TaxTMI Updates e-Newsletter
May 08,2024

Detention and penalty under Section 129 of the West Bengal Goods and Services Tax Act, 2017 / Central Goods and Services Tax Act, 2017 - e-way bill validity and extension - payment under Section 129(1)(b) and release of goods - mens rea and civil penalty in tax statutes - appellate obligation to consider and adjudicate grounds of appeal - requirement of material to infer evasion of tax

E-way bill validity and extension - detention and penalty under Section 129 of the West Bengal Goods and Services Tax Act, 2017 / Central Goods and Services Tax Act, 2017 - payment under Section 129(1)(b) and release of goods - Validity of detention and penalty where goods-in-transit were intercepted after expiry of an e-way bill and goods were released on payment under Section 129(1)(b). - HELD THAT: - The court found that the only recorded irregularity related to expiry of the e-way bill while the goods were in transit and that the petitioners had generated tax invoice and e-way bills and obtained release of goods by payment under Section 129(1)(b). The court examined whether mere non-extension of the e-way bill, without material showing intention to evade tax, justifies confirmation of detention and penalty. Reliance on precedents recognising that mens rea is not an essential ingredient for a civil penalty did not displace the requirement to examine the factual matrix for material establishing evasion. In the present facts the goods were intercepted within 24 hours of expiry of the e-way bill and there was no material to conclude deliberate evasion of tax. On that basis the court held that confirmation of detention and penalty could not be sustained. [Paras 16, 20, 21]

Orders of detention and confirmation of penalty under Section 129 were set aside for want of material to infer evasion of tax and in view of the facts that the goods were intercepted within 24 hours and had been released on payment under Section 129(1)(b).

Appellate obligation to consider and adjudicate grounds of appeal - requirement of material to infer evasion of tax - Whether the appellate authority properly considered and adjudicated the grounds of appeal before affirming the adjudicating authority's order. - HELD THAT: - The court noted that the appellate order recorded the grounds of appeal but did not address the petitioners' defence that there was no mens rea or intention to evade tax and did not advert to the factual materials bearing on that defence. The Division Bench decisions and Supreme Court authorities discussed that while mens rea need not be proved for civil penalties, absence of a requirement to prove mens rea does not relieve the authority of its obligation to apply its mind and pass a reasoned order dealing with the defence raised. As the appellate authority declined to entertain or adjudicate the defence presented in the grounds of appeal, its order could not stand. [Paras 15, 16, 21]

Appellate order was set aside for failure to adjudicate the grounds of appeal and to apply its mind to the defence that there was no evasion of tax.

Final Conclusion: The High Court set aside the adjudicating authority's order dated 18th May 2023 under Section 129(3) and the appellate authority's order dated 13th September 2023 under Section 107, finding no material to infer evasion of tax and noting that the appellate authority failed to adjudicate the defence; consequential legal effects follow.

Input Tax Credit (ITC) eligibility under Section 16(2) - Requirement to proceed against supplier before reversing recipient's ITC - Exceptional circumstances permitting reversal of recipient's ITC (collusion, missing supplier, closure, lack of assets) - Form GSTR-2A/GSTR-3B as facilitative for self-assessment - CBIC press release guidance on reversal of ITC and recovery from supplier

Requirement to proceed against supplier before reversing recipient's ITC - Exceptional circumstances permitting reversal of recipient's ITC (collusion, missing supplier, closure, lack of assets) - CBIC press release guidance on reversal of ITC and recovery from supplier - Whether the adjudicating authority was justified in directing reversal of ITC without first taking action against the supplier when the recipient produced tax invoices and certificates alleging payment of tax to the supplier - HELD THAT: - The Court held that where the recipient produces tax invoices and evidence (including Chartered Accountant certificates) indicating that tax was paid to the supplier, the authority cannot, as a matter of course, reverse the recipient's ITC without first proceeding against the supplier. The tribunal's approach must follow the exceptional-execution principle reflected in administrative guidance: reversal from the recipient is permissible only in exceptional cases such as collusion between parties, missing supplier, closure of the supplier's business, or absence of assets to satisfy recovery. The Court applied the reasoning in the earlier decision relied upon by the appellant and observed that, given the authority's admission that the recipient had paid the tax to the supplier, the elementary and lawful course was to enquire and, if necessary, recover from the supplier before penalising the recipient. The adjudicating authority's failure to do so rendered its action arbitrary, illegal and without jurisdiction, requiring setting aside of the demand and show-cause notice. [Paras 8, 9]

The demand and show-cause notice were set aside and the authorities were directed to proceed against the supplier first; proceedings against the recipient may be initiated only in the exceptional circumstances identified and as per CBIC guidance.

Input Tax Credit (ITC) eligibility under Section 16(2) - Form GSTR-2A/GSTR-3B as facilitative for self-assessment - Whether the adjudicating authority could rely on findings beyond the scope of the show-cause notice (e.g., requiring production of registers of workers and proof of actual availing of manpower services) to deny ITC - HELD THAT: - The Court found that the adjudicating authority recorded findings about lack of proof of actual receipt of manpower services and absence of worker registers, matters which were not the subject of the show-cause notice. Those additional requirements were extraneous to the allegations and could not form the basis for rejecting the certificates and invoices produced by the appellant. The Court noted that if further clarification or evidence was necessary the authority should have called for it rather than unilaterally rejecting the documents. The Court reiterated the settled position that statutory conditions for availing ITC under Section 16(2) must be applied consistently with the facilitative role of portal-generated statements such as GSTR-2A and that automatic denial is inappropriate absent exceptional grounds. [Paras 5]

Findings outside the scope of the show-cause notice were unsustainable; the adjudication based on such extraneous findings was set aside.

Final Conclusion: Appeal and writ petition allowed; the adjudication order dated 28.12.2023 and the show-cause notice dated 22.08.2023 are set aside. Authorities directed to first proceed against the supplier and to initiate action against the recipient only under the exceptional circumstances identified and in accordance with CBIC guidance.

Input tax credit - capital goods - remand for fresh consideration on terms - right to personal hearing - lifting of bank attachment

Input tax credit - capital goods - remand for fresh consideration on terms - Impugned assessment order set aside and remanded for fresh consideration because a substantive reply of the Petitioner was not considered - HELD THAT: - The Petitioner's subsequent reply dated 01.03.2023, which asserted that vehicles purchased qualify as capital goods and sought input tax credit, was not noticed in the impugned assessment order. The Court found that only two purchase bills enclosed to the earlier reply were referred to in the order and that the later reply was omitted from consideration. In view of that omission and the Petitioner's delayed approach to the Court, the matter was not decided on merits; instead the assessment order was set aside and the matter remanded for fresh adjudication. The remand is conditional: the Petitioner is to remit 15% of the disputed tax demand within two weeks and may, within that period, submit a further reply with all relevant documents. Upon satisfaction that the 15% has been paid, the Respondent must afford a right to personal hearing and thereafter pass fresh orders within three months from receipt of the Petitioner's reply. As a consequence of setting aside the assessment, the existing bank attachment is ordered to be lifted pending fresh consideration. [Paras 5, 6]

Impugned order dated 09.05.2023 is set aside and remanded for fresh consideration on the stated terms, with liberty to the Petitioner to file documents and a direction to the Respondent to grant a personal hearing and decide afresh within three months; bank attachment lifted.

Final Conclusion: The assessment order is quashed and remanded for fresh adjudication subject to the Petitioner remitting 15% of the disputed tax demand and filing any further documents; respondent to grant personal hearing and pass fresh orders within three months, and the bank attachment is lifted.

Maintainability of writ petition at show-cause notice stage - challenge to show-cause notice without filing written explanation - requirement to exhaust statutory/alternate remedy before invoking writ jurisdiction - non-interference at pre-adjudication stage where factual disputes exist

Maintainability of writ petition at show-cause notice stage - challenge to show-cause notice without filing written explanation - non-interference at pre-adjudication stage where factual disputes exist - Writ petition challenging the show-cause notice is not maintainable when the petitioner has not filed the written explanation or sought personal hearing and statutory/alternative remedy is available. - HELD THAT: - The Court found that the petitioner was issued a show-cause notice calling for a written explanation and offering an opportunity for personal hearing, but the petitioner did not submit any written explanation nor sought personal hearing. Relying on the authority of the Apex Court which discourages entertaining writ petitions at the show-cause notice stage where parties have not availed the statutory opportunity to place material and defend their case, the Court held that the petitioner rushed to the High Court without first presenting its defence before the competent authority. The Court noted that writ jurisdiction is not to be invoked to pre-empt the adjudicatory process where factual disputes and classification issues are apparent from the notice, and where an alternate statutory remedy or adjudicatory mechanism exists to decide the controversy. The petitioner's reliance on earlier decisions concerning state control over manufacture of rectified spirit was not treated as displacing the basic requirement to first respond to the show-cause notice; consequently the High Court should not interfere at the pre-adjudication stage in the absence of alleged lack of jurisdiction or denial of natural justice by the authority issuing the notice. [Paras 12, 13, 14, 15]

The writ petition is dismissed as not maintainable for having challenged the show-cause notice without filing the required written explanation or seeking personal hearing.

Final Conclusion: Petition dismissed for lack of maintainability because the petitioner approached the High Court to quash a show-cause notice without first availing the opportunity to submit a written explanation or seek personal hearing before the statutory authority.

Breach of principles of natural justice - service of notice via electronic portal and e-mail - cancellation of registration and duty to monitor GST portal - conditional quashing of assessment order - remand for fresh adjudication on terms - opportunity of personal hearing

Breach of principles of natural justice - service of notice via electronic portal and e-mail - cancellation of registration and duty to monitor GST portal - Whether the impugned assessment order suffered from breach of principles of natural justice on account of service of notices only via the GST portal - HELD THAT: - The Court found that the petitioner's registration had been cancelled with effect from 30.03.2019 and, having regard to that cancellation, the petitioner could not reasonably be expected to monitor the GST portal in the same manner as an active registrant. The respondent, however, placed on record that the show cause notice had also been sent by e-mail and that the portal records indicated the petitioner accessed a reminder dated 20.12.2023. Balancing these facts, the Court concluded that procedural fairness required affording the petitioner an opportunity to contest the demand because service solely by portal-given the cancellation-raised a justiciable concern under principles of natural justice. [Paras 4]

Impugned order found to be vulnerable on natural justice grounds and cannot stand without providing the petitioner an opportunity to be heard.

Conditional quashing of assessment order - remand for fresh adjudication on terms - opportunity of personal hearing - Relief to be granted in view of the breach and the terms on which the matter should be remitted for fresh consideration - HELD THAT: - The Court exercised its remedial discretion to quash the impugned order but placed the petitioner on terms to protect the revenue. The petitioner agreed to remit 10% of the disputed tax demand as a condition for remand. Accordingly, the Court quashed the assessment order subject to the petitioner remitting the agreed proportion within fifteen days of receipt of the order and submitting a reply to the show cause notice within the same period. Upon receipt and verification of the remittance and the petitioner's reply, the respondent was directed to afford a reasonable opportunity to the petitioner, including a personal hearing, and thereafter pass a fresh order within two months from receipt of the reply. [Paras 5, 6, 7]

Impugned order quashed on condition that petitioner remits 10% of the disputed tax demand and is permitted to file a reply; matter remitted for fresh adjudication with a personal hearing and fresh order within two months thereafter.

Final Conclusion: The assessment order dated 25.12.2023 is quashed subject to the petitioner remitting 10% of the disputed tax demand and filing a reply within fifteen days; on verification of payment and receipt of the reply the respondent shall provide a reasonable opportunity including personal hearing and pass a fresh order within two months.

Reverse charge mechanism - GST on royalty/mining lease - submission of objections/representations within stipulated time - adjudication kept in abeyance pending decision of Constitution Bench - no recovery of tax pending higher constitutional determination

Submission of objections/representations within stipulated time - Petitioner permitted to submit reply/objections to the intimation within a limited period - HELD THAT: - Following the Division Bench directions in A. Venkatachalam (quoted at paragraph 9 of that judgment), the Court allowed the petitioner to file objections/representations to the impugned intimation. The petitioner is granted a maximum period of four weeks from receipt of a copy of this order to submit his reply to the intimation, after which the authority may proceed in accordance with law subject to the other directions adopted from the Division Bench judgment. [Paras 5]

Reply/objections may be submitted within four weeks from receipt of copy of this order.

Adjudication kept in abeyance pending decision of Constitution Bench - no recovery of tax pending higher constitutional determination - GST on royalty/mining lease - Adjudication and recovery in respect of GST on the mining lease/royalty to be regulated pending the Nine Judge Constitution Bench decision - HELD THAT: - The Court disposed of the petition on the same terms as the Division Bench decision relied upon, which directed that upon receipt of objections the authority shall proceed with adjudication on merits but keep orders of adjudication in abeyance until the Nine Judge Constitution Bench decides the issue as to the nature of royalty, and that there shall be no recovery of GST on royalty until that Constitution Bench decision. Those directions are applied to the present petition, leaving all contentions open for appropriate proceedings thereafter. [Paras 5]

Adjudication to be carried out but orders of adjudication to remain in abeyance and no recovery to be effected until the Nine Judge Constitution Bench decides the issue.

Final Conclusion: Writ petition disposed on the terms of the Division Bench judgment: petitioner may file objections within four weeks; adjudication proceeds but is to be kept in abeyance and no recovery of GST on royalty/mining lease shall be effected until the Nine Judge Constitution Bench determines the issue; all other contentions are left open.

