TaxTMI Updates e-Newsletter
May 15,2023

Anticipatory bail - Seriousness of offences - Requirement to report to the Investigating Officer - Trial court's discretion to impose bail conditions

Anticipatory bail - Seriousness of offences - Requirement to report to the Investigating Officer - Trial court's discretion to impose bail conditions - Petitioner entitled to anticipatory bail subject to terms to be imposed by the trial court. - HELD THAT: - The petitioner faced allegations under penal provisions including Seriousness of offences such as offences under the Indian Penal Code and alleged fraudulent input credit under the GST law, and police statements of crucial witnesses had been examined. Despite the gravity of the allegations, this Court considered the circumstances and concluded that the petitioner should be enlarged on Anticipatory bail. The order records that the petitioner had been required to report to the Investigating Officer prior to this determination. The grant of bail is made subject to such terms and conditions as the trial court may impose, preserving the trial court's authority to frame appropriate conditions in the exercise of its discretion.

Special leave petition allowed and petitioner released on anticipatory bail subject to terms to be imposed by the trial court; pending applications disposed of.

Final Conclusion: The Supreme Court allowed the special leave petition and directed that the petitioner be released on anticipatory bail, while leaving it to the trial court to impose appropriate terms and conditions; all pending applications stand disposed of.

Grant of regular bail subject to stringent conditions - conditions against tampering with evidence and inducement of witnesses - obligation to attend trial dates including framing of charge and recording of statement under Section 313 Cr.P.C. - misuse of liberty of bail and consequences including proclamation and criminal proceedings - false claim of input tax credit - constitution of a Special Investigation Team comprising police, GST, audit and cyber experts - direction to State authorities to coordinate further investigation and file compliance affidavit

Grant of regular bail subject to stringent conditions - conditions against tampering with evidence and inducement of witnesses - obligation to attend trial dates including framing of charge and recording of statement under Section 313 Cr.P.C. - misuse of liberty of bail and consequences including proclamation and criminal proceedings - Applicant Mohd. Rashid Siddiqui entitled to be released on bail in Case Crime No.738 of 2020 on furnishing bond and sureties subject to specified conditions. - HELD THAT: - On consideration of the material on record including the FIR, parcha no.44 showing a transaction of Rs.1.12 lakh in the account of the applicant's wife, the fact that the main co-accused has already been granted bail, the absence of documentary evidence directly implicating the applicant in profiteering from false input tax credit, and the stage of investigation and trial, the court concluded that the applicant is entitled to bail. The court imposed specific conditions designed to prevent tampering with evidence or intimidation of witnesses, to ensure the applicant's presence at critical stages of trial (opening of case, framing of charge and recording of statement under Section 313 Cr.P.C.), and to deter misuse of bail by providing for issuance of proclamation and initiation of proceedings where warranted. Breach of any condition was declared a ground for cancellation of bail.

Applicant released on bail on furnishing personal bond and two sureties subject to enumerated conditions and attendance obligations; breach to invite cancellation and penal consequences.

False claim of input tax credit - constitution of a Special Investigation Team comprising police, GST, audit and cyber experts - direction to State authorities to coordinate further investigation and file compliance affidavit - Court directed constitution of a Special Investigation Team (SIT) and issued administrative directions to State authorities for further investigation into widespread false input tax credit claims. - HELD THAT: - Having accepted submissions and documentary material indicating large-scale alleged false claims of input tax credit nationwide and significant quantum attributable to firms registered in Uttar Pradesh, the court directed formation of an expert SIT including police/investigating officer, GST experts, audit experts and cyber experts to carry out further investigation. The Additional Chief Secretary, Department of Home, Director General of Police and Director General of SIT were directed to issue necessary directions; the Additional Chief Secretary was ordered to file an affidavit of compliance by the next date. The matter was listed for further orders in July 2023 to monitor progress.

SIT to be constituted and State authorities directed to take necessary steps and file affidavit of compliance; matter listed for further consideration.

Final Conclusion: Bail granted to the applicant on specified terms and conditions; concurrently the court directed constitution of a multi-disciplinary Special Investigation Team and administrative steps by State authorities to further investigate alleged systemic false input tax credit claims, with a compliance affidavit and further listing in July 2023.

Limitation period as four months - computation of limitation in days versus months - extension of time on satisfaction of sufficient cause - appellate authority's duty to examine sufficiency of cause before rejecting appeal

Limitation period as four months - computation of limitation in days versus months - extension of time on satisfaction of sufficient cause - appellate authority's duty to examine sufficiency of cause before rejecting appeal - Whether the appellate authority was justified in dismissing the appeal as time-barred on the ground that it exceeded 120 days without considering whether sufficient cause existed to admit the appeal within the extended four-month period prescribed by Section 107 of the Act, 2017. - HELD THAT: - Section 107 prescribes a primary period of three months for filing an appeal and permits the appellate authority to admit an appeal within a further period of one month if satisfied that the appeal was prevented by sufficient cause. The statutory language refers to months and not a fixed 120-day ceiling; accordingly the four-month outer limit must be computed by reference to the calendar months from the date of communication of the order, which in practice may amount to 121 or 122 days depending on the months involved. In the present case the appeal was filed on the 121st day counted in calendar months; the appellate authority, however, treated the limit as 120 days and dismissed the appeal summarily on that basis without entering into the statutory inquiry whether sufficient cause existed to extend time under Section 107(4). The appellate authority was under a duty to consider and decide the question of sufficient cause on merits before rejecting the appeal as time-barred. [Paras 5, 7, 8]

Impugned order quashed; appeal restored and remitted to the appellate authority to decide the issue on merits after examining whether sufficient cause existed for delay, and to proceed expeditiously in accordance with law.

Final Conclusion: Petition allowed. The appellate order dismissing the appeal as beyond 120 days is quashed; the appeal is restored and remanded to the appellate authority to consider on merits including the question of sufficient cause for condonation, and to decide expeditiously in accordance with law.

Disallowance of business loss and unabsorbed depreciation of amalgamated company (Dolphin Laboratories) - Scheme of amalgamation conceived - “cut off date” OR “appointed date” OR “date of amalgamation” - HELD THAT:- High Court has heavily relied upon the earlier decision of the High Court in the case of IRM Limited [2016 (7) TMI 972 - GUJARAT HIGH COURT] which was rendered after following the decision of this Court in Marshall Sons & Co. (India) Ltd. [1996 (11) TMI 6 - SUPREME COURT] as held once the scheme is sanctioned, the same would relate back to the appointed date of amalgamation.

Revenue is not in a position to point out any contrary decision of this Court taking a contrary view than the view taken in the case of Marshall Sons & Co. (India) Ltd. (supra).

No interference of this Court in High court decision - SLP dismissed.

TP adjustment - Comparable selection - functional similarity between the Assessee and Li and Fung - HC [2019 (5) TMI 1525 - DELHI HIGH COURT] confirmed lack of functional similarity between Li & Fung India and the Assessee

HELD THAT:- No interference of this Court is called for. The Special Leave Petition stands dismissed.

Sale of the chemical unit of the assessee company -itemised sale OR slump sale - addition under section 50B read with section 2(42C) and explanation 1 to section 2(19AA) - HELD THAT:- Having examined the agreement to sale, we do not find this a case of Slump Sale.

Recording the aforesaid, the special leave petition is dismissed.

Capital gain - Nature of land sold - capital asset or agricultural land - whether lands sold by the assessee are non-agricultural lands and fall within the definition of capital assets u/s 2(14)(iii) and therefore attract tax on the Capital gains? - HADA is not a body within the meaning of clauses (a) and (b) of Section 2 (14) (iii) of the Act and as affirmed the sale of said land did not form part of capital gain - HELD THAT:- No good ground to interfere with the impugned judgment and order passed by the High Court [2022 (8) TMI 249 - KARNATAKA HIGH COURT]. Accordingly, the Special Leave Petition is dismissed.

Reopening of assessment u/s 147 - Reasons to believe - Allowability of Expenditure on account of freebies incurred in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations 2022 is not admissible u/s 37(1) - As per HC [2022 (6) TMI 960 - BOMBAY HIGH COURT] reasons for reopening, there is not even a whisper as to what was not disclosed - HELD THAT:- The impugned order(s) does not call for interference.

The special leave petition is accordingly dismissed.

Reopening of assessment u/s 147 -net loss of cancellation of forward contract - HC [2021 (12) TMI 1093 - BOMBAY HIGH COURT] held when the primary facts necessary for assessment are fully and truly disclosed, the AO is not entitled on change of opinion to commence proceedings for reassessment - HELD THAT:- We are not inclined to interfere with the judgment(s) and order(s) passed by the High Court. Special Leave Petition is dismissed.

All pending applications are disposed of.

Scope of assessment under Section 153A - requirement of incriminating material for assessing completed or unabated assessments - assumption of jurisdiction for block assessment on search under Section 132 or requisition under Section 132A - abatement of pending assessments and reassessments - preservation of reassessment powers under Sections 147/148

Scope of assessment under Section 153A - requirement of incriminating material for assessing completed or unabated assessments - assumption of jurisdiction for block assessment on search under Section 132 or requisition under Section 132A - preservation of reassessment powers under Sections 147/148 - Whether additions or reassessments under Section 153A in respect of completed or unabated assessments can be made in absence of any incriminating material seized during search or requisition. - HELD THAT: - The High Court applied the binding conclusion of the Hon'ble Supreme Court in Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell [P] Ltd., adopting the legal position summarized in paragraphs 11 and 13 and the conclusions recorded in paragraph 14 of that judgment. The court recorded that on a search under Section 132 or requisition under Section 132A the assessing officer assumes jurisdiction to make block assessment under Section 153A and that pending assessments/reassessments stand abated. Crucially, the Supreme Court held that where incriminating material is unearthed during the search the AO may assess or reassess the total income taking into account such material and other material available; but where no incriminating material is unearthed the AO cannot, in respect of completed or unabated assessments, make additions by resort to material other than the incriminating material found during the search. The court also noted that the power to reopen completed assessments under Sections 147/148 remains available subject to the conditions of those provisions. Applying that binding precedent, the court concluded that the revenue's contentions could not be sustained and that the order of the Tribunal ought to be upheld.

Revenue's appeal dismissed and the question of law answered by applying the Supreme Court's decision in Abhisar Buildwell; appeal disposed accordingly.

Final Conclusion: The delay in filing the appeal was condoned; on the merits the High Court dismissed the revenue's appeal in view of the binding Supreme Court decision in Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell [P] Ltd., holding that in absence of incriminating material unearthed during search/requisition no additions can be made in respect of completed or unabated assessments under Section 153A, while preserving reassessment powers under Sections 147/148.

Violation of principles of natural justice - requirement to provide opportunity of personal hearing before passing assessment orders - duty of assessing officer to disclose material in his possession to the assessee - setting aside assessment orders and remand for de novo exercise

Violation of principles of natural justice - requirement to provide opportunity of personal hearing before passing assessment orders - Assessment orders dated 28.03.2023 for AYs 2013-14 to 2019-20 were liable to be set aside for breach of natural justice. - HELD THAT: - The Court found that notices dated 09.03.2023 granted the petitioner thirty days to file returns, a timeline which would expire on 08.04.2023. Notwithstanding the petitioner's request for time to respond to Section 142(1) notices and the existence of the thirty-day window, the Assessing Officer proceeded to pass assessment orders on 28.03.2023. The AO thus failed to adhere to the timeline in the earlier notices and did not accord the petitioner the opportunity of personal hearing before concluding assessments. This constituted a violation of principles of natural justice warranting setting aside of the impugned orders.

