TaxTMI Updates e-Newsletter
May 24,2019

Availability of input tax credit for construction of immovable property intended for letting out - Section 17(5)(d) - blocked credits for construction of immovable property on own account - Purpose of GST to avoid cascading and allow input tax credit along unbroken tax chain - Reading down a statute to save it from invalidity - Constitutional challenge under Article 14 and Article 19(1)(g)

Availability of input tax credit for construction of immovable property intended for letting out - Purpose of GST to avoid cascading and allow input tax credit along unbroken tax chain - Section 16 entitlement subject to restrictions in Section 17 - Input tax credit on goods and services used in construction of a shopping mall intended to be let out may be availed and set off against GST on rental income by the builder - HELD THAT: - The court held that Section 17(5)(d) as narrowly read by the revenue - to deny input tax credit for all inputs used in construction of immovable property even where the property is intended for letting out - frustrates the object of the GST scheme. Where construction results in a continuing taxable stream (rentals), there is no break in the tax chain; denial of credit would cause double taxation and defeat GST's aim of avoiding cascading. On that basis the Court read down the operation of Section 17(5)(d) so as not to apply to cases where the immovable property is constructed for letting out and the tax chain remains unbroken; in such cases the registered person is entitled to utilise input tax credit against GST on rental receipts. The Court relied on the statutory scheme (Sections 16 and 17), the distinction between sale after completion and letting out, and established principles of statutory interpretation favouring constructions that advance legislative intent and avoid double taxation. [Paras 19, 20]

Prayer (a) granted: Section 17(5)(d) to be read down so that ITC is available where the immovable property is constructed for letting out and the tax chain remains unbroken

Section 17(5)(d) - blocked credits for construction of immovable property on own account - Reading down a statute to save it from invalidity - Constitutional challenge under Article 14 and Article 19(1)(g) - Whether clause (d) of Section 17(5) is ultra vires the Constitution - HELD THAT: - The Court declined to strike down Section 17(5)(d) as unconstitutional. While it found the department's narrow construction to be unacceptable in the facts of the petitioner (and read the provision down accordingly), the Court was not prepared to hold the provision itself to be ultra vires. The Court therefore confined its relief to reading down the provision's application in cases where the construction is for letting out and the tax chain is unbroken, rather than declaring the statutory provision void. [Paras 21]

Prayer (b) rejected: clause (d) of Section 17(5) not declared ultra vires; relief confined to reading down its scope

Final Conclusion: Writ petition allowed in part: Section 17(5)(d) of the CGST/OGST Acts is read down so that input tax credit may be availed for goods and services used in construction of immovable property intended for letting out (where the tax chain remains unbroken); the provision itself is not struck down as unconstitutional.

Writ under Articles 226/227 - Requirement to decide representation expeditiously - Opportunity of hearing - Requirement of a speaking order

Requirement to decide representation expeditiously - Opportunity of hearing - Requirement of a speaking order - Direction to respondent No.3 to decide the representation dated 06.03.2019 after affording an opportunity of hearing and to pass a speaking order within a specified time. - HELD THAT: - The petition under Articles 226/227 sought release of a vehicle detained for alleged noncompliance with the Goods and Service Tax Act, 2017 and included a representation dated 06.03.2019 which was produced and taken on record. Without addressing the merits of the underlying controversy, the Court directed respondent No.3 to consider that representation afresh, to afford the petitioners an opportunity of hearing, and to record reasons in a speaking order. The Court imposed a specific time-bound mandate requiring completion of this process within 15 days from receipt of the certified copy of the order, thereby ensuring procedural fairness and prompt adjudication of the representation in accordance with law. [Paras 2, 4]

Respondent No.3 is directed to decide the representation dated 06.03.2019 after hearing the petitioners and to pass a speaking order within 15 days from receipt of certified copy of this order.

Final Conclusion: Writ petition disposed by directing respondent No.3 to decide the petitioners' representation dated 06.03.2019, after affording an opportunity of hearing and by passing a speaking order within 15 days from receipt of the certified copy of this order; merits left open.

Short-listing of candidates for interview - Rule 4A empowers Selection Board to evolve procedure - reasonableness and non-arbitrariness under Article 14 - conjoint reading of statutory eligibility and rule-making power - rejection of applications submitted after prescribed last date

Short-listing of candidates for interview - Rule 4A empowers Selection Board to evolve procedure - reasonableness and non-arbitrariness under Article 14 - conjoint reading of statutory eligibility and rule-making power - Validity of the Search cum Selection Committee's decision to short list only a limited number of applicants for interview and whether that procedure violated Article 14. - HELD THAT: - The Court held that Rule 4A of the Income Tax Appellate Tribunal Members (Recruitment and Conditions of Service) Rules, 1963 authorises the Selection Board to evolve its own procedure for selection. The Selection Committee's resolution to consider only complete applications and to short list a limited number of the most experienced practicing advocates for interview was a decision taken in the context of a large volume of applications and in conformity with the power to adopt a practicable procedure. The Court regarded the short listing as a reasonable exercise of the Committee's rule making/selection discretion and not arbitrary or discriminatory under Article 14. The decision was reinforced by the principle, as accepted by higher courts, that where applications are numerous relative to vacancies a selection body may adopt a rational and reasonable basis for short listing; the Court referred to Madhya Pradesh Public Service Commission v. Navnit Kumar Potdar and other authorities cited in the counter affidavit to support that approach. In the facts before the Court the Committee applied criteria (completeness of application, filing by last date, and ordering by experience) which the Court found to be within its powers and not violative of equal protection or intelligible differentia requirements. [Paras 6]

The Search cum Selection Committee's short listing procedure was reasonable and not arbitrary; the challenge under Article 14 fails.

Rejection of applications submitted after prescribed last date - conjoint reading of statutory eligibility and rule-making power - Validity of rejection of an applicant's submission made after the last date prescribed in the recruitment circular. - HELD THAT: - The Court noted that the recruitment circular fixed a last date for submission of complete applications and that the Committee had decided to consider only those applications filed on or before that date. The petitioner in W.P.(C) 5365/2019 submitted the complete application after the prescribed last date and the Committee rejected the candidacy on that ground. The Court found no infirmity in rejecting an application lodged after the due date where the Committee had uniformly applied the cut off and the rule permitting evolution of procedure supported such administrative decision. [Paras 7]

Rejection of the late application was valid; no relief is warranted to the petitioner whose application was filed after the last date.

Final Conclusion: Writ petitions dismissed; the Selection Committee's decision to short list a limited number of complete and more experienced applicants for interview was upheld as a reasonable exercise of its power under Rule 4A and not violative of Article 14, and the rejection of an application submitted after the prescribed last date was upheld.

