agreement dated 12.07.2011 are quashed, as such recoveries do not constitute consideration for a declared service under Section 66E(e) of the Finance Act, 1994.

Excisability of incidental/waste products arising during refining - eligibility for exemption under Notification No.89/1995-CE for wastes/incidental products - exemption for goods consumed within the factory of their production under Notification No.10/1996-CE - application of the ratio in Commissioner of Central Excise vs. Indian Aluminium Co. Ltd. and its adoption by the Tribunal in Ricela Health Foods Ltd.

Excisability of incidental/waste products arising during refining - eligibility for exemption under Notification No.89/1995-CE for wastes/incidental products - Whether 'fatty acid' arising during the course of refining crude palm oil is an excisable manufactured product or a waste/incidental product eligible for exemption under Notification No.89/1995-CE. - HELD THAT: - The Tribunal held that 'fatty acid' is not manufactured as an excisable good from crude palm oil but is a waste/incidental product arising during the course of manufacture of refined palm oil/vanaspati. Applying the ratio of the Supreme Court as interpreted by the Larger Bench in Ricela Health Foods Ltd., the value that an incidental product may fetch in the market is not decisive of excisability. The refining process removes unwanted materials to obtain refined oil; the materials removed (gums, waxes, fatty acids with odour) are incidental wastes and not the result of a process of manufacture of those products. Consequently, such incidental products fall within the scope of exemption under Notification No.89/1995-CE.

The products like 'fatty acid' are wastes/incidental products arising during refining and are eligible for exemption under Notification No.89/1995-CE.

Exemption for goods consumed within the factory of their production under Notification No.10/1996-CE - captively consumed packing containers exemption - Whether empty tins and HDPE jars manufactured in-house and captively consumed for packing the final product are excisable and disentitle the appellant to exemption under Notification No.89/1995-CE. - HELD THAT: - The Tribunal found that the adjudicating authority erred in denying exemption on the ground that the appellants manufactured tin containers/HDPE jars. The tins and jars manufactured in-house for captive use are eligible for exemption under Notification No.10/1996-CE (exemption for goods consumed within the factory of their production in the manufacture of specified goods). The Commissioner failed to appreciate that such packing containers, when captively consumed in the manufacturing process, attract the exemption under the said notification and therefore could not be a ground to deny the benefit of Notification No.89/1995-CE in respect of incidental products.

The in-house manufactured empty tins and HDPE jars, captively consumed in packing the final product, are eligible for exemption under Notification No.10/1996-CE and their manufacture does not disentitle the appellants from the exemption under Notification No.89/1995-CE.

Final Conclusion: The impugned orders are set aside; the appellants are entitled to exemption under Notification No.89/1995-CE in respect of incidental products arising during refining (such as 'fatty acid'), and the denial of benefit on account of in-house manufacture of packing containers was erroneous; the appeals are allowed with consequential relief as per law.

Cenvat credit for inputs used in repair and maintenance of plant and machinery - definition of 'input' under Rule 2(k) of Cenvat Credit Rules, 2004 - nexus between repair/maintenance activity and manufacture of final products - capital goods - acceptability of alternative documentary evidence in absence of Chartered Engineer certificate

Cenvat credit for inputs used in repair and maintenance of plant and machinery - definition of 'input' under Rule 2(k) of Cenvat Credit Rules, 2004 - nexus between repair/maintenance activity and manufacture of final products - capital goods - Entitlement to Cenvat credit in respect of MS angles, channels, beams, plates and TMT bars used in repair and maintenance of plant and machinery during 2008-09 and 2009-2010. - HELD THAT: - The Tribunal applied the scope of the definition of 'input' under Rule 2(k) of the Cenvat Credit Rules, 2004 and the principle that goods used in activities which are commercially essential to manufacture have the requisite nexus with manufacture. Relying on prior decisions cited in the record which held that inputs used for repair and maintenance of plant and machinery are eligible for Cenvat credit, the Tribunal held that repair and maintenance of plant and machinery is integrally connected with manufacture and therefore the steel items and TMT bars used for repair/platforms fall within the definition of inputs/capital goods eligible for credit. On that basis the impugned denial was set aside and credit was allowed.

Cenvat credit allowed in respect of the goods in question for the periods 2008-09 and 2009-2010; impugned order set aside.

Acceptability of alternative documentary evidence in absence of Chartered Engineer certificate - accounting and Chartered Accountant certificate as proof of use - Whether the absence of a Chartered Engineer certificate precludes grant of Cenvat credit when alternative documentary evidence is available. - HELD THAT: - The Tribunal noted that although a Chartered Engineer certificate was not produced, the appellant furnished accounting records and a Chartered Accountant's certificate showing that the steel materials were accounted for and used in repair of plant and machinery. The show cause notice statement also recorded usage within the plant. Given the practical difficulty of obtaining an engineer's certificate after many years, the Tribunal accepted the documentary evidence on the fact of use and found it sufficient to establish eligibility for credit.

Absence of Chartered Engineer certificate did not preclude credit where accounting records, CA certificate and documentary statements establish use for repair and maintenance.

Final Conclusion: The appeals are allowed: the impugned order denying Cenvat credit is set aside and credit is permitted for the specified steel items and TMT bars used for repair and maintenance of plant and machinery for 2008-09 and 2009-2010; the Tribunal accepted alternative documentary evidence in absence of a Chartered Engineer certificate.