Impugned assessment orders dated 28.03.2023 for AY 2013-14 to AY 2019-20 set aside for breach of natural justice.

Duty of assessing officer to disclose material in his possession to the assessee - setting aside assessment orders and remand for de novo exercise - Matters remanded to the Assessing Officer for de novo exercise with directions to disclose material, grant personal hearing, and permit the petitioner to furnish information within a specified time. - HELD THAT: - The Court granted liberty to the AO to carry out a fresh assessment de novo but imposed procedural safeguards. The AO was directed to provide to the petitioner any information or material in his possession that had not been furnished earlier. Before proceeding further, the AO must grant a personal hearing to the petitioner's authorised representative, issuing notice indicating date and time. The petitioner was directed to supply the information sought under the Section 142(1) notice dated 28.03.2023 within three weeks. These directions ensure that the remand proceeds with adherence to procedural fairness and transparency.

Matter remanded for de novo assessment with directions to disclose material in AO's possession, grant personal hearing, issue appropriate notices, and permit the petitioner three weeks to furnish required information.

Final Conclusion: Writ petition disposed of: impugned assessment orders dated 28.03.2023 for AY 2013-14 to AY 2019-20 set aside for breach of natural justice; matter remanded for de novo assessment with directions that the AO disclose material in his possession, afford a personal hearing to the authorised representative, issue notices specifying date and time, and allow the petitioner three weeks to furnish the information sought.

Principles of natural justice - opportunity of hearing - remand for fresh consideration - non-compliance of procedure under Section 144-B(6)(vii) and (viii) - closure of e-submission facility and e-filing grievance

Principles of natural justice - opportunity of hearing - non-compliance of procedure under Section 144-B(6)(vii) and (viii) - closure of e-submission facility and e-filing grievance - remand for fresh consideration - Impugned assessment order and consequential notices were issued without affording the petitioner an opportunity of hearing in alleged non-compliance with the procedure under Section 144 B(6)(vii) and (viii), warranting quashing and remand. - HELD THAT: - The petitioner sought adjournment or rescheduling of a virtual hearing on the morning of the scheduled date through the e-filing portal; the request remained shown as "Open" and the e-submission facility in the petitioner's account was closed. Respondent No.1 forwarded information regarding the request to the concerned Assessment Unit only subsequently. The Court found that, on the material before it, the assessment order and notices were issued without giving the petitioner an opportunity of hearing and in apparent non-compliance with the procedural safeguards reflected in clause (vii) and (viii) of sub section (6) to Section 144 B. The Court did not adjudicate the merits of the assessment; instead, it set aside the impugned orders and remitted the matter to the Assessing Officer with a direction to afford the petitioner an opportunity of hearing and to pass a fresh order in accordance with law.

Impugned order dated 24.03.2023 and the consequential notices are set aside and the matter is remanded to the Assessing Officer for fresh decision after providing the petitioner an opportunity of hearing in accordance with law.

Final Conclusion: Writ petition allowed; impugned order and notices quashed and matter remanded to the Assessing Officer to pass fresh order after affording opportunity of hearing; merits left open.

Condonation of delay - consistency principle - secondment costs - interference with findings of fact by the Tribunal - no substantial question of law

Condonation of delay - Application for condonation of delay of 240 days in filing the appeal was allowed. - HELD THAT: - The application filed on behalf of the appellant/revenue seeking condonation of delay in filing the appeal, admitted to be 240 days, was not opposed by the respondent. The Court exercised its discretion to condone the delay and disposed of the application allowing the appeal to be heard on merits. [Paras 1, 2, 3, 4, 5]

Delay of 240 days condoned and the application disposed of accordingly.

Secondment costs - consistency principle - interference with findings of fact by the Tribunal - no substantial question of law - Whether the Tribunal's confirmation of CIT(A)'s deletion of addition relating to secondment costs could be interfered with and whether a substantial question of law arises. - HELD THAT: - The Tribunal had confirmed the CIT(A)'s deletion of the addition which related to costs of employees seconded from the group company; the Court noted there was no challenge that secondment costs were incurred and that in earlier assessment years such costs had been allowed. The Assessing Officer's approach of disallowing only 50% while treating the secondment agreement as not genuine was held to lack rationale and to be inconsistent. The Court applied the principle of consistency (distinct from res judicata) where facts are pari materia and found no perversity in the Tribunal's factual findings. Since the Tribunal merely affirmed CIT(A)'s deletion of the addition and no legal question requiring determination was shown, the Court concluded that no substantial question of law arises warranting interference. [Paras 9, 10, 11, 12, 13]

Tribunal's order confirming deletion of the addition is upheld; no substantial question of law arises and the appeal is closed.

Final Conclusion: The delay in filing the appeal is condoned and, on the merits for AY 2014-15, the Tribunal's confirmation of CIT(A)'s deletion of the addition relating to secondment costs is upheld as there is no perversity in factual findings and no substantial question of law arises; the appeal is closed.

Application under Section 197 for lower withholding tax certificate - lower withholding tax certificate - setting aside of impugned withholding certificate and recorded reasons - remand for fresh decision - re-examination of application in light of earlier adjudication - time bound direction for re examination

Application under Section 197 for lower withholding tax certificate - lower withholding tax certificate - setting aside of impugned withholding certificate and recorded reasons - Impugned lower withholding tax certificate dated 31.08.2022 and the undated order (Annexure H) were set aside. - HELD THAT: - The Court noted that the petitioner had applied under Section 197 seeking a certificate at NIL rate for FY 2022-23, but the concerned officer had issued a certificate fixing withholding at 9.99% and furnished reasons in Annexure H. Having allowed a related writ (W.P.(C) 3639/2022) and given directions thereon, the Court found it appropriate to set aside the impugned certificate and the accompanying order and to require a fresh consideration of the petitioner's Section 197 application. [Paras 6, 8]

Impugned certificate dated 31.08.2022 and Annexure H set aside; writ petition disposed accordingly.

Remand for fresh decision - re-examination of application in light of earlier adjudication - time bound direction for re examination - The petitioner's Section 197 application was remitted for fresh decision and the officer was directed to re examine it within ten days of receipt of the judgment. - HELD THAT: - The Court directed that the concerned officer should re examine the petitioner's application under Section 197 in light of the reasons and directions given while disposing of W.P.(C) 3639/2022. Given the impending end of the relevant financial year (31.03.2023), the Court imposed a time bound obligation that the re examination be completed within ten days from receipt of the copy of the judgment, thereby limiting the remand to a fresh decision consistent with the Court's earlier directions. [Paras 6, 7]

Matter remitted for fresh decision; re examination to be completed within ten days from receipt of the judgment.

Final Conclusion: The impugned withholding tax certificate and the reasons recorded therein were set aside and the matter remitted for fresh, time bound consideration of the petitioner's Section 197 application in light of this Court's directions in W.P.(C) 3639/2022; re examination to be completed within ten days of receipt of the judgment.

Validity of reopening notice issued against non existing entity following amalgamation - Notice under Section 148 for reopening assessment - Effect of amalgamation on existence of the amalgamating company - Correction of procedural defects under Section 292B - Estoppel by participation in tax proceedings

Validity of reopening notice issued against non existing entity following amalgamation - Notice under Section 148 for reopening assessment - Effect of amalgamation on existence of the amalgamating company - Estoppel by participation in tax proceedings - Correction of procedural defects under Section 292B - Whether the notice dated 30th March 2015 under Section 148 issued in the name of M/s. Morgan Construction Company (I) Private Limited - a company that had amalgamated with and ceased to exist on merger into the petitioner - was legally sustainable, and whether Section 292B could cure the defect. - HELD THAT: - The Court applied settled principles that an amalgamating company ceases to exist on an approved scheme of amalgamation and, once the assessing officer was informed of such amalgamation (intimated on 17th September 2012), issuance of a jurisdictional notice under Section 148 in the name of the defunct amalgamating company could not satisfy the jurisdictional prerequisite and rendered the proceedings unsustainable. The Court relied on precedents which treat service or continuation of proceedings in the name of a non existing company as void and rejected the contention that participation by the amalgamated entity could operate as estoppel against law. The Court distinguished the decision relied on by the revenue (Sky Light Hospitality LLP) on the ground that in that case there was material on record (including PAN and reasons to believe) pointing to an intention to proceed against the successor entity (LLP), thereby attracting Section 292B; by contrast, in the present case the reasons recorded, the approval for reassessment and the notice itself referred only to M/s. Morgan Construction and contained no material indicating that the proceedings were intended to be against Siemens Limited. In these circumstances Section 292B could not be invoked to validate the notice, and the reopening notice and the order disposing of objections were held to be void. [Paras 11, 12, 13, 14]

The notice dated 30th March 2015 under Section 148 and the order dated 18th January 2016 disposing of objections are quashed as issued in the name of a non existing amalgamating company and not saved by Section 292B.

Final Conclusion: The petition is allowed: the reassessment notice dated 30.03.2015 under Section 148 and the order rejecting objections dated 18.01.2016 are quashed because proceedings were continued in the name of a company that had ceased to exist on amalgamation and the defect could not be cured under Section 292B.

Disputed questions of fact - lack of bona fides - writ jurisdiction not to adjudicate factual disputes - appropriate forum for civil claims - finality of prior judicial order - leave to pursue alternative proceedings

Disputed questions of fact - writ jurisdiction not to adjudicate factual disputes - appropriate forum for civil claims - Whether the petitioner is entitled in writ jurisdiction to a direction for refund of funds allegedly wrongly credited to a third party and to restraint on appropriation of those funds. - HELD THAT: - The Court held that the petitioner's claim involves contentious factual questions and lacks bona fides as previously adjudicated by a learned Single Judge by order dated 11th November, 2020. That prior order, which concluded that the petition raised highly disputed questions of fact and directed the petitioner to pursue remedies before an appropriate forum/civil court, has attained finality. In these circumstances the High Court declined to exercise writ jurisdiction to decide the competing factual contentions or to grant the equitable relief sought. The Court observed that the respondent authority's decision relied upon the earlier Single Judge's order and rejected the petitioner's contentions; the petitioner ought to have agitated its claim in the appropriate civil forum as directed earlier. The High Court therefore refused to entertain the present petition and application, while permitting the petitioner to file appropriate proceedings in accordance with law.

Writ petition and application dismissed; petitioner granted liberty to initiate appropriate proceedings in the proper forum.

Final Conclusion: The High Court dismissed the writ petition and attendant application, holding that the dispute involves disputed questions of fact already the subject of a final earlier order and is to be agitated before the appropriate civil forum; liberty was granted to the petitioner to pursue appropriate proceedings in accordance with law.

Disallowance of claimed long term capital loss - burden of proof to establish year and cost of acquisition of shares - reconciliation of share holdings and documentary proof - notional interest on interest-free advances/inter-corporate deposits - requirement to establish business purpose and source of funds for interest-free advances

Disallowance of claimed long term capital loss - burden of proof to establish year and cost of acquisition of shares - reconciliation of share holdings and documentary proof - Long term capital loss claimed on sale of shares of Escorts Ltd. was not allowable for lack of proof of year and value of acquisition and unreconciled share records. - HELD THAT: - The Tribunal accepted the findings of the Assessing Officer and the Commissioner (Appeals) that the assessee failed to produce documentary evidence establishing the year of acquisition and the cost/value of the shares sold. The appellate authority recorded discrepancies in the assessee's share reconciliations (purchases and sales figures did not tally across years) and noted absence of proof to substantiate that the shares sold were long-term holdings purchased in the earlier year claimed. The assessee did not place any material before the Tribunal to controvert these findings. On that basis the loss claimed could not be admitted and the addition was confirmed. [Paras 10]

Ground dismissed and disallowance of long term capital loss upheld.