Deductibility of interest on capital borrowed - capitalisation of interest and works-in-progress - income computation memo versus books of account - Method of accounting under Section 145A - Proviso to Section 36(1) overriding accounting treatment - put to use test for allowance of interest

Deductibility of interest on capital borrowed - put to use test for allowance of interest - The claim of interest expenditure was not allowable in the assessment years as expenditure utilised in the business. - HELD THAT: - The Tribunal's finding that the interest on borrowed capital for purchase and development of land could not be allowed in the impugned assessment years is sustained. The court accepted that the land/projects were still in project stage and had not been put to use or yielded income during the years under appeal. In that factual and legal setting the proviso to Section 36(1) operates to deny deduction of interest for the period from borrowing until the asset is first put to use, and therefore the claim cannot be treated as an allowable business expenditure in those years. [Paras 7]

Claim of interest as an allowable business expenditure for AYs 2010-11 to 2012-13 rejected.

Capitalisation of interest and works-in-progress - income computation memo versus books of account - The interest expenditure in question is capital in nature as reflected by its treatment as work-in-progress in the books and not allowable as a revenue deduction in the impugned years. - HELD THAT: - The Tribunal and this Court noted that the assessee consistently treated the interest as part of project cost and capitalised it in its books of account (recorded as work-in-progress), certified by auditors and reflected as consistent accounting treatment. Although the assessee sought to claim the interest by altering the income computation memo for tax purposes in later years, such outside-the-books adjustments do not convert the capital nature of the expenditure into an allowable revenue deduction for the years in question. [Paras 7]

Interest treated as capital expenditure in books; claim through income computation memo for the impugned years is not permissible.

Method of accounting under Section 145A - Proviso to Section 36(1) overriding accounting treatment - The method of accounting under Section 145A does not determine allowability of the interest; the proviso to Section 36(1) prevails and governs deduction. - HELD THAT: - The assessee relied on Section 145A (method of accounting and valuation of inventory) to contend that interest on borrowed capital should be allowable irrespective of capitalisation in books. The Court held that the proviso to Section 36(1), placed in the chapter dealing with computation of total income, operates to override the accounting treatment: the words 'whether capitalised or not' in the proviso negate the effect of merely following accounting standards or Section 145A for the purpose of claiming deduction. Consequently, the question of allowability is governed by the proviso's 'put to use' test and not by the method of accounting under Section 145A. [Paras 7, 8]

Section 145A method of accounting does not entitle the assessee to deduction; proviso to Section 36(1) governs and overrides in this context.

Final Conclusion: Appeals dismissed; the Tribunal's disallowance of interest for AYs 2010-11 to 2012-13 is upheld because the interest was capital in nature and not allowable under the proviso to Section 36(1) until the asset was first put to use; Section 145A does not alter that result.

Arm's length price - comparables - adjustments to comparables for differences in raw material and input procurement - transportation cost adjustment - remand to Assessing Officer/Transfer Pricing Officer for fresh consideration - substantial question of law under Section 260A

Arm's length price - comparables - adjustments to comparables for differences in raw material and input procurement - remand to Assessing Officer/Transfer Pricing Officer for fresh consideration - Remand for fresh consideration and appropriate adjustments to comparable M/s. Lubrizol's costs (raw materials and zinc) while determining the Appellant's arm's length price. - HELD THAT: - The Tribunal recorded that Lubrizol's procurement costs (including discounts on mineral oil and zinc procurement under tolling) appeared lower and directed remittance to the Assessing Officer for reconsideration and appropriate transfer pricing adjustments, with opportunity of hearing to the assessee. The High Court notes that on these aspects the Tribunal has remitted the matter to the AO/TPO for fresh consideration rather than finally adjudicating the adjustments. The remand requires the AO/TPO to examine available procurement cost details of Lubrizol vis-a -vis the assessee and to make suitable adjustments if differences are established, affording the assessee a hearing. [Paras 2, 3]

Issue remitted to the file of the Assessing Officer/Transfer Pricing Officer for fresh consideration and appropriate adjustments with opportunity to the assessee.

Transportation cost adjustment - Arm's length price - substantial question of law under Section 260A - Rejection of the assessee's claim for adjustment on account of higher transportation costs vis-a -vis Lubrizol and the High Court's refusal to entertain a Section 260A challenge to that finding. - HELD THAT: - The Tribunal found that the assessee had not established that Lubrizol's transportation cost was demonstrably lower and therefore rejected the claim for adjustment. The High Court held that this finding is a fact finding exercise within the Tribunal's domain and, absent ex facie perversity or non application of mind, does not raise a substantial question of law under Section 260A warranting interference. The Court relied on the principle that comparative selection and factual adjustments in determination of arm's length price are fact intensive and the High Court will not substitute its own comparative analysis unless perversity is established. [Paras 2, 5, 6]

Tribunal's rejection of the transportation cost adjustment is sustained; no substantial question of law under Section 260A is made out and the challenge is dismissed.

Final Conclusion: The appeals are dismissed: issues relating to procurement cost differences (raw materials and zinc) and associated adjustments are remitted to the Assessing Officer/Transfer Pricing Officer for fresh consideration; the Tribunal's rejection of a transportation cost adjustment is upheld and does not give rise to a substantial question of law under Section 260A.

Summary order. Appeal dismissed as not pressed since the tax effect is below the monetary limit prescribed in Central Board of Direct Taxes Circular No.3/2018 dated 11.7.2018 (threshold Rs.50 lakhs); substantial questions of law are left open for determination in an appropriate case.

Principle of natural justice - right to cross-examination - adverse inference based on statements and seized documents - onus under section 68 of the Income-tax Act

Principle of natural justice - right to cross-examination - adverse inference based on statements and seized documents - onus under section 68 of the Income-tax Act - Whether the addition of Rs. 40 lakhs treated as undisclosed income under section 68, based on statements and seized documents from search operations, was sustainable where the assessee was not allowed to cross-examine the alleged entry-provider whose statement formed the basis of the addition. - HELD THAT: - The Tribunal examined the assessment and appellate records and found that the Assessing Officer and the Commissioner (Appeals) had relied on statements and seized documents from a search in the Jain group matter to make the addition under section 68. The assessee had specifically requested opportunity to cross-examine the alleged entry-provider whose statement was used against it, but this request was not acceded to by either authority. Applying the law laid down by the Supreme Court in Andaman Timber Industries (as applied by the Tribunal in a recent SMC Bench decision), the Tribunal held that when an adjudicatory order is founded on statements of third parties and the assessee disputes those statements, denial of an opportunity to cross-examine those witnesses is a violation of the principle of natural justice and can vitiate the order. Although the right to cross-examination is not absolute and depends on circumstances, where the statement is the basis of the adverse finding and the assessee seeks to discredit it, the adjudicatory authorities must provide an opportunity for cross-examination or otherwise properly deal with that request. The Tribunal noted that the CIT(A) had not properly adjudicated the grounds raising this issue and that on identical facts a coordinate Bench had set aside similar additions. On that basis the Tribunal concluded that the addition could not stand.

Addition of Rs. 40 lakhs treated as unexplained credit under section 68 deleted for want of opportunity to cross-examine the witness whose statement formed the basis of the addition; appeals allowed.

Final Conclusion: All three appeals are allowed; the addition made on the basis of third party statements and seized documents is set aside for violation of the principle of natural justice in not permitting cross examination, and the Assessing Officer is directed to give effect to this order.