Claim for refund to be made within two years from the date of export - suspension of limitation period due to Covid-19 - rejection of refund solely on ground of delay - binding effect of coordinate bench decision - remand for fresh adjudication without objection to delay

Claim for refund to be made within two years from the date of export - suspension of limitation period due to Covid-19 - rejection of refund solely on ground of delay - binding effect of coordinate bench decision - Impugned orders rejecting the petitioner's refund applications for the stated tax periods on the sole ground of delay are unsustainable in view of suspension of limitation during the Covid-19 period. - HELD THAT: - The Court observed that ordinarily a refund claim must be filed within two years from the relevant date (date of export). Exports in question occurred in 2018 and 2019, so claims would normally have had to be filed by 2020 and 2021 respectively. However, by reason of the Covid-19 pandemic and consequent orders including the Government Notification suspending limitation for the period 15.2.2020 to 28.2.2022, the limitation period stood suspended. The petitioner's refund applications (filed by 21.6.2021 and 24.7.2021) therefore fall within the suspended period and cannot be rejected solely on the ground of delay. Any residual doubt on this position was clarified by a coordinate bench decision in Gamma Gaana Ltd. which the Court treated as resolving the legal position in favour of the petitioner. Applying these principles, the Court held that the impugned orders insofar as they refuse the refund only for delay cannot be sustained. [Paras 2, 3, 4, 5, 6]

Impugned orders dated 19.8.2021 and 13.9.2021 rejecting the refund claims for the stated periods solely on ground of delay are set aside.

Remand for fresh adjudication without objection to delay - Refund applications remitted to the Assistant Commissioner for fresh decision without permitting delay to be raised as an objection. - HELD THAT: - The Court directed that the matter be remitted to respondent No.3 (Assistant Commissioner, CGST, Division-(IV)) to pass fresh orders on the petitioner's refund applications and expressly directed that no objection as to delay be raised. The Assistant Commissioner is to give the petitioner an opportunity of hearing if any part of the claim is proposed to be rejected and to complete the exercise expeditiously, preferably within three months from the date of the order. [Paras 7, 8]

Matter remitted to the Assistant Commissioner for fresh adjudication of the refund applications without raising delay as an objection; exercise to be completed preferably within three months after hearing.

Final Conclusion: The Court set aside the orders rejecting the petitioner's refund claims for the tax periods April, 2018 to March, 2019 and April, 2019 to June, 2019 insofar as they rested solely on delay, and remitted the applications to the Assistant Commissioner for fresh adjudication without permitting delay to be taken as an objection, to be completed expeditiously.

Stay of recovery pending appeal - statutory remedy of appeal - non-constitution of Appellate Tribunal - deposit for obtaining stay - limitation of stay pending constitution of tribunal - removal of difficulties notification

Stay of recovery pending appeal - deposit for obtaining stay - non-constitution of Appellate Tribunal - Petitioner entitled to statutory benefit of stay under sub-section (9) of Section 112 of the BGST Act upon deposit of 20% of the remaining tax in dispute, despite non-constitution of the Tribunal. - HELD THAT: - The Court held that the petitioner, being prevented from availing the appellate remedy due to the respondents' failure to constitute the Appellate Tribunal, cannot be deprived of the statutory stay contemplated by Section 112(9). To secure that benefit the petitioner must deposit a sum equal to 20% of the remaining amount of tax in dispute, in addition to any earlier deposit under Section 107(6). Once such deposit is made, recovery of the balance and any steps taken in that regard are to be deemed stayed. The Court relied on parity with earlier orders granted in similar matters and treated the respondents' omission to constitute the Tribunal as a ground for extending the statutory stay to the petitioner on the specified deposit. [Paras 6]

Statutory stay extended on deposit of 20% of the remaining tax in dispute; recovery stayed.

Statutory remedy of appeal - limitation of stay pending constitution of tribunal - The stay granted as a consequence of non-constitution of the Tribunal is not open-ended and is subject to filing of the appeal once the Tribunal is constituted and functional. - HELD THAT: - For balancing equities, the Court directed that the petitioner must present/file the appeal under Section 112 of the BGST Act after the Tribunal comes into existence and the President or State President enters office. The relief granted due to non-constitution of the Tribunal is therefore provisional and conditioned upon the petitioner pursuing the statutory appellate remedy within the period that may be specified upon constitution of the Tribunal, thereby enabling consideration of the appeal on its merits. [Paras 6]

Stay is provisional; petitioner must file the appeal before the constituted Tribunal when it becomes functional.

Statutory remedy of appeal - removal of difficulties notification - If the petitioner does not file an appeal within the period to be specified after constitution of the Tribunal, respondent authorities are free to proceed in accordance with law. - HELD THAT: - The Court clarified that the provisional stay will cease to protect the petitioner if he elects not to avail the appellate remedy by filing the appeal within the timeframe to be prescribed upon constitution of the Tribunal; in that event the respondent-Authorities may resume recovery or other proceedings as legally permissible. [Paras 6]

Failure to file appeal within the specified period permits authorities to proceed in accordance with law.

Deposit for obtaining stay - stay of recovery pending appeal - On compliance with the deposit condition, any attachment of the petitioner's bank account made pursuant to the demand shall be released. - HELD THAT: - The Court ordered that if the petitioner pays the sum equivalent to 20% of the remaining disputed tax as directed, existing attachments of bank accounts effected in pursuance of the demand must be released, subject to the deposit being made as a condition for grant of the stay. [Paras 6]

Bank account attachments consequent to the demand to be released upon payment of the directed deposit.

Final Conclusion: Writ petition disposed by directing provisional extension of the statutory stay under Section 112(9) of the BGST Act on deposit of 20% of the remaining disputed tax, with the stay being conditional upon the petitioner filing the appeal before the Tribunal once it is constituted; failure to file within the period to be specified permits authorities to proceed, and compliance with the deposit condition mandates release of any bank attachments.

Prayer for stay against demand - second round of petition - order of demand has been stayed subject to depositing 10% of the demand - In the second round of writ petition, petitioner now submits that the authorities have again committed patent illegality and perversity and acted with arbitrariness in deciding the petitioner’s application.

As decided by HC [2024 (2) TMI 1376 - RAJASTHAN HIGH COURT] the authority having jurisdiction, has passed a brief order, keeping in view that it is only deciding the stay application and not the merits of the case. The argument of petitioner that various figures and details which were given by him have not received consideration, does not merit acceptance - We find that the authority has not restricted the relief of 20% but has granted stay subject to deposit of only 10% of the demand. The demand is based on order of assessment. The matter is in appeal. It is a tax matter and a party cannot, as a right, claim that merely because he files an appeal, the demand should be stayed.

HELD THAT:- We are not inclined to interfere with the impugned judgment, and hence, the special leave petition is dismissed.

We, however, clarify that we have not commented on whether or not a reference should have been made to the High-Pitched Scrutiny Assessment Committee.

Pending application(s), if any, shall stand disposed of.

Addition under Section 68 of the Income-tax Act, 1961 (unexplained cash credits claimed to be gifts) - preponderance of probability - assessment proceedings as civil proceedings and standard of proof - gifts as change of title distinguished from repayable deposits - findings of fact not giving rise to substantial question of law

Addition under Section 68 of the Income-tax Act, 1961 (unexplained cash credits claimed to be gifts) - preponderance of probability - assessment proceedings as civil proceedings and standard of proof - gifts as change of title distinguished from repayable deposits - findings of fact not giving rise to substantial question of law - Validity of the addition made by the Tribunal under Section 68 by disbelieving the assessee's explanation that amounts received were genuine gifts - HELD THAT: - The Tribunal examined the material and disbelieved the explanation of gifts from six individuals totalling the declared amount on the basis that no pre-existing relationship or circumstances were shown that could give rise to such gifts, and that the donors were persons of modest means while the assessee was well-to-do. The Tribunal applied the civil standard of proof-preponderance of probability-in assessment proceedings and held that bank channeling of funds or absence of denial by donors was insufficient, by itself, to establish genuineness. The Court found no error in treating the claimed receipts as gifts (a change of title) and in distinguishing such claims from repayable deposits; the Tribunal's conclusion was based on a holistic appraisal of evidence and constituted pure findings of fact. Consequently those findings do not raise any substantial question of law warranting interference despite admission of the appeal on questions of law. [Paras 6, 7, 8]

Tribunal's disallowance under Section 68 by disbelieving the gift explanation is upheld as a factual finding based on preponderance of probability; no substantial question of law arises.

Final Conclusion: Appeal dismissed; the Tribunal's factual finding rejecting the claimed gifts and confirming addition under Section 68 is sustained and does not give rise to any substantial question of law.

Reopening of assessment - change of opinion - reason to believe - notice under Section 148 of the Income Tax Act, 1961 - escapement of income - subject of consideration during assessment proceedings - quashing of reopening and consequent proceedings

Change of opinion - reopening of assessment - reason to believe - notice under Section 148 of the Income Tax Act, 1961 - quashing of reopening and consequent proceedings - Validity of the notice under Section 148 and the reopening of assessment where the reasons rely on a change of opinion - HELD THAT: - The Court examined the reasons recorded for reopening and found they amounted to a change of opinion. The reasons explicitly acknowledge that the Assessing Officer had earlier accepted the claim (expenses allowed) and now sought to treat the same items as capital in nature requiring disallowance. The Court applied the principle that a mere change of opinion does not constitute a valid reason to believe that income chargeable to tax has escaped assessment and therefore cannot sustain a notice under Section 148. Reliance was placed on the proposition in Aroni Commercials Limited that queries raised and replied to during assessment constitute matters that were in fact considered by the A.O., and a subsequent change in the A.O.'s view does not furnish fresh justification for reopening. Applying this principle to the facts, the Court concluded the reasons recorded showed no independent tangible material beyond a change of opinion and thus the reopening was unjustified. [Paras 8, 11, 12, 14, 15]

Notice under Section 148 and the reopening were quashed as being based on change of opinion and not on a valid reason to believe escapement of income.

Subject of consideration during assessment proceedings - notice under Section 142(1) - escapement of income - Whether the specific items forming the basis of reopening (designing fees and concession fee to PUDA) were earlier considered during the original assessment proceedings - HELD THAT: - The Court noted that during the original assessment proceedings the Assessing Officer had raised specific queries under Section 142(1) regarding the designing fees and the concession fee paid to PUDA, and the assessee had furnished detailed replies and supporting material. The reasons to believe themselves acknowledge that the items had been allowed in the assessment. Drawing on the principle that an issue raised during assessment and answered by the assessee is treated as having been considered by the Assessing Officer, the Court held that these items were indeed subject of consideration in the original assessment and their subsequent recharacterisation amounted to a change of opinion rather than discovery of new material. [Paras 10, 11]

The designing fees and the concession fee to PUDA were matters considered during the original assessment; reopening on those grounds was a change of opinion.

Final Conclusion: The petition succeeds. The notice under Section 148 dated 30 March 2021, the reassessment/assessment order passed under Sections 147/143(3) read with Section 144B, the consequent notice of demand and penalty proceedings are quashed as the reopening was founded on a mere change of opinion and the contested items had been considered during the original assessment.

Principles of natural justice - opportunity of hearing - personal hearing through video conferencing - statutory requirement under Section 144B(6)(viii) - reasonable opportunity to respond to a show cause notice

Principles of natural justice - opportunity of hearing - reasonable opportunity to respond to a show cause notice - Impugned assessment order violated the assessee's right to be heard and the principles of natural justice by not affording a reasonable opportunity of hearing. - HELD THAT: - The show cause notice dated 05.03.2024 called for a response by 09.03.2024, affording only a few working days and occurring across two holidays; the petitioner protested the limited time and sought additional time and an opportunity for factual/legal submissions and representation via video conferencing. Section 144B(6)(vii)-(viii) expressly contemplates that where a request for personal hearing is received the assessee may request oral submissions and that the relevant unit shall allow such hearing through the National Faceless Assessment Centre by video conferencing. The Court observed that opportunity to be heard is an important facet of natural justice and that, where the statute itself provides for hearing, failure to afford that opportunity renders the assessment order contrary to natural justice. Having regard to these statutory provisions and the short response time, the impugned order was found to have fallen foul of the principles of natural justice and the statutory requirement to afford the assessee an opportunity of hearing. [Paras 13, 15]

Impugned assessment order set aside for non-compliance with the requirement to afford a reasonable opportunity of hearing.

Personal hearing through video conferencing - statutory requirement under Section 144B(6)(viii) - Remand for fresh consideration after affording a hearing through video conferencing, and permitting filing of written submissions within a specified time. - HELD THAT: - In view of the statutory mandate in Section 144B(6)(viii) that where a request for personal hearing has been received the income-tax authority shall allow such hearing through the National Faceless Assessment Centre by video conferencing, the Court directed that the matter be restored to the Assessing Officer to consider afresh after affording a reasonable opportunity to be heard through video conferencing. The petitioner/assessee was further permitted to file written submissions within one week from the date of the order, so that the Assessing Officer can take those into account on fresh consideration. The remand is for fresh adjudication after compliance with the statutory opportunity to be heard; the Court did not decide the merits of the proposed additions. [Paras 16, 17]

Matter remanded to the Assessing Officer to consider afresh after affording a reasonable opportunity of hearing through video conferencing; petitioner permitted to file written submissions within one week.

Final Conclusion: The assessment order dated 27.03.2024 in respect of Assessment Year 2022-23 is set aside and the matter is remitted to the Assessing Officer for fresh consideration after affording the assessee a reasonable opportunity of hearing through video conferencing, with leave to file written submissions within one week.