Notional interest on interest-free advances/inter-corporate deposits - requirement to establish business purpose and source of funds for interest-free advances - Notional interest on interest-free advances to Escorts Finance Ltd. was correctly disallowed where assessee failed to establish business purpose for interest-free advances or that advances were made out of interest-free funds. - HELD THAT: - The AO determined, and the CIT(A) concurred, that the assessee had made interest-free advances/receivables without furnishing proof of payment dates or that such advances arose out of surplus interest-free funds; meanwhile the assessee itself paid interest on inter-corporate deposits. Precedents cited by the CIT(A) were relied upon to apply the principle that interest is to be disallowed where advances are interest-free, lack business purpose and are made out of borrowed funds. The assessee did not produce material before the Tribunal to demonstrate business necessity or the source of funds; consequently, the notional interest computed by the AO was sustained. [Paras 15]

Ground dismissed and addition of notional interest confirmed.

Final Conclusion: Both grounds of appeal were dismissed and the order of the Commissioner of Income Tax (Appeals) confirming the disallowance of the long term capital loss and the addition of notional interest was upheld; the appeal is dismissed.

Fees for Included Services - "make available" test for technical/consultancy services - Royalty - payment for access to databases / information - reimbursement of expenses / cost allocation to associated enterprises - segmentation (bifurcation) of composite service for characterisation - remand for de novo adjudication on levy of interest under section 234A

Fees for Included Services - "make available" test for technical/consultancy services - segmentation (bifurcation) of composite service for characterisation - Characterisation of specified project administration and related payments received for campus development as Fees for Included Services under the India-US DTAA. - HELD THAT: - The Tribunal examined the Campus Project Services Agreement and the detailed breakup of amounts claimed as reimbursements for third party vendor services. It applied the DTAA definition of Fees for Included Services and reiterated the twin test embodied in the "make available" jurisprudence: services qualify only if they result in imparting technical knowledge/skill/know how so that the recipient can independently deploy the technology after the contract. The Tribunal rejected a broad brush approach of treating the entire campus consideration as FIS solely because part of it was earlier taxed; each component must be examined. On the facts, the impugned items (document handling/printing, project administration, procurement, scheduling, reviews, legal and telecom services, etc.) did not make available technical knowledge nor involve development/transfer of technical plans or designs. Consequently those reimbursements were not taxable as FIS under Article 12(4) of the India-US DTAA. [Paras 10, 11, 12, 13, 14]

The additions treating the project administration and related reimbursement amounts as Fees for Included Services are deleted; grounds 1-2 are allowed.

Royalty - payment for access to databases / information - reimbursement of expenses / cost allocation to associated enterprises - Whether amounts recovered by the assessee from associated enterprises for access to third party databases/market data constitute Royalty under the India-US DTAA. - HELD THAT: - The Tribunal analysed the nature of the payments for subscription/access to multiple third party databases and noted that these were costs incurred by the Group and allocated to users on a usage basis. Relying on precedents addressing taxation of database/subscription access, the Tribunal held that mere provision of information or non exclusive, non transferable access to databases does not amount to transfer or making available of technology or intellectual property so as to attract the definition of Royalty. Where the underlying payments to database providers are not royalty, the pass through recovery by the assessee from associated enterprises likewise does not transform into royalty income in the hands of the assessee. The receipts were also not disputed to be cost recoveries. [Paras 16, 17, 18, 19]

The addition on account of market data charges treated as Royalty is deleted; ground 3 is allowed.

Remand for de novo adjudication on levy of interest under section 234A - Levy of interest under section 234A in respect of delayed filing of return. - HELD THAT: - The Tribunal did not decide the factual question whether the returns were filed within the prescribed time. Instead, it directed a fresh factual and legal examination by the Assessing Officer and remitted the matter for de novo adjudication so that interest under section 234A may be determined after verification of filing dates and relevant facts. [Paras 20, 25, 32, 40]

The issue of interest under section 234A is remanded to the Assessing Officer for de novo adjudication.

Reimbursement of expenses / cost allocation to associated enterprises - Credit for withholding tax (TDS) claimed by the assessee in respect of amounts withheld by associated enterprises. - HELD THAT: - The Tribunal restored the matter to the file of the Assessing Officer with a direction to verify records and grant TDS credit in accordance with law after necessary verification. [Paras 31]

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

Carry forward of short term capital loss - Allowability and carry forward of brought forward short term capital losses to the next assessment year. - HELD THAT: - The Tribunal restored the matter to the Assessing Officer for fresh decision after necessary verification of facts and correctness of carry forward treatment under the law. [Paras 34, 41]

Issue restored to the Assessing Officer for fresh adjudication and verification.

Penalty proceedings premature / dismissal - Initiation of penalty proceedings under the Income tax Act against the assessee. - HELD THAT: - The Tribunal held that initiation of penalty proceedings in the circumstances was premature and accordingly dismissed the grounds seeking imposition of penalty. [Paras 26, 35, 42]

The challenge to initiation of penalty proceedings is dismissed as premature.

Final Conclusion: The Tribunal allowed the appeals substantially: reimbursements and project administration costs charged by the assessee were held not to be Fees for Included Services; recoveries of market data/database costs were held not to be Royalty and the additions deleted; issues of interest under section 234A were remanded for de novo adjudication; certain factual matters (TDS credit, carry forward of losses) were restored to the Assessing Officer for verification; penalty proceedings were dismissed as premature.

Categorisation of corporate entities as Green, Amber and Red based on 12-month cashflow solvency test - requirement of judicial leave for unilateral re-categorisation of an entity previously recorded as Green - effect of a Resolution Consultant's solvency recommendation subject to lender waivers and conditions - treatment of interim/arbitral awards under challenge in solvency assessment - lenders' obligation to consider conditional waivers and renegotiation for solvency reclassification

Categorisation of corporate entities as Green, Amber and Red based on 12-month cashflow solvency test - requirement of judicial leave for unilateral re-categorisation of an entity previously recorded as Green - effect of a Resolution Consultant's solvency recommendation subject to lender waivers and conditions - lenders' obligation to consider conditional waivers and renegotiation for solvency reclassification - Whether Jharkhand Infrastructure Implementation Company Ltd. (JIICL) should be re-categorised as a "Green" entity notwithstanding earlier attempts by the IL&FS group to reclassify it unilaterally to "Red", and on what conditions. - HELD THAT: - This Tribunal recorded that entities earlier classified as "Green" in its orders could not be unilaterally re-categorised by the entities themselves without placing material before the Tribunal and obtaining leave. The Resolution Consultant thereafter re-assessed JIICL and, subject to certain lender-related waivers and an interest-rate renegotiation, recommended conversion to "Green". The Tribunal accepted that when an entity is recorded as "Green" the aim is that it should continue to discharge obligations and not be allowed to undermine that status by unilateral action. Given the Resolution Consultant's recommendation and the need for lender approvals (DSRA and MMRA waivers and link of interest rate to MCLR), the Tribunal directed that JIICL be declared "Green" conditionally, subject to the lenders taking the specified decisions within one month. [Paras 12, 13, 14, 17]

JIICL is to be treated as a "Green" entity subject to lenders approving the specified waivers and renegotiation of interest rate within one month.

Categorisation of corporate entities as Green, Amber and Red based on 12-month cashflow solvency test - effect of a Resolution Consultant's solvency recommendation subject to lender waivers and conditions - treatment of interim/arbitral awards under challenge in solvency assessment - requirement of judicial leave for unilateral re-categorisation of an entity previously recorded as Green - Whether Jharkhand Road Projects Implementation Company Limited (JRPICL) should be re-categorised as a "Green" entity in view of receipt of annuities and despite pending/arising arbitral awards. - HELD THAT: - The record showed substantial annuities were received by JRPICL and the Resolution Consultant and the New Board had given conditional approval for re-categorisation to "Green" subject to receipt of additional annuities; those conditions were fulfilled and account balances were substantial. Although arbitral awards had been passed against JRPICL, those awards were under challenge and therefore could not automatically defeat the re-categorisation; the Tribunal noted that contingent liabilities in the form of awards being contested must be considered, but pending challenge they were not a bar to treatment as "Green." The Tribunal therefore directed JRPICL be treated as "Green" while granting liberty to seek leave to re-categorise if any award ultimately results in an inability to meet liabilities. [Paras 15, 16, 17]

JRPICL is to be treated as a "Green" entity, with liberty to apply to the Tribunal to re-categorise if any arbitral award ultimately gives rise to an inability to discharge liabilities.

Final Conclusion: IA No.1709 of 2022 is allowed: JIICL is declared "Green" subject to lenders granting specified waivers and interest-rate renegotiation within one month; JRPICL is declared "Green" while preserving the Tribunal's liberty to permit future recategorisation if contested arbitral liabilities materialise.

Project-wise insolvency resolution process - corporate insolvency resolution process - committee of creditors - reverse CIRP - interim relief/interim arrangement - balance of convenience - irreparable injury - status quo / interlocutory mandatory injunction principles

Project-wise insolvency resolution process - committee of creditors - corporate insolvency resolution process - Validity and interim effect of the Appellate Tribunal's order authorising constitution of CoC only for Eco Village-II and, more generally, adopting a project-wise CIRP approach - HELD THAT: - The Court examined whether, as an interim measure, the NCLAT's directions restricting constitution of the CoC to the Eco Village-II project and treating other projects as ongoing under IRP supervision should be altered. Applying established principles for interim relief-including assessment of prima facie case, balance of convenience and risk of irreparable injury-the Court concluded that interfering with the impugned directions at this stage would likely cause greater inconvenience and potential irreparable harm to home buyers and ongoing projects. The Court noted that the NCLAT's order had, as its practical effect, limited immediate CoC constitution to Eco Village-II while preserving continuation of construction of other projects under the IRP with assistance of ex management but without conferring additional rights on the ex management. In light of the lower risk of injustice, the Court declined to direct constitution of a CoC for the corporate debtor as a whole as an interim measure and therefore did not upset the NCLAT directions except as specifically modified in relation to further steps on Eco Village II. [Paras 10, 11, 13]

The impugned order is permitted to operate as an interim measure; the directions keeping other projects as ongoing under IRP supervision are not disturbed.

Project-wise insolvency resolution process - committee of creditors - interim relief/interim arrangement - Extent of permissible action in respect of Eco Village II pending final disposal of appeals - HELD THAT: - The Court accepted NCLAT's constitution of the CoC for Eco Village II but restricted further steps. While the impugned order's directions relating to constitution of CoC for Eco Village II are not interfered with at interim stage, the Court held that any process beyond voting on a resolution plan for Eco Village II shall not proceed without specific orders of this Court. This limitation reflects the Court's application of the balance of convenience and risk of injustice tests to prevent irreversible steps before final adjudication. [Paras 11, 13]

CoC constitution for Eco Village II may stand for interim purposes, but any process beyond voting on a resolution plan shall await further orders of this Court.

Interim relief/interim arrangement - status quo / interlocutory mandatory injunction principles - Whether NCLAT may consider and decide upon offers received from prospective resolution applicants during pendency of these appeals - HELD THAT: - Recognising that offers had been placed before NCLAT and that further delay could prejudice parties, the Court authorised NCLAT to deal with the offers and pass appropriate orders thereon. However, consistent with the Court's overall interim scheme, such exercise by NCLAT must remain subject to the ultimate orders to be passed in these appeals, thereby ensuring that actions taken at the Appellate Tribunal do not pre empt this Court's final adjudication. [Paras 14]

NCLAT may deal with the offers received and pass appropriate orders thereon, subject to the final orders in these appeals.

