TaxTMI Updates e-Newsletter
May 23,2023

Jurisdiction of writ under Article 226 where alternate statutory remedy exists - statutory appeal under Section 107 of the GST Act - provisional release under Section 129(1) of the GST Act - detention and penalty under Section 129 of the GST Act - interim relief by Appellate Authority on terms including bank guarantee

Jurisdiction of writ under Article 226 where alternate statutory remedy exists - detention and penalty under Section 129 of the GST Act - Maintainability of the writ petition challenging the detention and penalty when an alternate statutory remedy under Section 107 of the GST Act is available and disputed questions of fact remain. - HELD THAT: - The Court held that the objections raised by the petitioner involved disputed questions of fact concerning the transaction and delivery address which the adjudicating authority had considered. In view of the availability of a specific statutory remedy under Section 107 of the GST Act, the matter was not appropriate for final adjudication in writ jurisdiction under Article 226; the Court declined to go into the factual controversies in the present petition and treated the objections as matters to be decided in the statutory appeal. [Paras 7]

Writ petitioner's challenge on merits was not entertained; petitioner directed to avail the statutory appeal under Section 107.

Statutory appeal under Section 107 of the GST Act - provisional release under Section 129(1) of the GST Act - interim relief by Appellate Authority on terms including bank guarantee - Procedure and timelines for interim relief and disposal of the statutory appeal arising from detention under Section 129. - HELD THAT: - The Court granted liberty to the petitioner to file the statutory appeal within ten days and directed the Statutory Appellate Authority to decide the appeal on merits without imposing limitation for the period covered by this order. The petitioner was also permitted to move an application for provisional release of the goods and vehicle under Section 129(1). The Appropriate Authority was directed to take up such interim application immediately and pass orders within one week; the Appellate Authority was directed to dispose of the appeal within four weeks. The Court further permitted the Appellate Authority to release the goods and vehicle on terms, including accepting a bank guarantee for the penalty amount, without prejudice to the rights in the main appeal, and emphasised emergent and expeditious disposal. [Paras 8]

Liberty to file appeal within ten days; interim application under Section 129(1) to be decided within one week; appellate disposal within four weeks; interim release permissible on appropriate terms.

Final Conclusion: Writ petition disposed of by refusing to adjudicate disputed factual issues in writ jurisdiction and directing the petitioner to pursue the statutory appeal under Section 107; directions issued for prompt consideration of interim release under Section 129(1) and expedited disposal of the appeal by the Appellate Authority.

Maintainability of writ petition after expiry of statutory limitation for appeal - availability of alternate efficacious statutory remedy - principles of natural justice in assessment orders - requirement of reasons while passing assessment order - exercise of extraordinary jurisdiction under Article 226

Maintainability of writ petition after expiry of statutory limitation for appeal - availability of alternate efficacious statutory remedy - exercise of extraordinary jurisdiction under Article 226 - Whether the writ petition filed after expiry of the statutory period for filing appeal is maintainable before the High Court under Article 226. - HELD THAT: - The Court noted that the impugned order was passed on 16.2.2022 and that the limitation for preferring an appeal under the statutory scheme was 30 days with a fettered extension mechanism. The petitioner did not prefer the statutory appeal within the prescribed period and approached the High Court by way of writ after the limitation had expired. Relying on the principle that the High Court, notwithstanding its wide powers under Article 226, should not routinely permit collateral challenge where an efficacious statutory remedy existed and the statutory limitation has lapsed, the Court held that entertaining the writ would be contrary to the legislative scheme and the ratio of higher authority relied upon. The Court therefore concluded that the writ petition filed after the expiry of the limitation for appeal was not maintainable and declined to examine the merits alleged (including the contention as to absence of reasons in the assessment order). [Paras 13, 14, 15, 16, 17]

Writ petition dismissed as not maintainable because filed after expiry of the period available for statutory appeal.

Final Conclusion: The High Court dismissed the writ petition on the ground that it is not maintainable where the petitioner failed to prefer the statutory appeal within the prescribed limitation and thereafter sought relief under Article 226; the Court did not adjudicate the substantive allegations of infirmity in the assessment order.

Exclusion of limitation period during Covid-19 pandemic - computation of limitation after exclusion - condonation of delay under the CGST Act - special statute as complete code excluding Limitation Act - appellate jurisdiction to entertain delayed appeal beyond prescribed extension

Exclusion of limitation period during Covid-19 pandemic - computation of limitation after exclusion - Whether the appeal filed on 07.10.2022 came within the period of limitation after applying the Supreme Court's exclusion of 15.03.2020 to 28.02.2022 and the consequent 90-day/longer period from 01.03.2022. - HELD THAT: - The Court applied the Supreme Court's order excluding the period from 15.03.2020 to 28.02.2022 and noted that the balance period of limitation, or the 90-day period granted from 01.03.2022 (or a longer actual balance, if any), would have ended by the end of May 2022, with the further one-month extension under Section 107(4) of the Act ending by the end of June 2022. The appeal in the present case was filed on 07.10.2022, after these extended periods had expired. The petition does not plead any facts explaining why the impugned order dated 28-29.01.2021 could not have been challenged within the extended period, and the appeal form itself records receipt of the certified copy and does not claim delay. Consequently, even allowing for the Covid-19 exclusion, the Court concluded that the appeal was not within the extended limitation period. [Paras 7, 8, 10]

The appeal filed on 07.10.2022 was not within the limitation period even after applying the Supreme Court's exclusion and extension, and therefore remained time-barred.

Condonation of delay under the CGST Act - special statute as complete code excluding Limitation Act - appellate jurisdiction to entertain delayed appeal beyond prescribed extension - Whether the First Appellate Authority had jurisdiction to condone the delay beyond the period permitted under Section 107 of the Act of 2017 and whether provisions of the Limitation Act could be invoked to extend time further. - HELD THAT: - The Court relied on the Division Bench decision in Nandan Steels and Power Limited which interprets the CGST/CGST scheme as a special code, concluding that the appellate authority's power to admit an appeal beyond the three months is limited to the further one month contemplated by Section 107(4). The Court observed that where the special law's scheme indicates a complete code, the benefit of Sections 4 to 24 of the Limitation Act cannot be called in aid to enlarge the period. Applying that principle, the Court held that there is no power to condone delay beyond the one-month extension provided by the Act and that the Appellate Authority was functus off with regard to further enlargement beyond that statutory limit. [Paras 11, 12]

There is no jurisdiction to condone delay beyond the further one-month period under Section 107(4); the Limitation Act cannot be invoked to enlarge the period where the special statute operates as a complete code.

Remand for reconsideration where delay computation is erroneous - Whether the writ petition should be remitted to the First Appellate Authority because the Appellate Authority erroneously computed the period of delay (stated as 536 days). - HELD THAT: - The Court examined the effect of any misstatement of the number of days' delay by the Appellate Authority against the backdrop of the Supreme Court's exclusion order. It concluded that even if the Appellate Authority's numerical computation (536 days) was erroneous, recalculating the period after excluding 15.03.2020 to 28.02.2022 would not bring the appeal within the permissible extended period. Because such a remand would therefore be futile and would not alter the outcome on limitation, the Court declined to remit the matter for reconsideration. [Paras 3, 8, 12]

Remand for recalculation was unnecessary and not sustainable because exclusion of the pandemic period would still not render the appeal timely.

Relief of stay and production of records during pendency of writ - Whether interim reliefs sought (production of records, stay of operation of the impugned appellate order, and prohibition of coercive action) should be granted. - HELD THAT: - The petition sought production of records, stay of the impugned appellate order dated 10.11.2022, and a direction restraining coercive action during pendency of the writ. Having concluded that the appeal was time-barred and that no sustainable error requiring remand or interference was demonstrated, the Court found no basis to grant the interim reliefs sought by the petitioner. [Paras 1, 14]

The prayers for production of records, stay of the impugned order and restraint on coercive action were not granted; the petition was dismissed.

Final Conclusion: Writ petition dismissed. The Court held that exclusion of the Covid-19 period did not render the appeal timely, that the appellate authority had no power to condone delay beyond the one-month extension under the CGST scheme, remand for recomputation would be futile, and consequently no interim reliefs were warranted.

Maintainability of an application under Section 245C(1) of the Income tax Act - meaning of "case" in Section 245A(b) for purposes of settlement - deemed commencement of proceedings under Section 147 as per Explanation (i) to clause (b) of Section 245A

Maintainability of an application under Section 245C(1) of the Income tax Act - deemed commencement of proceedings under Section 147 as per Explanation (i) to clause (b) of Section 245A - Validity of the petitioner's settlement application under Section 245C(1) in respect of Assessment Years 2012-13, 2013-14 and 2014-15. - HELD THAT: - The Court examined whether a 'case' as defined in clause (b) of Section 245A existed for the stated assessment years at the time the settlement application was filed. The Assessing Officer's time to make assessment pursuant to the returns filed had expired and no notice under Section 148 had been issued for those assessment years. Explanation (i) to clause (b) of Section 245A deems proceedings under Section 147 to commence from the date a notice under Section 148 is issued (or, for other years, from the date such a notice could have been issued where returns were filed). On a plain reading of that Explanation, proceedings for assessment, reassessment or recomputation under Section 147 had not commenced for the three assessment years; accordingly there was no pending 'case' relating to the petitioner for those years. In those circumstances the Commission correctly held the Section 245C(1) application to be not maintainable for the said assessment years. [Paras 6]

Application under Section 245C(1) was not maintainable for AYs 2012-13, 2013-14 and 2014-15 as no proceedings under Section 147/Section 148 had commenced for those years.

Final Conclusion: The petition is dismissed; the Settlement Commission did not err in holding the petitioner's Section 245C(1) application to be invalid for AYs 2012-13, 2013-14 and 2014-15 because no assessment proceedings were pending for those years.

Rejection of books of account - estimation of income - treatment of tax deducted at source (TDS) - assessment of income in the hands of the recipient - apportionment under joint venture agreement

Rejection of books of account - estimation of income - Validity of rejection of the joint venture's books of account and consequent estimation of income by the Assessing Officer - HELD THAT: - The Assessing Officer rejected the JV's books on four specified grounds and estimated the JV's income. The Tribunal examined each ground and found none constituted a valid basis for rejection: (i) choice of business practice by the JV does not by itself justify rejecting accounts; (ii) deductions made by the contractee (South Eastern Railway) were not expenditures of the JV and could have been queried directly with the contractee rather than serve as a basis for rejection; (iii) claiming TDS refund despite showing nil net total income does not negate entitlement to TDS benefit and is not a ground to reject books; and (iv) alleged non supporting compliance regarding transfer of refund did not constitute a substantial basis for rejecting accounts. As the four stated reasons were unsubstantiated and unsustainable, the Tribunal held that the rejection of the books was not warranted and consequently deleted the estimation made by the Assessing Officer. [Paras 6, 7]

Reversal of rejection of books of account and deletion of the income estimated by the Assessing Officer.

Assessment of income in the hands of the recipient - apportionment under joint venture agreement - treatment of tax deducted at source (TDS) - Liability to tax interest income received by the joint venture and scope for adjustment if constituent members have disclosed the same - HELD THAT: - The Tribunal held that interest received by the JV is taxable in the hands of the JV because the income was received by the JV; thereafter any profit is to be apportioned among constituents in accordance with the JV agreement. The Tribunal upheld the Assessing Officer's addition of the interest income received from Corporation Bank to the JV's income. However, the Tribunal directed the Assessing Officer to examine whether the same interest income has been disclosed by the constituent members in their returns; if so, the Assessing Officer is to delete the amount from the constituents' hands. This constitutes a verification/remedial direction to avoid double taxation rather than a reversal on merits. [Paras 8]

Addition of the interest income to the JV sustained; directed verification whether constituent members have disclosed the amount and, if found, delete it from the constituents' hands.