Maintainability of writ against assessment order - availability of alternate statutory remedy - judicial prudence in exercising constitutional jurisdiction - relegation to statutory appeal - exception where authority acted without jurisdiction - factual disputes unsuitable for writ jurisdiction

Maintainability of writ against assessment order - availability of alternate statutory remedy - judicial prudence in exercising constitutional jurisdiction - factual disputes unsuitable for writ jurisdiction - relegation to statutory appeal - exception where authority acted without jurisdiction - Entertainability of the writ petition under Article 226 challenging the assessment order when statutory remedy of appeal is available. - HELD THAT: - The High Court declined to entertain the writ petition challenging an assessment order passed under Sections 147 read with 144B of the Income-tax Act, 1961 because alternate statutory remedies of appeal are available and the dispute involves factual questions which require examination of the record rather than a 'fishing enquiry' in writ jurisdiction. The Court distinguished the narrow principle in Calcutta Discount Co. Ltd. permitting writ relief where the assessing authority acted without jurisdiction, noting that the present case does not fall within that exception. Reliance was placed on the Supreme Court decisions in Greatship (India) Limited and Commercial Engineers and Body Building Company Limited which hold that where an alternate statutory remedy exists and there are factual controversies or disputed dates/events, judicial prudence requires relegation to the statutory appellate forum. Consequently, the writ petition was dismissed and the petitioner was granted liberty to pursue the statutory appeal; though the period for filing the appeal had expired, the appellate authority was directed to hear any appeal filed within 15 days on merits subject to applicable pre-deposit requirements. [Paras 3, 4, 5, 6]

Writ petition dismissed; petitioner relegated to avail the statutory appellate remedy; appellate authority directed to hear any appeal filed within 15 days despite expiry of limitation, subject to law on pre-deposit; liberty granted to avail alternate remedies.

Final Conclusion: The High Court dismissed the writ petition challenging the assessment order, holding that judicial prudence and settled precedent require relegation to the statutory appeal mechanism where factual disputes and alternate remedies exist, while directing the appellate authority to entertain any belated appeal filed within 15 days subject to applicable conditions.

Jurisdictional notice under section 143(2) - assumption of jurisdiction - reassessment under section 147 - incurable defect rendering assessment void ab initio - scope of section 292BB - condonation of delay

Jurisdictional notice under section 143(2) - assumption of jurisdiction - reassessment under section 147 - incurable defect rendering assessment void ab initio - scope of section 292BB - Validity of the reassessment framed under section 147 (and order under section 143/147) for AY 2010-11 in absence of issuance of the statutory notice under section 143(2) in response to notice under section 148. - HELD THAT: - The assessee filed a return in response to the notice u/s 148. The record shows that the Assessing Officer did not issue any statutory notice u/s 143(2) for assumption of jurisdiction and the assessment order does not record issuance of such notice. The assessee repeatedly sought inspection and certified copies of assessment records, including any notice u/s 143(2), but the AO did not furnish them; the Department could not produce the notice before the Tribunal. Reliance was placed on binding Supreme Court precedents (as cited before the Tribunal) and a coordinate Bench decision which hold that non-issuance of the statutory notice u/s 143(2) is an incurable jurisdictional defect. The Tribunal held that this defect goes to the foundation of the reassessment proceedings and cannot be cured (including beyond the remedial scope invoked by the Revenue), therefore the reassessment framed u/s 147/143(3) is invalid. The Tribunal decided the appeal solely on this jurisdictional ground and did not adjudicate the merits of the additions or other grounds. [Paras 11, 12, 13]

Ground No.7 allowed; assessment for AY 2010-11 quashed as void for non-issuance of notice u/s 143(2); appeal allowed.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, on the substantive point of jurisdiction, allowed the appeal by quashing the reassessment for AY 2010-11 on the ground that no statutory notice under section 143(2) was issued to assume jurisdiction; other grounds were left undecided.

Deduction under Section 80IAB in respect of profits enhanced by disallowance of expenses - allowability of depreciation on intangible asset (right to use water) - application of CBDT Circular No.37/2016 treating disallowances as enhancing profits for Chapter VI-A deductions

Deduction under Section 80IAB in respect of profits enhanced by disallowance of expenses - application of CBDT Circular No.37/2016 treating disallowances as enhancing profits for Chapter VI-A deductions - Allowability of deduction under Section 80IAB on the amount of income enhanced by disallowance of depreciation. - HELD THAT: - The Tribunal accepted the assessee's submission that disallowance of claimed depreciation led to enhancement of the profits of an undertaking eligible for deduction under Section 80IAB. Relying on CBDT Circular No.37/2016 and the Coordinate Bench decision in the assessee's own case, the Tribunal held that such enhancement of profits by reason of disallowance is eligible for deduction under Section 80IAB. The Assessing Officer was directed to allow the deduction under Section 80IAB on the amount corresponding to the disallowed depreciation and to give consequential relief. [Paras 8]

Deduction under Section 80IAB to be allowed on the profits enhanced by the disallowance of depreciation; AO directed to grant relief.

Allowability of depreciation on intangible asset (right to use water) - Claim for depreciation on the capitalised payment for water-use rights rendered academic by allowance of deduction under Section 80IAB. - HELD THAT: - The Tribunal noted that, having allowed the consequential deduction under Section 80IAB on the amount of profit enhanced by the disallowance, adjudication on the substantive merit of the depreciation claim (whether the one-time payment constituted a depreciable capital asset) need not be undertaken. The Court therefore declined to pass any separate order on allowance of depreciation, treating that ground as academic in view of the relief granted under Section 80IAB. [Paras 9]

Ground relating to allowability of depreciation on the intangible asset is academic and no separate order is required.

Final Conclusion: The appeal is allowed: the Assessing Officer is directed to allow deduction under Section 80IAB in respect of the profit enhanced by the disallowance of depreciation; the substantive claim for depreciation on the water-use rights is treated as academic and left undecided.

Imposition of penalty under section 271(1)(b) of the Income Tax Act, 1961 - Failure to comply with notice issued under section 142(1) of the Income Tax Act, 1961 - Effect of quashing/vitiation of assessment on collateral penalty proceedings - Validity of service of hearing notice and right to opportunity of being heard - Consent/waiver form and risk of self incrimination

Effect of quashing/vitiation of assessment on collateral penalty proceedings - Imposition of penalty under section 271(1)(b) of the Income Tax Act, 1961 - Deletion of the penalty imposed under section 271(1)(b) in view of quashing of the related assessment proceedings in the second round - HELD THAT: - The Tribunal observed that the penalty under section 271(1)(b) challenged in the appeal arose out of the second round assessment proceedings which have been quashed by the Tribunal in ITA No. 425/Del/2022. Having set aside the assessment orders passed in the second round, the Tribunal held that the penalty consequential to those assessment proceedings cannot survive. The Tribunal also noted that a penalty levied in the earlier/first round had already been deleted by the Tribunal (order dated 28.02.2017) and that the High Court had recorded observations supporting the assessee's position regarding the consent/waiver form and the absence of reliable material to rebut the assessee's denial of the subject account. For these reasons the Tribunal concluded that the impugned penalty, sustained by the CIT(A), must be deleted when the assessment in the second round stands vitiated. [Paras 11, 12]

Impugned penalty under section 271(1)(b) deleted.

Consent/waiver form and risk of self incrimination - Requirement of valid notice and opportunity of being heard - Assessee's contention regarding the nature of the consent/waiver form and earlier findings of the High Court were recognised but no separate adjudication of service/hearing grievance was necessary once the assessment/penalty was quashed - HELD THAT: - The Tribunal placed on record the High Court's observations that the consent form, as framed, could have compelled the assessee to furnish information that might incriminate him, and that the Revenue had not produced reliable material to displace the assessee's denial of the questioned account. Although the assessee raised grounds about non service of hearing notice and omission to afford adequate opportunity, the Tribunal's dispositional reasoning rested on the quashing of the assessment in the second round; accordingly, there was no need for a separate remand or detailed adjudication on the procedural service/hearing objections once the penalty was held unsustainable in light of the vitiated assessment proceedings. [Paras 11]

Procedural/contentions regarding consent form and service were noted but rendered academically moot by the deletion of the penalty consequent to quashing of assessment.

Final Conclusion: The appeal is allowed and the penalty imposed under section 271(1)(b) for AY 2006-07, which arose from the second round assessment proceedings now quashed, is deleted.

Admission of additional evidence under Rule 46A - explanation of cash receipts under section 68 - disallowance under section 40A(3) for cash purchases - disallowance of interest under section 36(1)(iii) - allowability of commission expenses - remand report and verification of additional evidence

Admission of additional evidence under Rule 46A - remand report and verification of additional evidence - Ld. CIT(A)'s admission of additional evidence under Rule 46A(1) was valid - HELD THAT: - The Tribunal upheld the admission of documents by the first appellate authority, observing that the CIT(A) obtained and considered the Assessing Officer's remand report before admitting evidence and that the additional evidence was crucial to disposal of the appeal. Relying on precedent (CIT v. Virgin Securities and Credits (P) Ltd.), the Tribunal held that Rule 46A permits admission of evidence that is material to the appeal and that the AO's opportunity to comment in remand proceedings satisfied procedural fairness. There was no contention that additional evidence was impermissible in principle and the CIT(A) followed due process in admitting it. [Paras 15]

Admission of additional evidence by the Ld. CIT(A) is upheld

Explanation of cash receipts under section 68 - remand report and verification of additional evidence - Addition of Rs. 1.47 crore under section 68 deleted as source was satisfactorily explained - HELD THAT: - The Tribunal sustained the CIT(A)'s finding that the assessee explained the source of the receipts shown in the cash book by producing, and having verified in remand, a sale agreement dated 01.08.2013 and a sale deed dated 16.01.2018. The appellate authority found these documents established that the receipts were advances from the purchaser and that the sale deed removed any suspicion about genuineness. The Tribunal found no reason to interfere as the additional evidence had been admitted after remand and opportunity to the AO to rebut. [Paras 16]

Addition under section 68 of Rs. 1.47 crore deleted

Disallowance under section 40A(3) for cash purchases - remand report and verification of additional evidence - Addition of Rs. 90 lakhs under section 40A(3) deleted as purchases were not established to have been made in cash - HELD THAT: - The Tribunal agreed with the CIT(A)'s conclusion, reached after admitting and examining evidence in remand, that the assessee did not make cash purchases of Rs. 90 lakhs. Examination of the 2011 sale deed showed the assessee's 50% share in the property, explaining the payment of Rs. 90 lakhs. The AO's materials did not overturn the appellate finding, and the Tribunal found the deletion justified. [Paras 17, 21]

Addition under section 40A(3) of Rs. 90 lakhs deleted

Disallowance of interest under section 36(1)(iii) - Disallowance of interest under section 36(1)(iii) deleted (confirmed amount reduced for calculation mistake) and ultimately disallowed by Tribunal - HELD THAT: - The AO had disallowed interest claiming funds borrowed were used to grant interest free advances. The Tribunal observed there was no finding that the interest paid was for non business purposes, nor any direct linkage established that borrowed interest bearing funds were diverted to make the advances. The assessee's uncontroverted case that borrowed capital was employed for business purposes was accepted; the Tribunal thus found the disallowance lacked legal foundation. The Tribunal noted the CIT(A) had corrected a calculation error and confirmed a reduced disallowance, but on appeal directed deletion of the disallowance entirely. [Paras 23, 26]

Disallowance under section 36(1)(iii) deleted

Allowability of commission expenses - Disallowance of commission expenses of Rs. 1,10,000/- deleted - HELD THAT: - The AO disallowed the commission for want of documentary proof that payments were routed through accounted money; the CIT(A) sustained the disallowance. The Tribunal, on reviewing the record and submissions, found that the assessee produced party wise details with PAN and addresses and that the remand examination by the AO found no infirmity in the evidence. The Tribunal held that sustaining the disallowance amounted to conjecture and surmise, and that the commission payments were reasonable in relation to turnover and properly evidenced for allowance. [Paras 25, 31]

Disallowance of commission expenses is deleted

Calculation mistake adjustment - Deletion of Rs. 24,000 adjustment (calculation mistake) upheld - HELD THAT: - The Tribunal accepted the CIT(A)'s finding that Rs. 24,000 of the AO's addition arose from a calculation mistake. The Department could not demonstrate the absence of such mistake, and the Tribunal found no basis to sustain the addition. [Paras 18]

Rs. 24,000 addition deleted as calculation mistake

Final Conclusion: For AY 2014-15 the Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal: the CIT(A)'s admission of additional evidence was upheld; additions under section 68 (Rs. 1.47 crore) and section 40A(3) (Rs. 90 lakhs) were deleted; the calculation error of Rs. 24,000 was rectified; and the disallowances of interest under section 36(1)(iii) and of commission expenses were directed to be deleted.

Applicability of section 44BB to non-residents - Permanent Establishment (PE) requirement under Article 7 of DTAA - Primacy of Double Taxation Avoidance Agreement over computation provisions - Taxability of business profits in absence of PE - TDS credit entitlement - Interest under section 244A entitlement on refunds - Inapplicability of interest under section 234B where tax is deductible at source - Admissibility of additional evidence under Rule 46A

Applicability of section 44BB to non-residents - Permanent Establishment (PE) requirement under Article 7 of DTAA - Primacy of Double Taxation Avoidance Agreement over computation provisions - Taxability of business profits in absence of PE - Impugned receipts cannot be taxed under section 44BB where the non-resident assessee has no Permanent Establishment in India and is entitled to the beneficial provisions of the India-Canada DTAA. - HELD THAT: - The Tribunal found as an admitted fact that the assessee, a Canadian resident, had no PE in India and the Revenue failed to prove otherwise. Section 44BB is a computation provision and does not override sections 5, 9 or the treaty framework under section 90; therefore a non-resident may elect the more beneficial treaty treatment. Following authoritative decisions of the jurisdictional High Courts and Coordinate Benches of the Tribunal, and distinguishing the Apex Court decision relied upon by Revenue (which concerned different factual and legal questions), the Tribunal held that in absence of PE the business profits (the receipts in dispute) are not taxable in India under section 44BB but fall to be governed by Article 7 of the India-Canada DTAA. The Tribunal therefore allowed the grounds challenging taxation under section 44BB for AYs 2012-13, 2019-20, 2020-21 and 2021-22. [Paras 9, 14, 15]

Impugned receipts are not taxable under section 44BB in the relevant AYs as the assessee had no PE in India and is entitled to treaty protection under Article 7 of the India-Canada DTAA.