Interim relief/interim arrangement - Interim relief in Civil Appeal No. 1975 of 2023 - HELD THAT: - The Court considered whether any interim relief or arrangement was necessary in Civil Appeal No. 1975 of 2023 and found none warranted at the present stage. The issue of maintainability of that appeal was left open for consideration at an appropriate stage. [Paras 16]

No interim relief or arrangement is granted in Civil Appeal No. 1975 of 2023; maintainability kept open.

Final Conclusion: The impugned NCLAT order dated 10.06.2022 is allowed to operate as an interim measure subject to modification: other projects shall continue as ongoing under IRP supervision, CoC constitution for Eco Village II is preserved but any steps beyond voting on a resolution plan for Eco Village II shall await further orders of this Court; NCLAT may consider offers received subject to the final outcome of these appeals; no interim relief is granted in Civil Appeal No. 1975 of 2023 and its maintainability is left open.

Condonation of delay in filing appeal - appeal under Section 61 of the Insolvency and Bankruptcy Code - jurisdiction to condone delay under Section 61(2) of the Insolvency and Bankruptcy Code - statutory limitation as uncondonable by exercise of extraordinary constitutional powers

Condonation of delay in filing appeal - Section 61(2) of the Insolvency and Bankruptcy Code - effect of High Court direction on limitation - Article 142 of the Constitution - Whether the Tribunal could entertain and condone an appeal filed beyond the statutory period of thirty days plus a further permissible extension of fifteen days under Section 61(2) of the Code. - HELD THAT: - The Tribunal held that the time-limit for filing an appeal under Section 61(2) is thirty days with a proviso permitting an extension not exceeding fifteen days on satisfaction of sufficient cause, and that this combined period of forty-five days is the maximum permissible time for filing. The appeal in the present case was not filed within that statutory period; instead a writ petition was filed before the High Court and the appeal was filed only after the forty-five day period had expired. Reliance was placed on the Supreme Court's decision in National Spot Exchange Limited (supra) which establishes that where a special statute prescribes a limitation and permits condonation only to a fixed outer limit, that outer limit is binding and cannot be exceeded even by exercise of extraordinary jurisdiction under Article 142. A direction by the High Court to permit filing before the Appellate Tribunal within a specified period does not enlarge or extend the statutory limitation prescribed by Section 61(2). In consequence, the Tribunal found that it had no jurisdiction to condone delay beyond the statutory forty-five days and that the application for condonation was liable to be rejected.

Application for condonation of delay was rejected and the appeal dismissed for being barred by limitation; the Tribunal has no power to condone delay beyond forty-five days under Section 61(2).

Final Conclusion: The appeal and the application for condonation of delay are dismissed as barred by the statutory limitation prescribed under Section 61(2) of the Insolvency and Bankruptcy Code; the Tribunal cannot condone delay beyond the maximum forty-five day period.

Competent person signing and verification of petition - power of attorney and sub-delegation - proof of delivery of goods as part of operational debt - burden of proof in summary insolvency proceedings under the IBC - dishonest or moonshine defence - admission of Section 9 application

Competent person signing and verification of petition - power of attorney and sub-delegation - Whether the Section 9 petition was duly signed and verified by a competent person on behalf of the Operational Creditor. - HELD THAT: - The Adjudicating Authority examined whether the petition was signed and verified by a person authorised to act for the Operational Creditor. It applied settled principles that a company acts through authorised persons and that a pleading signed by an officer may be validated by express or implied ratification, or by a specific power of attorney. The record showed a specific power of attorney in favour of Mr. Debabrata Basu and no rider requiring further board approval for sub-delegation. On this basis the Adjudicating Authority concluded, and this Tribunal agreed, that the petition was filed by a competent person and complied with the requirement of signing and verification. [Paras 6, 7, 10]

The petition was validly signed and verified by a competent person pursuant to the power of attorney and related authorities.

Proof of delivery of goods as part of operational debt - burden of proof in summary insolvency proceedings under the IBC - admission of Section 9 application - Whether the Operational Creditor failed to prove delivery of goods so as to vitiate admission of the Section 9 application. - HELD THAT: - The Tribunal reviewed the pleadings, invoice, correspondence and conduct of the parties. The Demand Notice, the Section 9 application and Part IV expressly stated that the equipment was duly received by the Corporate Debtor "without any dispute or demur." The tax invoice identified the Corporate Debtor as recipient and CESC Limited as consignee and contained shipment particulars including vehicle numbers and packing details. Post supply correspondence from the Operational Creditor demanded payment, recorded receipt of materials on specific dates, and warned of withdrawal of service engineers - none of which was met by contemporaneous complaint of non delivery by the Corporate Debtor. The Corporate Debtor's plea in reply contested delivery but also admitted defects and delay in execution and later sought adjournments stating possibility of settlement. The Tribunal held that strict evidentiary burden under the Evidence Act is not to be mechanically applied to summary IBC proceedings where prescribed forms and pleadings are relied upon; given the consistent assertions of receipt, documentary indicia of delivery, absence of prior protest, and the Corporate Debtor's conduct, the Adjudicating Authority rightly concluded that delivery and debt were prima facie established and that the non delivery plea was a dishonest (moonshine) defence. [Paras 19, 23, 24, 27, 29]

Operational Creditor had prima facie proved delivery and operational debt for the purposes of admission; the Corporate Debtor's denial of delivery was held to be a dishonest defence and did not vitiate admission under Section 9.

Admission of Section 9 application - Whether the Adjudicating Authority erred in admitting the Section 9 application. - HELD THAT: - Combining the findings on competence to sign the petition and on proof of delivery, the Tribunal considered the totality of record including demand notice, invoice, shipment particulars, follow up correspondence and the Corporate Debtor's conduct (including repeated adjournments and settlement overtures). The Tribunal accepted the Adjudicating Authority's application of the relevant legal principles and its view that debt and default were established prima facie and the defences raised were groundless. The Tribunal rejected reliance on strict Evidence Act authorities for imposing a heightened burden in summary IBC proceedings and found no infirmity in the admission order. [Paras 6, 9, 17, 23, 30]

No error in admitting the Section 9 application; the admission is upheld and the appeal dismissed.

Final Conclusion: The Tribunal upheld the Adjudicating Authority's admission of the Section 9 application: the petition was signed by a competent person under a valid power of attorney, prima facie proof of delivery and operational debt was established from the documents and parties' conduct, the Corporate Debtor's denial of delivery was held to be a dishonest defence, and therefore the admission under Section 9 was confirmed and the appeal dismissed.

Withdrawal of application admitted under section 7, 9 or 10 - Restructuring proposal not equating to settlement under Section 12A - Requirement of ninety per cent approval of the Committee of Creditors - Maintenability of Section 12A application where Committee of Creditors has constituted and resolution plans are under consideration

Restructuring proposal not equating to settlement under Section 12A - The application filed by the appellant claiming a restructuring proposal cannot be treated as an application for withdrawal/settlement under Section 12A. - HELD THAT: - The Adjudicating Authority's finding that the appellant's filing was not an application for settlement under Section 12A was affirmed. Section 12A permits the Adjudicating Authority to allow withdrawal of applications admitted under sections 7, 9 or 10 upon an application made by the applicant with requisite CoC approval. In the present case the Corporate Insolvency Resolution Process had advanced to a stage where the Committee of Creditors had been constituted and resolution plans were being considered; a mere restructuring proposal by the appellant did not amount to a settlement application under Section 12A and therefore could not be entertained as such.

Application based on a restructuring proposal is not maintainable as an application for withdrawal under Section 12A.

Requirement of ninety per cent approval of the Committee of Creditors - Maintenability of Section 12A application where Committee of Creditors has constituted and resolution plans are under consideration - The Section 12A application was untenable also because it did not have the approval of ninety per cent of the Committee of Creditors. - HELD THAT: - Section 12A conditions the withdrawal of an admitted application on the approval of ninety per cent voting share of the Committee of Creditors. The Adjudicating Authority found, and this Tribunal agreed, that there was no ninety per cent CoC consent in favour of the appellant's proposal. Given the absence of the specified CoC approval and the fact that the CoC had already considered and rejected a similar proposal in its thirtieth meeting, the 12A application could not be allowed. The Tribunal therefore found no error in the Adjudicating Authority's rejection of the application.

Absence of ninety per cent CoC approval rendered the Section 12A application liable to be rejected.

Final Conclusion: The adjudication below rejecting the appellant's Section 12A application was affirmed: the appellant's restructuring proposal did not qualify as a settlement under Section 12A and, independently, the requisite ninety per cent approval of the Committee of Creditors was lacking; the appeal is dismissed.

Admission of Section 9 application under Insolvency and Bankruptcy Code, 2016 - Acknowledgement of debt and its evidentiary value - Settlement agreement as admission of liability - Effect of balance-sheet entries in proving or negating set-off - Irrelevance of subsequent criminal proceedings to Section 9 adjudication

Admission of Section 9 application under Insolvency and Bankruptcy Code, 2016 - Acknowledgement of debt and its evidentiary value - Settlement agreement as admission of liability - Effect of balance-sheet entries in proving or negating set-off - Whether the Adjudicating Authority was justified in admitting the Section 9 application by finding that debt and default existed in respect of the Operational Creditor's claim. - HELD THAT: - The Tribunal examined the material placed before the Adjudicating Authority and recorded that the Corporate Debtor did not deny the Operational Creditor's entitlement to the claimed dues but pleaded that the debt stood discharged by payments made to two other entities allegedly under common control. The balance-sheet of the Corporate Debtor for the relevant year, filed by the Operational Creditor, recorded the claimed amount as a Trade Payable in favour of the Operational Creditor while separately showing the amounts said to have been paid to the two entities as Trade Receivables, thereby contradicting the plea of set-off or payment. The Settlement Agreement signed by the Appellant contained an express adjustment/acknowledgement of liability in favour of the Operational Creditor. Having regard to these contemporaneous commercial records and the acknowledgement in the settlement, the Adjudicating Authority was entitled to conclude that there was a debt owed and a default by the Corporate Debtor, and to admit the Section 9 application. [Paras 6, 7, 9, 11]

The finding that the Operational Creditor's debt existed and remained unpaid was upheld and admission of the Section 9 application was held to be justified.

Irrelevance of subsequent criminal proceedings to Section 9 adjudication - Whether criminal proceedings initiated by the Appellant after receipt of the demand notice could preclude admission of the Section 9 application. - HELD THAT: - The Tribunal held that proceedings initiated under the criminal law subsequent to service of the demand notice could not be relied upon to defeat the Section 9 application. The Adjudicating Authority was required to decide the Section 9 application on the basis of the material placed before it establishing debt and default; initiation of criminal proceedings after the demand notice does not negate the documentary evidence of debt and acknowledgement relied upon by the Operational Creditor. [Paras 12, 13]

Criminal proceedings instituted after the demand notice do not preclude admission of the Section 9 application; no benefit could be drawn by the Appellant from such proceedings.

Final Conclusion: The appeal is dismissed. The National Company Law Tribunal's order admitting the Section 9 application was upheld: the Operational Creditor's claim of debt and default was supported by the Corporate Debtor's balance-sheet entries and the settlement agreement, and subsequent criminal proceedings did not defeat the Section 9 admission.