Final Conclusion: Appeals partly allowed: the Tribunal set aside the Assessing Officer's rejection of the JV's books and deleted the estimated income; the Assessing Officer's addition of the interest income to the JV was upheld, subject to verification and deletion if the constituent members have already disclosed the amount in their returns.

Revisionary power of Commissioner under section 263 - erroneous and prejudicial to the interests of Revenue - reliability of books of accounts - burden of rebuttal on the assessee - remand for fresh assessment

Revisionary power of Commissioner under section 263 - erroneous and prejudicial to the interests of Revenue - reliability of books of accounts - burden of rebuttal on the assessee - remand for fresh assessment - Whether the order of the Principal Commissioner of Income-tax under section 263 setting aside the assessment for being erroneous and prejudicial to the interests of Revenue should be upheld for AY 2013-14. - HELD THAT: - The Principal CIT recorded that the assessing officer completed assessment without proper examination, that the assessee's accounts were not reliable (with debtors and creditors disproportionate to turnover), and that during assessment of AY 2014-15 creditors were held to be bogus which pointed to amounts raised in AY 2013-14 that ought to have been added to income. The assessee did not rebut those findings or place contrary material on record and failed to attend proceedings before the Tribunal. In these circumstances, and in the absence of material to show that the assessment order was not erroneous or prejudicial, the Tribunal found no reason to interfere with the Pr. CIT's exercise of revisionary power and affirmed the order setting aside the assessment with directions to the AO to pass a fresh assessment in accordance with law. [Paras 5, 6]

Order under section 263 setting aside the assessment for AY 2013-14 is affirmed and the appeal is dismissed; assessment is remitted for fresh assessment in accordance with law.

Final Conclusion: The Tribunal affirmed the Pr. CIT's order under section 263 for AY 2013-14, finding the assessment erroneous and prejudicial to the Revenue in the absence of any rebuttal by the assessee, and directed fresh assessment by the AO.

Deduction under section 80P - Eligibility of a cooperative society for deduction under 80P(2)(d) - Allowability of deduction on interest income from deposits with cooperative banks - Allowability of deduction on interest income from deposits with nationalised banks under 80P(2)(a)(i) - Precedential value of Tribunal decisions and binding consistency

Eligibility of a cooperative society for deduction under 80P(2)(d) - Allowability of deduction on interest income from deposits with cooperative banks - Denial of deduction under section 80P in respect of interest income earned from various cooperative banks was not sustainable. - HELD THAT: - The Tribunal examined whether interest earned on deposits with cooperative banks is deductible under section 80P(2)(d) where the payer bank is itself a registered co-operative society. Relying on the reasoning in Rena Sahakari Sakhar Karkhana Ltd. Vs. Pr.CIT , the Tribunal recorded that the exclusion introduced by section 80P(4) w.e.f. 1.4.2007 (which excludes certain cooperative banks) does not oust the entitlement under section 80P(2)(d) of a cooperative society to claim deduction on interest income from deposits with a cooperative bank that is a registered co-operative society within the meaning of the Act. Applying that precedent, the Tribunal held that the Assessing Officer's denial, and the first appellate authority's concurrence, were contrary to the settled view and therefore directed that deduction under section 80P(2)(d) be allowed in respect of interest earned from the various cooperative banks. [Paras 4]

Deduction under section 80P(2)(d) allowed on interest income earned from cooperative banks.

Allowability of deduction on interest income from deposits with nationalised banks under 80P(2)(a)(i) - Reliance on Tribunal precedents where jurisdictional High Court decision is absent - Interest income earned on deposits with nationalised banks is deductible under section 80P(2)(a)(i). - HELD THAT: - The Tribunal considered earlier Tribunal precedents, including Sureshdada Jain Nagari Sahakari Patsanstha Maryadit Vs. The Pr.CIT and Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO , which preferred the view permitting deduction on interest income from bank deposits (following the approach in Tumkur Merchants Souharda Credit Cooperative Ltd. ) over contrary High Court views elsewhere. Observing that no binding decision of the jurisdictional High Court on the point had been shown, the Tribunal respectfully followed the consistent Pune Bench approach that allows deduction under section 80P(2)(a)(i) for interest on deposits with nationalised banks and therefore set aside the disallowance by the authorities below. [Paras 5]

Deduction under section 80P(2)(a)(i) allowed on interest income earned from deposits with nationalised banks.

Final Conclusion: The Tribunal allowed the appeal for assessment year 2018-19, directing that deduction under section 80P be granted in respect of interest income earned from both cooperative banks (under 80P(2)(d)) and nationalised banks (under 80P(2)(a)(i)).

Prohibition on acceptance of loans or deposits otherwise than by account payee cheque, bank draft or electronic clearing under Section 269SS - Penalty for contravention of Section 269SS under Section 271D - Reasonable cause defence and applicability of Section 273B - Irrelevance of genuineness/bona fides to attract Section 269SS

Prohibition on acceptance of loans or deposits otherwise than by account payee cheque, bank draft or electronic clearing under Section 269SS - Irrelevance of genuineness/bona fides to attract Section 269SS - Penalty for contravention of Section 269SS under Section 271D - Literal application of Section 269SS to cash acceptance of loans and its effect on levy of penalty under Section 271D despite genuineness of transactions - HELD THAT: - The Tribunal held that Section 269SS, by its plain wording, prohibits taking or accepting loans or deposits otherwise than by an account payee cheque, bank draft or electronic clearing system where the threshold conditions are met; the statute contains no exception for transactions which are otherwise genuine or bona fide. Consequently, establishing the genuineness of a cash loan does not obviate violation of Section 269SS. Where Section 269SS is contravened, penalty under Section 271D is attracted unless a reasonable cause is shown as contemplated by Section 273B. The Tribunal relied on authoritative decisions cited in the record which uphold that bona fides alone cannot be a defence to the statutory prohibition, and concurred with the findings of the lower authorities that the legislative mandate must be given effect to. [Paras 7, 8]

Section 269SS applies to the cash loans accepted by the assessee and the genuineness of the transactions does not prevent invocation of Section 269SS or levy of penalty under Section 271D.

Reasonable cause defence and applicability of Section 273B - Penalty for contravention of Section 269SS under Section 271D - Whether the assessee established a reasonable cause for accepting cash loans to avoid penalty under Section 271D - HELD THAT: - The Tribunal accepted the Assessing Officer's factual findings that on the dates of acceptance the assessee's bank accounts showed sufficient balances and that most transactions occurred on bank working days with net-banking facilities available. Those uncontroverted findings negatived the assessee's claim of business exigency or emergency as a reasonable cause for accepting cash. In the absence of any reasonable cause within the meaning of Section 273B, the statutory bar to levy of penalty was not available to the assessee. The Tribunal therefore affirmed the CIT(A)'s conclusion confirming the penalty. [Paras 9, 10]

The assessee failed to establish reasonable cause for taking cash loans; consequently the penalty under Section 271D as confirmed by the CIT(A) was upheld.

Final Conclusion: Appeal dismissed; penalty under Section 271D for acceptance of cash loans in violation of Section 269SS (AY 2016-17) upheld as the statute admits no exception for genuine transactions and the assessee failed to prove reasonable cause.

Exemption under section 10(38) - sham transactions - unexplained cash credit under section 68 - onus of proof - preponderance of probabilities - application of mind by Assessing Officer - unexplained expenditure under section 69C

Exemption under section 10(38) - sham transactions - unexplained cash credit under section 68 - onus of proof - preponderance of probabilities - application of mind by Assessing Officer - Denial of exemption claimed under section 10(38) on long term capital gain and treatment of the proceeds as unexplained income under section 68 was sustained. - HELD THAT: - The Tribunal upheld the findings of the Assessing Officer and the CIT(A) that the long term capital gain claimed on sale of HPC Biosciences Ltd. shares was not genuine. The authorities relied on contemporaneous material including investigative findings about the scrip, abrupt and unrealistic rise in price within a short span, the company's financials inconsistent with the market valuation, and the established modus operandi of accommodation entries. The assessee failed to satisfactorily explain the nature and source of the receipts, did not appear for examination under summons, and thus did not discharge the onus cast upon her. The AO applied his mind objectively, drew adverse inferences where justified, and reached a conclusion by way of inferential reasoning on the basis of surrounding circumstances and preponderance of probabilities. Reliance on precedents dealing with penny stock manipulations supported treating the impugned gain as unexplained cash credit chargeable to tax under section 68; consequently the claim of exemption under section 10(38) was rejected. [Paras 13, 15, 27]

Claim of exemption under section 10(38) on the long term capital gain is rejected and the addition under section 68 is sustained.

Unexplained expenditure under section 69C - tax period relevance - Addition under section 69C made in AY 2015 16 was deleted because the expenditure (purchase of shares) pertained to the financial year 2012 13 (relevant to AY 2013 14) and could not be taxed in AY 2015 16. - HELD THAT: - The Tribunal noted that the purchase of 20,000 shares at the time of allotment occurred on 03.01.2013, i.e. in FY 2012 13 relevant to AY 2013 14. Section 69C applies to unexplained expenditure incurred in a particular financial year; therefore the addition sought to be made in AY 2015 16 was not maintainable. On this temporal basis the AO's and CIT(A)'s invocation of section 69C in AY 2015 16 was set aside and the addition was deleted. [Paras 31]

Addition under section 69C in AY 2015 16 is deleted as the expenditure relates to AY 2013 14.

Final Conclusion: The appeal is partly allowed: the denial of exemption under section 10(38) and corresponding addition under section 68 is sustained, while the addition under section 69C is deleted because the expenditure related to an earlier tax period.

Arm's Length Price - Transactional Net Margin Method - Comparability analysis - Knowledge Process Outsourcing (KPO) v. advertising/marketing services - Remand for fresh verification/consideration - Depreciation on goodwill - Credit for tax deducted at source (TDS)

Arm's Length Price - Transactional Net Margin Method - Comparability analysis - Knowledge Process Outsourcing (KPO) v. advertising/marketing services - Remand for fresh verification/consideration - Comparability and arm's-length determination for international transactions involving provision/availing of services (classification as KPO vis-a -vis advertising services) restored to the Transfer Pricing Officer for fresh consideration. - HELD THAT: - The Tribunal found the Transfer Pricing Officer's comparability analysis inconsistent: while accepting Quadrant Communications Limited (an advertising services company) as a comparable, the TPO simultaneously introduced KPO comparables and treated the assessee as a KPO, producing a contradictory basis for benchmarking. The Dispute Resolution Panel's reliance on tolerance of the Transactional Net Margin Method did not cure the functional mismatch. The Tribunal directed the assessee to first substantiate comparables from the advertising industry performing similar functions and, only if such comparables are unavailable, to broaden the search. The Transfer Pricing Officer is to examine the revised comparability selection, verify data and margins, and compute the Arm's Length Price after giving the assessee an opportunity of hearing. This direction was applied to the appeals for A.Y. 2009-10, A.Y. 2011-12 and A.Y. 2012-13 where like facts prevailed. [Paras 20, 31, 35]

Grounds on transfer pricing comparability/ALP restored to the file of the Transfer Pricing Officer for fresh selection/verification of comparables and recomputation of Arm's Length Price after affording hearing.