Penalty under section 271(1)(c) - Disallowance of business expenses - Ad-hoc disallowance - Acceptance of addition during assessment and entitlement to advance alternative grounds in appellate/penalty proceedings - Prosecution of penalty where no concealment or misstatement

Penalty under section 271(1)(c) - Disallowance of business expenses - Acceptance of addition during assessment and entitlement to advance alternative grounds in appellate/penalty proceedings - Whether penalty under section 271(1)(c) is attracted for motor car expenses, depreciation and interest (debited by the assessee but relating to a vehicle registered in director's name) totalling Rs. 2,51,941/- - HELD THAT: - The Tribunal found as admitted that the assessee agreed to the addition during assessment, but also recorded that full particulars regarding the takeover of the proprietorship and the director's status were available before the Assessing Officer and that the vehicle, though registered in the director's name, was used for the company's business and expenses were incurred by the company. Relying on the principle that mere claim of an expenditure which is not accepted by the revenue does not, by itself, attract penalty under section 271(1)(c), and that an assessee who has accepted an addition in assessment may still advance alternative arguments before the Tribunal in penalty proceedings, the Tribunal concluded there was no concealment or misstatement warranting penalty on this addition. [Paras 8]

Penalty under section 271(1)(c) is not attracted in respect of the motor car expenses, depreciation and interest of Rs. 2,51,941/-; penalty deleted.

Penalty under section 271(1)(c) - Ad-hoc disallowance - Prosecution of penalty where no concealment or misstatement - Whether penalty under section 271(1)(c) is sustainable on an ad-hoc disallowance of business promotion expenses amounting to Rs. 1,02,392/- (10% ad-hoc disallowance) - HELD THAT: - The Tribunal noted that the addition was made on an ad-hoc basis and applied the established view that penalty under section 271(1)(c) is not sustainable where disallowance is ad-hoc. Given that the disallowance was estimated and there was no finding of concealment or deliberate misstatement, the imposition of penalty could not be sustained. [Paras 9]

Penalty under section 271(1)(c) is not sustainable on the ad-hoc disallowance of business promotion expenses; penalty deleted.

Final Conclusion: The Tribunal allowed the appeal, deleted the penalty levied under section 271(1)(c) in respect of both the motor car related expenses and the ad-hoc disallowance of business promotion expenses for A. Y 2014-15, and set aside the orders of the Assessing Officer and the CIT(A) on these points.

Addition on account of unexplained cash deposits - estimation of unexplained savings - onus of proof for source of credit - reopening of assessment under section 147/148 of the Income Tax Act - confirmation of assessment by appellate authority

Addition on account of unexplained cash deposits - onus of proof for source of credit - Addition of Rs. 2,00,000 treated as income from undisclosed sources on account of unexplained cash credited by the husband - HELD THAT: - The Tribunal reviewed the assessment-record statements of the purchaser and of the assessee's husband which showed that only part payment of Rs. 2,00,000 was proved to have been available at the time of the alleged sale; the husband could not satisfactorily account for the remaining amount he claimed to have handed to the assessee and declined to take further time to produce evidence. The authorities applied the legal burden on the assessee to prove the source of the cash credited to her bank account and found the creditworthiness of the husband not established. On these facts the Tribunal upheld the finding that the unexplained sum correctly stood added to the assessee's income. [Paras 5]

Addition of Rs. 2,00,000 confirmed

Addition on account of unexplained cash deposits - onus of proof for source of credit - Addition of Rs. 1,37,000 treated as income from undisclosed sources out of amounts purportedly contributed by the son - HELD THAT: - The son admitted limited formal employment income and could not quantify alleged additional earnings from occasional labour; the assessee likewise could not substantiate the source or quantum of the purported contributions. The AO allowed a modest notional amount as attributable to labour and made the balance addition. The Tribunal found the AO's conclusion that the assessee failed to prove the creditworthiness of the son supported by the record and sustained the addition. [Paras 5]

Addition of Rs. 1,37,000 confirmed

Estimation of unexplained savings - addition on account of unexplained cash deposits - Addition of Rs. 6,00,000 by estimation from claimed past savings of Rs. 8,50,000 arising from dairy and sale of livestock - HELD THAT: - The assessee's statements as to rearing of a few buffaloes, sale of milk and livestock, and keeping a large cash amount at home were found inconsistent with the family's circumstances, lack of contemporaneous records and the long-standing bank-account habit. The AO made a partial allowance as plausible past savings and estimated the remainder as unexplained income; the CIT(A) upheld this estimate and the Tribunal concurred that the estimation was justified on the material before the authorities. [Paras 5]

Addition of Rs. 6,00,000 confirmed

Reopening of assessment under section 147/148 of the Income Tax Act - Ground raising invalidity of reopening under section 147/148 was not pressed before the CIT(A) and is dismissed - HELD THAT: - The Tribunal noted that the specific ground challenging the validity of the reopening before the CIT(A) was not pursued by the assessee at the appellate stage below. Consequently that contention did not arise from the CIT(A)'s order for determination and was dismissed by the Tribunal as not pressed. [Paras 5]

Ground on reopening dismissed as not pressed

Final Conclusion: The Tribunal dismissed the appeal and upheld the additions confirmed by the CIT(A), thereby sustaining the assessment as computed for Assessment year 2013-14.

Reasonable rate of commission - addition under section 68 - burden of proof - peak unexplained credit - set aside proceedings

Reasonable rate of commission - set aside proceedings - Whether profit/commission for estimating unexplained commission income should be computed at 0.50% instead of 2% - HELD THAT: - The Tribunal noted that in subsequent and group appeals involving the assessee the Tribunal had held that 0.50% was the reasonable rate of profit/commission to be adopted for computing commission income. Having regard to those decisions and the parity with the assessee's cases for later years, the Tribunal set aside the orders of the authorities below and directed the Assessing Officer to adopt a profit rate of 0.50% (in place of 2%) for estimating commission income. The Tribunal therefore followed the precedent in the group appeals and applied the same figure to the assessment under challenge. [Paras 5]

Orders below set aside to the extent profit rate of 2% was applied; AO directed to adopt 0.50% for estimating commission income.

Addition under section 68 - burden of proof - peak unexplained credit - Whether the addition of Rs. 4,50,000 as unexplained cash deposits (treated as credit under section 68) should be sustained - HELD THAT: - In the earlier round the Tribunal had directed that each assessee must explain credits by proving identity, creditworthiness and genuineness, and that the AO should restrict addition to peak unexplained credit after eliminating circular transactions. On remand the assessee failed to produce the fund-flow details, identify the origin and first transactions, or otherwise discharge the onus placed on it. The AO therefore made the addition under section 68, and the appellate authorities upheld it. The Tribunal held that in set-aside proceedings authorities must follow the prior directions and cannot permit the assessee to raise a new plea; since the conditions of section 68 were not satisfied and the assessee did not comply with the Tribunal's directions to demonstrate peak credits, there was no justification to interfere with the addition. [Paras 7]

Addition of Rs. 4,50,000 on account of unexplained bank deposits confirmed; assessee failed to discharge burden as per directions, so section 68 addition sustained.