Offences to be cognizable and non-bailable - rigour of Section 45 of the PML Act, 2002 - scheduled offences under the PML Act, 2002 - bail in money laundering cases - distinction between predicate-offence investigation and money laundering investigation by the Enforcement Directorate

Rigour of Section 45 of the PML Act, 2002 - Offences to be cognizable and non-bailable - bail in money laundering cases - Whether the High Court erred in granting bail without applying the requirements and rigour of Section 45 of the PML Act, 2002 in respect of accused facing money laundering investigation - HELD THAT: - The Supreme Court found that the High Court did not consider the statutory rigour of Section 45 of the PML Act, 2002 before enlarging the accused on bail. Section 45 imposes a restricted regime for grant of bail in offences under the PML Act by requiring opportunity to the Public Prosecutor and, where opposed, satisfaction of the court that there are reasonable grounds for believing the accused is not guilty and is not likely to commit an offence while on bail. The High Court's orders indicate reliance on the filing of a chargesheet in respect of the predicate offences as a basis for bail, without applying the statutory test under Section 45 to the money laundering offences. The Court held that such omission was impermissible and constituted a material error in law because the limited scope for bail in money laundering cases must be examined even where predicate offence proceedings have progressed. [Paras 6, 7]

High Court's orders granting bail were set aside for failure to consider and apply Section 45 of the PML Act, 2002.

Scheduled offences under the PML Act, 2002 - distinction between predicate-offence investigation and money laundering investigation by the Enforcement Directorate - Whether the High Court wrongly treated completion of the predicate offence chargesheet as equivalent to completion of the Enforcement Directorate's money laundering investigation - HELD THAT: - The Court emphasised that investigation into predicate offences and the separate money laundering investigation by the Enforcement Directorate are distinct. The High Court erred in treating the filing of a chargesheet in respect of predicate offences as conclusive of the ED's inquiry; the record showed the ED's investigation into scheduled offences was still continuing. Given the ongoing ED probe and the seriousness of the alleged money laundering offences, the Supreme Court held that relying on the state of predicate proceedings alone amounted to considering an irrelevant factor and warranted setting aside the bail orders. [Paras 2, 6, 7]

The High Court's reliance on the predicate offence chargesheet as a ground for bail was misplaced; the ED investigation into scheduled offences remained ongoing and required fresh consideration.

Bail in money laundering cases - Offences to be cognizable and non-bailable - Whether the matter should be remitted for fresh consideration of bail applications and the procedural consequences directed by the Supreme Court - HELD THAT: - Because the High Court failed to apply the statutory bail test and misapprehended the status of the ED investigation, the Supreme Court quashed the impugned bail orders and remitted the matters to the High Court for fresh adjudication. The Court directed that the accused shall surrender to the competent court or jail authority within one week, after which the High Court is to decide the bail applications afresh in light of the observations made, including proper application of Section 45 and assessment of the seriousness of the scheduled offences. [Paras 7, 8]

Bail orders quashed; accused directed to surrender within one week and High Court to reconsider bail applications afresh in light of the Court's observations.

Final Conclusion: The Supreme Court allowed the appeals, quashed the High Court's orders granting bail to the accused for offences under the PML Act, 2002, directed the accused to surrender within one week, and remitted the matters to the High Court to decide the bail applications afresh after applying the statutory test under Section 45 and taking into account that the Enforcement Directorate's investigation into the scheduled offences was still pending.

Taxability of composite works contracts - service tax on construction services - classification between works contract and service contract - absence of charge and machinery to levy service tax on indivisible composite contracts - application of authoritative precedent

Taxability of composite works contracts - classification between works contract and service contract - absence of charge and machinery to levy service tax on indivisible composite contracts - Impugned taxable service classifications under Section 65(105)(zzq) and Section 65(105)(zzzh) cannot be applied to indivisible composite works contracts. - HELD THAT: - The High Court applied the Supreme Court's reasoning in Commissioner, Central Excise and Customs, Kerala v. Larsen and Toubro Limited, which held that the charging provisions in Section 65(105) refer to service contracts simpliciter and do not provide for taxation of composite works contracts containing both transfer of property in goods and provision of services. The Supreme Court further found that the Finance Act, 1994 lacks the necessary charge or machinery to levy and assess service tax on indivisible composite works contracts. Applying that authoritative precedent, the Court concluded that the Adjudicating Authority's treatment of the petitioner's composite contracts as taxable under Section 65(105)(zzq) and (zzzh) is unsustainable. [Paras 11, 12, 13]

The impugned order-in-original, insofar as it treats the petitioner's composite contracts as taxable under Section 65(105)(zzq) and (zzzh), is set aside.

Application of authoritative precedent - service tax on construction services - Further adjudication of the show cause notices remitted to the Adjudicating Authority for fresh consideration in light of the Supreme Court's decision. - HELD THAT: - While holding that the Adjudicating Authority's classification could not stand, the High Court remitted the matter to the Adjudicating Authority to adjudicate the show cause notices afresh, directing it to proceed in accordance with the law as laid down by the Supreme Court in Larsen and Toubro. The remand contemplates reconsideration of the demands and related consequences under the correct legal position established by that precedent. [Paras 14]

Matter remanded to the Adjudicating Authority to decide the show cause notices afresh in light of the Supreme Court's ruling.

Final Conclusion: The petition succeeds: the order-in-original dated 28.03.2012 is set aside to the extent it treats indivisible composite works contracts as taxable under Section 65(105)(zzq) and (zzzh); the matters are remanded to the Adjudicating Authority for fresh adjudication in accordance with the law laid down by the Supreme Court.

Taxability of composite works contracts - service tax on commercial and industrial construction services - construction of complex services - charging provision construed to apply to service contracts simpliciter - precedential application of Commissioner, Central Excise and Customs, Kerala v. Larsen & Toubro Ltd.

Taxability of composite works contracts - charging provision construed to apply to service contracts simpliciter - service tax on commercial and industrial construction services - construction of complex services - precedential application of Commissioner, Central Excise and Customs, Kerala v. Larsen & Toubro Ltd. - Whether Sub clauses (zzq) and (zzzh) of Section 65(105) of the Finance Act, 1994 could be invoked to levy service tax on composite works contracts entered into by the petitioner. - HELD THAT: - The court held that the challenge to Sub clauses (zzq) and (zzzh) is squarely covered by the Supreme Court's decision in Commissioner, Central Excise and Customs, Kerala v. Larsen & Toubro Ltd., which construed the charging provision to refer to service contracts simpliciter and not to indivisible composite works contracts containing elements of transfer of property in goods as well as labour and services. The Supreme Court emphasised that the taxable services in the sub clauses are service contracts simpliciter and that the Finance Act, 1994 does not provide a charge or machinery to levy and assess service tax on indivisible composite works contracts. Applying that precedent, the impugned order which proceeded on the basis that composite contracts were taxable under Sub clauses (zzq) and (zzzh) could not be sustained.

The impugned order in original dated 30.11.2012, insofar as it confirmed service tax demand under Sub clauses (zzq) and (zzzh) on composite works contracts, is set aside.

Precedential application of Commissioner, Central Excise and Customs, Kerala v. Larsen & Toubro Ltd. - remand for fresh adjudication - The procedural consequence to follow after declaring that composite works contracts are not taxable under the challenged sub clauses. - HELD THAT: - In light of the Supreme Court's authoritative ruling, the court directed that the matter be remitted to the Adjudicating Authority for fresh adjudication of the show cause notices. The fresh adjudication is to be carried out in accordance with the law laid down by the Supreme Court, thereby requiring reassessment of the demands without treating indivisible composite works contracts as taxable under the impugned sub clauses.

The matter is remanded to the Adjudicating Authority for fresh adjudication of the show cause notices in accordance with the Larsen & Toubro precedent.

Final Conclusion: The petition is allowed to the extent indicated: the impugned order in original dated 30.11.2012 is set aside insofar as it levied service tax on composite works contracts under Sub clauses (zzq) and (zzzh), and the matter is remanded for fresh adjudication in conformity with the law laid down by the Supreme Court.

Penalty under Section 76 and penalty under Section 78 mutually exclusive - benefit of reasonable cause under Section 80 - waiver of balance penalty where tax, interest and 25% penalty paid - confirmation of service tax liability with interest

Waiver of balance penalty where tax, interest and 25% penalty paid - Whether the appellants are liable to pay the balance of penalties when they have discharged the service tax with interest and deposited 25% of the penalty. - HELD THAT: - The Tribunal confined the contest to waiver of the balance penalty as the appellants did not press the merits of tax liability. Noting that the appellants had deposited the tax with interest and 25% of the penalty on receipt of the communication of the Original Authority, the Tribunal considered whether further penalty should be sustained. Having regard to the appellants' conduct in making these payments and the submissions seeking waiver rather than contest on merits, the Tribunal concluded that the continuation of the balance penalty was not justified and that penalties imposed were not sustainable. [Paras 4, 8]

Balance of the penalties is set aside; service tax with interest is confirmed.

Penalty under Section 76 and penalty under Section 78 mutually exclusive - Whether penalties under Sections 76 and 78 could be treated as mutually exclusive for the period prior to the Finance Act, 2008 amendment. - HELD THAT: - The Tribunal examined the view of the jurisdictional High Court in Pannu Property Dealers which, while not holding categorically that the two sections were mutually exclusive before the amendment, upheld the appellate authority's discretion to treat the penalties as mutually exclusive in the spirit of the subsequent amendment. Applying that reasoning and noting the relatively small amount involved, the Tribunal held that Sections 76 and 78 could be viewed as mutually exclusive even before the amendment and that this supported relief from multiple penal consequences. [Paras 5, 6]

Penalties under Sections 76 and 78 may be treated as mutually exclusive for the facts of this case.

Benefit of reasonable cause under Section 80 - Whether the appellants were entitled to the protection of Section 80 on the ground of reasonable cause for failure to discharge service tax earlier. - HELD THAT: - The Tribunal considered Section 80 which precludes imposition of penalty if the assessee proves reasonable cause. It found that the appellants, being small operators, faced rapidly changing service tax law and that the principal operator had discharged service tax on amounts collected from customers, which could reasonably have led the appellants to believe no separate liability arose. Given these circumstances and the appellants' subsequent payment of tax with interest and a portion of the penalty, the Tribunal concluded there was sufficient reasonable cause to invoke Section 80 and extend its benefit to the appellants. [Paras 7]

Benefit of Section 80 is available to the appellants and penalties are not sustainable.

Confirmation of service tax liability with interest - Whether the service tax liability (as determined by lower authorities) was to be sustained. - HELD THAT: - The Tribunal did not re-open the merits as the appellants did not press that aspect and observed that earlier decisions of this Bench in similar facts upheld the Department's position. Consequently, the Tribunal confirmed the service tax liability as paid by the appellants along with interest. [Paras 4, 8]

Service tax paid by the appellants, together with interest, is confirmed.

Final Conclusion: The appeal is partly allowed: service tax liability with interest is confirmed, but the penalties imposed are set aside by applying the benefit of Section 80 and treating penalties under Sections 76 and 78 as mutually exclusive in the circumstances of this case.