Recovery and reimbursement of expenses - Remand for fresh verification/consideration - Adjustment in respect of recovery and reimbursement of expenses remitted to the Transfer Pricing Officer for verification of invoices as directed by the Dispute Resolution Panel. - HELD THAT: - The Dispute Resolution Panel had directed verification of the complete invoices for reimbursements; however, the Transfer Pricing Officer made an adjustment without giving the assessee the opportunity to produce and have verified the full set of supporting bills. The Tribunal directed that the TPO give effect to the DRP's direction, permit the assessee to produce the complete details, verify them, and then decide whether adjustment remains necessary. [Paras 21]

Adjustment on account of reimbursement/recovery of expenses restored to the Transfer Pricing Officer for verification in accordance with the DRP's directions.

Depreciation on goodwill - Disallowance of depreciation pending earlier year's adjudication - Remand for fresh verification/consideration - Claim for depreciation on goodwill remitted to the Assessing Officer for fresh adjudication in light of pending determination in earlier assessment year. - HELD THAT: - The Tribunal observed that the question of depreciation on goodwill had been earlier litigated and that adjudication for A.Y. 2000-01 remained pending; consequently, the present years' claims (A.Y. 2009-10, A.Y. 2010-11 and A.Y. 2012-13) could not be finally determined without resolving that earlier year's issue. The Tribunal therefore restored the grounds relating to depreciation on goodwill to the Assessing Officer to decide in accordance with the outcome for A.Y. 2000-01 and to consider whether intangible assets eligible for depreciation were in fact acquired and used for business. [Paras 22, 26, 38]

Grounds on depreciation of goodwill restored to the Assessing Officer to be decided in accordance with the pending earlier year's adjudication and on merits as to eligibility for depreciation.

Credit for tax deducted at source (TDS) - Claim for short grant of TDS credit directed to the Assessing Officer for examination and grant of appropriate credit in accordance with law. - HELD THAT: - The Tribunal directed the Assessing Officer to examine the assessee's claim for TDS credit and to grant appropriate credit on the basis of certificates and verification under the law, without deciding the quantum itself. [Paras 23]

Assessing Officer directed to examine and grant appropriate TDS credit as per law.

Depreciation on goodwill - Cross-objection filed by the Assessing Officer challenging entitlement to claim depreciation on goodwill dismissed as infructuous. - HELD THAT: - The cross-objection questioned whether depreciation could be claimed where written down value was zero or where no goodwill was acquired/used. The Tribunal observed that the dispute in the primary proceedings (and the DRP confirmation) rendered the assessing officer's cross-objection infructuous and dismissed it. [Paras 38]

Assessing Officer's cross-objection dismissed.

Final Conclusion: The Tribunal restored transfer-pricing and reimbursement-of-expense issues to the Transfer Pricing Officer for fresh comparability selection, verification and recomputation of Arm's Length Price after affording opportunities of hearing; remitted depreciation-on-goodwill claims to the Assessing Officer for decision in accordance with the pending earlier-year adjudication; directed the Assessing Officer to examine and grant appropriate TDS credit; and dismissed the assessing officer's cross-objection as infructuous. Appeals were allowed for statistical purposes with the stated directions.

Time limit for completion of assessment under Section 153(1) - validity of assessment passed beyond limitation - quashing time-barred assessment as void ab initio - effect of The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 on limitation - admission of new legal ground at appellate stage where facts are on record - principles of repose and finality underlying limitation in tax proceedings

Time limit for completion of assessment under Section 153(1) - validity of assessment passed beyond limitation - quashing time-barred assessment as void ab initio - Assessment framed on 30.09.2021 was beyond the time limit prescribed by Section 153(1) and thereby void. - HELD THAT: - The Tribunal found on the record that the return was filed on 06.10.2017 and notice under section 143(2) was dated 27.09.2018. The statutory outer limit for completion of assessment under section 153(1) (21 months from the end of the relevant assessment year) expired on 31.12.2019. The Assessing Officer's order dated 30.09.2021 was therefore outside the prescribed period. The Tribunal held that compliance with the statutory time-limit is a condition of validity of assessment and that an assessment completed after the prescribed period is not effective in law. Applying these conclusions to the lead matter and identical appeals, the assessment orders were quashed as being void ab initio and all consequential additions became academic. [Paras 12, 14, 15, 19, 20]

Assessment order dated 30.09.2021 is time-barred and quashed; consequential issues rendered academic.

Effect of The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 on limitation - time limit for completion of assessment under Section 153(1) - The relief under the 2020 Relaxation Act and subsequent notifications did not validate the assessment which was required to be completed before 31.12.2019. - HELD THAT: - The Revenue relied on the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and subsequent notifications extending time-limits into 2021. The Tribunal observed that those amendments and extensions came into effect from 20.03.2020 and later, whereas the statutory period applicable to the assessee expired on 31.12.2019. Consequently the post 2020 relaxations could not operate retrospectively to validate an assessment which was already time barred prior to the commencement of the relief provisions. Therefore the Revenue's contention that the order of 30.09.2021 was saved by those relaxations was rejected. [Paras 13, 16]

Relaxation Act and subsequent notifications do not apply to validate the impugned assessment; contention rejected.

Admission of new legal ground at appellate stage where facts are on record - A legal ground challenging limitation raised for the first time before the Tribunal was admitted for adjudication. - HELD THAT: - The assessee had pleaded in its grounds (including Form No.36) that the assessment was beyond the limitation period. Although the Revenue objected that this plea was not taken before lower authorities, the Tribunal applied settled principle that a pure legal/technical ground going to the root of the matter may be admitted where the relevant facts are on record and no further enquiry is required. Relying on this approach, the Tribunal admitted and first decided the limitation challenge. [Paras 7, 8, 10, 11]

The Tribunal admitted the legal limitation ground and adjudicated it as a preliminary determinative issue.

Final Conclusion: The Tribunal quashed the time barred assessments (lead AY 2017 18 and similarly placed matters) as void ab initio for being completed after the expiry of the period under Section 153(1); the Revenue's reliance on the 2020 relaxation measures was rejected; the legal limitation ground raised at the appellate stage was admitted and decided, resulting in allowance of the assessees' appeals and dismissal of the Revenue's cross appeals.

Treatment of bank cash deposits as unexplained income under section 69 - admissibility and weight of documentary evidence of agricultural receipts and stock records - reopening of assessment and validity of notices issued under sections 147/148 (controverted but rendered academic) - consequential deletion of penalty proceedings where underlying addition is deleted - use of third party AIR data as a basis for reassessment

Treatment of bank cash deposits as unexplained income under section 69 - admissibility and weight of documentary evidence of agricultural receipts and stock records - use of third party AIR data as a basis for reassessment - Whether the addition confirmed by the CIT(A) treating deposited cash as unexplained income was sustainable in view of the documentary evidence of agricultural receipts and cash flow furnished by the assessee. - HELD THAT: - The Tribunal examined the record including the cash flow statement, girdawari, cold storage receipts, certificate from the Dy. Director Horticulture confirming average yield, certificate of conformity and other documents admitted in appeal. While the CIT(A) doubted the assessee's claim-observing that joint family landholding made it improbable that the assessee alone possessed the entire proceeds and expressing scepticism about the quantum of potato sales-the Tribunal found those conclusions to be perverse in light of the additional evidence. The Tribunal recorded that the CIT(A) did not adequately rebut or investigate the admitted documentary material nor bring on record corroborative evidence to displace the assessee's claim. Having considered the documentary evidence showing cultivation, stocking and yield calculations, the Tribunal held that the claimed agricultural receipts (including the amount shown as sale consideration of potatoes) were reasonable and that the addition of the amount confirmed by the CIT(A) was not sustainable. On that basis the confirmed addition of Rs.40,06,360 treated as unexplained income was deleted. [Paras 13, 14]

The addition of Rs.40,06,360 made by the CIT(A) under treatment of bank cash deposits as unexplained income under section 69 is deleted.

Consequential deletion of penalty proceedings where underlying addition is deleted - penalty under section 271(1)(c) consequential deletion - Whether the penalty imposed under section 271(1)(c) could survive after deletion of the addition in the quantum appeal. - HELD THAT: - The Tribunal noted that the quantum appeal was decided in favour of the assessee by deleting the addition confirmed by the CIT(A). As the penalty was consequential to the addition which stood deleted, the Tribunal held the penalty not maintainable. The Tribunal therefore set aside the penalty order as a consequence of its finding on the merits in the quantum appeal. [Paras 16]

The penalty levied under section 271(1)(c) is deleted as consequential on the deletion of the underlying addition.

Reopening of assessment and validity of notices issued under sections 147/148 (controverted but rendered academic) - Whether the legal objections to the reopening of assessment (grounds 1 to 3 challenging the validity of proceedings under sections 147/148 and requirement under section 151) required adjudication. - HELD THAT: - The Tribunal observed that the assessee obtained full relief on the merits by deletion of the addition. Consequently, the legal issues raising the validity of reopening were rendered academic and were not adjudicated by the Tribunal. [Paras 15]

Grounds contesting validity of reopening of assessment are rendered academic and not decided.

Final Conclusion: Both appeals are allowed: the addition of Rs.40,06,360 treated as unexplained income is deleted on the basis of admitted documentary evidence of agricultural receipts and cash flow, and the consequential penalty under section 271(1)(c) is deleted; challenges to the validity of reopening are rendered academic.

Percentage of completion method - recognition of project revenue and project costs by reference to stage of completion - change in accounting estimate accounted prospectively in percentage completion method - inclusion of direct project costs (TDR, stamp duty, municipal premiums) in project cost - treatment of demolished area and disputed development rights in computation of saleable area - irrelevance of closing stock valuation under percentage completion method - verification of deduction claimed under section 80G

Percentage of completion method - recognition of project revenue and project costs by reference to stage of completion - change in accounting estimate accounted prospectively in percentage completion method - Computation of profit from the real estate project for AY 2011-12 to 2013-14 by applying the percentage completion method. - HELD THAT: - The Tribunal applied the established principles in AS-7 and the ICAI Guidance Note that revenue and costs for real estate projects are to be recognised by reference to the stage of completion where the economic substance is akin to construction contracts. The percentage of completion is to be determined with reference to project costs incurred (excluding administrative expenses), and changes in estimates of total project costs are to be treated as changes in accounting estimates and accounted for in the period of change and subsequently. Using the assessee's and record figures, the Tribunal adopted the methodology set out in para 12.2-12.3 and computed percentage completion and cumulative and year-wise profits for AYs 2011-12 to 2013-14. The Assessing Officer was directed to adopt the profits worked out by the Tribunal for AY 2011-12 to AY 2013-14 when giving effect to the order. [Paras 12, 19]

Profit from the project for AY 2011-12 to 2013-14 is to be computed and adopted in accordance with the percentage completion method as worked out by the Tribunal; AO to give effect thereto.

Inclusion of direct project costs (TDR, stamp duty, municipal premiums) in project cost - Whether direct costs such as purchase of TDR, stamp duty, registration charges and BMC charges form part of total project cost. - HELD THAT: - The Tribunal accepted that direct costs attributable to the project-specifically TDR entitlement from society, TDR purchased, stamp duty & registration charges and BMC payments-are to be included in the total estimated project cost. The ld. CIT(A)'s breakup of the revised estimated total project cost (direct cost, construction cost and administrative cost) was adopted and ground no. 2 was allowed accordingly. [Paras 12]

Direct project costs (including TDR, stamp duty, BMC charges) shall be included in total estimated project cost.

Change in accounting estimate accounted prospectively in percentage completion method - revision of estimated renovation/repair costs - Whether revision of estimated cost of repairs/renovation arising after AY 2011-12 can be given effect in AY 2011-12. - HELD THAT: - The Tribunal found that the events giving rise to escalation of renovation/repair costs arose in a period subsequent to AY 2011-12; therefore, their effect could not be taken into account in AY 2011-12 but only in the relevant subsequent assessment years when the liability/event crystallised. The Tribunal, however, revised the project cost for AY 2012-13 onwards by restoring an increased estimate (as recorded by the ld. CIT(A)) and directed adjustments for AY 2012-13 and AY 2013-14 accordingly. [Paras 13, 19]

Revision of renovation/repair estimates dismissed for AY 2011-12 but accepted to the extent restored by the Tribunal for AY 2012-13 onwards; project cost revised for subsequent years as indicated.