Cenvat credit - Input service - Storage and Warehousing Service - place of removal - Rule 2(l) of Cenvat Credit Rules, 2004 - inclusion clause of definition of Input Service - Section 4 of Central Excise Act

Cenvat credit - Storage and Warehousing Service - place of removal - Rule 2(l) of Cenvat Credit Rules, 2004 - Section 4 of Central Excise Act - Entitlement to Cenvat credit of storage and warehousing service provided at the premises of the C&F agent from whose premises the goods are sold (place of removal). - HELD THAT: - The Tribunal found that the C&F agent's premises, from which the appellant's goods are sold, constitute the place of removal in terms of Section 4 of the Central Excise Act. Services provided up to the place of removal fall within the ambit of admissible input service under Rule 2(l) of the Cenvat Credit Rules, 2004. The inclusion clause in the definition of Input service expressly covers services of Storage and Warehousing Service when rendered up to the place of removal. The Tribunal distinguished the decision relied upon by the Revenue (Cadila Healthcare Limited), observing that that case concerned sales commission incurred after sale (beyond the place of removal) and is therefore inapplicable to services rendered prior to or up to the place of removal. Applying the foregoing legal proposition, the Tribunal concluded that the appellant's storage and warehousing service at the C&F premises qualifies for Cenvat credit.

Appeal allowed; Cenvat credit granted for Storage and Warehousing Service at the C&F agent's premises.

Final Conclusion: The impugned order is set aside and the appellant is entitled to claim Cenvat credit on Storage and Warehousing Service provided at the C&F agent's premises, those premises being the place of removal under Section 4 and the service being an admissible input service under Rule 2(l) of the Cenvat Credit Rules, 2004.

Cenvat credit - inputs and packing material used in manufacture - testing and trials for quality under the Drugs and Cosmetics Act as integral part of manufacture - destruction after quality testing - marketability ascertained by statutory quality tests - distinguishing precedent where material destroyed before manufacture

Cenvat credit - inputs and packing material used in manufacture - testing and trials for quality under the Drugs and Cosmetics Act as integral part of manufacture - destruction after quality testing - Entitlement to Cenvat credit on inputs and packing material used in manufacture of medicaments that were used for mandatory quality testing/trials under the Drugs and Cosmetics Act and destroyed thereafter. - HELD THAT: - The Tribunal found that the inputs and packing materials in question were utilised in the manufacturing process for the purpose of mandatory quality tests and trials under the Drugs and Cosmetics Act, and that those tests are the means by which marketability of the final product is ascertained. Because the testing process is integral to and used in relation to the manufacture of the final medicament, the raw and packing materials consumed in that testing qualify as inputs used in or in relation to manufacture and are therefore admissible for Cenvat credit. The Tribunal noted that the authorities cited by the appellant support this principle. The judgment relied upon by the Revenue was distinguished on its facts: in that case the raw material was destroyed prior to manufacture, a factual matrix different from the present case where destruction occurred after statutory testing tied to manufacture. [Paras 4, 5, 6]

Appellant entitled to Cenvat credit on the input and packing material used for testing products; impugned order set aside and appeal allowed.

Final Conclusion: Credit for inputs and packing materials consumed in mandatory statutory testing/trials that are integral to manufacture and used to ascertain marketability is allowable; the impugned order denying such credit is set aside and the appeal is allowed.

Entertainment of writ petition in presence of alternate remedy - remedy under the Arbitration Act, 1940 - challenge to arbitral award - making arbitral award a decree of the court - Articles 226 and 227 of the Constitution

Entertainment of writ petition in presence of alternate remedy - remedy under the Arbitration Act, 1940 - challenge to arbitral award - High Court ought not to have entertained writ petition under Articles 226 and 227 to set aside an arbitral award and the decree made thereon when statutory remedies under the Arbitration Act, 1940 were available. - HELD THAT: - The Court held that where the statute provides a specific remedy by way of appeal against an award and against an order making the award a decree of the court, the High Court should not entertain a writ petition under Articles 226 and 227 to challenge the award or the decree. In such circumstances the remedy conferred by the Arbitration Act, 1940 is the appropriate course and the High Court's interference by quashing the award and remanding the matter for de novo consideration was unsustainable. Consequently, the impugned judgment and order of the High Court setting aside the award was quashed and set aside. [Paras 2]

Impugned judgment and order of the High Court quashing the arbitral award is unsustainable and is set aside.

Liberty to pursue statutory remedy without limitation - making arbitral award a decree of the court - adjustment of amounts paid subject to outcome - Liberty granted to respondent to invoke remedies under the Arbitration Act, 1940 within a limited time and treatment of amounts already paid pending such proceedings. - HELD THAT: - The Court reserved liberty for the respondent to avail the remedies available under the Arbitration Act, 1940 against the award and the order making the award a decree, provided such proceedings are initiated within four weeks from the date of the judgment. The Court directed that those proceedings shall be considered in accordance with law and on their merits without raising the issue of limitation. The Court further observed that any amount already paid to the appellant (original claimant) shall be subject to the ultimate outcome of any such proceedings initiated by the respondent. [Paras 3, 4]

Respondent permitted to initiate proceedings under the Arbitration Act, 1940 within four weeks; such proceedings to be considered on merits without raising limitation, and amounts already paid shall be subject to the ultimate outcome.

Final Conclusion: Appeal allowed to the extent that the High Court order quashing the arbitral award is set aside; respondent is granted limited time-liberalised liberty to pursue statutory remedies under the Arbitration Act, 1940 and amounts already paid remain subject to the result of those proceedings; no order as to costs.