Final Conclusion: Appeal partly allowed: commission income to be recomputed using 0.50% profit rate; addition of Rs. 4,50,000 as unexplained cash deposit under section 68 confirmed.

Penalty under section 271(1)(c) - Concealment of income - Furnishing of inaccurate particulars - Estimated disallowance - Claim unsustainable in law does not ipso facto amount to concealment - Disclosure in return and audit report

Penalty under section 271(1)(c) - Concealment of income - Furnishing of inaccurate particulars - Estimated disallowance - Claim unsustainable in law does not ipso facto amount to concealment - Disclosure in return and audit report - Whether penalty under section 271(1)(c) is leviable where the assessee disclosed particulars and the disputed disallowance of interest was on estimate basis - HELD THAT: - The Tribunal found that the assessee had furnished full particulars of the interest payments in the return and in the audit report, and the only discrepancy between the return and assessment related to the quantum of interest under section 24(b), which was determined on an estimated basis by the assessing officer. Applying the principle that a claim merely unsustainable in law does not necessarily amount to furnishing inaccurate particulars, the Tribunal held that there was no concealment of income warranting penalty. The assessing officer had also computed penalty on the assessed income instead of on the excess claimed amount; even the CIT(A) limited the sustained addition. In view of the disclosed particulars and the estimate nature of the disallowance, the Tribunal concluded that the facts did not satisfy the threshold for levy of penalty under section 271(1)(c). [Paras 9, 10, 11]

Penalty under section 271(1)(c) cancelled and appeal allowed.

Final Conclusion: The Tribunal set aside the CIT(A)'s order upholding the penalty and directed cancellation of the penalty, holding that disclosed particulars and an estimated disallowance of interest do not constitute concealment of income warranting penalty under section 271(1)(c).

Deduction under section 80P - inquiry into activities of a co-operative society for 80P(4) - classification of income as income from business vs other sources - each assessment year to be examined separately

Deduction under section 80P - inquiry into activities of a co-operative society for 80P(4) - each assessment year to be examined separately - Entitlement of the assessee to deduction under section 80P(2)(a)(i) of the Income-tax Act. - HELD THAT: - The Larger Bench of the jurisdictional High Court in The Mavilayi Service Co-operative Bank Ltd. held that, in light of the Supreme Court decision in Citizen Co-operative Society, the Assessing Officer must enquire into the factual activities of the assessee society and determine eligibility for deduction under section 80P, notwithstanding the class of the society shown in the registration certificate. Each assessment year is distinct and eligibility must be verified year-wise. The Tribunal applied that dictum and restored the claim for deduction to the Assessing Officer for factual examination as to whether the assessee's activities conform to those of a co-operative society entitled to the benefit under section 80P(2). [Paras 7]

Claim for deduction under section 80P(2)(a)(i) is restored to the Assessing Officer for inquiry into the assessee's activities and determination of eligibility in accordance with the law laid down by the Larger Bench of the High Court.

Classification of income as income from business vs other sources - deduction under section 80P - inquiry into activities of a co-operative society for 80P(4) - Whether interest income on investments (deposits with banks and treasuries) can be treated as income from business and whether such income is eligible for deduction under section 80P. - HELD THAT: - A coordinate Bench of the Tribunal (Kizhathadiyoor) treated interest earned from investments with treasuries and banks as part of the banking activity and therefore as income from business rather than income from other sources. The present Tribunal accepted that characterization for assessment purposes. However, the question of granting deduction under section 80P on such interest income is not mechanically answered; following the Larger Bench decision in The Mavilayi Service Co-operative Bank Ltd., the Assessing Officer must examine the assessee's activities before allowing deduction under section 80P. Thus, while the interest income may be assessed as business income, entitlement to deduction on that income is subject to the AO's factual determination under the authoritative High Court precedent. [Paras 8]

Interest on investments with banks and treasuries is to be treated as income from business for assessment, but grant of deduction under section 80P on such interest is remitted to the Assessing Officer for examination of the assessee's activities in accordance with the Larger Bench ruling.

Final Conclusion: The Revenue appeal is disposed of by directing the Assessing Officer to examine, year-wise, the activities of the assessee society and determine eligibility for deduction under section 80P; interest on investments may be assessed as business income, but allowance of section 80P deduction on that interest is subject to the AO's factual enquiry as directed.

Validity of notice under section 153C as trigger for assessment of documents found in search - Requirement of incriminating material for invoking search-based proceedings against a third person - Books of account regularly maintained and recorded transactions excluding initiation of section 153C proceedings - Scope of assessment years when documents found pertain to a one time transaction - Assessment under section 143(3) read with section 153C held bad in law where statutory conditions not satisfied

Validity of notice under section 153C as trigger for assessment of documents found in search - Requirement of incriminating material for invoking search-based proceedings against a third person - Books of account regularly maintained and recorded transactions excluding initiation of section 153C proceedings - Whether proceedings under section 153C could be validly initiated against the assessee on the basis of a copy of a registered gift deed found during search when the transaction was recorded in the assessee's books and no incriminating material was found. - HELD THAT: - The Tribunal examined the statutory scheme of section 153C and the search provisions and held that the machinery in section 153C is triggered where documents or assets found in the course of a search on one person belong to another and bear on determination of that other person's undisclosed income. Where a document records a transaction that is duly reflected in the regularly maintained books of the other person, such a document cannot be the foundation for opening proceedings under section 153C for multiple preceding assessment years. The Tribunal found that the copy of the registered gift deed seized related to a one time gift disclosed in the financial statements of both donors and donee for the relevant year, and that no incriminating material was found during search or survey to suggest undisclosed income or inflated expenses. Consequently, initiation of proceedings under section 153C for assessment years 2005-06 to 2010-11 was held to be without basis and bad in law. [Paras 13, 14, 15, 16]

Proceedings under section 153C and assessments framed under section 143(3) r.w.s. 153C for assessment years 2005-06 to 2010-11 are invalid and do not stand.

Assessment under section 143(3) read with section 153C held bad in law where statutory conditions not satisfied - Validity of adhoc disallowance of expenses @5% made by the CIT(A) and the Assessing Officer's disallowances in the assessment orders. - HELD THAT: - The Tribunal noted that the CIT(A) had examined the assessment records and observed absence of any incriminating material concerning the genuineness of expenses claimed by the trust; therefore the CIT(A) reduced the Assessing Officer's disallowances to an adhoc 5%. However, having held that the initiation of proceedings under section 153C itself was invalid, the Tribunal observed that the legal and factual grounds raised on merits (including the adhoc disallowance) become academic. [Paras 11, 17]

Merits of disallowance were rendered academic by the decision on jurisdiction; no separate adjudication on the substantive disallowance is required in view of set aside of assessments.

Final Conclusion: All appeals of the assessee are allowed: notices and assessments under section 143(3) read with section 153C for assessment years 2005-06 to 2010-11 are set aside as bad in law; consequential merit issues are academic.