Treatment of demolished area and disputed development rights in computation of saleable area - Treatment of (i) the disputed area where development rights were restrained by injunction and (ii) the demolished area in computation of saleable area. - HELD THAT: - The Tribunal held that the area subject to restraint by injunction (11,958 sq. ft.) continued to remain with the assessee and therefore could not be reduced from the overall saleable area merely because of temporary restraint. In contrast, the demolished area of 3,350 sq. ft. was physically extinguished and therefore properly reduced from saleable area. Applying these principles the Tribunal revised the saleable area to 1,32,250 sq. ft. for purposes of computing cost per unit and profits. [Paras 12]

Disputed area under injunction retained in saleable area; demolished area reduced; revised saleable area adopted as recorded by the Tribunal.

Irrelevance of closing stock valuation under percentage completion method - Whether valuation of unsold flats at cost (rather than market value) affects computation of profit under the percentage completion method. - HELD THAT: - The Tribunal noted that under the percentage completion method revenue and costs are recognised by reference to stage of completion and that valuation of closing stock does not play a role in computing profit from the project under that method. Consequently, the challenge to the ld. CIT(A)'s view on valuation of unsold flats was set aside and ground no. 5 was allowed. [Paras 14]

Valuation of unsold flats is irrelevant for profit computation under the percentage completion method; the Tribunal allowed the ground.

Verification of deduction claimed under section 80G - Disposition of the assessee's claim for deduction under section 80G. - HELD THAT: - The ld. CIT(A) had directed the Assessing Officer to verify the claim under section 80G while giving effect to his order. The Tribunal directed that the Assessing Officer should give effect to the ld. CIT(A)'s finding if not already done and accordingly allowed the ground for statistical purposes. [Paras 18]

Assessee's claim under section 80G to be verified by the AO as directed by ld. CIT(A); allowed for statistical purposes.

Final Conclusion: The three appeals are allowed partly: the Tribunal upheld and applied the percentage completion method and the detailed computations of cumulative and year-wise profits for AY 2011-12 to 2013-14 as worked out in the order, directed inclusion of specified direct project costs, ruled on treatment of demolished and disputed areas in saleable area, held that revision of renovation costs cannot be taken into AY 2011-12 but adjusted project cost for subsequent years, declared closing stock valuation irrelevant for the method, and directed verification of the section 80G claim; the Assessing Officer is directed to give effect to the Tribunal's computations and directions.

Exemption under section 10(38) for long term capital gains - Genuineness of share transactions / bogus long term capital gains - Burden of proof under section 68 - Role of documentary evidence (demat holdings, account payee cheque payments, STT and trading on recognised stock exchange) - Binding effect of coordinate bench / Division Bench decisions - Requirement of cross examination and principles of natural justice when adverse third party statements are relied upon

Exemption under section 10(38) for long term capital gains - Genuineness of share transactions / bogus long term capital gains - Role of documentary evidence (demat holdings, account payee cheque payments, STT and trading on recognised stock exchange) - Burden of proof under section 68 - Claim of exemption under section 10(38) in respect of long term capital gain from sale of equity shares of M/s Kailash Auto Finance Ltd. for AY 2014-2015. - HELD THAT: - The Tribunal allowed the assessee's appeal and deleted the addition treating the LTCG as bogus. The decision rests on the assessee having placed on record documentary evidence - payment by account payee cheque for allotment, dematerialisation of shares in the assessee's demat account, sale through a recognised stock exchange with STT paid - and there being no cogent material brought on record by the Assessing Officer to contradict these documents. The Bench noted that a Division Bench decision of the coordinate Tribunal (Deepansu Mohapatra & Others) addressing identical facts in relation to shares of the same company had been affirmed by the Jurisdictional High Court when Revenue did not contest the merits; accordingly, that coordinate bench ruling is binding on a Single Member Bench. Applying the settled principle that suspicion or generalised investigation reports cannot outweigh specific documentary proof unless rebutted by cogent evidence, the Tribunal found the AO's conclusion to be based on conjecture and set aside the addition. [Paras 7, 8, 9]

Assessee's claim of exemption under section 10(38) allowed; addition treating LTCG as bogus deleted and appeal allowed.

Final Conclusion: Following documentary evidence of genuine purchase, dematerialisation and sale on a recognised exchange and applying binding coordinate bench precedent (affirmed by the High Court on the point), the Tribunal set aside the assessments' treatment of the gains as bogus and allowed the assessee's claim of exemption under section 10(38) for AY 2014-2015.

Confiscation under the Customs Act - penalty for improper importation and dealing with goods - liability under DEPB scheme and role of DGFT vis-a -vis Customs - penalty under export provisions vis-a -vis import provisions - temporal applicability of penal provisions - extended period of limitation in cases of fraud - caveat emptor / purchaser's duty in acquisition of licences/scrips

Liability under DEPB scheme and role of DGFT vis-a -vis Customs - confiscation under the Customs Act - Whether Customs authorities could adjudicate that DEPB scrips were obtained by fraud and cancel or treat the related exports as not entitled to DEPB, leading to confiscation and denial of DEPB benefit. - HELD THAT: - The Tribunal held that determination of whether DEPB licences/scrips were obtained by fraud and cancellation of such scrips is within the jurisdiction of the DGFT under the Import-Export Policy, and not for Customs to decide as a matter of entitlement. Where a reference for cancellation has been made to DGFT and no action has been taken by DGFT, Customs could not adjudicate the DEPB scrips as void ab initio and thereby determine entitlement or effect confiscation on that ground. The Tribunal noted that the shipping bills were not shown to be misdeclared as to description, quantity or FOB value and relied on precedents and circulars restricting Customs' role to verification of particulars in the shipping bill and to report discrepancies to DGFT rather than usurp DGFT's licensing role. (See paras 4.3, 4.5, 4.11 and 4.11(e)-(g).) [Paras 4]

Customs could not adjudicate the entitlement/cancellation of DEPB scrips in place of DGFT; confiscation/denial based on such adjudication was unsustainable.

Penalty for improper importation and dealing with goods - penalty under export provisions vis-a -vis import provisions - temporal applicability of penal provisions - Whether penalties imposed by the adjudicating authority and upheld by Commissioner (Appeals) - specifically under provisions applicable to importation and under a provision not in force for the relevant period - were sustainable against the appellants. - HELD THAT: - The Tribunal observed that penalties under provisions framed for improper importation (e.g., provisions dealing with persons concerned with imported goods) cannot be validly imposed on appellants who were not importers and where those provisions do not correspond to the acts adjudicated in the export proceedings. The show cause notice had invoked certain sections, but the adjudicating authority and Commissioner (Appeals) imposed and upheld penalties under different provisions that were not applicable to the facts or to import/export status of the appellants. Further, a section creating penalty liability that came into force after the relevant period cannot be applied retrospectively to acts committed earlier. The Tribunal applied these principles to set aside the penalties which were imposed under inapplicable provisions and found that imposition of penal liability under such provisions was unsustainable. (See paras 4.6, 4.10, 4.16 and 4.18.) [Paras 4]

Penalties imposed under provisions applicable to importation or under provisions not in force during the tax period were not sustainable and were set aside.

Extended period of limitation in cases of fraud - caveat emptor / purchaser's duty in acquisition of licences/scrips - Whether, in cases involving forged/false licences or scrips, extended limitation for recovery and duty liability may be invoked and what bearing buyer's knowledge has on penalty. - HELD THAT: - The Tribunal reviewed authorities recognising that where licences/scrips are forged or obtained by fraud, such documents may be treated as void ab initio and extended limitation can be invoked for recovery of duty. However, knowledge of the buyer regarding forgery bears on penalty proceedings though not on duty liability. The Tribunal distinguished these principles from the present facts where the adjudication of entitlement by Customs (rather than DGFT) was impermissible, and observed that authorities addressing extended limitation and buyers' knowledge are not directly applicable to uphold the penalties imposed here. (See paras 4.11, 4.14 and 4.14(11).) [Paras 4]

While fraud may invoke extended limitation for recovery and buyer's knowledge affects penalties, those principles did not validate the impugned adjudication where Customs had stepped into DGFT's licensing domain and imposed inapplicable penalties.

Final Conclusion: The appeals were allowed: the Tribunal held that Customs could not adjudicate and cancel DEPB scrip entitlement in place of DGFT, and that penalties imposed under provisions inapplicable to the appellants or not in force for the relevant period were unsustainable; accordingly the impugned orders upholding confiscation/penalties on those grounds were set aside.

Forensic audit - appointment of auditor - locus to submit report - authority of appointee versus firm - remand to Tribunal for consideration of objections

Forensic audit - appointment of auditor - locus to submit report - authority of appointee versus firm - remand to Tribunal for consideration of objections - Direction to the Tribunal to consider the appellants' objections, including the challenge to the competency of the person who submitted the final forensic audit report where a different individual had been appointed. - HELD THAT: - The Appellants challenged the final forensic audit report on the ground that Mr. Sundararaman had been appointed by the Tribunal but the final report was prepared and submitted by Mr. Mitesh Parekh of the same firm. The Appellate Tribunal did not decide the merits of that challenge. Noting that objections to the draft report were filed but no objection to the final report was placed on record, the Appellate Tribunal held that the learned Tribunal, which is seized of the main Company Petition, should consider the appellants' objections afresh. The appellate court observed that the learned Tribunal must examine the appellants' contention that the appointment was of Mr. Sundararaman in his individual capacity (and whether that appointment permitted substitution or submission by another employee of the firm), and also consider the respondents' contentions that substitution was permissible because both persons belong to the same firm. The appellate court limited its role to issuing a direction for consideration and did not express any view on the substantive correctness of the final report or the validity of the appointment/substitution.

Appeal disposed with a direction that the learned Tribunal shall consider the appellants' objections, including the objection to the final forensic audit report having been submitted by a different person than the one appointed, and also consider the respondents' contentions while deciding the main petition.

Final Conclusion: The appeal is disposed of by directing the Tribunal seized of the main petition to consider the appellants' objections to the final forensic audit report (including the contention as to whether the person who submitted the final report was properly authorised in view of the appointment) and the respondents' counter contentions, without the Appellate Tribunal adjudicating the merits.

Maintainability of company petition after company struck off - effect of company notified as dissolved - limited exception for realisation or discharge of liabilities - infructuousness of proceedings upon cessation of corporate existence - irrelevance of tax-liability authorities to oppression and mismanagement proceedings

Maintainability of company petition after company struck off - infructuousness of proceedings upon cessation of corporate existence - CP No.58/ND/2012 was not maintainable and was liable to be dismissed once the petitioner company's name was struck off from the register of companies. - HELD THAT: - The Tribunal found as a matter of fact that the petitioner (Panthera Developers Pvt. Ltd.) had been struck off the ROC register on 08.08.2018 and thereby ceased to exist as a company. A company petition filed by an entity incorporated under the Companies Act must be brought by a company in existence; once the company's name is struck off and it ceases to operate as a company the petition cannot be maintained. Applying Section 250, the Tribunal concluded that the petitioner no longer had competence to pursue CP No.58/ND/2012 which had been instituted for reliefs relating to alleged oppression and mismanagement rather than for realisation of the company's dues or discharge of its liabilities. On that basis the IA seeking dismissal of the petition was allowed and the petition was dismissed. The appellate court found no error in this reasoning and dismissed the appeal. [Paras 10, 11, 12, 14]

CP No.58/ND/2012 stands dismissed as infructuous because the petitioner had been struck off and ceased to be a company.