Valuation of taxable services - reimbursable expenses - secondment of employees / import of manpower - inclusion in gross amount charged - interpretation of Section 67 relating to gross amount charged - service tax liability under reverse charge mechanism

Valuation of taxable services - reimbursable expenses - inclusion in gross amount charged - interpretation of Section 67 relating to gross amount charged - Reimbursable expenses and benefits provided in relation to seconded employees are includible in the gross value for levy of service tax. - HELD THAT: - The Tribunal held that the legal position is settled by the Supreme Court decisions culminating in Union of India v. M/s. Intercontinental Consultants and Technocrats Pvt. Ltd. and subsequent authorities, which construe Section 67 to require that only the gross amount charged for the taxable service - the consideration paid as quid pro quo for the service - is to be brought to tax. Expenses reimbursed or other costs not constituting consideration for the taxable service cannot be included in the valuation. Applying that principle to the facts, the Tribunal found that the payments and reimbursements in question (hotel stay, school tuition fees, accommodation and related perquisites in respect of secondees) did not form part of the consideration for taxable services and thus were not includible in the gross amount charged for levy of service tax. [Paras 11, 12, 13]

Such reimbursable expenses/benefits are not includible in the value of taxable services and the demand confirmed on that basis is set aside.

Secondment of employees / import of manpower - service tax liability under reverse charge mechanism - Taxability of secondment/import of manpower and related reimbursements under the reverse charge or other provisions. - HELD THAT: - The Tribunal noted that the question of taxability of secondment has been authoritatively considered by the Supreme Court and allied decisions, and that where an employer-employee relationship exists and reimbursements are not consideration for a taxable service, service tax does not attach. The adjudication below which treated the disputed reimbursements and benefits as part of consideration for import of manpower services was therefore inconsistent with the settled law. Consequently, demands framed on that basis were unsustainable. [Paras 2, 5, 11, 12, 13]

The demand premised on treating secondment-related reimbursements as consideration for imported manpower services is not sustainable and is quashed.

Reimbursable expenses - penalty and extended period of limitation - Legitimacy of invoking extended period of limitation and imposition of penalty under the cited provisions in respect of the disputed claims. - HELD THAT: - The appellant contended, and the Tribunal accepted in outcome, that the ingredients necessary for invoking the extended period of limitation and for imposing penalty under the relevant provisions were not present. Although the Tribunal's determination on valuation is the principal basis for allowing the appellant's challenge, that result also negates the grounds for sustaining the demand, interest and equal penalty that had been confirmed by the adjudicating authority. [Paras 9, 13]

Extended period and penalty could not be sustained in the circumstances; the appellant's challenge to the demand, interest and penalty is allowed.

Final Conclusion: The appeals are allowed in favour of the appellant: the adjudicated demands based on inclusion of reimbursable expenses and benefits relating to secondees in the value of taxable services (for April 2015 to June 2017) are set aside, and the revenue's cross-appeal is dismissed.

Taxable service - public authority - statutory functions - service tax liability - banking and other financial services - negative list regime - mandated/compulsory fees and charges

Public authority - statutory functions - mandated/compulsory fees and charges - taxable service - Whether amounts collected by the appellant for the period 01.04.2009 to 30.06.2012 attract service tax as consideration for taxable services. - HELD THAT: - The Tribunal's earlier decision in the appellant's own case held that the appellant is a public authority performing statutory functions under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 and that fees/charges collected are statutorily fixed and compulsory. Those amounts therefore do not constitute consideration for a taxable service. The Tribunal applied the Board's clarification and the principle that where activities are statutory duties of a public authority and levies are compulsory, they are not services for levy of service tax. The Tribunal's reasoning was accepted by this Court and the Supreme Court has dismissed the Department's challenge; accordingly the demand for this period cannot be sustained. [Paras 13, 14]

Demand for service tax for the period 01.04.2009 to 30.06.2012 set aside.

Negative list regime - banking and other financial services - taxable service - mandated/compulsory fees and charges - Whether amounts collected by the appellant for the period 01.07.2012 to 31.03.2014 attract service tax under the negative list regime. - HELD THAT: - The Tribunal's ratio - that EPFO is a statutory authority performing mandated welfare functions and that fixed statutory charges do not constitute consideration for taxable services - was held applicable despite the shift to the negative list regime. The Commissioner, Siliguri applied that reasoning in a detailed order discharging the show cause notice for the period 01.07.2012 to 31.03.2014 and that order has attained finality. The Commissioner, Delhi has also discharged related show cause notices relying on the Tribunal's decision and Board Circular. Having regard to these authorities and the applicability of the Tribunal's reasoning to the later period, the demand for service tax for 01.07.2012 to 31.03.2014 cannot be sustained. [Paras 15, 16, 17, 18]

Demand for service tax for the period 01.07.2012 to 31.03.2014 set aside.

Final Conclusion: The impugned order dated 26.11.2015 confirming service tax, interest and penalties is set aside; the appeal is allowed and demands for the periods 01.04.2009 to 30.06.2012 and 01.07.2012 to 31.03.2014 are discharged.

Characterisation of amounts retained under a revenue sharing model as consideration for provision of business support service - application of the negative list regime to health care services provided by clinical establishments - scope and effect of exemption of health care services rendered by clinical establishments - inference versus contractual terms in determining existence of a taxable service

Characterisation of amounts retained under a revenue sharing model as consideration for provision of business support service - scope and effect of exemption of health care services rendered by clinical establishments - inference versus contractual terms in determining existence of a taxable service - Whether the amounts retained by the hospital out of sums collected from patients constituted consideration for a taxable business support service or formed part of consideration for exempt health care services rendered by a clinical establishment - HELD THAT: - The Tribunal's reasoning, accepted by this Appellate Tribunal, shows that the contractual arrangements between the hospital and consulting doctors operated as a revenue sharing model for the joint provision of health care services with shared obligations, responsibilities and benefits. The agreements did not specify provision of infrastructural or administrative facilities as a separate service nor attribute any part of the consideration to such a service. The retained amount therefore flows from the arrangement for provision of health care services by the clinical establishment and the engaged doctors, not as consideration for an independent business support service. Under the negative list regime the health care services rendered by clinical establishments are exempt; treating a portion of the consideration as taxable business support service would undermine that exemption. The Tribunal's view in Sir Ganga Ram Hospital (and subsequent consistent decisions) that such arrangements do not give rise to a taxable service has been accepted and applied to the present period. [Paras 8]

The Commissioner (Appeals) was correct in holding that the retained amounts were not consideration for a taxable business support service and the demand was not sustainable; the departmental appeal is dismissed.

Final Conclusion: Appeal dismissed; the order of the Commissioner (Appeals) setting aside the demand for service tax (business auxiliary service / renting of immovable property service) was upheld on the ground that the revenue sharing arrangements between the hospital and doctors constituted part of exempt health care services provided by a clinical establishment under the negative list regime.

CENVAT credit on input service - definition of "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004 - services used for providing output service - sales promotion includes services by way of sale of dutiable goods on commission basis - retrospective effect of an explanatory amendment

Retrospective effect of an explanatory amendment - sales promotion includes services by way of sale of dutiable goods on commission basis - Whether the Explanation inserted to Rule 2(l) on 03.02.2016 has retrospective effect and clarifies that services by way of sale of dutiable goods on commission basis fall within the scope of input service - HELD THAT: - The Tribunal accepted the Commissioner (Appeals)'s conclusion that the Explanation added to Rule 2(l) on 03.02.2016 clarifies legislative intent to include services by way of sale of dutiable goods on commission basis within the inclusive limb of "input service." The Court relied upon authoritative treatment showing that explanatory amendments of this kind can be given retrospective effect where they merely clarify the scope of the provision and to give effect to the legislative object of extending benefit. The Calcutta High Court's decision recognising the retrospective operation of the Explanation was noted and applied to support this conclusion. [Paras 12, 13]

The Explanation inserted to Rule 2(l) on 03.02.2016 has retrospective effect and includes services by way of sale of dutiable goods on commission basis within the definition of input service.

CENVAT credit on input service - definition of "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004 - services used for providing output service - Whether CENVAT credit of service tax paid on commission to collection agents for recovery of post-paid dues is admissible to the telecommunication service provider - HELD THAT: - The Tribunal held that Rule 2(l) entitles a provider of output service to credit for services that are used for providing the output service - that is, services without which provision of the output would be impossible or commercially inexpedient. The recovery/collection services rendered by collection agents bear a direct nexus to the business of providing telecommunication services (they secure revenue necessary for continuing the output service) and therefore qualify as input services. The Tribunal applied earlier decisions (including Bajaj Finance and Vodafone Essar) which treated recovery/collection services and bill collection agency services as input services and found the Joint Commissioner's reasoning - that such services occur after provision of the output service and therefore cannot be input services - to be incorrect. [Paras 12, 14, 15, 16]

CENVAT credit of service tax on commission paid to collection agents for post-paid plan dues is admissible as the services qualify as input service under Rule 2(l).

Final Conclusion: The departmental appeal is dismissed: the Explanation to Rule 2(l) of the CENVAT Credit Rules, 2004 (03.02.2016) is retrospective and, applying the definition of input service, the respondent was entitled to CENVAT credit of service tax paid on commission to collection agents for recovery of post-paid dues.

Condonation of delay - limitation for filing appeals before Commissioner (Appeals) - discretion of appellate authority circumscribed by proviso - interpretation of proviso limiting condonation power - appeal dismissed for want of limitation

Condonation of delay - limitation for filing appeals before Commissioner (Appeals) - discretion of appellate authority circumscribed by proviso - Whether the Commissioner (Appeals) was justified in dismissing the appeal as barred by limitation and not within the further period permissible for condonation of delay. - HELD THAT: - The Court examined sub-section (3) of Section 85 as it stood prior to 20.05.2012 and held that an appeal must be presented within three months from receipt of the adjudicating authority's order, and the Commissioner (Appeals) may, if satisfied that the appellant was prevented by sufficient cause, allow presentation within a further period of three months. The proviso thus circumscribes the Commissioner's power to condone delay to that further three month period only. The Court relied on the parity between section 85(3) and section 35 of the Central Excise Act and the Supreme Court's exposition in Singh Enterprises that the appellate authority cannot extend the condonation period beyond the specific further period provided by the proviso. Applying this principle, since the appeal in the present case was filed not only beyond the initial three month statutory period but also beyond the additional three month period available for condonation, the Commissioner (Appeals) was justified in dismissing the appeal on the ground of limitation. [Paras 5, 6, 7, 8, 9]

The appeal was correctly dismissed by the Commissioner (Appeals) as barred by limitation and not within the condonable period.

Final Conclusion: The appeal is dismissed; there is no error in the Commissioner (Appeals)'s order dismissing the appeal as time barred and beyond the period permissible for condonation.

Definition of "job worker" under Rule 10A - principal-to-principal manufacture - inputs supplied by the principal manufacturer - moulds as non-inputs for manufacture - assessable value and amortisation of moulds - departmental practice and judicial precedents dropping demands

Definition of "job worker" under Rule 10A - inputs supplied by the principal manufacturer - principal-to-principal manufacture - moulds as non-inputs for manufacture - assessable value and amortisation of moulds - Whether the appellants fall within the definition of "job worker" under Rule 10A and are liable to duty computed on the price at which M/s Nilkamal Limited cleared the goods from its depots. - HELD THAT: - The Tribunal examined the Explanation to Rule 10A and the contractual and factual matrix. It found no contract term or factual foundation showing that the appellants manufactured goods "on behalf" of M/s Nilkamal Limited or that the goods were manufactured "from" inputs supplied by Nilkamal. The appellants purchased and used raw materials themselves, albeit following specifications and using moulds supplied by Nilkamal. The Tribunal accepted the distinction that moulds are not inputs "from" which the final goods are manufactured and therefore do not convert the relationship into job work for the purposes of Rule 10A. The Tribunal relied on the original authority's reasoning in the appellants' subsequent-period order, which held that supply of moulds alone does not make a party a job worker and that amortisation of moulds and related valuation are separately dealt with under valuation rules. The Tribunal also noted departmental and judicial practice where similar demands were dropped in respect of other suppliers of Nilkamal and that proceedings for a later period in the appellants' own case had been dropped. On these grounds the demand founded on classification of the appellants as job workers was held unsustainable. [Paras 5, 6]

The appellants are not "job workers" within the meaning of Rule 10A; the demand based on that classification is not sustainable and is set aside.