Taxability of receipts as royalty or fee for technical services - Taxability of business profits in absence of PE - Characterisation of the impugned receipts as royalty or FTS under the DTAA is academic once the receipts are held to be business profits not attributable to a PE. - HELD THAT: - Although the assessee contended that software licence fees and maintenance/training charges did not constitute royalty or FTS under Article 12, the Tribunal held that since the receipts have been held to be business income not attributable to any PE, the question of treating them as royalty or FTS under the DTAA did not require adjudication and became academic. Accordingly, challenges to classification (grounds noted in various AYs) were allowed on that basis. [Paras 15]

Issue of characterisation as royalty or FTS is academic and does not alter the conclusion that the receipts are not taxable in India in absence of PE.

TDS credit entitlement - Assessee is entitled to credit of tax deducted at source where shown in Form 26AS. - HELD THAT: - For AY 2019-20 the Tribunal directed the Assessing Officer to grant TDS credit to the assessee in accordance with law in respect of tax deducted at source reflected in Form 26AS, accepting the assessee's challenge to denial of credit. [Paras 16]

TDS credit to be granted by the Assessing Officer in accordance with law.

Interest under section 244A entitlement on refunds - Assessee entitled to interest under section 244A for delayed refunds as per law. - HELD THAT: - In AYs 2020-21 and 2021-22 the Tribunal found merit in the assessee's claim for complete interest under section 244A and directed the Assessing Officer to grant interest in accordance with law from the relevant dates until actual receipt of refund. [Paras 17]

Assessing Officer to grant interest under section 244A in accordance with law.

Inapplicability of interest under section 234B where tax is deductible at source - Interest under section 234B is not leviable on the non-resident assessee for the relevant AYs where tax was deductible at source. - HELD THAT: - Relying on the proviso to section 209(1)(d) as interpreted by the Apex Court in Mitsubishi Corporation and subsequent High Court pronouncements, the Tribunal held that the proviso (inserted by Finance Act, 2012) applies prospectively and that during the relevant AYs the assessee, being non-resident whose income was subject to full deduction at source, could not be charged interest under section 234B. The Tribunal followed the cited precedents and allowed the related grounds. [Paras 19]

Levy of interest under section 234B is not called for; related grounds allowed.

Admissibility of additional evidence under Rule 46A - Application for admission of additional evidence under Rule 46A was refused by the CIT(A) and the Tribunal did not disturb that finding. - HELD THAT: - The CIT(A) declined to admit additional evidence filed by the assessee, rejecting explanations about unfamiliarity with Indian procedures and upholding validity of reassessment proceedings. The Tribunal recorded those proceedings and proceeded on the material before it; the decision refusing admission was not reversed by the Tribunal in the disposed matters. [Paras 5]

Refusal to admit additional evidence by the CIT(A) stands; Tribunal proceeded on the available record.

Prematurity of penalty initiation - Initiation of penalty proceedings under sections 271(1)(c) and 270A is premature and does not require adjudication at this stage. - HELD THAT: - The Tribunal observed that penalty-related grounds for AY 2012-13, 2019-20 and 2020-21 were premature and therefore refrained from adjudicating them at this stage. [Paras 20]

Penalty initiation proceedings are premature and not adjudicated.

Final Conclusion: All four appeals for AY 2012-13, 2019-20, 2020-21 and 2021-22 are allowed for statistical purposes: the impugned receipts are not taxable under section 44BB in the relevant years because the assessee had no PE in India and is protected by the India-Canada DTAA; consequential directions given for grant of TDS credit and interest under section 244A; interest under section 234B disallowed; penalty matters left unadjudicated as premature.

Arm's length price - Comparable Uncontrolled Price (CUP) - Transactional Net Margin Method (TNMM) - Internal comparables versus external comparables - Determination of ALP by prescribed methods under Section 92C - Jurisdiction and limited power of the Transfer Pricing Officer - Interest under section 244A

Arm's length price - Comparable Uncontrolled Price (CUP) - Internal comparables versus external comparables - Deletion of transfer pricing adjustment made to management consultancy fees (receipt) on account of alleged non-arm's length pricing. - HELD THAT: - The Tribunal examined the assessee's use of internal CUP based on standard hourly rates charged to AEs and unrelated parties, and the TPO's rejection of CUP in favour of company level TNMM. The Tribunal accepted the assessee's explanation about commercial practice (negotiated lump sums derived from hourly rates), the heterogeneous nature of consultants' qualifications affecting effective hourly charges, and the availability of internal comparable data. The Tribunal also held that where internal TNMM/CUP is available it should be preferred to external TNMM; Rule 10B contemplates computation having regard to the same base and permits internal comparables. Consequently the Tribunal found the TPO's company level TNMM application and proportionate imputation to the AE segment erroneous and accepted the assessee's CUP analysis. [Paras 10, 11, 12, 13, 14]

TP adjustment in respect of management consultancy fees deleted; Ground No. 1 allowed.

Determination of ALP by prescribed methods under Section 92C - Jurisdiction and limited power of the Transfer Pricing Officer - Deletion of transfer pricing adjustment in respect of payment of licence fees for time and billing software. - HELD THAT: - The Tribunal followed coordinate bench precedent holding that the TPO/AO had not applied any of the prescribed methods under Section 92C/Rule 10B-10E to determine ALP and that ad hoc attribution or disallowance dehors the prescribed methods is unsustainable. Applying those precedents to the identical factual matrix, the Tribunal directed deletion of the TP adjustment in respect of the licence fee. [Paras 16]

TP adjustment in relation to licence fees for time and billing software deleted; Ground No. 2 allowed.

Transactional Net Margin Method (TNMM) - Comparable Uncontrolled Price (CUP) - Determination of arm's length price for regional coordination services and inclusion of an excluded comparable for fresh computation. - HELD THAT: - The Tribunal analysed the functional profile of the selected comparables and the TPO's exclusion of Vatika Marketing Ltd. while including Lancor Maintenance & Services Ltd. Observing that Vatika undertakes similar activities and that Lancor's business profile supports inclusion of Vatika, the Tribunal concluded the TPO erred in excluding Vatika. The Tribunal directed the TPO/AO to include Vatika Marketing Ltd. in the comparable set for determination of ALP, thereby remitting the matter for fresh computation consistent with this direction. [Paras 20, 21]

Directed inclusion of Vatika Marketing Ltd. in comparable set and remand to TPO/AO for recomputation; Ground No. 3 allowed (remanded for verification/fresh consideration).

Determination of ALP by prescribed methods under Section 92C - Jurisdiction and limited power of the Transfer Pricing Officer - Deletion of transfer pricing adjustment in respect of information technology cost allocation. - HELD THAT: - Relying on coordinate bench decisions, the Tribunal found that the TPO/AO had not applied any of the mandatorily prescribed methods under Section 92C before making the adjustment. Following the principle that ad hoc determinations dehors the statutory methods cannot be sustained, the Tribunal allowed the ground and set aside the TP adjustment concerning IT cost allocation. [Paras 22, 23]

TP adjustment in relation to information technology cost allocation deleted; Ground No. 4 allowed.

Determination of ALP by prescribed methods under Section 92C - Deletion of transfer pricing adjustment in respect of reimbursements paid. - HELD THAT: - The Tribunal observed that the reasoning for the reimbursement adjustment mirrored the defects found in other adjustments (absence of application of prescribed methods). Following the coordinate bench approach adopted for similar issues, the Tribunal allowed the ground and set aside the reimbursement adjustment. [Paras 24]

TP adjustment in relation to reimbursements paid deleted; Ground No. 5 allowed.

Procedural posture of grounds not pressed - Ground concerning short granting of TDS credit not pressed and dismissed as not pressed. - HELD THAT: - The assessee expressly did not press Ground No. 6 before the Tribunal; accordingly the Tribunal dismissed the ground as not pressed without adjudication on merits. [Paras 25]

Ground No. 6 dismissed as not pressed.

Interest under section 234B and 234D - Consequential relief - Interest charged under sections 234B and 234D treated as consequential to primary transfer pricing findings. - HELD THAT: - The Tribunal recorded that grounds relating to interest under sections 234B and 234D were consequential to the primary tax/TP adjustments; having allowed or directed deletion/remand of the underlying TP adjustments, the interest computations were to follow from the final tax computation by the Assessing Officer. [Paras 26]

Interest issues under sections 234B and 234D to be recalculated/considered consequentially upon final tax computation.

Interest under section 244A - Assessee entitled to interest under section 244A up to the date of actual receipt of refund. - HELD THAT: - Following coordinate bench precedent and relevant High Court authority, the Tribunal held that interest under section 244A is payable up to the date of actual receipt of the refund order/pay out by the assessee. The Tribunal directed the Assessing Officer to consider extending the benefit to the assessee up to the date of actual receipt of the refund. [Paras 27, 28]

Assessee's claim for interest under section 244A allowed to the extent of interest up to actual receipt of refund; Ground No. 9 allowed.

Final Conclusion: The assessee's appeal for A.Y. 2011-12 is partly allowed: transfer pricing adjustments in respect of management consultancy fees, licence fees for time & billing software, information technology cost allocation and reimbursements paid have been deleted; the regional coordination services matter is remitted with direction to include Vatika Marketing Ltd. as a comparable for fresh determination; the TDS ground was not pressed; interest consequences under sections 234B/234D to follow from final computation; and interest under section 244A is to be allowed up to the date of actual receipt of refund. An additional limitation challenge was left open for adjudication.

Interest under Section 28 of the Land Acquisition Act treated as part of land acquisition compensation - Taxability as income from other sources under section 56(2)(viii) of the Income-tax Act - Effect of statutory amendment deeming interest on compensation chargeable to tax - Binding effect of the jurisdictional High Court's decisions on the Tribunal - Territorial jurisdiction of a High Court bench in determining applicable precedent - Precedential value of coordinate Bench decisions of the Tribunal

Interest under Section 28 of the Land Acquisition Act treated as part of land acquisition compensation - Taxability as income from other sources under section 56(2)(viii) of the Income-tax Act - Binding effect of the jurisdictional High Court's decisions on the Tribunal - Territorial jurisdiction of a High Court bench in determining applicable precedent - Whether the interest awarded under Section 28 of the Land Acquisition Act is chargeable to tax as income under section 56(2)(viii) for AY 2016-17 or is exempt as part of compensation under section 10(37). - HELD THAT: - The Tribunal examined competing authorities and the effect of post-Ghanshyam statutory amendment inserting clause (viii) to section 56(2). It noted conflicting decisions but held that, for the facts before it, the Bombay High Court's view (as applied by the Tribunal's coordinate bench decisions) favourable to the assessee governs because the assessee, the land and the Assessing Officer fall within the territorial jurisdiction of the Bombay bench. Relying on the principle that the Tribunal must follow its jurisdictional High Court unless that view has been reversed by the Supreme Court, and having regard to territorial allocation of benches, the Tribunal accepted the assessee's contention that the interest under Section 28 is not taxable separately under section 56(2)(viii) for the case at hand and allowed the appeal. The Tribunal adopted its earlier detailed reasoning (mutatis mutandis) applicable to Panvel and declined to disturb the assessee's claim of exemption.

Appeal allowed; interest under Section 28 held not chargeable as income under section 56(2)(viii) for the assessment year 2016-17, the Tribunal following the jurisdictional High Court/coordinate-bench precedent applicable to Panvel.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2016-17, accepting that the interest awarded under Section 28 of the Land Acquisition Act is not taxable as income under section 56(2)(viii) in the facts of the case and directing disposal in accordance with the jurisdictional bench's precedent.

Allowability of mercantile losses as business expenditure - mark-to-market / notional loss on forward foreign exchange contracts - derivative/forward contracts as hedging incidental to business - speculative transaction under section 43(5) - CBDT Instruction No. 3/2010 on M2M losses

Mark-to-market / notional loss on forward foreign exchange contracts - allowability of mercantile losses as business expenditure - CBDT Instruction No. 3/2010 on M2M losses - Deletion of addition of loss on valuation of forward foreign exchange contracts computed on mark-to-market basis was justified and such loss is allowable as business loss under mercantile system of accounting. - HELD THAT: - The Tribunal examined the assessing officer's view that M2M losses are not crystallized and, relying on CBDT Instruction No.3/2010, are not deductible because they are notional. The assessee, however, followed the mercantile system of accounting, entered into forward contracts as hedges incidental to its export business, and consistently recognised gains and losses in profit and loss account. The Tribunal applied the ratio of the Hon'ble Supreme Court in Woodward Governor and related High Court/Tribunal decisions (as relied upon by the CIT(A) and the coordinate bench in Bechtel India) holding that a revenue loss by way of exchange difference accruing on the balance sheet date is allowable as expenditure where the mercantile system and contractual liability establish that the loss is a business loss and not merely contingent. In the facts of the case the forward contracts were binding and hedging in nature and the loss on 31.03.2009 therefore represented an allowable business loss despite being computed M2M; accordingly the addition was correctly deleted. [Paras 6, 7, 8, 9]

Ground No.1 of the Revenue dismissed; the M2M loss of Rs.55,62,952/- allowed as business loss.