Effect of company notified as dissolved - limited exception for realisation or discharge of liabilities - Section 250's exception for a struck-off company applies only to proceedings for realising amounts due to the company or for payment or discharge of the liabilities or obligations of the company, and does not permit continuation of an oppression and mismanagement petition not falling within that exception. - HELD THAT: - The Tribunal examined Section 250 and noted that the statute treats a struck-off company as ceasing to operate as a company, with a narrow exception that preserves existence only for the purpose of realisation of the company's dues or payment/discharge of liabilities. The petitioner's prayers in CP No.58/ND/2012 sought reliefs relating to corporate governance, appointment/removal of directors and declarations of invalid acts - matters unrelated to realisation of assets or discharge of liabilities. Therefore, those prayers fall outside the statutory exception and could not be pursued after striking off. The appellate court upheld this statutory construction and its application to the facts. [Paras 8, 9, 12, 13]

Section 250 does not preserve the right to pursue an oppression and mismanagement petition by a struck-off company because the petition's reliefs do not fall within the statutory exception.

Irrelevance of tax-liability authorities to oppression and mismanagement proceedings - Authorities and decisions concerning tax liabilities or recovery by struck-off companies (including the Supreme Court and ITAT decisions relied upon by the appellant) do not assist the appellant in maintaining an oppression and mismanagement petition after striking off. - HELD THAT: - The appellant relied on precedent concerning the maintainability of proceedings by struck-off companies in the context of tax liabilities. The Tribunal distinguished those authorities on the ground that they dealt with realisation of tax or similar liabilities and applicable provisions of tax law, not with petitions for reliefs concerning oppression and mismanagement under company law. Since the present petition sought reliefs unrelated to recovery or discharge of liabilities, the tax-law authorities cited were held inapplicable. The appellate court agreed with this distinction and rejection of that reliance. [Paras 13]

Precedents addressing tax-liability disputes of struck-off companies do not render CP No.58/ND/2012 maintainable where the petition's reliefs fall outside the narrow exception in Section 250.

Final Conclusion: The appeal is dismissed. The NCLT correctly allowed the application to dismiss CP No.58/ND/2012 because the petitioner company's name had been struck off and, under Section 250, the company's corporate existence subsists only for the limited purpose of realising dues or discharging liabilities - a category that does not include the oppression and mismanagement reliefs sought in the petition.

Composition of the Adjudicating Authority under PMLA - exercise of writ jurisdiction in the presence of an alternative statutory remedy - appeal to the Appellate Tribunal under Section 26 of the PMLA - principles of natural justice

Composition of the Adjudicating Authority under PMLA - appeal to the Appellate Tribunal under Section 26 of the PMLA - exercise of writ jurisdiction in the presence of an alternative statutory remedy - principles of natural justice - Writ petition challenging the attachment order and the competence of an Adjudicating Authority consisting of only one technical member disposed of on the basis of availability of statutory appellate remedy; merits not decided. - HELD THAT: - The Court recognised that orders of attachment by the Adjudicating Authority are appealable to the Appellate Tribunal constituted under Section 26 of the PMLA and observed that where an effective statutory forum exists, writ jurisdiction under Article 226 should be exercised with caution. Reliance was placed on the Division Bench view in J Sekar (and subsequent High Court decisions) and on the Supreme Court's guidance in M/s South Indian Bank Ltd. v. Naveen Mathew Philip that statutory remedy ought to be availed of and High Courts should not routinely supplant the tribunal process. Although the petitioner contended violation of principles of natural justice and challenged the competence of a single technical member to pass the attachment order, the Court did not enter on merits and directed that the petitioner may approach the Appellate Tribunal under Section 26, granting liberty to do so. [Paras 7, 8, 9]

Petition dismissed as withdrawn with liberty to approach the Appellate Tribunal under Section 26 of the PMLA; merits not considered.

Final Conclusion: The petition challenging the attachment order and the competence of the Adjudicating Authority is dismissed as withdrawn; the petitioner is permitted to pursue remedy before the Appellate Tribunal under Section 26 of the PMLA, the High Court having declined to examine merits in view of the alternative statutory forum.

Development fee / User Development Fee as statutory levy - Distinction between charges under Section 22 and levy under Section 22A - Airport service - Nexus between amount charged and service (valuation under Section 67) - Escrowed statutory collections and regulated utilization - Precedent in Consumer Online Foundation on nature of development fee

Development fee / User Development Fee as statutory levy - Airport service - Nexus between amount charged and service (valuation under Section 67) - Distinction between charges under Section 22 and levy under Section 22A - Whether the User Development Fee (UDF) collected by airport concessionaires is liable to service tax under the Finance Act, 1994. - HELD THAT: - The Court held that UDF collected under Section 22A of the AAI Act is a statutory exaction in the nature of a cess or tax for specified public purposes and is not a consideration for services rendered to passengers. The decision in Consumer Online Foundation was treated as conclusive on the character of development fees: they are levied de hors the facilities that embarking passengers get at existing airports and are intended to fund future upgradation, expansion or establishment of airports. Pursuant to Section 67 and the Court's reasoning in Bhayana Builders, service tax applies only where there is a nexus between the amount charged and a taxable service provided; Section 67 requires the gross amount charged to be consideration for the service. UDF lacks such nexus as it is collected for future projects, deposited into escrow accounts, and its utilization is monitored and regulated by statute and rules (including the 2011 Rules), rather than being payment for present services to passengers. The statutory and regulatory scheme (including escrowing and prescribed utilization) and the judicial finding that Section 22A levies are not charges for services distinguish UDF from fees or rents under Section 22 that may constitute consideration for services. Consequently, UDF does not form part of the value of any taxable service and is not subject to service tax. [Paras 34, 35, 36, 39, 40]

UDF collected under Section 22A is not liable to service tax as it is a statutory levy/cess unconnected to consideration for any taxable service.

Final Conclusion: The revenue's appeals are dismissed. The CESTAT orders holding that the User Development Fee is not subject to service tax are upheld; no order as to costs.

Refund under Rule 5 of the Cenvat Credit Rules, 2004 - Prohibition on varying CENVAT credit in Rule 5 refund proceedings - Requirement for initiation of proceedings under Rule 14 to deny or vary CENVAT credit - No requirement of one to one nexus between input services and exported output services - Liberal approach to incomplete invoices in refund claims

Refund under Rule 5 of the Cenvat Credit Rules, 2004 - Prohibition on varying CENVAT credit in Rule 5 refund proceedings - Requirement for initiation of proceedings under Rule 14 to deny or vary CENVAT credit - Modification or denial of refund under Rule 5 by re opening admissibility of CENVAT credit in refund proceedings - HELD THAT: - The Tribunal held that the substituted Rule 5 (post amendment) prescribes a formula for refund and does not permit the adjudicating authority in refund proceedings to re open or vary the quantum of CENVAT credit taken during the relevant period. Any challenge to the admissibility of credit or a finding that certain services do not qualify as input services must be undertaken by initiating appropriate proceedings under Rule 14 of the Cenvat Credit Rules, 2004. Reliance was placed on earlier Tribunal decisions establishing that Rule 5 merely determines refund proportionate to export turnover and total turnover and does not require establishment of nexus for denial of credit in refund adjudication. Applying that principle, the impugned order which denied portions of the refund by disallowing credits in the refund proceedings could not be sustained; the Tribunal therefore modified the Commissioner (Appeals) order to hold that the entire credit as claimed for computing refund is to be treated as admissible unless and until it is disallowed in proper Rule 14 proceedings.

Impugned modification/denial of refund under Rule 5 by disputing admissibility of CENVAT credit set aside; entire credit claimed held admissible for computing refund unless disallowed in proceedings under Rule 14.

No requirement of one to one nexus between input services and exported output services - Liberal approach to incomplete invoices in refund claims - Necessity of establishing direct nexus between input services and exported services and treatment of incomplete invoices in refund claims - HELD THAT: - The Tribunal confirmed that, in the context of refund under amended Rule 5, a rigid one to one correlation between an input service and an exported output service is not required. The definition of 'input service' is wide and inclusive and credits are not to be denied on the ground of lack of 'one to one' nexus so long as the services are not used primarily for personal use or consumption of employees. Further, where invoices are incomplete (for example, omission of registered address or assesseename), a liberal approach is to be adopted in refund proceedings: if the nature of service, tax paid and other essentials can be ascertained and the invoices are accounted for as business expenses, the refund should be allowed. Applying these principles, the Tribunal upheld the Commissioner (Appeals) findings (in remand proceedings) that the contested services satisfy the definition of input services and that the appellant is eligible for the claimed credits.

One to one nexus not required; incomplete invoices to be viewed liberally where business use and tax payment are evident; contested input services held to satisfy input service definition for refund purposes.

Final Conclusion: The appeals are allowed to the extent that the Commissioner (Appeals) order is modified: credits claimed for the specified periods are to be treated as admissible for determining refund under Rule 5 unless they are subsequently disallowed in proper proceedings under Rule 14; additionally, the Tribunal endorsed that no strict one to one nexus is required and a liberal approach to incomplete invoices is warranted.

Refund under Rule 5 of the Cenvat Credit Rules - recovery/modification of availed Cenvat credit under Rule 14 of the Cenvat Credit Rules - allowance of re-credit where refund sanctioned is less than amount claimed (Notification No.27/2012-CE(NT)) - cash refund entitlement under Section 142 of the CGST Act - nexus between input services and exported output services

Refund under Rule 5 of the Cenvat Credit Rules - recovery/modification of availed Cenvat credit under Rule 14 of the Cenvat Credit Rules - nexus between input services and exported output services - Whether refund claimed under Rule 5 could be denied or reduced by testing the correctness of earlier availment of Cenvat credit (nexus/non-eligibility) without initiating proceedings under Rule 14. - HELD THAT: - The Tribunal held that the substituted Rule 5 prescribes a formulaic refund linked to the ratio of export turnover to total turnover and does not permit denial of refund by re-opening or varying the quantum of Cenvat credit already availed without invoking Rule 14. Denial of refund on the ground of non-establishment of nexus or that certain services do not qualify as input services is impermissible in Rule 5 proceedings unless the department first proceeds under Rule 14 to disallow or recover the credit. Reliance was placed on earlier Tribunal decisions which interpret Rule 5 (as amended) and the TRU clarification that no correlation/nexus requirement is to be insisted upon when Rule 5 as substituted applies. Applying this principle, the modification of the refund by the lower authorities to the extent indicated cannot be sustained and the appellant's refund claim must be restored to that extent. [Paras 4]

Modification/denial of refund under Rule 5 by re-opening the correctness of availed credit without invoking Rule 14 is not permissible; the impugned reduction is set aside and the appeal is allowed on this ground.

Allowance of re-credit where refund sanctioned is less than amount claimed (Notification No.27/2012-CE(NT)) - refund under Rule 5 of the Cenvat Credit Rules - Treatment of the portion of the refund claim held to be not admissible (claimed as premature) - whether it may be re-credited to the Cenvat account. - HELD THAT: - Notification No.27/2012-CE(NT) provides that the amount claimed as refund shall be debited from the claimant's Cenvat credit account at the time of making the claim and that where the amount of refund sanctioned is less than the amount claimed, the claimant may take back the credit for the difference. Applying this safeguard, the Tribunal directed that the amount conceded by the appellant as not admissible for refund should be credited back to the appellant's Cenvat account, if possible. The Tribunal observed that claims for cash refund under the CGST statute are matters for the proper authority under that Act and the Tribunal is not the competent forum to adjudicate entitlement to cash refund under Section 142. [Paras 4]

The portion of the claim not allowed as refund should be credited back to the appellant's Cenvat account in terms of Notification No.27/2012-CE(NT); entitlement to cash refund under the CGST Act is to be pursued before the appropriate authority.