Final Conclusion: Both appeals are allowed; the demand and penalties imposed on the appellants insofar as founded on their classification as job workers under Rule 10A are set aside.

Bagasse as agricultural waste or residue not a manufacture - deeming fiction in amended definition of "excisable goods" (Section 2(d)) - requirement of separate accounts for dutiable and exempted goods under Rule 6(2) of Cenvat Credit Rules, 2004 - liability under Rule 6(3) of Cenvat Credit Rules, 2004 - 5% of value of exempted goods - manufacture as defined in Section 2(f) - necessity of process falling within definition - binding effect of Supreme Court precedent under Article 141 of the Constitution

Bagasse as agricultural waste or residue not a manufacture - manufacture as defined in Section 2(f) - necessity of process falling within definition - deeming fiction in amended definition of "excisable goods" (Section 2(d)) - liability under Rule 6(3) of Cenvat Credit Rules, 2004 - 5% of value of exempted goods - requirement of separate accounts for dutiable and exempted goods under Rule 6(2) of Cenvat Credit Rules, 2004 - Whether appellant was liable under Rule 6(3) Cenvat Credit Rules, 2004 to pay 5% of the sale value of bagasse for failure to maintain separate accounts under Rule 6(2), having regard to the amended definition of "excisable goods" and the definition of "manufacture". - HELD THAT: - The Tribunal applied the authoritative ratio of the Hon'ble Supreme Court in Union of India vs. DSCL Sugar Ltd. and held that bagasse is an agricultural waste or residue and not the result of any manufacturing process. The amended explanation in Section 2(d) creates a deeming fiction that treats marketable articles as "goods" for purposes of excisability, but that fiction can be invoked only if the activity producing the article falls within the definition of "manufacture" in Section 2(f). Since no process in respect of bagasse is specified in the Section or Chapter notes of the First Schedule and bagasse itself is not the result of a process amounting to manufacture, the deeming provision could not be attracted. In the absence of manufacture, Rule 6 (including Rule 6(2) and the consequential liability under Rule 6(3)) has no application and the appellant cannot be held liable to pay the 5% amount on sale of bagasse. [Paras 5, 10, 11]

Appellant not liable under Rule 6(3) for the period in issue; demand based on failure to maintain separate accounts under Rule 6(2) set aside.

Binding effect of Supreme Court precedent under Article 141 of the Constitution - departmental circulars and their effect in view of judicial pronouncement - Whether the Tribunal was bound to follow the Supreme Court decision and consequential administrative action in relation to departmental circulars. - HELD THAT: - The Tribunal noted that the law declared by the Supreme Court in DSCL Sugar Ltd. constitutes binding precedent under Article 141. Following that decision, which addressed both periods before and after insertion of the explanation to Section 2(d), the departmental circular issued in 2009 aligning with the amendment was rendered non est and subsequently rescinded by a later circular. The Tribunal therefore followed the Supreme Court's declaration of law and applied it to the facts of the present case. [Paras 6, 7]

Supreme Court precedent is binding; departmental circular inconsistent with that precedent has been rescinded and cannot sustain the demand.

Final Conclusion: Appeal allowed. Following the binding decision of the Supreme Court, the demand based on Rule 6(3) read with Rule 6(2) in respect of bagasse for the period 1.3.2010 to 30.9.2010 is set aside; consequential relief, if any, to be given as per law.

Retrospective amendment - recovery of unutilized CENVAT credit - temporal scope of validation of exemption/recoupment - limitation of retrospective effect to operative period of notification

Retrospective amendment - recovery of unutilized CENVAT credit - temporal scope of validation of exemption/recoupment - Whether the demand for recovery of unutilized CENVAT credit as on 28/02/2003 is sustainable in view of the retrospective amendment which validated recovery only up to 22/12/2002. - HELD THAT: - The Tribunal examined the retrospective amendment effected by Section 153 of the Finance Act, 2003 which validated recovery of CENVAT credit availed during the period 08.07.1999 to 22.12.2002. The impugned demand sought recovery of unutilized CENVAT credit as on 28.02.2003, thereby extending the claim beyond 22.12.2002. The Bench applied the principle that retrospective validation operates only for the period it expressly covers and does not permit recovery beyond the temporal limits validated by the amendment. The Tribunal found the decision in Hunwal Tea Estate v. Commissioner (same Bench) to be squarely applicable on similar facts, where a demand extending recovery until 28.02.2003 was set aside. Applying that reasoning, the Tribunal concluded that the retrospective amendment validated recovery only up to 22.12.2002 and that demands for unutilized credit beyond that date are not permissible; accordingly the impugned demand for amounts as on 28.02.2003 could not be sustained.

The demand for recovery of unutilized CENVAT credit as on 28/02/2003 is not sustainable because the retrospective amendment validated recovery only up to 22/12/2002; the impugned order is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the retrospective amendment validated recovery of CENVAT credit only for the period up to 22.12.2002 and therefore the demand seeking recovery of unutilized credit as on 28.02.2003 was unsustainable; the impugned order is set aside.

Limitation for refund under Section 11B with Explanation (ec) fixing "relevant date" as appellate order - proviso to Section 11B excluding time bar where duty is paid "under protest" - refund for erroneous/unauthorised collection of duty

Limitation for refund under Section 11B with Explanation (ec) fixing "relevant date" as appellate order - Application for refund dated 09.01.2019 was within the one-year limitation prescribed by Section 11B read with Explanation (ec), having regard to the Tribunal's order dated 27.04.2018. - HELD THAT: - Section 11B(1) prescribes a one-year period for making a refund application from the relevant date, and Explanation (ec) expressly treats the date of a judgment, decree, order or direction of an appellate authority as the relevant date where duty becomes refundable as a consequence of such decision. The Tribunal had allowed the appellants' appeals and set aside the inclusion of the VAT subsidy in assessable value by its order dated 27.04.2018 (communicated on 04.05.2018), thereby creating the right to refund. The refund application filed on 09.01.2019 was therefore within one year of the relevant date and could not be rejected as time-barred on that ground.

Refund claim filed 09.01.2019 is within the statutory limitation period under Section 11B read with Explanation (ec) and should not have been rejected as time-barred.

Proviso to Section 11B excluding time bar where duty is paid "under protest" - evidence of payment "under protest" in Cenvat records and returns - The amounts deposited by the appellant were paid "under protest" for the purposes of the proviso to Section 11B, thereby removing the one-year limitation bar. - HELD THAT: - The Tribunal examined the Cenvat account entries and excise returns which recorded that central excise duty had been debited against amounts received as State VAT subsidy "under protest." Supplementary instructions and Chapter 13 of the CBEC Excise Manual were considered and, on balance, the entries and records were found to substantially comply with the procedure such that they could not be ignored. Precedent (including the principle in India Cements Ltd.) shows that a protest need not be in any technical form so long as a reasonable reader would understand that liability was not accepted without protest. Applying that principle to the present records, the payment qualifies as made under protest and the proviso to Section 11B therefore applies.

Payments are to be treated as made "under protest", so the limitation of one year under Section 11B does not apply.

Refund for erroneous/unauthorised collection of duty - The deposit of duty was an erroneous/unauthorised collection as the Tribunal held that the VAT subsidy could not be included in the transaction value, and therefore refund is due. - HELD THAT: - On the merits the Tribunal, in the appeal decided on 27.04.2018, accepted that the VAT subsidy (utilised via Form 37B challans) could not be included in transaction value for excise duty and set aside the impugned orders with consequential relief. That decision established that the amounts collected were not properly leviable as excise duty; accordingly, the payments were erroneous collections for which restitution is appropriate and cannot be defeated by a limitation plea where, as here, the proviso or relevant date under Explanation (ec) is applicable.

Amount deposited was erroneously collected and, in view of the Tribunal's decision, the appellant is entitled to refund.

Final Conclusion: Impugned orders rejecting the refund were set aside. The appeal is allowed and the respondents are directed to process and refund the claimed amounts in accordance with law forthwith, having regard to the Tribunal's order and the applicability of the proviso to Section 11B.

Clandestine removal - shortage of raw material - consideration of inputs lying in molten state in bath tank - weight assessment at the time of search (Panchnama) by eye-estimation - assumptive findings unsupported by record - Rules 9(5) of Cenvat Credit Rules, 2004 - requirement to comply with remand directions - absence of evidence of clearance without invoice

Consideration of inputs lying in molten state in bath tank - requirement to comply with remand directions - assumptive findings unsupported by record - Whether the adjudicating authority complied with the Tribunal's remand direction to consider the quantity of zinc in the bath tank before concluding a shortage - HELD THAT: - The Tribunal had earlier remanded the matter directing that shortage of raw material be decided taking into account zinc lying in the molten bath tank. The adjudicating authority framed the question but proceeded to base its conclusion on the structure of the stock register and general assumptions without discussing or quantifying the zinc actually present in the bath tank. The authority made a categorical finding that zinc in the tank was merely residual without relying on any recorded figures or calculations. Such a conclusion did not comply with the remand directions and amounted to an assumptive finding unsupported by the record.

Finding that the adjudicating authority failed to comply with remand directions and reached an assumptive conclusion is upheld; the authority's treatment of the bath-tank zinc is set aside.

Weight assessment at the time of search (Panchnama) by eye-estimation - assumptive findings unsupported by record - Whether shortages alleged on the basis of eye-estimated weights recorded at the time of search are sustainable - HELD THAT: - The Tribunal noted that assessment of weight by eye-estimation in the Panchnama is hypothetical and has been repeatedly held to be irrational and unreliable for concluding clandestine removal. The adjudicating authority relied on such estimations and on average-weight assumptions to build a case of shortage, without undertaking proper quantification or considering the molten zinc recoverable from the tank. Prior decisions and a departmental order for a different period require ascertainment of actual stock weight before concluding shortage. In the present facts, proper calculations on record and invoices for recovered zinc showed that the alleged large shortage would have been avoided had the bath-tank zinc been considered.

Shortage concluded on the basis of eye-estimated Panchnama and assumptive averaging is unsustainable; such findings are set aside.

Clandestine removal - absence of evidence of clearance without invoice - Whether the allegation of clandestine removal is established by evidence - HELD THAT: - The Department alleged clandestine removal but did not produce documents showing clearance of goods without invoice or confession by the appellant. The record contains invoices showing sale of zinc recovered from the tank and no material demonstrating that finished goods were cleared without payment of duty. In the absence of positive evidence of unauthorised clearance, the allegation of clandestine removal could not be sustained.

Allegation of clandestine removal is not supported by evidence and is rejected.

Final Conclusion: The adjudicating authority's findings are set aside for failure to comply with remand directions and for relying on assumptive and eye-estimated weight assessments; evidence on record (including invoices and calculations of recovered zinc) shows no sustainable clandestine removal and the appeal is allowed.