Speculative transaction under section 43(5) - derivative/forward contracts as hedging incidental to business - Deletion of addition of loss on forward contracts treated by the AO as speculative under section 43(5) was correct because the contracts were hedging transactions in the ordinary course of business and foreign exchange is not a 'commodity' for the purpose of that provision. - HELD THAT: - The assessing officer characterised the assessee's losses on forward contracts as speculative under section 43(5) because there was no delivery. The CIT(A) and the Tribunal noted that the assessee was not a dealer in foreign exchange, entered into forward contracts to hedge export receipts, and acted in the regular course of business pursuant to RBI/FEDAI norms. Relying on the coordinate Tribunal decision in Munjal Showa and authorities holding foreign exchange not to be a 'commodity' for the purpose of the speculative transaction definition, the Tribunal concluded that such hedging transactions are not speculative transactions within the meaning of section 43(5) and the addition was rightly deleted. [Paras 10, 12, 13]

Ground No.2 of the Revenue dismissed; loss of Rs.4,18,22,913/- treated as business loss and deletion of addition upheld.

Derivative/forward contracts as hedging incidental to business - allowability of mercantile losses as business expenditure - Deletion of addition relating to forward premium amortisation was justified and the amount is allowable as business expenditure. - HELD THAT: - The assessed disallowance related to amortised loss under the forward premium account (difference between forward and spot rates). Having held that forward contracts entered into by the assessee were hedging transactions incidental to business and not speculative (as decided under Ground No.2) and that mercantile recognition of exchange losses is allowable (as decided under Ground No.1), the Tribunal treated expenditure under the forward premium account as business expenditure. There was no material to distinguish this expenditure from the business losses already held to be allowable; hence the CIT(A)'s deletion was sustained. [Paras 14, 16]

Ground No.3 of the Revenue dismissed; deletion of addition of Rs.18,44,736/- upheld as business expenditure.

Final Conclusion: The Revenue's appeal is dismissed: the Tribunal upheld the CIT(A)'s deletions and treated the contested mark-to-market loss, the loss on cancellation of forward contracts, and the forward premium amortisation as allowable business losses/expenditure for Assessment Year 2009-10.

Disallowance on account of unsubstantiated expenses - admission of additional evidence by appellate tribunal - remand to Assessing Officer for verification of documents - opportunity of being heard

Admission of additional evidence by appellate tribunal - disallowance on account of unsubstantiated expenses - opportunity of being heard - remand to Assessing Officer for verification of documents - Whether the Tribunal should admit documents produced for the first time on appeal and remit the matter to the Assessing Officer for verification of claimed material purchases and indirect expenses previously disallowed on an ad-hoc basis. - HELD THAT: - The Tribunal admitted the additional documents produced by the assessee at the hearing (audit report, work orders, sales bills, purchase register with invoices, ledgers and supporting vouchers) since these documents were material to determine the correct total income and tax liability and had not been before the Assessing Officer. The Tribunal observed that lower authorities had no opportunity to verify those documents and, without expressing any opinion on the merits, directed that the matter be restored to the file of the Assessing Officer for consideration of the documents and adjudication of the issues after affording the assessee a hearing. The Tribunal treated the appeal as partly allowed and remitted the question of the correctness of the Assessing Officer's ad-hoc additions (25% of material purchases and 25% of indirect expenses) for fresh verification and decision by the Assessing Officer. [Paras 7, 8, 9]

Additional documents admitted; appeal partly allowed for the limited purpose of remand; matter restored to the Assessing Officer to verify and adjudicate the claimed material purchases and indirect expenses after giving the assessee an opportunity of being heard.

Final Conclusion: The Tribunal admitted documents produced before it, declined to decide the merits, and remitted the matter to the Assessing Officer for verification of the assesee's claims regarding material purchases and indirect expenses (previously disallowed on an ad-hoc 25% basis), directing fresh adjudication after giving the assessee a hearing; appeal treated as allowed for statistical purposes.

Reopening of assessment - reason to believe - scope of section 147 - reliance on statements recorded under section 131/133A/132(4) - retracted statements - corroboration requirement for retracted confessions - admissions as evidence - estimation of income versus rejection of books of account

Reopening of assessment - reason to believe - scope of section 147 - Validity of reopening assessments under section 148/147 based on material collected during survey - HELD THAT: - The Tribunal held that issuance of notices under section 148 was competent where the Assessing Officer had prima facie material to form a reason to believe that income had escaped assessment. The bench accepted that statements recorded during the survey and other documents constituted sufficient prima facie material to trigger jurisdiction under section 147 (paras 4, 4.1-4.4). The Tribunal noted the changed scope of section 147 after substitution (only existence of reason to believe is required) and observed that reopening is permissible even where original proceedings were under section 143(1) (para 4.2-4.3). Accordingly, the reassessment proceedings were not invalid for want of jurisdiction on the ground of reliance on survey material alone (para 4.1). [Paras 4]

Reopening of assessments was legally competent as the Assessing Officer had prima facie material from the survey to form a reason to believe and thereby to issue notices under section 148/147.

Reliance on statements recorded under section 131/133A/132(4) - retracted statements - corroboration requirement for retracted confessions - admissions as evidence - estimation of income versus rejection of books of account - Whether additions for 'bogus purchases' and partners' personal expenses could be sustained when based primarily on sworn statements later retracted and without rejecting the books of account - HELD THAT: - Although the Assessing Officer treated the partner's sworn statements and related digital/excel material seized during survey as constituting admission and corroboration, the Tribunal examined the effect of prompt retraction and lack of independent corroborative evidence. It reviewed authorities and CBDT instructions emphasizing that retracted confessions/statements require substantial independent corroboration before they can support additions. The Tribunal found that the partners had retracted the statement (retraction placed on record shortly after survey) and that the Assessing Officer did not reject the books of account nor produce documentary evidence to displace their reliability. In that factual matrix, reliance solely on the retracted statement to make uniform adhoc additions across years was held improper. The Tribunal recalled the principle that either books must be rejected and income estimated, or accepted and admissions corroborated; the AO had adopted a mixed approach (accepting books yet making additions on surrender), which could not be sustained. Consequently, additions for bogus purchases and for personal expenses (AY 2017-18) were deleted for lack of corroboration and because of the retraction (paras 8, 8.4-8.6, 8.10-8.15, 8.31-8.36). [Paras 5, 6, 7, 8]

Additions on account of alleged bogus purchases and partners' personal expenses, being founded primarily on statements that were retracted and not substantiated by independent corroborative evidence nor preceded by rejection of books of account, are deleted.

Final Conclusion: The Tribunal held that (i) reopening of assessments under section 148/147 was legally permissible because the Assessing Officer had prima facie material from the survey to form a reason to believe; and (ii) on the merits the adhoc additions for bogus purchases and partners' personal expenses could not be sustained where they rested largely on sworn statements that were retracted and were not supported by independent corroborative evidence nor accompanied by rejection of the books of account; accordingly the additions were deleted and the appeals were allowed in part.

Dismissal for low tax effect - threshold limit for filing appeal - effect of administrative circular enhancing monetary limit

Dismissal for low tax effect - threshold limit for filing appeal - effect of administrative circular enhancing monetary limit - Appeals dismissed as having low tax effect in view of the enhanced monetary threshold stated in the Circular dated 02.11.2023. - HELD THAT: - The Court recorded that the latest Circular dated 02.11.2023 has enhanced the monetary limit to Rs.2 crores. The amount in dispute in these appeals is stated to be Rs.1,28,73,481/-, which falls below the revised threshold. Having regard to the administrative enhancement of the monetary limit, the appeals were disposed of on the ground of low tax effect. No further adjudication on merits was undertaken because the statutory/administrative threshold for entertaining the appeals, as communicated by the Circular, was not met.

Appeals dismissed owing to low tax effect pursuant to the Circular dated 02.11.2023 raising the monetary threshold to Rs.2 crores.

Final Conclusion: The appeals are dismissed on the singular ground that the amount in dispute is below the enhanced monetary threshold specified in the Circular dated 02.11.2023; pending applications, if any, are disposed of.

Classification of goods under IGST schedules - residuary tariff entry - interpretation of the expression "i.e." as words of limitation - applicable rate of IGST - time-bar/limitation of demand in tax proceedings

Classification of goods under IGST schedules - interpretation of the expression "i.e." as words of limitation - residuary tariff entry - applicable rate of IGST - Whether the appellant's imported nutrition/dietary supplement products fall under Sr. No. 9 of Schedule IV (28% IGST) or under Sr. No. 453 of Schedule III (18% IGST). - HELD THAT: - The Tribunal examined the tariff entries for heading 2106 and the text of Serial No. 9 of Schedule IV which describes "Food preparations not elsewhere specified or included i.e. Protein concentrates and textured protein substances, ...". The expression "i.e." was held to be restrictive and to circumscribe the scope of Serial No. 9 to the specific items enumerated thereafter. The imported products listed by the appellant (tablets, capsules, softgels and powder-based dietary/ nutrition supplements) do not fall within the specific items described after "i.e." in Serial No. 9. Consequently, Serial No. 9 is not applicable. Serial No. 453 of Schedule III is a residuary entry covering goods not specified in Schedules I, II, IV, V or VI; therefore the appellant's goods, not being covered by Serial No. 9, fall under Serial No. 453. The determinative legal reasoning adopts the restrictive meaning of "i.e." (as words of limitation) and applies the residuary entry to reach the applicable IGST rate of 18%. The Tribunal noted that the issue and reasoning are consistent with an earlier decision of this Tribunal on identical facts and adopted that ratio in concluding classification in favour of the appellant. [Paras 4, 5]

The appellant's goods do not fall under Serial No. 9 of Schedule IV and are correctly classifiable under Serial No. 453 of Schedule III; IGST at 18% applies.

Time-bar/limitation of demand in tax proceedings - absence of suppression/mis-declaration - Whether the differential IGST demand made after assessment is barred by limitation in view of absence of suppression or mis-declaration by the appellant. - HELD THAT: - The Tribunal observed that the bill of entry had been finally assessed by the proper officer and the appellant had declared the goods and claimed the residuary rate. The Tribunal found no allegation or evidence of suppression or mis-declaration by the appellant. It noted that, had the department taken a different view at assessment, objections or a show cause notice could have been issued earlier; a delayed show cause notice for the later period indicates issuance beyond the permissible time in the absence of fraud or suppression. The Tribunal further observed that any additional IGST liability would have been available as input tax credit to the appellant, reinforcing revenue neutrality and negating mala fides. On these grounds the demand was held to be hit by limitation and not sustainable. [Paras 6]

The differential IGST demand is barred by limitation insofar as it arises from no suppression or mis-declaration and therefore is not sustainable.

Final Conclusion: The impugned order confirming differential IGST is set aside: the appellant's imported goods are classifiable under the residuary entry Sr. No. 453 of Schedule III attracting IGST at 18%, and the extended demand is also untenable on limitation grounds; the appeal is allowed.

Re-export of warehoused goods after expiry of bonding period - extension of warehousing period - Board Circular permitting re-export despite demand notice - application of Supreme Court's COVID-19 cognizance for extension of limitation - confiscation for failure to clear bonded goods - absence of fraud or willful omission

Re-export of warehoused goods after expiry of bonding period - Board Circular permitting re-export despite demand notice - extension of warehousing period - Permissibility of allowing re-export of goods warehoused where the permitted bonding period had expired and demand notices were issued - HELD THAT: - The Tribunal examined Board Circular No. 3/2003 (14.01.2003) which states that requests to permit re-export under Section 69 may be allowed even if the permitted bonding period has expired and demand notices under Section 72 have been issued, subject to extending the period of warehousing under Section 61 to enable export. Applying that Circular to the facts where the goods were warehoused in November 2019, February 2020 and March 2020 and where show cause notices were issued before the effective expiry of the warehousing period, the Tribunal held that the adjudicating authority ought to have considered the appellant's request for extension and permitted re-export rather than treating the earlier demand notices as a bar. The Tribunal therefore set aside the impugned order and directed that re-export be permitted within a limited period. [Paras 9, 11]

Re-export of the warehoused goods is to be permitted; the impugned order is set aside and re-export is to be allowed within three months from receipt of the final order.

Application of Supreme Court's COVID-19 cognizance for extension of limitation - absence of fraud or willful omission - confiscation for failure to clear bonded goods - Whether demand of duty, interest, fine and penalty could be sustained where delay in clearance arose from COVID-19 disruptions and there was no allegation of fraud or willful omission - HELD THAT: - Relying on the Supreme Court's cognizance regarding extension of limitation during the COVID-19 pandemic and the Board Circular, the Tribunal found that where the importer sought extension and re-export in the circumstances of COVID-19 and there was no allegation of fraud, collusion or willful omission, the authorities should not have insisted on payment of duty, interest or imposed fines and penalties as a condition for permitting re-export. The Tribunal applied these principles to conclude that duty, interest, fine and penalty were not payable as a precondition to allowing re-export in the present case. [Paras 10, 11]

Demand for duty, interest, fine and penalty is unsustainable in the circumstances; re-export is to be allowed without insisting on such payments or penalties.

Final Conclusion: Appeal allowed; impugned order set aside. Respondent directed to permit re-export of the warehoused goods within three months from receipt of this order without insisting on payment of duty, interest, fine or penalty, having regard to the Board Circular and the Supreme Court's COVID-19 limitation cognizance where no fraud or willful omission is alleged.