Final Conclusion: The appeal is allowed: the lower authorities could not lawfully reduce/deny the Rule 5 refund by re-opening the correctness of availed Cenvat credit without invoking Rule 14, and the impugned modification is set aside; the amount conceded as not admissible for refund should be permitted to be re credited to the appellant's Cenvat account, while any claim for cash refund under the CGST Act must be pursued before the competent authority.

Refund of CENVAT credit under Rule 5 - No requirement of nexus between input services and export services under amended Rule 5 - Prohibition on denial or variation of CENVAT credit in Rule 5 proceedings - Proceedings under Rule 14 for denial/variation of CENVAT credit

Prohibition on denial or variation of CENVAT credit in Rule 5 proceedings - Proceedings under Rule 14 for denial/variation of CENVAT credit - Denial or variation of Cenvat credit could not be undertaken in refund proceedings under Rule 5 and had to be initiated under Rule 14 of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal applied the substituted Rule 5 framework and prior decisions of the Tribunal to hold that Rule 5 proceedings, which determine refund of accumulated credit by a proportionate formula, do not permit the revenue to examine and deny or vary the quantum of Cenvat credit availed during the relevant period. Any adjudication to deny credit on merits (for example, holding that particular services are not input services, or that invoices are dummy/time barred) must be effected by initiating proceedings under Rule 14. The Tribunal relied on earlier decisions (including Cross Tab Marketing, Accelya Kale, TPG Capital and BNP Paribas decisions) and observed that, having not raised objections at the time of availment, the revenue cannot undertake such examination while deciding a Rule 5 refund claim; the correct course is Rule 14 proceedings. [Paras 4]

The impugned denial/variation of Cenvat credit in the refund adjudication under Rule 5 could not be sustained; such denial/variation must be proceeded with under Rule 14.

Refund of CENVAT credit under Rule 5 - No requirement of nexus between input services and export services under amended Rule 5 - Amended Rule 5 does not require establishing a nexus between input services and exported services; refund is determined by the prescribed proportional formula. - HELD THAT: - The Tribunal examined the amended Rule 5 (substituted by Notification No.18/2012) and the formula therein, and held that the rule allows refund of Cenvat credit by applying the ratio of export turnover to total turnover to the net Cenvat credit for the relevant period. The plain language of the amended rule and contemporaneous clarifications indicate that no correlation/nexus test is required in refund proceedings; therefore, attempts to disallow credit in refund proceedings on the ground of lack of nexus are impermissible and must be pursued separately under Rule 14. [Paras 4]

Rule 5 as amended does not require a nexus test; refund is to be allowed in accordance with the formula unless credit has been disallowed in proper Rule 14 proceedings.

Final Conclusion: The appeal is allowed. The impugned order sustaining denial of parts of the refund cannot be sustained; the Tribunal modified the order to hold that the credits claimed for determining the refund are admissible for the Rule 5 refund calculation unless they have been disallowed in proper proceedings under Rule 14 of the Cenvat Credit Rules, 2004.

Taxability of liquidated damages and contractual penalties - Declared service within the meaning of Section 66E(e) of the Finance Act, 1994 - Consideration for supply / whether payment is consideration - Distinction between compensation for breach of contract and consideration for an independent supply - CBIC Circular No. 178/10/2022-GST clarifying tax treatment of liquidated damages

Taxability of liquidated damages and contractual penalties - Declared service within the meaning of Section 66E(e) of the Finance Act, 1994 - Consideration for supply / whether payment is consideration - Amounts received as liquidated damages and contractual penalties are not taxable as declared service where they are compensation for breach of contract and do not constitute consideration for any independent supply. - HELD THAT: - The Tribunal accepted the appellant's contention that amounts labelled as liquidated damages or penalties payable on breach or non-performance are compensatory flows of money and not consideration for a supply. The decision relied on earlier Tribunal precedent which addressed the identical question and on the clarification issued by the Tax Research Unit (CBIC Circular No. 178/10/2022-GST) explaining that where such payments compensate for loss or damage and there is no agreement by the recipient to tolerate an act or to provide any additional supply, they are not consideration and therefore do not fall within the definition of a declared service under Section 66E(e). The Circular (summarised in the order) applies the Contract Act principles (Sections 73 and 74) and sets out the test: if the payment is merely a flow of money to compensate loss and does not represent the object of a contract or consideration for tolerating/doing an act, it is not taxable; conversely, payments which represent consideration for an ancillary supply (forbearance, early termination facilities, acceptance of late payment etc.) are taxable. Applying these principles to the facts, the Tribunal found no merit in the adjudicating authority's treating the contractual liquidated damages and penalties recovered by the appellant as taxable declared service.

Impugned order confirming service tax demand and penalties quashed; appeal allowed.

Final Conclusion: The Tribunal set aside the adjudicating authority's order confirming service tax demand and penalties insofar as contractual liquidated damages and penalties were treated as taxable declared service, allowing the appeal in favour of the appellant.

Pre-deposit under Section 35-F of the Central Excise Act, 1944 - waiver of mandatory deposit - mandamus to the Tribunal to admit appeal without pre-deposit - extension of time for depositing pre-deposit - CESTAT's obligation not to entertain appeal without prescribed deposit

Pre-deposit under Section 35-F of the Central Excise Act, 1944 - waiver of mandatory deposit - CESTAT's obligation not to entertain appeal without prescribed deposit - Prayer for waiver of the mandatory pre-deposit required under Section 35-F of the Central Excise Act, 1944 was rejected. - HELD THAT: - The court examined the petitioner's claim of financial hardship during the Covid-19 pandemic but noted that the balance sheet filed indicated the petitioner was in profit after the pandemic period. The court relied on the statutory scheme of Section 35-F, which uses peremptory language disallowing the Tribunal from entertaining appeals unless the prescribed deposit is made, and on precedents holding that courts cannot direct an authority to act contrary to such statutory mandate. In view of the legal position as explained in the cited decisions, the court was not inclined to grant relief in the form of waiver of the mandatory pre-deposit and rejected that prayer. [Paras 11]

Prayer for waiver of the mandatory pre-deposit rejected.

Extension of time for depositing pre-deposit - mandamus to the Tribunal to admit appeal without pre-deposit - Alternate prayer for extension of time to comply with the pre-deposit requirement was allowed and time was extended. - HELD THAT: - Although the writ challenged only the defect notice and no subsequent tribunal order was on record, the court, while declining to direct waiver, exercised its discretion to afford the petitioner an opportunity to contest the appeal on merits. Having considered the petitioner's stated difficulties during the pandemic, the court granted a limited extension to enable compliance with Section 35-F. The order conditions that if the petitioner deposits the mandatory pre-deposit within the extended period, the appeal will be admitted and heard on merits in accordance with law. [Paras 12, 13]

Three months' further time granted to deposit the mandatory pre-deposit; upon deposit the appeal will be heard on merits.

Final Conclusion: Writ petition disposed: request for waiver of statutory pre-deposit under Section 35-F rejected; limited extension of three months granted to deposit the mandatory pre-deposit, upon which the appeal will be admitted and heard on merits.

Valuation under Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Application of Rule 8 of the Valuation Rules to inter-unit/job-work clearances - Adjustment of excess duty paid against shortfall in duty liability - Revenue neutrality and relevance of CENVAT credit in valuation adjustments - Sustainability of demand, interest and penalty where duty demand is not established

Valuation under Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Application of Rule 8 of the Valuation Rules to inter-unit/job-work clearances - Correctness of the appellant's valuation of clearances to job-workers using comparable sales under Rule 4 and adjustments for grade, versus departmental application of Rule 8. - HELD THAT: - The Tribunal examined the methodology adopted by the appellant of valuing goods cleared to job-workers by referencing comparable independent sale prices under Rule 4, with adjustments where necessary for grade differences. The Tribunal found this methodology to be correct and held that duty was correctly paid by the appellant on that basis. The Tribunal therefore rejected the department's contention that Rule 8 valuation should supplant the appellant's Rule 4 based valuation for the clearances in issue, concluding that the assessment in the impugned order was unsustainable on this ground. [Paras 8, 11]

Appellant's Rule 4 valuation (with adjustments) upheld; departmental invocation of Rule 8 to substitute that valuation not sustained.

Adjustment of excess duty paid against shortfall in duty liability - Revenue neutrality and relevance of CENVAT credit in valuation adjustments - Legality of the Commissioner confirming differential duty by selectively considering only transactions showing short payment while ignoring transactions showing excess duty paid. - HELD THAT: - The Tribunal considered the jurisdictional Assistant Commissioner's annexures which showed some transactions where excess duty had been paid and others where duty was short. It found that the Commissioner erred in 'pick and choose' selection of only short-payment annexures and in ignoring annexures showing excess payment. Relying on precedents and applying the principle that where valuation/duty is determined on an annual or comparable basis the overall net duty position must be considered, the Tribunal held that excess duty paid should have been adjusted against short payments before raising any demand. The department's method of selective computation was held legally erroneous. [Paras 9, 10]

Demand quantified by ignoring excess payments is unsustainable; excess duty paid must be adjusted against shortfall before raising demand.

Sustainability of demand, interest and penalty where duty demand is not established - Consequences for interest and penalty where the primary duty demand is held unsustainable. - HELD THAT: - Having held that the duty demand itself could not be sustained because the appellant had paid duty correctly and had, in aggregate, paid in excess of the demand, the Tribunal found there was no basis to maintain interest or penalty. Where the foundational demand fails, ancillary liabilities grounded on that demand cannot survive. [Paras 12, 13]

Interest and penalty set aside as consequential to setting aside of the duty demand.

Final Conclusion: The impugned order confirming differential excise duty, interest and penalty is set aside. The appellant's Rule 4 based valuation (with adjustments) is accepted, the department's selective quantification is held legally erroneous for failing to adjust excess duty against shortfalls, and consequential relief is granted to the appellant.

Penalty under Rule 26 of the Central Excise Rules, 2002 - Excisable goods as goods subject to duty of excise - Liability to confiscation - Inapplicability of Rule 26 to imported goods

Penalty under Rule 26 of the Central Excise Rules, 2002 - Excisable goods as goods subject to duty of excise - Inapplicability of Rule 26 to imported goods - Whether penalty under Rule 26 can be imposed for transportation of imported goods. - HELD THAT: - The Tribunal examined Rule 26 and the definition of 'excisable goods' in section 2(d) of the Central Excise Act, 1944. Rule 26 imposes a penalty where a person deals with excisable goods which he knows or has reason to believe are liable to confiscation. Section 2(d) confines 'excisable goods' to those specified in the Schedules to the Central Excise Tariff Act as being subject to a duty of excise. Imported goods, as transported in the present case, are not goods liable to excise duty under that definition. Consequently, the mischief targeted by Rule 26 - dealing with excisable goods liable to confiscation - is not engaged where the goods are imported and not excisable goods. Applying these principles, the Tribunal concluded that Rule 26 has no application to the transportation of the imported raw material in this case and the penalty imposed thereunder cannot be sustained. [Paras 4, 5]

Penalty imposed under Rule 26 set aside and appeal allowed.

Final Conclusion: The penalty imposed under Rule 26 of the Central Excise Rules, 2002 for transportation of imported goods was held not sustainable because Rule 26 applies only to dealings in excisable goods (goods subject to excise duty); the impugned penalty is set aside and the appeal is allowed.