Arm's length price - transfer pricing adjustment - profit level indicator - comparability of comparable companies - capacity utilization adjustment - cash profit as profit level indicator - deduction under section 10B - set-off of brought forward losses and unabsorbed depreciation

Transfer pricing adjustment - arm's length price - profit level indicator - Whether the TPO's presumption that the assessee netted off stock difference to artificially reduce operating cost was justified and whether the PLI computation must be reworked. - HELD THAT: - The Tribunal examined the financial statements and noted that the stock difference was shown as a credit in the Profit and Loss account because closing stock exceeded opening stock, while raw material consumed was shown at the gross debit figure. The assessee, for computing the PLI, netted the stock difference against raw material consumed; this change in presentation did not alter net profit. The TPO's presumption that this was done to artificially reduce operating cost was held to be fallacious. The Tribunal observed that even if operating cost were reduced, that would tend to increase profit margin, and therefore the TPO's inference was incorrect. The Tribunal also noted an identical view expressed by a co-ordinate bench and concluded that the PLI computation must be revisited in light of the correct treatment of stock difference. [Paras 6]

TPO's presumption rejected and AO/TPO directed to rework the PLI of the assessee.

Comparability of comparable companies - transfer pricing adjustment - Admissibility of M/s Talbros Engineering Limited and Jotindra Steel & Tubes Limited as comparables. - HELD THAT: - The assessee sought inclusion of the two companies as comparables, asserting their business activities were relevant. The Tribunal observed the assessee failed to demonstrate how the functional profile of these companies was similar to that of the assessee, which manufactures and exports aircraft engine parts. In the absence of evidence establishing functional comparability, the request for inclusion was not sustained. [Paras 8]

Claim for inclusion of the two named companies as comparables rejected.

Computation of net profit margin - transfer pricing adjustment - Reconciliation of differing methodologies for computing net profit margin of comparable companies. - HELD THAT: - There was a material difference between net profit margins computed by the assessee and those computed by the TPO (illustrated by differing margins for JMT Auto Limited). The Tribunal treated this as a matter of reconciliation of methodologies and held that the assessee should be given an opportunity to understand or explain the TPO's methodology so that differences can be reconciled. The issue requires fresh examination by AO/TPO. [Paras 9]

Issue restored to AO/TPO for fresh examination and reconciliation of methodologies.

Cash profit as profit level indicator - profit level indicator - Whether cash profit (profit before depreciation) may be adopted as the PLI. - HELD THAT: - The Tribunal noted precedent from coordinate benches allowing profit before depreciation as PLI where there is substantial variation in charging depreciation between the assessee and comparables. The Tribunal directed AO/TPO to consider the assessee's contention and asked the assessee to furnish details proving substantial variation in depreciation treatment so that the PLI may be determined appropriately. [Paras 11]

AO/TPO directed to consider cash profit as PLI after assessee furnishes supporting details; matter remanded for examination.

Capacity utilization adjustment - comparability of comparable companies - Claim for capacity utilization adjustment in favour of the assessee. - HELD THAT: - The assessee claimed lower capacity utilization compared to the average of comparables. The Tribunal examined the comparable companies' utilization data and found one comparable (Sundaram Fasteners Limited) showed an anomalously high utilization of 218.24%, which suggested possible error. The assessee had not ascertained or explained that anomalous figure. Comparable companies Rane Engine Valves and Samkrg Pistons had utilization nearer to the assessee. In view of the unexplained anomaly and lack of satisfactory explanation by the assessee, the capacity utilization adjustment claim was not accepted. [Paras 12]

Capacity utilization adjustment rejected.

Deduction under section 10B - set-off of brought forward losses and unabsorbed depreciation - Treatment of brought forward losses and unabsorbed depreciation in computing deduction under section 10B and their set-off against assessed income. - HELD THAT: - The assessee contended that brought forward losses and unabsorbed depreciation pertaining to the EOU should not have been deducted while computing deduction under section 10B and that set-off against income assessed after adjustments ought to be allowed; reliance was placed on a Supreme Court decision. The Tribunal found that these contentions raise substantial questions requiring application of the cited authority and factual examination, and therefore restored these issues to the file of the AO for fresh consideration in light of the Supreme Court decision referred to by the assessee. [Paras 14, 15]

Issues restored to AO for fresh examination of deduction under section 10B and set-off of brought forward losses and unabsorbed depreciation.

Final Conclusion: The appeal is partly allowed: certain TPO inferences were rejected and specific transfer pricing issues were remanded to the AO/TPO for recomputation or verification (including reworking the PLI, reconciliation of net margin computations, consideration of cash profit as PLI upon proof, and examination of section 10B and set-off claims); the proposed comparables and the capacity utilization adjustment were rejected. The matter is remitted to the AO/TPO for compliance with the directions given.

Deduction under Section 80HHC - Taxability of profit on transfer of DEPB - Retrospective amendment to taxation provisions - Application of Supreme Court decision in Avani Exports - Effect of Topman Exports precedent

Deduction under Section 80HHC - Taxability of profit on transfer of DEPB - Application of Supreme Court decision in Avani Exports - Deduction under Section 80HHC in respect of DEPB receipts is to be computed in accordance with the law as laid down by the Supreme Court in Avani Exports and the authorities below must give effect to that decision. - HELD THAT: - The Tribunal examined earlier proceedings, intervening retrospective amendments effected by the Taxation Laws (Amendment) Act, 2005, and the consequent judicial pronouncements including Topman Exports and subsequently Avani Exports. While earlier remands and orders directed computation in the light of Topman Exports, the later binding decision in Avani Exports settles that the third and fourth provisos to Section 80HHC inserted by the 2005 amendment do not operate retrospectively and exporters with turnover below and above Rs.10 crores must be treated similarly; accordingly exporters with turnover exceeding Rs.10 crores are also entitled to claim the benefit under the proviso without complying with the earlier prescribed conditions. The Tribunal held that when the Supreme Court in Avani Exports altered the applicable legal position, the same is binding and must be applied to the assessee's claim. The assessee is to supply working for recomputation and the Assessing Officer shall verify and allow the deduction under Section 80HHC in accordance with Avani Exports.

Assessee's claim for deduction under Section 80HHC in respect of DEPB receipts is allowed to be recomputed and given effect to in accordance with the Supreme Court's decision in Avani Exports; the matter is remitted for verification and recomputation by the Assessing Officer.

Final Conclusion: Appeal allowed; deduction under Section 80HHC in respect of DEPB receipts to be recomputed and granted in accordance with the binding Supreme Court decision in Avani Exports, with remand to the Assessing Officer for verification of the assessee's working.