Classification under Customs Tariff Heading 7220 90 22 - Nickel Chromium Austenitic Stainless Steel - benefit of exemption under Notification No. 50/2018 Cus (Sr. No. 734) - extended period of limitation under section 28(4) of the Customs Act - show cause notice confined to proposals therein - Indian Standard IS 15997:2012

Classification under Customs Tariff Heading 7220 90 22 - Nickel Chromium Austenitic Stainless Steel - Indian Standard IS 15997:2012 - Imported stainless steel coils are correctly classifiable as Nickel Chromium Austenitic Stainless Steel under CTH 7220 90 22. - HELD THAT: - The Tribunal examined whether the product's nickel content being approximately 1% precluded classification as Nickel Chromium Austenitic Stainless Steel. Reliance by the Revenue on commercial websites showing nickel ranges of 4.5%-12% was held insufficient. The tribunal accepted the appellant's evidence including Indian Standard IS 15997:2012 and a clarification from the India Stainless Steel Development Association showing that austenitic stainless steel grades may have nickel content varying from as low as 0.2% upwards. On the undisputed material facts (composition and mill test certificates), the goods comply with the specification for austenitic nickel chromium stainless steel and therefore are correctly classifiable under CTH 7220 90 22. [Paras 5]

Classification under CTH 7220 90 22 as Nickel Chromium Austenitic Type is upheld.

Show cause notice confined to proposals therein - Adjudicating authority travelled beyond the classifications proposed in the show cause notice and such action vitiates the impugned orders. - HELD THAT: - The SCN had proposed specific alternate classifications but the adjudicating authority imposed a different classification not suggested in the notice. The Tribunal applied settled law that the department cannot travel beyond the proposals made in the show cause notice; where the adjudication departs from the SCN's alternatives the SCN fails on that point. Reliance was placed on established decisions to support the principle that proceedings must be confined to the grounds alleged in the notice. [Paras 6]

Impugned orders are unsustainable insofar as they rest on classifications not proposed in the show cause notice.

Extended period of limitation under section 28(4) of the Customs Act - Extended period of limitation under section 28(4) cannot be invoked; demands beyond the normal limitation period are time barred. - HELD THAT: - The Tribunal found no suppression or deliberate nondisclosure because the material facts (including mill test certificates showing chemical composition) were available to the department at the time of import. Given that the case against the appellants was founded on information already on record, the department could have acted within the normal limitation period. The Tribunal reviewed authority establishing that mere misclassification or omission does not constitute deliberate suppression and concluded that invocation of extended limitation was not justified. [Paras 6]

Show cause notice insofar as it seeks demands beyond the normal limitation period is barred by limitation and cannot be sustained.

Final Conclusion: The appeals are allowed: the goods are held classifiable under CTH 7220 90 22 as Nickel Chromium Austenitic Stainless Steel; the adjudication is invalid to the extent it proceeds beyond classifications proposed in the SCN; and demands raised under extended limitation are time barred. The impugned orders are set aside with consequential relief in accordance with law.

Appealability under Section 129A of the Customs Act, 1962 - appealable order - principles of natural justice - cross-examination of witnesses - quasi-judicial duty to decide applications independently - personal hearing

Appealability under Section 129A of the Customs Act, 1962 - appealable order - The impugned communication dated 25.09.2023 constitutes an appealable order for the purpose of filing an appeal under Section 129A. - HELD THAT: - The communication fixed the date of personal hearing before the adjudicating authority and enclosed the DRI's letter on the request for cross-examination without the Commissioner taking and communicating any independent decision. Such transmission of DRI's views without a clear adjudicatory finding by the Commissioner is a significant decision affecting the noticee's rights and therefore falls within the class of decisions/orders against which an appeal under Section 129A can be filed. The Tribunal relied on parallel authority treating similar communications as appealable and emphasised that the adjudicating authority must articulate its decision rather than merely forwarding departmental views. [Paras 5, 6]

The appeal against the impugned communication is maintainable as it is an appealable order under Section 129A.

Principles of natural justice - cross-examination of witnesses - quasi-judicial duty to decide applications independently - personal hearing - The adjudicating authority cannot fix personal hearing or proceed to decide the show cause notice without first deciding the appellant's request for cross-examination and communicating its reasons. - HELD THAT: - As a quasi-judicial authority, the Commissioner must apply independent mind to ancillary applications, such as a request for cross-examination, and communicate a reasoned decision before fixing personal hearing. Merely forwarding the DRI's views and fixing a hearing without accepting or rejecting the request amounts to failure to perform the adjudicatory function and infringes principles of natural justice where witness testimony forms part of the basis for adjudication. The Tribunal set aside the impugned communication for this reason, recorded that it has not expressed any view on the merits of the request, and directed the Commissioner to decide afresh and communicate his decision prior to proceeding further. [Paras 9, 10, 11, 12, 13]

The impugned communication is set aside; the Commissioner must independently decide the request for cross-examination, communicate reasons to the appellant, and only then proceed with personal hearing or further adjudication.

Final Conclusion: Appeal allowed. The impugned communication dated 25.09.2023 is held appealable and is set aside; the Commissioner is directed to independently decide the appellant's request for cross-examination, communicate the decision with reasons to the appellant, and thereafter proceed with the personal hearing and further adjudication.

Notes to accounts as part of financial statements under Section 134(7) of the Companies Act - Balance sheet disclosure and reliance on explanatory notes for qualification - Interpretation of tender conditions - Consortium versus sole bidder - reliance on third party experience - Disqualification from tender process - Remand for fresh consideration excluding disqualified bidder

Notes to accounts as part of financial statements under Section 134(7) of the Companies Act - Balance sheet disclosure and reliance on explanatory notes for qualification - Validity of disqualification of M/s. BVG India Ltd. on ground of non-compliance for not filing explanatory notes of account as part of the Balance Sheet. - HELD THAT: - The Court held that explanatory notes to the financial statements form part of the Balance Sheet in terms of Section 134(7) and that the Balance Sheet must be read together with such notes. The High Court's conclusion that there was no mandatory requirement in the tender to furnish explanatory notes was not sustainable because notes to the accounts are integral to understanding the Balance Sheet and other bidders had complied with that requirement. Given that M/s. BVG India Ltd. was aware of the compliance requirement, the rejection of its technical bid for failure to furnish explanatory notes cannot be faulted. The High Court's setting aside of BVG's disqualification was therefore reversed. [Paras 5, 6, 7]

Disqualification of M/s. BVG India Ltd. from the tender is upheld.

Interpretation of tender conditions - Consortium versus sole bidder - reliance on third party experience - Disqualification from tender process - Validity of disqualification of M/s. Pashupatinath Distributors Private Limited for seeking dilution of clauses and reliance contrary to tender terms. - HELD THAT: - The Court agreed with the tendering authority and the technical committee that the request to dilute Clauses 2.2 and 2.3 was not feasible. Clause 2.2 expressly deals with a tender by a sole bidder and excludes a consortium; a bidder who declares it is submitting independently cannot rely upon technical qualifications of a third party or consortium member. The judgment in Municipal Corporation, Ujjain v. BVG India Ltd. was applied to uphold the principle that a sole bidder cannot buttress its qualification by relying on another entity's technical experience. Accordingly, the High Court's finding regarding disqualification of M/s. Pashupatinath Distributors Private Limited was upheld. [Paras 8, 9]

Disqualification of M/s. Pashupatinath Distributors Private Limited from the tender is upheld.

Remand for fresh consideration excluding disqualified bidder - Disqualification from tender process - Interpretation of tender conditions - Whether the matter should be remitted to the State for fresh consideration and the consequences of the disqualifications. - HELD THAT: - The Court affirmed the High Court's order remitting the matter to the State for fresh consideration but clarified that both M/s. BVG India Ltd. and M/s. Pashupatinath Distributors Private Limited remain disqualified from participating in the tender unless they satisfy the tender conditions as interpreted in this judgment. The Court permitted M/s. Pashupatinath Distributors Private Limited to continue operations until the tender process concludes and directed the State to complete the tender within three months. The interim order dated 02.01.2024 was directed to continue till the tendering process is concluded. The Court also observed that the State is free to frame new conditions going forward. [Paras 2, 10, 11, 12]

Matter remitted to the State for fresh consideration excluding the two disqualified entities; interim continuation and a three month timeline for concluding the tender directed.

Final Conclusion: The appeals are disposed of by (a) upholding disqualification of both M/s. BVG India Ltd. and M/s. Pashupatinath Distributors Private Limited from the tender on the stated grounds, (b) affirming remand to the State for fresh consideration excluding the disqualified entities, (c) permitting interim continuation of operations by Pashupatinath until conclusion of the tender, and (d) directing the State to conclude the tender process within three months.

Professional misconduct for non-cooperation with regulator - failure to supply information called for - failure to exercise due diligence and gross negligence in conduct of professional duties - submission of false affidavit to avoid regulatory process - penalty and debarment under section 132(4) of the Companies Act, 2013 - duty of auditor to cooperate with statutory investigation and maintain audit quality

Professional misconduct for non-cooperation with regulator - failure to supply information called for - failure to exercise due diligence and gross negligence in conduct of professional duties - The audit firm M/s PCN & Associates and CA Gopala Krishna Kandula were guilty of professional misconduct by failing to supply requisite information and by conduct amounting to failure of due diligence and gross negligence. - HELD THAT: - NFRA initiated investigation and repeatedly called for audit files and other specified information for FY 2019-20 to FY 2021-22. Although audit files were eventually submitted, the majority of other material information required for investigation was not provided despite multiple extensions and repeated requests. The persistent non-provision of information impeded NFRA's ability to determine whether audits complied with law and standards. The conduct was held to fall within professional misconduct under the Act and applicable ethical and quality control requirements because it manifested unwillingness to cooperate and inability to demonstrate that audits were performed with due diligence. [Paras 5, 15, 16, 21]

Found guilty of professional misconduct for non-cooperation, failure to supply information, and failure to exercise due diligence.

Submission of false affidavit to avoid regulatory process - duty of auditor to cooperate with statutory investigation - The Engagement Partner submitted a false affidavit and avoided personal hearing, which constituted professional misconduct. - HELD THAT: - The Engagement Partner sought adjournments on medical grounds and furnished a notarized affidavit undertaking not to provide professional services during the adjournment period. NFRA records, including UDIN data furnished by ICAI, showed that the Engagement Partner continued to generate UDINs and perform professional services during the period covered by the affidavit. The affidavit was therefore found to be false and the conduct of avoiding the personal hearing, while continuing professional work, was treated as obstructive and constituting misconduct. [Paras 14, 19, 20, 21]

Engagement Partner's affidavit was false and his non-attendance amounted to professional misconduct.

Penalty and debarment under section 132(4) of the Companies Act, 2013 - Monetary penalties and debarment were imposed on the audit firm and the Engagement Partner as sanctions for the established professional misconduct. - HELD THAT: - Having found professional misconduct by both the firm and the Engagement Partner-based on failure to cooperate, non-submission of requested information, and submission of a false affidavit-NFRA exercised its statutory powers under section 132(4) to impose sanctions. The Authority took into account the nature of the misconduct, the regulator's duty to oversee audits of public interest entities, and comparative precedents to determine appropriate punishment. Consequential orders include specified monetary penalties and periods of debarment from appointment as auditor or undertaking audits. [Paras 6, 27, 28, 31]

Imposed monetary penalties and debarment on the firm and the Engagement Partner under section 132(4).

Final Conclusion: NFRA concluded that M/s PCN & Associates and CA Gopala Krishna Kandula committed professional misconduct by wilful non-cooperation, non-submission of requisite information and by submission of a false affidavit; accordingly, monetary penalties and periods of debarment were imposed under section 132(4) of the Companies Act, 2013, effective 30 days from the date of the Order.

Verification and admission of claims by Liquidator - distinction between debt and claim for damages - preclusion of Liquidator from adjudicating disputes involving claims and counterclaims - effect of prior provisional admission by Resolution Professional - impact of sale as going concern on admission of claims - doctrine of clean slate

Verification and admission of claims by Liquidator - distinction between debt and claim for damages - Validity of rejection of the appellant's claim for want of supporting documents and the requirement of prior adjudication of damages before recognition as a debt - HELD THAT: - The Tribunal accepted the Liquidator's explanation that several components of the appellant's claim (goods ready for dispatch but not delivered, work-in-progress, goods under manufacturing, GST without tax invoice, interest) were not substantiated from the records of the Corporate Debtor or by production of invoices/dispatch documents. The Liquidator acted by verifying available records and applying the principle that claims for damages arising from alleged non performance require prior adjudication by a civil court or arbitrator before becoming a debt payable under the Code. The Tribunal found the Liquidator furnished sufficient reasons for disallowance and that the rejection was based on verification and absence of documentary proof rather than arbitrary disallowance (paras 14-18). [Paras 14, 18]

Rejection of the components of the appellant's claim for lack of documentary support and because alleged damages require prior adjudication is valid

Effect of prior provisional admission by Resolution Professional - Whether an earlier communication by the Resolution Professional acknowledging an amount in the books estops the Liquidator from reassessing and rejecting the claim - HELD THAT: - The Tribunal noted that the RP's earlier indication of an amount in the books did not constitute a final determination of the claim and that the RP and Liquidator perform verification based on records; thus an initial ad hoc statement based on available materials does not preclude later verification or rejection after full scrutiny. The Tribunal accepted the Liquidator's position that claim admission requires documentary support and that mere entries in the Corporate Debtor's books do not obviate the verification process (paras 9, 12, 18). [Paras 9, 12, 18]

The earlier acknowledgement by the RP does not preclude the Liquidator from reassessing and rejecting the claim on verification

Preclusion of Liquidator from adjudicating disputes involving claims and counterclaims - impact of sale as going concern on admission of claims - doctrine of clean slate - Whether the Liquidator can adjudicate disputed claims where claims and counterclaims exist, particularly after sale of the Corporate Debtor as a going concern - HELD THAT: - The Tribunal endorsed the Adjudicating Authority's conclusion that where claims and counterclaims are inter se disputed, the Liquidator is not the forum to resolve such disputes; those matters require adjudication by competent civil courts or arbitral tribunals. The Liquidator's role is verification and admission/rejection on the basis of records, statutory obligations or decrees, not to decide contested liabilities. Further, the Tribunal noted the factual position that the Corporate Debtor was sold as a going concern and the Board reconstituted, limiting the Liquidator's jurisdiction to entertain fresh claims; the Tribunal also recorded the respondent's reliance on the doctrine of clean slate and found the Liquidator's approach consistent with this framework (paras 13-16, 19). [Paras 13, 15, 16, 19]

Liquidator was correct in declining to adjudicate disputed claims and counterclaims, and sale as going concern further circumscribed entertaining such claims

Final Conclusion: The appeal is dismissed as devoid of merit; the Tribunal upheld the Liquidator's rejection of the contested claim and the Adjudicating Authority's acceptance of that reasoning, while granting the appellant liberty to pursue appropriate remedies in competent forums.