Refund under Section 11B of the Central Excise Act, 1944 - time-bar / limitation for refund claims - cenvat credit on inputs used for captive generation of electricity - refund of cenvat credit not availed / not reflected in ER-1 - maintainability of refund claim

Refund of cenvat credit not availed / not reflected in ER-1 - maintainability of refund claim - The refund claim was not maintainable because the amounts for which refund was sought were never claimed as cenvat credit in statutory excise records (ER-1) and only appeared as 'cenvat receivable' in the balance sheet. - HELD THAT: - The Tribunal accepted the appellant's admission that the amounts for which refund was claimed had never been shown as cenvat credit in any ER-1 return and were reflected only as receivables in the balance sheets. As these sums were never availed or recorded as cenvat credit in the statutory returns, they could not constitute an unutilised cenvat balance eligible for refund. The Tribunal therefore held that the primary basis of the refund claim was absent and the claim was not maintainable without going into substantive admissibility on merits. [Paras 4]

Refund claim held not maintainable because the alleged credit was never availed in ER-1/statutory excise records.

Refund under Section 11B of the Central Excise Act, 1944 - time-bar / limitation for refund claims - Even if considered, the refund claim was barred by limitation as it was filed well beyond the one-year period prescribed under Section 11B. - HELD THAT: - The Tribunal noted that the claim was filed nearly 14-15 years after the relevant communications and that Section 11B(1) prescribes a one-year limitation from the relevant date for filing refund applications. The Tribunal observed that the lower authorities were justified in rejecting the claim on the ground of limitation and that the Commissioner (Appeals) correctly upheld the time-bar ground. The Tribunal therefore did not need to and did not examine the substantive admissibility of the claimed credit in detail. [Paras 4, 5]

Refund claim rejected as time-barred under Section 11B; appeal dismissed.

Final Conclusion: Appeal dismissed. The refund claim was held not maintainable because the amounts were never availed as cenvat credit in statutory returns and, in any event, the claim filed many years later was barred by the one-year limitation under Section 11B of the Central Excise Act, 1944.

Penalty under Rule 209A of Central Excise Rules - Sabka Vishwas (Legacy Dispute Resolution) Scheme - non-automatic extension of SVLDRS benefit to co-noticees - remand for fresh adjudication and cross-examination - failure to follow tribunal directions

Penalty under Rule 209A of Central Excise Rules - Sabka Vishwas (Legacy Dispute Resolution) Scheme - non-automatic extension of SVLDRS benefit to co-noticees - Validity of the penalty imposed on the appellant after co-noticees and the main noticee availed SVLDRS while the appellant did not - HELD THAT: - The Commissioner relied on the fact that the main noticee and several co-noticees settled under SVLDRS and obtained waiver of penalty and interest, while the appellant (a director) did not apply under the scheme. The Tribunal observed that SVLDRS does not automatically confer benefits on co-noticees merely because the main noticee obtained settlement, and that the absence of the appellant's application to SVLDRS, by itself, did not justify imposing or upholding the penalty without following proper adjudicatory process. Having regard to Board Circular No. 1071/4/2019-CX.8 dated 27.08.2019 and the Tribunal's consistent decisions, the Tribunal concluded that the Commissioner's reliance on the SVLDRS outcome of the main noticee as a standalone basis for penalizing the appellant was not a proper basis to sustain the penalty, and therefore set aside the penalty imposed on the appellant. [Paras 3]

Penalty imposed on the appellant was set aside as unsustainable where it was founded on others' SVLDRS settlement without proper adjudication of the appellant's liability.

Remand for fresh adjudication and cross-examination - failure to follow tribunal directions - Whether the Commissioner complied with the Tribunal's earlier remand directions to conduct fresh adjudication including opportunity for cross-examination and verification of records - HELD THAT: - The Tribunal's earlier remand order directed the adjudicating authority to reconsider the matter afresh, grant opportunity for cross-examination of persons whose statements were relied upon, and examine the appellant's records and accounts. The Commissioner, however, proceeded to impose penalty without following those remand directions and without conducting the ordered cross-examination and verification. The Tribunal found such approach unjustified and inconsistent with the remand directions, and held that the matter should have been adjudicated as directed rather than decided on the limited basis that the appellant did not avail SVLDRS. [Paras 3]

Commissioner's failure to follow the Tribunal's remand directions for fresh adjudication and cross-examination was a ground for setting aside the penalty and required that the remand directions be given effect rather than short-circuiting adjudication.

Final Conclusion: The appeal is allowed; the penalty imposed upon the appellant is set aside because the Commissioner failed to follow the Tribunal's remand directions for fresh adjudication (including cross-examination and verification of records) and could not sustain the penalty solely on account of the main noticee's SVLDRS settlement which does not automatically extend to co-noticees.

Pre-deposit under Section 35F of the Central Excise Act, 1944 - Maintainability of appeal for non-compliance with mandatory pre-deposit - Use of Form DRC-03 / payment under CGST Act for compliance with pre-deposit under erstwhile law - Remand for decision on merits after compliance with pre-deposit requirement

Pre-deposit under Section 35F of the Central Excise Act, 1944 - Maintainability of appeal for non-compliance with mandatory pre-deposit - Use of Form DRC-03 / payment under CGST Act for compliance with pre-deposit under erstwhile law - Remand for decision on merits after compliance with pre-deposit requirement - Whether the appeal, dismissed by the Commissioner (Appeals) for non-compliance with the mandatory pre-deposit under Section 35F, should be entertained now that the appellant has made the required pre-deposit. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) rejected the appeal on the ground that the payment shown earlier by the appellant via Form DRC-03 (debit entry under the CGST ledger for tax period July 2017) did not constitute compliance with the pre-deposit requirement under Section 35F of the Central Excise Act, 1944. The appellant thereafter produced bank confirmation showing initiation of an NEFT transfer on 06.01.2023 for the pre-deposit amount. The Bench observed that the appellant has now deposited the required amount and thereby fulfilled the mandatory condition of Section 35F. Although the Commissioner (Appeals) could have treated the earlier debit entry as payment, he chose to reject the appeal on a technical ground. Having regard to the subsequent deposit, the Tribunal held that the conditions of Section 35F are satisfied and the appeal cannot be kept out of adjudication on that ground. The Tribunal directed remand to the Commissioner (Appeals) to verify the challan of payment and to decide the appeal on merits within three months from receipt of the order. The Tribunal also advised that the earlier amount shown by DRC-03, if sought to be refunded, should be the subject of a proper refund application to the concerned authority for disposal in accordance with law. [Paras 3, 4]

The appeal is allowed by way of remand: the pre-deposit requirement under Section 35F is held to be complied with on production of the bank confirmation, and the matter is remanded to the Commissioner (Appeals) to decide the appeal on merits after verification of the challan within three months.

Final Conclusion: The impugned appeal order rejecting the appeal for non-compliance with the mandatory pre-deposit is set aside; having now deposited the pre-deposit, the appellant's appeal is remanded to the Commissioner (Appeals) for adjudication on merits after verification of the payment challan within three months.

Pre-deposit condition for entertaining appeals - application of amended statute to pending proceedings - procedural condition attached to statutory right of appeal - jurisdiction of appellate authority to waive pre-deposit

Pre-deposit condition for entertaining appeals - application of amended statute to pending proceedings - jurisdiction of appellate authority to waive pre-deposit - Whether the amended provision of Section 62(5) of the Punjab VAT Act, 2005 (w.e.f. 28.07.2015) applied to the petitioner's pending application for waiver of pre-deposit and justified dismissal of the waiver application for non-deposit of 25% of the additional demand. - HELD THAT: - The Court observed that Section 62(5) was amended w.e.f. 28.07.2015 to require a prior minimum payment of twenty five per cent of the total amount of additional demand and interest. The petitioner's application for waiver of pre-deposit was pending when the amendment came into force. Relying on the established principle that an amendment during the pendency of proceedings governs the decision of that pending application, the Court held that the Appellate Authority was bound to decide the waiver application in accordance with the amended provision. The Court treated the pre-deposit requirement as procedural in nature and not a substantive entitlement to be assessed under the unamended statute. Consequently, the Appellate Authority had no jurisdiction to dispense with the amended pre-deposit requirement by applying the pre-amendment position. The Court noted that this approach is consistent with precedent recognizing that statutory conditions attached to the right of appeal must be complied with and that amendments reducing or altering pre-deposit obligations govern pending applications unless otherwise provided.

The amended Section 62(5) applied to the pending waiver application and the Appellate Authority rightly dismissed the waiver application for non-deposit; no interference is warranted.

Final Conclusion: Petition dismissed; impugned order declining waiver of the 25% pre-deposit under the amended Section 62(5) is upheld as the amendment applied to the pending application and the Appellate Authority acted within its jurisdiction.

Cooked food - exemption notification dated 09.03.2010 - branded bakery product - burden on revenue to prove classification - ordinary parlance - subsequent legislation as aid to interpret earlier statute

Cooked food - exemption notification dated 09.03.2010 - Pizza sold by the petitioner is a 'cooked food' and falls within the ambit of the exemption notification dated 09.03.2010. - HELD THAT: - The Court examined the classification adopted by the Additional Commissioner and the Tax Board and found their reasoning to be based on extraneous, unproved and irrelevant factors (such as insistence that cooked food must be prepared on a chulha or gas burner, contain only fresh ingredients, require traditional cutlery, or take substantial time to prepare). The revenue produced no expert or technical evidence to displace the petitioner's case that pizza is prepared by baking (a process of cooking) and is served in restaurants below three-star category. Reliance by the authorities on dictionary/Wikipedia definitions and on prior decisions without appreciation of contemporary eating habits and without cogent evidence was held to be unsustainable. Consequently, pizza was held to qualify as 'cooked food' for purposes of the 09.03.2010 notification. [Paras 10, 11, 12]

Pizza is held to be 'cooked food' and entitled to the exemption under the notification dated 09.03.2010.

Cooked food - exemption notification dated 09.03.2010 - Sandwich sold by the petitioners is a 'cooked food' and falls within the ambit of the exemption notification dated 09.03.2010. - HELD THAT: - The Court applied the same reasoning as in relation to pizza. It held that the Tax Board's restrictive view of 'food' by reference to traditional meal substitutes and prior precedent was inadequate, especially in light of changing dietary practices and the absence of evidence displacing the petitioners' case that sandwiches involve cooking steps (preparation of bread, heating/frying of fillings, assembly) and are sold in below three-star restaurants. The Tax Board's reliance on earlier decisions and common parlance limitations without evidentiary support was rejected. [Paras 10, 11, 12]

Sandwiches are held to be 'cooked food' and entitled to the exemption under the notification dated 09.03.2010.

Burden on revenue to prove classification - ordinary parlance - The revenue failed to discharge the burden of proving that pizza and sandwich do not fall within the notified category of 'cooked food'. - HELD THAT: - The Court reiterated the legal principle that where the revenue seeks to classify goods under a residual or alternative tariff entry it bears the onus of establishing that a specific product does not fall within a particular (here, exempt) entry. The authorities below relied on unsubstantiated assertions and extraneous factors without adducing expert opinion, scientific study or admissible evidence. The Court held that the mere appeal to ordinary parlance or to general perceptions, absent evidence, could not discharge the revenue's onus. [Paras 10]

Revenue's classification case was held to be unproved; the burden remained unmet.