Penalty under section 271AAB of the Act - undisclosed income - search under section 132 of the Act - ad-hoc declaration made in the course of section 132(4) statement - onus on the Assessing Officer to bring on record incriminating material - non-application of mind in imposition of penalty

Penalty under section 271AAB of the Act - undisclosed income - ad-hoc declaration made in the course of section 132(4) statement - onus on the Assessing Officer to bring on record incriminating material - Validity of imposition of penalty under section 271AAB where additional income was declared during search but no incriminating material was found or referred to in the assessment or penalty order. - HELD THAT: - The Tribunal held that section 271AAB applies only to 'undisclosed income' as defined in the provision, which requires nexus to money, bullion, jewellery or other valuable articles or entries/documents found in the course of search or false entries in books of account. Where an assessee makes an ad hoc or lump sum declaration in a statement under section 132(4) and the Assessing Officer does not refer to any incriminating material or particulars of undisclosed money/assets/documents linking the declaration to 'undisclosed income', the declaration by itself does not fall within the statutory definition. The onus is on the Assessing Officer to bring material pointing to 'undisclosed income' as defined; absent such material and any reference thereto in the orders, imposition of penalty under section 271AAB is without legal foundation. The Tribunal followed coordinate bench decisions (including reasoning under erstwhile section 271AAA whose definition of 'undisclosed income' is identical) and distinguished authority relied upon by Revenue where declarations were supported by seized incriminating documents. The Tribunal also found that the Assessing Officer's penalty order exhibited non application of mind and was therefore vitiated. [Paras 9, 11]

Penalty imposed under section 271AAB deleted and the appeals allowed.

Final Conclusion: In respect of AY 2013-14, penalties imposed under section 271AAB in the captioned appeals were set aside because the additional income declared during the search was not supported by any incriminating material or particulars establishing 'undisclosed income' as defined, and the Assessing Officer failed to apply his mind.

Addition under Section 68 as unexplained cash credit - genuineness and existence of creditors - reliance on non-service of notice under Section 133(6) - burden of proof on the assessee to identify creditors - documentary evidence (PAN, ITR, bank statements, TDS) as proof of genuineness

Addition under Section 68 as unexplained cash credit - genuineness and existence of creditors - reliance on non-service of notice under Section 133(6) - documentary evidence (PAN, ITR, bank statements, TDS) as proof of genuineness - burden of proof on the assessee to identify creditors - Validity of additions made under Section 68 treating amounts payable to ten sub-contractors as unexplained credits and whether the assessee discharged the onus to prove their genuineness and existence. - HELD THAT: - The Tribunal found that the Assessing Officer issued notices under Section 133(6) to 52 creditors and returned notices unserved in respect of 10; however, documentary evidence including names, addresses, PAN, income-tax returns, bank statements and TDS certificates for those creditors had been filed by the assessee and were not disputed before the Tribunal. The remand report recorded that the Assessing Officer personally visited the relevant district and verified the existence of nine out of the ten disputed creditors. The Tribunal held that mere non-service of notices cannot, by itself, convert genuine transactions into non-genuine ones where other cogent evidence establishes identity, creditworthiness and genuineness. Reliance was placed on the authority that where the assessee furnishes adequate documentary proof and the Revenue has means of further verification but does not discredit the documents, the assessee is held to have discharged the onus. The Tribunal also noted comparable decisions where deletion of additions was upheld when voluminous documentary evidence established the transactions despite non-appearance of parties to notices. Applying these principles, the Tribunal concluded that the Assessing Officer's addition was not justified. [Paras 7, 8, 10]

The additions made under Section 68 in respect of the ten sub-contractors are deleted; grounds 2.1 to 2.5 of the assessee's appeal are allowed.

Final Conclusion: The Tribunal set aside the CIT(A)'s order and allowed the appeal in part by deleting the additions made under Section 68 in respect of the disputed creditors for Assessment Year 2009-10.

Service of Show Cause Notice within six months - Right to return of seized goods where Show Cause Notice not issued in time - Seizure and disposal of goods under Section 110 - Requirement of notice before sale/auction of seized goods - Illegality of ex parte adjudication without service - Refund of sale proceeds with interest

Service of Show Cause Notice within six months - Right to return of seized goods where Show Cause Notice not issued in time - Illegality of ex parte adjudication without service - Whether the Show Cause Notice in respect of the seized gold was required to be served within six months of seizure and the consequences of non-service. - HELD THAT: - The Court found that seizure occurred on 5th January 2015 and that service of a Show Cause Notice had to be effected within six months in terms of the statutory scheme. The record demonstrated that although an SCN dated 30th June 2015 was produced, it was sent through diplomatic channels and was not in fact served on the petitioner (High Commission/Ministry communications indicated the petitioner "no longer resides at the physical address provided"). In light of established precedent, failure to issue/serve the SCN within six months renders the person from whom goods were seized entitled to their return, and any adjudication passed ex parte without actual service is legally unsustainable. [Paras 19, 20]

SCN was not effectively served within the statutory six-month period; consequence is that the adjudication passed without service is illegal and the petitioner is entitled to relief.

Seizure and disposal of goods under Section 110 - Requirement of notice before sale/auction of seized goods - Refund of sale proceeds with interest - Whether the disposal (sale/auction) of the seized gold without notice to the petitioner and despite the goods being non-perishable was lawful. - HELD THAT: - The Court observed that the goods were gold bars (non-perishable) and there was no justification for summary disposal under the notified grounds in Section 110(1)(A). The respondents produced no explanation for disposing of the seized gold without issuing notice to the petitioner as required by law and Board guidance (CBEC circular emphasising notice prior to sale). Disposal without notice, particularly where the SCN itself had not been effectively served, was held to be improper. Given the disposal had already occurred, the appropriate remedy identified was repayment of the sale proceeds to the petitioner. [Paras 21, 22, 23]

Disposal of the seized gold without issuing notice was unlawful; respondents must refund the sale proceeds to the petitioner.

Illegality of ex parte adjudication without service - Refund of sale proceeds with interest - Whether the adjudication order dated 15th January 2019 should stand and what relief should be given in view of the defects in service and disposal. - HELD THAT: - Having concluded that the SCN was not effectively served and that the seized goods were disposed of without requisite notice, the Court held the adjudication order to be unsustainable. As the physical gold had been sold, the Court directed repayment to the petitioner of the sale proceeds (equivalent to the assessed value as claimed by respondents) by a specified date and provided for simple interest at 6% p.a. in case of delay. The Court also left open the petitioner's ability to pursue other remedies. [Paras 24, 25, 26]

Adjudication order set aside; respondents directed to refund the sale proceeds to the petitioner (or precise amount realised) by the date stipulated, failing which interest at 6% p.a. shall accrue.

Final Conclusion: The petition succeeds: the adjudication order is set aside for want of effective service of the Show Cause Notice and unlawful disposal without notice; because the gold has been sold, the respondents are directed to refund the sale proceeds to the petitioner (or the precise amount realised) by the date ordered, with interest at 6% p.a. for any delay.