Limitation under section 61(2) of Insolvency and Bankruptcy Code, 2016 - condonation of delay - sufficient cause for extension of limitation - date of pronouncement versus date of uploading for computation of limitation - object and timelines of the Insolvency and Bankruptcy Code - rejection of time barred appeals

Limitation under section 61(2) of Insolvency and Bankruptcy Code, 2016 - date of pronouncement versus date of uploading for computation of limitation - condonation of delay - sufficient cause for extension of limitation - Whether the Appeal was filed within the period of limitation and whether the appellant demonstrated sufficient cause to condone the delay beyond thirty days but within the outer limit under section 61(2) of the IBC. - HELD THAT: - The Tribunal examined the chronology and accepted that the impugned order was pronounced and digitally signed on 23.12.2022. While the appellant argued that the limitation should commence from the date of uploading or receipt of the certified copy (26/27.12.2022), the Tribunal held that where the order was pronounced on the hearing date and the appellant was present, the principle in V. Nagarajan applies and limitation commences from the date of pronouncement. The Tribunal further considered the appellant's asserted grounds for a 14 day delay beyond the 30 day window (difficulty in retrieving old documents and remoteness of residence) and found them general and not credible, particularly given that the respondent produced an index of papers and that records were earlier filed before the NCLT. The Tribunal emphasised the time sensitive objectives and strict timelines of the IBC and concluded that a liberal approach to condonation would frustrate those objectives. On that basis the appellant failed to demonstrate a sufficient cause within the ambit of section 61 to justify condonation of the delay not exceeding 15 days. [Paras 9, 10, 11, 12]

Limitation commences from 23.12.2022 (date of pronouncement); the appellant did not demonstrate sufficient cause to condone the 14 day delay and the application for condonation is dismissed.

Final Conclusion: IA No.383/2023 for condonation of delay is dismissed; the Company Appeal (AT) (CH) (INS) No.99 of 2023 is rejected as time barred and the connected IA for stay is closed.

De novo adjudication during pendency of appeal - mandatory pre-deposit and stay of recovery - violation of principles of natural justice - exemption for transportation of agricultural produce under Mega Notification No.25/2012 (Sl.21,22) - limitation / time bar - remand for fresh adjudication and verification of documents

De novo adjudication during pendency of appeal - mandatory pre-deposit and stay of recovery - violation of principles of natural justice - De novo order passed by the adjudicating authority during the pendency of the appeal before the Tribunal (after mandatory pre-deposit) was improper and set aside. - HELD THAT: - The Tribunal held that where an appellant has made the mandatory pre-deposit and an appeal is pending before the Tribunal, recovery proceedings are stayed and the adjudicating authority ought not to have proceeded to pass a de novo order. The adjudicating authority had received e-mail intimation from the appellant that an appeal was pending but did not verify the same and proceeded to pass the de novo order. Passing the de novo order during the pendency of the appeal was found to be contrary to the provisions governing pre-deposit and to principles of natural justice and therefore the de novo order required to be set aside. [Paras 9]

De novo order set aside as in violation of principles of natural justice; proceedings remitted for fresh adjudication.

Exemption for transportation of agricultural produce under Mega Notification No.25/2012 (Sl.21,22) - limitation / time bar - remand for fresh adjudication and verification of documents - Whether the amounts received by the appellant for arranging transportation of agricultural produce are exempt under Sl.21, 22 of Notification No.25/2012 and whether any demand is time-barred is remanded for fresh adjudication. - HELD THAT: - The Tribunal accepted that the Commissioner (Appeals) had already directed remand to verify taxable turnover, eligibility for exemption, applicability of reverse charge (RCM) and to examine any time-bar issues. The adjudicating authority is directed to consider the documents produced by the appellant to establish transportation of agricultural produce, determine eligibility for exemption under the cited notification, examine limitation/time-bar contentions, quantify any service tax liability if applicable, and afford the appellant adequate opportunity for filing documents and for personal hearing. All issues were left open for de novo determination on merits and limitation. [Paras 10, 11]

Matter remanded to the adjudicating authority to decide afresh on exemption, taxable turnover, RCM and limitation after verification of documents and personal hearing; remand to be completed within the specified time.

Final Conclusion: The impugned de novo order is set aside; the appeal is allowed by way of remand to the adjudicating authority to decide afresh on exemption for transportation of agricultural produce, taxable turnover, reverse charge and limitation after giving opportunity to the appellant; de novo proceedings to be completed within three months from receipt of this order.

Supply of Tangible Goods Service - Exemption notification and strict construction - Burden of proof for claiming exemption - Definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 - Cenvat Credit admissibility where input service is used by a provider of taxable service for providing an output service

Supply of Tangible Goods Service - Exemption notification and strict construction - Burden of proof for claiming exemption - Appellate Tribunal decision on whether service tax was payable on vehicle hire charges received for trailers rented to a goods transport agency - HELD THAT: - The Tribunal examined the exemption notifications relied upon by the appellant and recalled the settled principle that exemption notifications are to be strictly construed and the claimant bears the burden of proving eligibility. Notification No.1/2009 ST required, as a condition, that the invoice issued by the service provider mention the name and address of the goods transport agency and the name and date of the consignment note. The invoices produced by the appellant (filed in the paper book) showed the recipient as Kataria Carriers with description stating 'Goods Transport Vehicle (Trailers) Hire Charges', thereby substantially complying with the condition in Notification No.1/2009 ST. For periods where no such condition applied, the notifications themselves did not preclude exemption. On that basis the Tribunal held that the appellant satisfied the documentary requirement for the exemption and that the departmental demand of service tax on the vehicle hire receipts could not be sustained. [Paras 4]

Demand of service tax on vehicle hire charges from F.Y.2008 09 to F.Y.2012 13 is set aside as the appellant substantially complied with the conditions of the exemption notification.

Definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 - Cenvat Credit admissibility where input service is used by a provider of taxable service for providing an output service - Appellate Tribunal decision on admissibility of Cenvat credit availed on documentation charges, terminal handling charges and bill of lading charges - HELD THAT: - The Tribunal analysed Rule 2(l) of the Cenvat Credit Rules, 2004 and emphasised the main limb of the definition: an 'input service' includes any service 'used by a provider of taxable service for providing an output service'. The appellant undisputedly is a provider of taxable output services and had used the disputed services in the course of providing those output services. The Tribunal held that satisfaction of the main clause is sufficient to claim Cenvat credit and that the adjudicating authority's denial-grounded on the view that such services should have been used for Customs House Agent services-was not supported. Consequently, the impugned disallowance of credit was incorrect and the credit claimed by the appellant is allowable. [Paras 4]

Denial of Cenvat credit on documentation, terminal handling and bill of lading charges is set aside; Cenvat credit is admissible to the appellant.

Final Conclusion: The appeal is allowed; the impugned order is set aside insofar as it (a) demanded service tax on vehicle hire charges for F.Y.2008 09 to F.Y.2012 13 and (b) disallowed Cenvat credit on the disputed heads. Consequently, the demands, interest and penalties founded on those determinations have been vacated; issues concerning extended limitation and penalties were not decided as they became academic.

Maintenance of separate accounts - Rule 6(2) of Cenvat Credit Rules, 2004 - proportionate reversal under Rule 6(3A) - admissibility of Cenvat credit - extractability of records from computerized accounting

Maintenance of separate accounts - Rule 6(2) of Cenvat Credit Rules, 2004 - admissibility of Cenvat credit - Whether the appellant complied with Rule 6(2) by maintaining separate accounts for input services used for taxable and exempted services and thereby legitimately availed Cenvat credit - HELD THAT: - The Tribunal examined the adjudicating authority's order, the Chartered Accountant's certificate and the Range Officer's verification report and deposition that the report was prepared after joint inspection and that necessary details could be extracted from the appellant's computerized records. The High Court's limited remand required the Tribunal to verify records as the Commissioner had done for 01.04.2011-31.03.2012; on verification the Range Officer confirmed that the appellant's accounts were maintained in its system in a manner consistent with the particulars required under Rule 6(2). The earlier finding in favour of the appellant for 01.04.2011-31.03.2012 has attained finality and the combined reading of the CA certificate, the Range Officer's report and the adjudicating authority's findings establish compliance with Rule 6(2). Consequently the impugned demands premised on non-maintenance of separate accounts are unsustainable. [Paras 17, 19, 20]

Appellant complied with Rule 6(2) and is entitled to the claimed Cenvat credit; demands based on non-maintenance of separate accounts set aside.

Proportionate reversal under Rule 6(3A) - admissibility of Cenvat credit - Effect of amendment to Rule 6 w.e.f. April 2008 and the different compliance regime for periods before and after that amendment - HELD THAT: - The Tribunal accepted the distinction that for periods up to March 2008 there was no provision for monthly provisional reversal under Rule 6(3A) and the practical limit on utilisation of full credit required different treatment, whereas for periods after April 2008 Rule 6(3A) prescribes provisional monthly reversal and annual reconciliation by 30th June of the succeeding year. The Tribunal applied these legal positions in assessing the appellant's compliance and the scope of allowable credit for the respective periods. [Paras 16]

Different procedural requirements apply pre- and post-April 2008; Rule 6(3A) governs post-April 2008 provisional reversal and annual adjustment.

Admissibility of Cenvat credit - maintenance of separate accounts - extractability of records from computerized accounting - Quantification of reversal required to negate the confirmed demands and consequential direction - HELD THAT: - On the Tribunal's scrutiny the appellant accepted (and did not challenge) a summary figure showing that a specified aggregate amount remained to be reversed to negate the demands. The Tribunal recorded the bifurcation of the reversal across the four appeals and directed payment of that reversal amount with interest. Having found compliance with Rule 6(2) for the relevant periods, the Tribunal allowed the appeals subject to the appellant reversing the identified balance amount and paying interest. [Paras 21, 22]

Appeals allowed subject to payment by the appellant of the specified reversal amount (aggregate reversal) along with interest; consequential relief as per law.

Final Conclusion: The Tribunal, after verification and having regard to the Range Officer's report and the CA's certificate, held that the appellant maintained separate accounts in terms of Rule 6(2) CCR, 2004 and was entitled to Cenvat credit; the appeals are allowed but the appellant must reverse the identified aggregate amount with interest, whereupon consequential relief, if any, shall follow.

Taxability of corporate guarantee without consideration - reverse charge mechanism for banking and financial services - requirement of consideration for levy of service tax - no-notional-amount principle (no tax on hypothetical consideration) - consequence of no consideration on interest, penalty and extended limitation

Taxability of corporate guarantee without consideration - requirement of consideration for levy of service tax - Whether provision of corporate guarantee without any consideration is exigible to service tax. - HELD THAT: - The Tribunal found that the show cause notice, adjudication order and the impugned appellate order consistently record that no consideration was received by the respondent for providing corporate guarantees to its group company. Relying on earlier Bench and Supreme Court decisions cited in the order, the Tribunal reaffirmed that service tax is leviable only on consideration for a taxable service; where no consideration is received, no service tax can be charged even if a notional or hypothetical amount is postulated by Revenue. The Tribunal therefore held that the corporate guarantees provided without payment of any commission or fee do not attract service tax under the reverse charge mechanism or as taxable service post 01.07.2012, and that the present case is indistinguishable from precedents where demands were negatived for lack of consideration. [Paras 5]

No service tax is leviable on the respondent for corporate guarantees provided without consideration.

Consequence of no consideration on interest, penalty and extended limitation - Whether issues of extended period of limitation, interest and penalty survive after holding no tax liability on merits. - HELD THAT: - The Tribunal recorded that having decided the core issue on merits that no service tax is payable because no consideration was received, ancillary disputes concerning extended limitation, interest and penalty do not survive. The reasoning is that such consequential reliefs depend on establishment of tax liability which is absent in the facts of this case. [Paras 5]

Questions of extended period, interest and penalty do not survive once tax liability is negatived.

Final Conclusion: The appeal is dismissed; the order of the Commissioner (Appeals) setting aside the demand of service tax on corporate guarantees (for the periods April, 2010 to June, 2012 and July, 2012 to April, 2015) is upheld, and consequential issues of limitation, interest and penalty do not survive.