Subsequent legislation as aid to interpret earlier statute - Subsequent amendments/notifications (14.07.2014 and 09.03.2015) treating pizza and sandwich as examples of 'cooked food' may be referred to for interpreting the earlier exemption notification dated 09.03.2010, and support the conclusion that pizza and sandwich qualify as cooked food under the earlier notification. - HELD THAT: - The Court observed that the State Government, by later inserting specific references to items such as pizza and sandwich within the broader category of cooked food in subsequent notifications and the rate schedule, manifested an intention consistent with treating those items as cooked food. Applying the established principle that subsequent legislation may be considered to resolve ambiguity in an earlier provision, the Court found the subsequent notifications material and supportive of the petitioners' interpretation of the 09.03.2010 notification. [Paras 11]

Subsequent notifications were held to legitimately inform the interpretation of the earlier exemption notification and to support classifying pizza and sandwich as 'cooked food'.

Final Conclusion: The questions of law framed in the STRs are answered in favour of the petitioner assessee: pizza and sandwiches are held to be 'cooked foods' within the scope of the exemption notification dated 09.03.2010; the revenue failed to discharge the burden to prove otherwise; and subsequent notifications treating pizza and sandwich as cooked food may be relied upon in interpreting the earlier notification. The STRs are allowed and consequential relief is directed to be granted within 90 days.

Levy of interest under Section 14(6) of the Haryana Value Added Tax Act, 2003 - Interest on additional demand - date from which leviable - Liability to pay interest arises from failure to make payment of tax as required by the Act - Revisional proceedings creating additional demand and consequential interest

Levy of interest under Section 14(6) of the Haryana Value Added Tax Act, 2003 - Interest on additional demand - date from which leviable - Revisional proceedings creating additional demand and consequential interest - Interest on the additional tax demand raised in revisional proceedings is leviable from the date of filing of the return (i.e., the date on which payment was liable to be made), and not from the date of the revisional order. - HELD THAT: - The Court examined the scheme of Section 14(6) of the HVAT Act and concluded that liability to pay interest arises when a dealer fails to make payment of tax in accordance with the Act and rules, such that interest is payable from the date the tax was required to be deposited. Earlier decisions under the HVAT scheme, including the Haryana Tax Tribunal decision in M/s. Faridabad Fabricators (P) Ltd., were held directly applicable in recognizing that non-payment in accordance with the Act renders the dealer liable to interest from the date the tax was supposed to be deposited. Decisions under a different statutory scheme (Haryana General Sales Tax Act, 1973) and Ghasi Lal (and related precedents) were distinguished as inapposite because they arose under a different statutory framework and provisions. Applying the statutory language of Section 14(6), the Court held that interest on the additional demand created in revisional proceedings must be calculated from the date the payment was due (the date of filing the return), and thus directed recalculation of interest accordingly. [Paras 12, 13, 14, 15]

Allowance of the appeal in part by modifying the Tribunal's order to hold that interest on the additional demand is leviable from the date of filing of the return and directing the Assessing Authority to recalculate interest on the additional demand.

Final Conclusion: The appeal is allowed in part: the Haryana Tax Tribunal's order is modified to hold that interest under Section 14(6) on the additional demand created in revisional proceedings is leviable from the date the tax was due (date of filing of the return); the Assessing Authority is directed to recalculate interest accordingly.

Limitation for application under Section 11(6) - Article 137 of the Schedule to the Limitation Act, 1963 - pre-referral jurisdiction under Section 11(6) - time-barred (dead) claims versus live claims - continuing cause of action - effect of bilateral discussions on limitation ("breaking point") - prima facie test to screen ex facie non-arbitrable claims - application of Section 43 of the Arbitration and Conciliation Act, 1996

Time-barred (dead) claims versus live claims - prima facie test to screen ex facie non-arbitrable claims - Whether claims that are ex facie barred by limitation can be referred to arbitration under Section 11(6) of the Act, 1996. - HELD THAT: - The Court applied settled authorities and the limited pre referral jurisdiction of courts under Section 11(6) to hold that a referral may be refused where the claims are manifestly and ex facie time barred or there is no subsisting dispute. While the arbitral tribunal is generally the preferred forum to decide arbitrability and limitation defences, the referral court may conduct a prima facie scrutiny to screen out dead, frivolous or non arbitrable claims. If on admitted facts a claim is shown to be hopelessly barred by limitation and no intervening facts are pleaded to extend limitation, the court may decline to refer the disputes to arbitration. [Paras 22, 41, 49]

Claims that are manifestly and ex facie time barred may be refused reference to arbitration at the Section 11(6) stage after a limited prima facie scrutiny.

Article 137 of the Schedule to the Limitation Act, 1963 - limitation for application under Section 11(6) - application of Section 43 of the Arbitration and Conciliation Act, 1996 - The applicable period of limitation for filing an application under Section 11(6) and when that period begins to run. - HELD THAT: - The Court held that because the 1996 Act does not prescribe a time limit for applications under Section 11(6), the Limitation Act, 1963 applies by virtue of Section 43 of the 1996 Act. In consequence the residuary Article 137 (three years from when the right to apply accrues) governs Section 11 applications. The right to apply accrues when the party first has a right to seek appointment (i.e., when the cause for referral crystallises) and is to be determined on the facts of each case. [Paras 28, 29, 31, 33]

An application under Section 11(6) must be made within three years under Article 137, beginning when the right to apply first accrues.

Effect of bilateral discussions on limitation ("breaking point") - continuing cause of action - limitation for application under Section 11(6) - Whether ongoing "bilateral discussions" between the parties tolled or postponed the running of limitation in this case. - HELD THAT: - Relying on precedents (including Geo Miller and related authorities), the Court emphasised that negotiations conducted in good faith may, if specifically pleaded and proved, be considered to identify the 'breaking point' when a reasonable party would have abandoned settlement efforts and sought arbitration. However, mere assertions of continuing negotiations are insufficient. On the facts, the respondent's communication and final action of encashing the bank guarantee and crediting LDs into the Government account in 2016 constituted a clear crystallisation of rights; that event was the "breaking point". Consequently, mere subsequent negotiations did not postpone accrual of the right to apply and could not defeat the statutory limitation. [Paras 13, 28, 59, 61, 63]

Mere bilateral discussions do not, without detailed pleaded and proved negotiation history, postpone the accrual of the right to apply; the cause of action in this case crystallised on encashment in 2016.

Continuing cause of action - time-barred (dead) claims versus live claims - Application of law to the facts: whether the petitioner's claim remained a live claim or had become a hopelessly time barred (dead) claim. - HELD THAT: - Applying the legal principles to the record, the Court found that the petitioner had notice of the final decision (including the letter of 24.02.2016 and the encashment/deduction on 26.09.2016). The Court recorded that the petitioner slept over its rights for more than five years and failed to plead any intervening event extending limitation. The result is that the claim was a dead, time barred claim and therefore not referable to arbitration at the Section 11(6) stage. [Paras 59, 61, 62, 66, 67]

On the facts, the petitioner's claim was hopelessly time barred and the Section 11(6) petition is not maintainable.

Final Conclusion: The petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 for constitution of an arbitral tribunal is rejected as the claims are ex facie time barred; Article 137 governs the limitation for Section 11 applications and the cause of action in this case crystallised on encashment/deduction in 2016, so subsequent negotiations did not revive or toll limitation.

Validity of unilateral arbitrator appointment procedure - Independence and neutrality of arbitral tribunal - nemo judex in causa sua - Referability to arbitration under Section 11 of the Arbitration & Conciliation Act, 1996 - Limitation as a ground for refusing reference to arbitration (Article 137, Limitation Act, 1963) - Exclusion of moratorium period for corporate debtor under Section 60(6) IBC - When courts may decline reference to arbitration - manifestly time-barred / 'deadwood' category

Validity of unilateral arbitrator appointment procedure - Independence and neutrality of arbitral tribunal - nemo judex in causa sua - Whether clause 2.21 of the contract providing for appointment of a sole arbitrator by the respondent is sustainable. - HELD THAT: - The Court held that clause 2.21, which contemplates appointment by BHEL/In Charge(Region), cannot be sustained because it permits unilateral appointment by a party having interest in the outcome and is therefore contrary to the settled principle that arbitrators must be independent and neutral. Reliance was placed on Supreme Court authorities emphasizing the necessity of independence and impartiality of the arbitral tribunal and the rule against making a party judge in its own case (nemo judex in causa sua). In consequence, the appointment procedure stipulated in clause 2.21 was found to be in direct contravention of those principles and not acceptable. [Paras 21, 22, 23]

Clause 2.21 is unsustainable as it permits unilateral appointment and violates the requirement of an independent and neutral arbitral tribunal.

Limitation as a ground for refusing reference to arbitration (Article 137, Limitation Act, 1963) - When courts may decline reference to arbitration - manifestly time-barred / 'deadwood' category - Exclusion of moratorium period for corporate debtor under Section 60(6) IBC - Whether the petitioner's claims are ex facie time-barred so as to justify refusal to refer the disputes to arbitration under Section 11. - HELD THAT: - The Court analysed the negotiation history between the parties to ascertain the 'breaking point' for limitation purposes, adopting the approach in Geo Miller regarding exclusion of bona fide settlement negotiations and the need to identify when negotiations became futile. It found the cause of action arose when the project was put on 'Hold' (March 18, 2013) and on short-closure (May 16, 2015), but the parties engaged in ongoing discussions which prevented finality of the claims. The Court concluded that the petitioner issued a Section 21 notice on January 16, 2019 when settlement efforts had effectively broken down, and the subsequent filing before this Court was within time. Further, the petitioner was under a moratorium pursuant to CIRP from February 05, 2019 and, applying Section 60(6) IBC as interpreted by the Supreme Court, the moratorium period is excluded for computation of limitation; accordingly limitation does not bar the petition. Applying the restrictive doctrine that courts may decline reference only when a claim is manifestly time-barred, the Court found this was not such a case and declined to treat the claim as 'deadwood'. [Paras 30, 31, 32, 33, 35]

The claims are not ex facie time-barred; the moratorium period under Section 60(6) IBC is excluded and the petition is within limitation, so reference to arbitration is not precluded.

Referability to arbitration under Section 11 of the Arbitration & Conciliation Act, 1996 - Whether the petition invoking this Court's power under Section 11 should be entertained despite ongoing settlement communications. - HELD THAT: - The Court found that the petitioner had invoked arbitration by issuing a Section 21 notice and that subsequent settlement talks had effectively broken down, as evidenced by the respondent's communications and requests. Bearing in mind Vidya Drolia and its progeny which limit judicial interference under Section 11 to cases where a claim is manifestly time-barred or non-arbitrable, and given the absence of manifest bar here, the matter was fit to be referred to arbitration rather than being rejected as premature. [Paras 34, 35]

The petition is not premature; amicable settlement talks having failed, the court will refer the disputes to arbitration.

Referability to arbitration under Section 11 of the Arbitration & Conciliation Act, 1996 - Appointment of a sole arbitrator to adjudicate the disputes between the parties. - HELD THAT: - Having found the contractual appointment procedure unsustainable and that the dispute is referable to arbitration, the Court appointed Justice Sahidullah Munshi, Former Judge, Calcutta High Court, as sole arbitrator to adjudicate the disputes. The appointment is subject to the arbitrator filing the declaration under Section 12(1) (Sixth Schedule) within four weeks. The Court directed registry to communicate the order to the arbitrator and urged expeditious conduct of proceedings. [Paras 36, 37]

Justice Sahidullah Munshi is appointed as sole arbitrator subject to submission of the Section 12(1) declaration; the matter is referred to arbitration.

Final Conclusion: The Court held that the contract clause enabling unilateral appointment of the arbitrator is unsustainable, found the petitioner's claims not to be manifestly time-barred (with the CIRP moratorium period excluded), refused to treat the petition as premature, and appointed Justice Sahidullah Munshi as sole arbitrator to adjudicate the disputes; AP 313/2021 is disposed of with no order as to costs.