Writ petition under Articles 226/227 - application of notification dated 16.2.2019 - representation for administrative decision - speaking order - opportunity of hearing

Representation for administrative decision - speaking order - opportunity of hearing - Respondent No.2 directed to decide the petitioner's representation dated 21.2.2019 by passing a speaking order after affording an opportunity of hearing. - HELD THAT: - The Court, without expressing any opinion on the merits of the dispute regarding the applicability of notification dated 16.2.2019, disposed of the writ petition by ordering the administrative authority to consider the pending representation. The authority is required to decide the representation in accordance with law, record reasons in a speaking order and afford the petitioner an opportunity of hearing before issuing its decision. The mandate is procedural and remedial, leaving substantive questions about the notification's applicability open for the authority's determination on merits. [Paras 4]

Respondent No.2 to decide the representation dated 21.2.2019 with a speaking order after giving the petitioner an opportunity of hearing within 15 days from receipt of certified copy of this order.

Final Conclusion: Writ petition disposed by directing respondent No.2 to decide the petitioner's representation dated 21.2.2019 in accordance with law by passing a speaking order and after affording an opportunity of hearing within 15 days from receipt of the certified copy of this order; merits left open.

Liability of custodian/CCSP for duty on missing or pilfered bonded cargo under the Handling of Cargo in Customs Areas Regulations, 2009 - procedural mandate for inquiry under Regulation 12 of the Handling of Cargo in Customs Areas Regulations, 2009 before imposing penalty - invalidity of penalty imposed without compliance with statutory procedure - custodial responsibility as envisaged by Section 45 of the Customs Act, 1962

Liability of custodian/CCSP for duty on missing or pilfered bonded cargo under the Handling of Cargo in Customs Areas Regulations, 2009 - custodial responsibility as envisaged by Section 45 of the Customs Act, 1962 - Duty and interest demand for missing bonded cargo confirmed against the CCSP - HELD THAT: - The Tribunal found that the imported goods were missing while under the custody of the CCSP (CFS Petta) and, therefore, the CCSP is liable to pay duty and interest for the missing bonded cargo under the obligations imposed by the Handling of Cargo in Customs Areas Regulations, 2009, as reflected in the impugned order. The appellant's counsel conceded willingness to pay the duty; accordingly the demand for duty and interest amounting to the sum specified in the impugned order was confirmed. [Paras 5]

Confirmed the duty demand of Rs. 12,227/- with interest for the missing bonded cargo.

Procedural mandate for inquiry under Regulation 12 of the Handling of Cargo in Customs Areas Regulations, 2009 before imposing penalty - invalidity of penalty imposed without compliance with statutory procedure - Penalty imposed under Regulation 12(8) set aside for failure to conduct the required inquiry and for contradiction in the impugned order - HELD THAT: - The Tribunal noted that Regulation 12 prescribes the procedure for imposition of penalties and that no inquiry under Regulation 12 was conducted by the Commissioner nor was the prescribed procedure followed. The impugned order itself was internally inconsistent-paragraph 21 reportedly dropped proceedings under Regulations 11 and 12 while the operative portion imposed a penalty under Regulation 12(8). For these reasons the Tribunal held that the penalty lacked legal basis and was unsustainable. [Paras 5]

Set aside the penalty of Rs. 50,000/- imposed under Regulation 12(8).

Final Conclusion: Appeal partly allowed: duty demand with interest confirmed; penalty under Regulation 12(8) quashed for want of the statutory inquiry and procedural compliance.

Time limit for refund claims - refund of Special Additional Duty under Section 3(5) of the Customs Tariff Act - construction of an exemption notification - application of Section 27 of the Customs Act - limitation and statutory remedy - strict construction of exemption notifications

Time limit for refund claims - application of Section 27 of the Customs Act - construction of an exemption notification - refund of Special Additional Duty under Section 3(5) of the Customs Tariff Act - Whether the claim for refund of Special Additional Duty (SAD) under Notification No. 102/2007 is barred by the one year limitation introduced by Notification No. 93/2008 and by Section 27 of the Customs Act. - HELD THAT: - The Tribunal examined the scheme under Section 3(5) of the Customs Tariff Act and Notification No. 102/2007 which exempts certain goods from SAD but requires payment of the duty at import and subsequent claim for refund. Notification No. 93/2008 introduced a one year time limit for filing refund claims. The Tribunal held that the amending notification was made under statutory power and aligns with the statutory provision in Section 27 of the Customs Act which prescribes a one year period for filing refund applications. The Tribunal rejected the Commissioner (Appeals)'s view that the amendment was without statutory basis, observing that limitation for a statutory remedy must be governed by the special statute and cannot be extended by inherent powers of a court. Reliance was placed on authority that exemption notifications are to be strictly construed and on the principle that a statutory remedy must be pursued in the mode and within the time prescribed by the statute. Applying these principles, the Tribunal concluded that refund claims under Notification No. 102/2007 must be filed within one year of payment, and that the claimant's refund filed beyond that period was time barred.

The refund claim for the portion held to be barred by limitation is rejected as time barred; the Commissioner (Appeals) order expanding the limitation in favour of the assessee is set aside.

Final Conclusion: The appeal is allowed and the portion of the refund claim that was filed beyond the one year period is rejected as time barred under Notification No. 93/2008 and Section 27 of the Customs Act; the Commissioner (Appeals) order in favour of the assessee is set aside.

Withdrawal of insolvency application after settlement prior to constitution of Committee of Creditors - Reliance on Swiss Ribbons principle permitting withdrawal - Effect of withdrawal-setting aside of moratorium, appointment of Interim Resolution Professional and related interim orders - Restoration of corporate debtor's management and release from rigour of insolvency law - Obligation to pay Resolution Professional's fees after settlement

Withdrawal of insolvency application after settlement prior to constitution of Committee of Creditors - Reliance on Swiss Ribbons principle permitting withdrawal - Withdrawal of the Section 9 application was permitted because the parties settled prior to constitution of the Committee of Creditors. - HELD THAT: - The Tribunal found that the parties had reached a settlement on 18th January, 2019 and that the settlement pre-dated constitution of the Committee of Creditors (constituted on 28th January, 2019). Applying the principle in Swiss Ribbons, the Operational Creditor was permitted to withdraw the Section 9 application. On that basis the impugned admission order dated 7th January, 2019 was set aside and the application was treated as withdrawn. [Paras 6, 7]

Section 9 application permitted to be withdrawn and impugned order dated 7th January, 2019 set aside.

Effect of withdrawal-setting aside of moratorium, appointment of Interim Resolution Professional and related interim orders - All interim orders passed pursuant to the impugned admission-including appointment of Interim Resolution Professional, declaration of moratorium, freezing of accounts and advertisement for claims-were declared illegal and set aside. - HELD THAT: - Having allowed withdrawal of the Section 9 proceeding, the Tribunal held that consequential orders passed by the Adjudicating Authority pursuant to the impugned admission could not stand. Therefore orders appointing any Interim Resolution Professional, declaring moratorium, freezing of accounts and any advertisement or action taken by the Interim Resolution Professional pursuant to the impugned order were declared illegal and set aside, and the application under Section 9 was dismissed. [Paras 8]

Interim orders and actions pursuant to the impugned admission declared illegal and set aside; Section 9 application dismissed.