Supply of water - Assignment of right to use natural resources - Taxable service - Exemption limited to one-time charges - Service tax applicability w.e.f. 01.04.2016 - Deemed sale under Article 366(29A)

Supply of water - Assignment of right to use natural resources - Taxable service - Service tax applicability w.e.f. 01.04.2016 - Exemption limited to one-time charges - Whether the Agreement dated 05.01.2013 with the Water Resources Department constituted a supply of water by the Government to the appellant or an assignment of right to use natural resources attracting service tax - HELD THAT: - The Agreement (Form 7A), read with Section 40 of the Madhya Pradesh Irrigation Act, 1931 and Rule 71A of the Madhya Pradesh Irrigation Rules, 1974, granted the appellant prior permission to draw specified quantities of water for its power plant on terms and conditions and for a term of 30 years, expressly subject to the provisions of the Act and Rules. The Agreement's title describes it as for supply of water; it fixes water rates to be paid by the appellant based on the quantity of water drawn, requires the appellant to make arrangements for drawal and measurement, contemplates reduction/shortage in supply and disclaims any guarantee of uninterrupted supply. These contractual features demonstrate a supply of water by the Government to the appellant rather than a mere assignment of a right to use a natural resource. Consequently, the payments were not consideration for a taxable service of assignment of right to use natural resources (even accepting the department's characterisation), and the exemption regime and its temporal operation (including Notification No. 22/2016 and the limitation of exemption to one-time charges) need not be applied because no taxable service was found to be provided by the Government under the Agreement. [Paras 16, 17, 18, 19, 20]

The Agreement constitutes supply of water by the Government to the appellant and not assignment of right to use natural resources; no service was provided by the Government and the impugned order confirming service-tax demand is set aside.

Final Conclusion: The Commissioner's order dated 30.11.2022 confirming service-tax demand for the period April 2016 to June 2017 is set aside and the appeal is allowed, the tribunal not proceeding to adjudicate the remaining contentions.

Manner of distribution of Cenvat credit by Input Service Distributor - ISD distribution prior to amendment (pre 2012) - Pro rata distribution obligation introduced post 2012 - Denial of Cenvat credit for procedural non registration of ISD - Revenue neutrality of intra group Cenvat distribution

Manner of distribution of Cenvat credit by Input Service Distributor - ISD distribution prior to amendment (pre 2012) - Pro rata distribution obligation introduced post 2012 - Entitlement of the appellant to avail entire Cenvat credit distributed by its head office (ISD) to a single manufacturing unit for the period April 2008 to March 2012 - HELD THAT: - The Tribunal examined Rule 7 of the Cenvat Credit Rules, 2004 as it stood during the relevant period and contrasted it with the post 2012 amended provision. The Rule, prior to amendment, used permissive language allowing the input service distributor to distribute Cenvat credit to manufacturing units but contained no mandatory requirement for proportionate or pro rata allocation among multiple units. The post 2012 amendment introduced express clauses requiring distribution to the unit where the service was used wholly and pro rata distribution where the service related to more than one unit. Relying on the plain language of Rule 7 as existing prior to 01.04.2012 and on judicial decisions and administrative pronouncements cited in the record that have interpreted the earlier Rule as not imposing a pro rata obligation, the Tribunal held that distribution of 100% of the credit to the appellant's Silvassa unit was permissible for the period in question. The Tribunal further noted precedents and Board clarification treating non registration of ISD and related procedural irregularities as not attracting denial of substantive Cenvat benefit where records exist and payment of service tax is established, but the determinative ground in this appeal was the absence of any statutory restriction in Rule 7 prior to the 2012 amendment. Because the adjudicating authority sought to deny credit contrary to the then existing Rule and consistent authorities, the demand was unsustainable. The Tribunal expressly left open the separate contention on limitation raised by the appellant and did not adjudicate it.

Impugned demand and penalty set aside; entire Cenvat credit distributed to the appellant for April 2008 to March 2012 held to be in order.

Final Conclusion: The appeal is allowed: the Tribunal set aside the adjudicating order and held that, under Rule 7 of the Cenvat Credit Rules as in force for April 2008 to March 2012, an ISD could lawfully distribute the entire Cenvat credit to a single unit; consequential relief, if any, to follow in accordance with law.

Eligibility to avail Cenvat credit on input services - Input service used in or in relation to manufacture - Bundled services characterised as Management Consultancy Services - Receiver's right to avail credit where provider paid service tax and classification was not objected - Burden of proof under Rule 9(6) of the Cenvat Credit Rules, 2004

Eligibility to avail Cenvat credit on input services - Input service used in or in relation to manufacture - Bundled services characterised as Management Consultancy Services - Receiver's right to avail credit where provider paid service tax and classification was not objected - Burden of proof under Rule 9(6) of the Cenvat Credit Rules, 2004 - Assessee entitled to avail cenvat credit on Management Consultancy Services provided by Biocon Limited for the period January 2009 to November 2012. - HELD THAT: - The Tribunal found that the services described as Permanent Services in the Support Services Agreement (supply of electricity, back-up power, steam, supply of water, canteen facilities, ETP charges, potable water supply charges, etc.) were necessary for and used in or in relation to the manufacture of excisable goods at the premises taken over from Biocon Limited. The adjudicating authority's dissection of the bundled services and denial of credit on that basis was rejected. Further, the Tribunal applied the principle that where the provider has discharged service tax on the bundled services under the category of Management Consultancy Services and the Department had not objected to that classification for the relevant period, the receiver (the appellant) could avail credit of the service tax so paid. The Tribunal noted that this approach is consistent with the Supreme Court decisions relied upon and followed by the Tribunal in subsequent cases. Although the Revenue relied upon the contention that certain individual services were ineligible and on Rule 9(6) placing the burden on the manufacturer to justify admissibility, the Tribunal held that, on the facts and the contractually bundled characterization accepted by the Department during the relevant period, the cenvat credit was admissible.

Impugned demands confirmed by the adjudicating authority are set aside; appeals allowed and cenvat credit on the Business Support/Management Consultancy Services is held admissible for January 2009 to November 2012.

Final Conclusion: The Tribunal allowed the appeals, setting aside the adjudication confirming recovery of cenvat credit on the Business Support/Management Consultancy Services supplied by Biocon Limited for the period January 2009 to November 2012, and directed consequential relief as per law.

Exemption from State sales tax under Section 8 read with the Fourth Schedule - Scope of the expression "cotton fabrics" in Entry-5 of the Fourth Schedule as informed by Item-59.03 of the Additional Duties of Excise (Goods of Special Importance) Act - Effect of inclusion of goods in a First Schedule entry (Entry 174) vis-a -vis pre existing exemption under Fourth Schedule - Characterisation of impregnated, coated or laminated textile fabrics as "cotton fabrics" for sales tax exemption

Exemption from State sales tax under Section 8 read with the Fourth Schedule - Scope of the expression "cotton fabrics" in Entry-5 of the Fourth Schedule as informed by Item-59.03 of the Additional Duties of Excise Act - Emery cloth is covered by Item 59.03 of the First Schedule to the Additional Duties of Excise Act and therefore falls within Entry 5 of the Fourth Schedule to the APGST Act and is exempt from tax under Section 8. - HELD THAT: - The Tribunal found, and this Court concurs, that the basic material of emery cloth is textile cloth and that emery cloth is of the character of a textile fabric impregnated/covered for use. Item 59.03 of the First Schedule to the Additional Duties Act covers textile fabrics of cotton or man made materials impregnated, coated, covered or laminated, and the Explanation to Entry 5 requires that the terms in Entry 5 be read with the Central Act. Therefore, emery cloth, even though based with sand for its functional use, does not cease to be a cloth for the purpose of Entry 5 and, being liable to additional excise duty under the Central Act, is exempt from State sales tax under Section 8 and the Fourth Schedule. The Tribunal's finding that emery cloth is covered by Item 59.03 and thus exempt is affirmed. [Paras 16, 25, 26]

Emery cloth is exempt from tax under Section 8 read with Entry 5 of the Fourth Schedule as it falls within Item 59.03 of the Additional Duties of Excise Act.

Characterisation of impregnated, coated or laminated textile fabrics as "cotton fabrics" for sales tax exemption - Effect of inclusion of goods in a First Schedule entry (Entry 174) vis-a -vis pre existing exemption under Fourth Schedule - Tarpaulins are cotton fabrics within Entry 5 of the Fourth Schedule and hence exempt from sales tax under Section 8; their inclusion in Entry 174 of the First Schedule does not defeat that exemption. - HELD THAT: - Applying the extended meaning of 'cotton fabrics'-which includes fabrics impregnated, coated or laminated-the Court accepted the Tribunal's conclusion that tarpaulin (waterproof cloth with a cloth base, even when finished with hems and eyelets) retains the essential character of cotton fabric. Precedents treat similar coated or finished textile products as 'cotton fabrics' for the purpose of Entry 5. Once tarpaulin is held to fall within Entry 5 and is liable to additional excise duty under the Central Act, Section 8 exempts it from State sales tax; the mere listing of tarpaulin in Entry 174 of the First Schedule does not alter that exemption. [Paras 6, 19, 21, 22]

Tarpaulins are exempt from State sales tax under Section 8 read with Entry 5 of the Fourth Schedule; inclusion in Entry 174 does not affect that exemption.

Final Conclusion: The Appellate Tribunal's order setting aside the assessment findings on emery cloth and tarpaulins is upheld: both goods fall within the ambit of Entry 5 of the Fourth Schedule as informed by Item 59.03 of the Additional Duties of Excise Act and are therefore exempt from levy of APGST under Section 8; the Tax Revision is dismissed.

Entitlement to interest on delayed refund - mandated grant of simple interest for delayed refunds - computation of interest on a daily basis - time-limit for refund (two months for quarterly return) - exclusion of period of delay attributable to the claimant

Time-limit for refund (two months for quarterly return) - entitlement to interest on delayed refund - Refund claim became due on expiry of two months from filing of return and the petitioner seeks interest for the delayed payment. - HELD THAT: - The Court records that the petitioner filed the VAT return for the Fourth Quarter of 2013-2014 and made an application for refund on 31.03.2015. In terms of the statutory time-limit contained in Section 38(3)(a)(ii) the refund claim became due on expiry of two months w.e.f. 01.06.2015. It is an admitted position that the refund was sanctioned and disbursed on 23.05.2023 but without any interest. The Court, while noting these facts, did not adjudicate entitlement to interest on the merits but directed the respondents to consider the petitioner's claim for interest in accordance with law. [Paras 4, 5, 9, 10]

The matter of entitlement/quantification of interest for the delayed refund is remitted to the respondents for consideration and determination; if found entitled, interest shall be sanctioned and disbursed within four weeks, or else a speaking order shall be communicated within four weeks.

Mandated grant of simple interest for delayed refunds - computation of interest on a daily basis - exclusion of period of delay attributable to the claimant - Section 42 mandates payment of simple interest on refunds delayed beyond the date they became due and prescribes the mode of computation and exclusion for delay attributable to the claimant. - HELD THAT: - The Court notes and applies Section 42(1) which entitles a person found entitled to a refund to receive, in addition to the refund, simple interest at the annual rate notified by the Government computed on a daily basis from the later of the date the refund was due or the date the overpaid amount was paid, until the refund date. The provisos and the Explanation that the period of delay attributable to the claimant shall be excluded are also recorded. The Court observed that the annual rate notified for the purposes of Section 42 in the present case is 6% per annum. [Paras 6, 7, 8]

Section 42 requires grant of simple interest (computed daily) on delayed refunds, subject to exclusion of any period of delay attributable to the claimant; the respondents must apply this provision in considering the petitioner's claim.

Final Conclusion: Petition disposed of by directing the respondents to consider and decide the petitioner's claim for interest on the delayed refund in accordance with Section 42; if found entitled, interest shall be sanctioned and paid within four weeks, or a speaking order denying interest shall be issued within four weeks; further legal remedies remain open to the petitioner.

Compounding of offence under the Negotiable Instruments Act - Consent of the complainant in compounding - Distinction between quashing and compounding - Judicial power under Article 142 to do complete justice - Compensatory emphasis in Section 138 prosecutions

Compounding of offence under the Negotiable Instruments Act - Consent of the complainant in compounding - Distinction between quashing and compounding - Judicial power under Article 142 to do complete justice - Compensatory emphasis in Section 138 prosecutions - Whether, in the circumstances where the accused has repaid the entire cheque amount and additional interest but the complainant refuses to compound, the Court may bring finality by quashing the FIR and pending criminal appeals and setting aside conviction and sentence. - HELD THAT: - The Court noted the compensatory object of prosecutions under Section 138 and the legislative provision making offences under the NI Act compoundable, but emphasised that consent of the complainant is a central principle in compounding. Prior decisions (including the trilogy of authorities discussed) recognise the primacy of compensation while also upholding the role of complainant's consent; yet courts possess jurisdiction, in appropriate cases and in the interests of justice, to bring finality to proceedings. Applying those principles to the facts, the Court found that the appellant had repaid the entire amount originally due and had deposited additional funds by way of interest; the appellant had already undergone incarceration before bail; and there was no material to show a dishonest intention at the inception to sustain the separate FIR under Sections 406, 420 and 120B of the IPC. Given these peculiar facts and the prolonged supervision by this Court to ensure repayment, continuation of the appeals would defeat that process. Therefore, exercising powers under Article 142, the Court held it appropriate to quash the FIR and the pending criminal appeals and to set aside the conviction and sentence, while distinguishing quashing from compounding and observing that compulsion of the complainant's consent is not permissible but final relief may be granted in the interest of justice where compensation has been made and other circumstances justify closure of proceedings. [Paras 11, 12, 13, 14]

Allowed the appeal; set aside the High Court order; quashed FIR No.35 of 2014 and all pending criminal appeals against the appellant; set aside conviction and sentence; directed trial court to hand over deposited demand drafts to the complainant.

Final Conclusion: Appeal allowed: in view of full repayment, deposit of interest, absence of antecedent dishonest intention on record and the need to do complete justice, the Supreme Court quashed the FIR and pending criminal appeals, set aside conviction and sentence, and directed appropriate disbursement of deposited instruments.