Remission of duty under Rule 21 of Central Excise Rules, 2002 - Liability to pay excise duty upon destruction of goods before removal - Deferment of duty till removal under Rule 8 of Central Excise Rules, 2002 - Requirement to apply for remission and effect of withdrawal of remission application - Recoverability of duty and interest under Section 11A/11AB and penalty under Rule 25 read with Section 11AC

Remission of duty under Rule 21 of Central Excise Rules, 2002 - Liability to pay excise duty upon destruction of goods before removal - Requirement to apply for remission and effect of withdrawal of remission application - Whether confirmation of demand of excise duty, interest and penalty for goods destroyed by fire in factory is sustainable in absence of an order granting remission under Rule 21 and without removal of goods from factory premises. - HELD THAT: - The Tribunal examined the facts that finished goods were destroyed by fire inside the factory and that no remission order under Rule 21 was obtained; the assessee had earlier filed and subsequently withdrawn a remission application. Relying on precedent, the Tribunal recorded that duty is chargeable under the Act but payment is deferred until removal under Rule 8; therefore, where goods remain within factory and no remission has been sanctioned, demand cannot be sustained merely because a remission application was filed and later withdrawn. The Tribunal noted earlier decisions holding that demand based solely on absence of a remission application is not justified where goods have not been removed and where the adjudicating authority could have considered remission at adjudication; accordingly, the impugned confirmation of duty, interest and penalty was found unsustainable and was set aside. [Paras 4, 5]

Impugned order confirming duty, interest and penalty set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the confirmation of duty, interest and penalty relating to goods destroyed by fire within the factory in the absence of a sanctioned remission under Rule 21, and held that duty could not be demanded where goods were not removed from the factory premises.

Manufacture - manufactured goods - residue/waste - eligibility for exemption Notification No. 89/95-CE - excisability of by products/residues - definition of manufacture under section 2(f) - amendment to section 2(d) of the Central Excise Act, 1944

Manufacture - manufactured goods - excisability of by products/residues - definition of manufacture under section 2(f) - amendment to section 2(d) of the Central Excise Act, 1944 - Spent earth arising during the course of manufacture of refined vegetable oil is a manufactured goods and liable for excise duty. - HELD THAT: - The Tribunal rejected the Revenue's contention that spent earth is a manufactured good liable to duty. It relied on earlier decisions of the Tribunal and the Supreme Court which examined identical materials and processes and held that spent earth and similar residues do not fall within the concept of manufacture. The Bench noted that amendment to section 2(d) does not itself determine what amounts to 'manufacture', and that the definition under section 2(f) remains decisive; where the process and nature of the material show it to be residue/waste rather than an output meeting the definition of manufacture, the amendment to section 2(d) cannot alter that conclusion. On these grounds the Tribunal found that the spent earth is not excisable as a manufactured good and set aside the impugned orders. [Paras 4, 5]

The finding that spent earth is not a manufactured good liable to excise duty is affirmed and the impugned orders are set aside.

Residue/waste - eligibility for exemption Notification No. 89/95-CE - excisability of by products/residues - Whether the spent earth, being residue/waste, is eligible for exemption under Notification No. 89/95-CE dated 18.05.1995. - HELD THAT: - The Tribunal held that spent earth generated in the refining of vegetable oil is in substance industrial waste or residue and is either not a product of manufacture or, alternatively, falls within the ambit of Notification No. 89/95-CE as waste. The Bench relied on precedents where tank sledge, spent solvent and similar by products arising from refining were held to be non-excisable or covered by the exemption notification. Applying identical reasoning to the material facts of the present case, the Tribunal concluded that the spent earth is entitled to the benefit of the exemption notification. [Paras 2, 4]

The spent earth is to be treated as residue/waste eligible for the benefit of Notification No. 89/95-CE and not liable to excise duty.

Final Conclusion: Appeals allowed; impugned orders set aside as spent earth arising in refining is not excisable and, in any event, is covered by Notification No. 89/95-CE, with consequential relief.

Refund of accumulated CENVAT credit - entitlement under Rule 5 of the CENVAT Credit Rules - procedural compliance for refund and related notification - nexus between input services and exported output services - invocation of Rule 14 of the CENVAT Credit Rules and Section 73 of the Finance Act

Refund of accumulated CENVAT credit - entitlement under Rule 5 of the CENVAT Credit Rules - procedural compliance for refund and related notification - Whether the appellant was entitled to refund of accumulated CENVAT credit under Rule 5 despite certain invoices bearing the old address, where the Department had not challenged the availment of CENVAT credit at the time of availment and there was no specific finding on compliance with procedures under Rule 5 and the notification. - HELD THAT: - The Tribunal observed that Rule 3 enables availment of CENVAT credit and Rule 5 prescribes the conditions and procedures for refund of accumulated CENVAT credit where export of services precludes utilisation. The Department had the opportunity to invoke Rule 14 read with Section 73 when credit was initially availed but did not do so; consequently, defects later raised (such as invoices showing an old address) could not be used to curtail refund entitlement under Rule 5 in the absence of contemporaneous proceedings denying the credit. The authorities below failed to record specific findings on whether the procedural requirements of Rule 5 and the applicable notification were complied with by the appellant. Reliance placed on earlier co-ordinate Bench decisions was noted, where refund entitlement was recognized despite invoice or nexus objections when statutory conditions for refund were otherwise met. In these circumstances, denial of refund on the grounds relied upon by the impugned order was held unsustainable. [Paras 5, 6, 7]

The denial of refund on the stated grounds was set aside and the appellant's claim to refund of accumulated CENVAT credit under Rule 5 was allowed.

Nexus between input services and exported output services - invocation of Rule 14 of the CENVAT Credit Rules and Section 73 of the Finance Act - Whether the Department could raise a nexus objection to the refund claim where no proposal to deny CENVAT credit under Rule 14/Section 73 had been made at the time credit was taken. - HELD THAT: - The Tribunal held that the Department's failure to question the legitimacy of CENVAT credit at the time of its availment (by invoking Rule 14 and Section 73) precluded it from later converting that omission into a ground to deny refund under Rule 5. The decision noted consistent views of earlier Benches that nexus cannot be agitated to defeat a refund claim under Rule 5 if the statutory machinery to deny credit was not invoked when credit was initially availed. Consequently, the nexus objection could not sustain the impugned denial. [Paras 5, 6]

The nexus objection was rejected as a basis to deny the refund, since the Department had not proceeded under Rule 14/Section 73 when credit was availed.

Final Conclusion: The impugned order denying refund of accumulated CENVAT credit is set aside and the appeal is allowed; the appellant is entitled to the refund subject to compliance with the procedural conditions of Rule 5 and the notification as assessed by the proper officer.

Pre-referral jurisdiction under Section 11(6) - examination of existence of arbitration agreement under Section 11(6A) - distinction between existence/validity of arbitration agreement and non-arbitrability - obligation of referral court to decide existence and validity of arbitration agreement conclusively at pre referral stage - remand for fresh consideration to decide existence and validity of arbitration agreement

Pre-referral jurisdiction under Section 11(6) - examination of existence of arbitration agreement under Section 11(6A) - distinction between existence/validity of arbitration agreement and non-arbitrability - Whether the referral court, while exercising pre-referral jurisdiction, must conclusively decide the existence and validity of an arbitration agreement or may leave that question to the arbitral tribunal. - HELD THAT: - The Court held that after insertion of sub section (6A) the court exercising jurisdiction under Section 11(6) is confined to examining the existence of an arbitration agreement. The pre referral inquiry has two distinct limbs: (a) the primary inquiry into existence and validity of the arbitration agreement (including parties and privity), which goes to the root of the matter and requires thorough examination and a conclusive decision by the referral court; and (b) a secondary, prima facie inquiry as to non arbitrability which may, in appropriate clear cases, be considered at the reference stage to cut obvious non arbitrable claims. The Court emphasised the distinction: existence/validity must be finally decided by the referral court because without an arbitration agreement there can be no reference to arbitration, whereas limited prima facie scrutiny for non arbitrability is a different, narrower exercise. Relying on the legislative intent behind Section 11(6A) and prior constitutional bench pronouncements, the court held that leaving the question of existence/validity to the arbitral tribunal would be contrary to Section 11(6A) and would risk forcing parties to arbitrate where no valid agreement exists. [Paras 5, 6]

The referral court must conclusively and finally decide the existence and validity of an arbitration agreement at the pre referral stage; it cannot leave that determination to the arbitral tribunal.

Remand for fresh consideration to decide existence and validity of arbitration agreement - obligation of referral court to decide existence and validity of arbitration agreement conclusively at pre referral stage - Disposition of the impugned common order which referred disputes to arbitration without finally deciding the existence and validity of the arbitration agreement. - HELD THAT: - The Supreme Court found that the High Court did not pronounce finally on the existence and validity of the arbitration agreement but expressly left that question to the arbitral tribunal. Because that approach is inconsistent with Section 11(6A) and the settled principle that the referral court must decide existence/validity at the pre referral stage, the Supreme Court quashed and set aside the impugned common order and remitted the matters to the High Court for fresh adjudication. The remand is limited to deciding the arbitration petitions afresh and conclusively on the question of existence and validity of the arbitration agreement; the Supreme Court did not express any opinion on the merits or on whether the several agreements are interconnected. [Paras 6, 7, 8]

Impugned order quashed and set aside; matters remitted to the High Court to decide afresh and to determine conclusively the existence and validity of the arbitration agreement within three months.

Final Conclusion: The appeals are allowed to the extent that the common order referring the disputes to arbitration is quashed and set aside; the matters are remitted to the High Court/referral court to decide the arbitration petitions afresh and to determine conclusively and finally the existence and validity of the arbitration agreement in accordance with Section 11(6A), within three months; no expression of opinion was made on the merits and there shall be no order as to costs.

Quashing of criminal proceedings under Section 482 Cr.P.C. - Liability under Section 138 NI Act (dishonour of cheque) - Liability under Section 141 NI Act (offences by companies - directors, officers, company secretary) - Prima facie case and summoning - triability of disputed factual allegations - Vicarious liability of directors and officers - Standard for exercise of quashing power - sparing use where factual foundation exists

Quashing of criminal proceedings under Section 482 Cr.P.C. - Prima facie case and summoning - triability of disputed factual allegations - Liability under Section 141 NI Act (offences by companies - directors, officers, company secretary) - Whether the summoning order dated 22.10.2018 and the complaint under Sections 138 and 141 of the Negotiable Instruments Act, 1881, insofar as they relate to the petitioners, should be quashed. - HELD THAT: - The Court applied the settled legal principles under Sections 138 and 141 NI Act, including the guiding observations in S.P. Mani & Mohan Dairy, and examined the material on record (including minutes of meetings). It noted that Section 141(1) implicates persons who were in charge of and responsible for the conduct of the company's business, while Section 141(2) covers directors, managers, secretaries or other officers whose consent, connivance or negligence can be shown. The complainant averred that the petitioners were directors/office-bearers and relied on MCA records and meeting minutes which prima facie indicate presence and involvement in company functioning; petitioner no. 3 was also shown as a signatory and company secretary. The Court held that determinations about the extent of each petitioner's active role, the veracity of claims (such as absence from India), and whether the proviso to Section 141 applies involve disputed factual questions which are triable matters. Given that the complaint, read as a whole, pleads facts sufficient to require trial and that quashing powers under Section 482 Cr.P.C. are to be exercised sparingly, the Court declined to quash the summoning order at the pre-trial stage. The Court emphasised that petitioners who seek quashing must produce incontrovertible material to demonstrate that proceeding would be an abuse of process, which was not done here. Consequently, the contentions raised are to be examined at trial by leading evidence before the learned Trial Court. [Paras 9, 10, 11, 12, 13]

Petition to quash the summoning order and complaint dismissed; the allegations against the petitioners raise triable issues to be decided at trial.

Final Conclusion: The petition under Section 482 Cr.P.C. is dismissed; the summoning order and complaint insofar as they relate to the petitioners shall stand and the matter shall proceed to trial, with the Trial Court unaffected by observations in this order.