Restoration of corporate debtor's management and release from rigour of insolvency law - Obligation to pay Resolution Professional's fees after settlement - The Corporate Debtor was released to function through its Board of Directors and directed to pay the remaining fees of the Resolution Professional within 15 days. - HELD THAT: - Following setting aside of the admission and interim orders, the Tribunal directed that the Corporate Debtor be released from the rigour of the insolvency process and allowed to function independently through its Board. It also directed the Corporate Debtor to pay the balance of the Resolution Professional's fees (after adjustment of any amounts already paid) within 15 days. [Paras 8, 9]

Corporate Debtor released to its Board; balance of Resolution Professional's fees to be paid within 15 days.

Final Conclusion: The appeal is allowed: the Section 9 admission is set aside as withdrawn; all consequent interim orders and actions are declared illegal and set aside; the Corporate Debtor is restored to its Board and ordered to pay the remaining fees of the Resolution Professional within 15 days. No costs.

Fixation of CIRP costs - powers of the Adjudicating Authority under Insolvency Regulations - statutory override under section 238 of the Insolvency Code - escrow account / no lien account for CIRP funds - supervision and ratification by Committee of Creditors - regulatory oversight by the Insolvency and Bankruptcy Board of India - requirement of item wise disclosure of resolution costs

Escrow account / no lien account for CIRP funds - supervision and ratification by Committee of Creditors - Permission to withdraw funds from the escrow/corpus account for CIRP expenses was granted only to a limited extent. - HELD THAT: - The Resolution Professional sought permission to withdraw the claimed CIRP expenses from the escrow account opened under the Tribunal's earlier directions. Noting concerns about the magnitude and documentation of the claimed expenses and while observing that withdrawals from the escrow account are to be operated under NCLT supervision and subject to CoC ratification, the Tribunal authorised an interim withdrawal of a limited sum of Rs.10 lakhs to enable continuation of the insolvency process. The Tribunal also directed the RP to submit a detailed report of work done and the progress of the CIRP and to appear for further consideration, thus conditioning further withdrawals on subsequent scrutiny and oversight.

Interim withdrawal of funds allowed to the extent of Rs.10 lakhs; RP directed to submit detailed report by 13 June 2019 and to attend hearing on 24 June 2019 for further consideration of withdrawals.

Fixation of CIRP costs - requirement of item wise disclosure of resolution costs - powers of the Adjudicating Authority under Insolvency Regulations - The Tribunal held that the claimed CIRP expenses appear exorbitant and that the Adjudicating Authority has jurisdiction to examine and fix expenses even if approved by the CoC. - HELD THAT: - On scrutiny the Tribunal observed that several heads of expenses claimed by the RP (including professional fees and other costs) seemed disproportionately high and lacked supporting explanation or corroborative evidence on the record. Reliance was placed on the Insolvency Regulations which require item wise disclosure of resolution costs and envisage that the Adjudicating Authority shall fix expenses after considering the circumstances of the case. Consequently, the Tribunal declined to allow the entirety of the claimed expenditure without further examination and emphasised that CoC approval does not oust the Adjudicating Authority's power to determine the propriety and quantum of expenses.

Claimed CIRP expenses not allowed in full at interim stage; Adjudicating Authority to determine admissibility and quantum of expenses in accordance with the Regulations.

Regulatory oversight by the Insolvency and Bankruptcy Board of India - statutory override under section 238 of the Insolvency Code - The Tribunal referred the question of fixation and reasonableness of the CIRP costs to the Insolvency and Bankruptcy Board of India for guidance and examination. - HELD THAT: - Given concerns about the scale and justification of the fees and expenses claimed and in light of regulatory action taken against certain RPs for charging unrealistic fees, the Tribunal considered it appropriate to obtain guidance from the IBBI on any applicable Regulations or notifications concerning fixation of RP remuneration and CIRP costs. The reference invites the regulatory authority to examine the basis on which the CoC approved the expenditures and to advise whether any regulatory guidance or mechanism exists to fix such costs. The matter is to be reconsidered by the Tribunal on receipt of IBBI's response.

Matter referred to IBBI, New Delhi for examination and guidance; further consideration of the MA deferred pending IBBI's response.

Final Conclusion: The Tribunal granted an interim withdrawal of Rs.10 lakhs from the escrow corpus for continuation of the CIRP, found the balance of the claimed CIRP expenses prima facie exorbitant and subject to scrutiny under the Insolvency Regulations, and referred the question of fixation and reasonableness of such costs to the IBBI for guidance while directing the RP to furnish a progress report for further hearing.

Commercial training or coaching - commercial training or coaching centre - taxability of conduct of an examination - requirement of consideration for taxable service - evidentiary basis for levy of service tax

Commercial training or coaching - commercial training or coaching centre - taxability of conduct of an examination - Whether conduct of the IELTS test by the Appellant amounted to 'commercial training or coaching' taxable under the Finance Act, 1994 for the period 1 April, 2012 to 30 June, 2012. - HELD THAT: - The agreement between the parties is a licence for the Appellant to administer and deliver the IELTS Test in India; it grants use of test materials, manuals of procedure and requires the Appellant to operate test centres, supply personnel, and comply with standards for administering the test. The statutory definition requires a 'commercial training or coaching centre' to provide training or coaching for imparting skill or knowledge. The mere holding of a test does not constitute imparting skill or knowledge or lessons. There is no clause in the agreement obliging the Appellant to coach or train candidates, nor is any consideration earmarked in the receipts for coaching. The Commissioner's conclusion that the retained portion of the fee could not relate to test conduct because the Appellant outsourced certain test activities ignored that an entity administering a test may legitimately retain a portion of the fee for organising, licensing and supervisory obligations. Absent positive evidence that the Appellant imparted training or received consideration for coaching, the activity cannot be treated as 'commercial training or coaching' liable to service tax for the period in dispute. [Paras 21, 22, 23, 25]

The conduct of the IELTS test by the Appellant is not commercial training or coaching and is not taxable as such for the period 1 April, 2012 to 30 June, 2012.

Evidentiary basis for levy of service tax - requirement of consideration for taxable service - Whether the Commissioner could rely on material from the Appellant's website and social media, and the retained fee component, to sustain the demand when such material did not form part of the show cause notice and no consideration for coaching was shown. - HELD THAT: - The Commissioner relied on the Appellant's website and a Facebook page to infer that the Appellant provided advice, practice materials, master classes and seminars; however, the website at best directed candidates to free practice materials on other sites and did not demonstrate that the Appellant itself provided paid coaching or received consideration for such services. The subsequent show cause notice did not incorporate new relied-upon material that was not part of the notice which gave rise to the impugned order. The Department's suggestion that earlier show cause reliance justified omission of documents in the appeal record is unsustainable where the proximate show cause was confined to the test fees for the specified period. The finding that mere administration of the test constituted a skill imparted to candidates was rejected as lacking evidential support. For levy of service tax the department must point to payment/consideration for the taxable service, which was not established. [Paras 22, 24]

Reliance on the website/Facebook content and on the retained fee component was insufficient to establish taxability; the Commissioner's conclusions based on those materials cannot be sustained.

Final Conclusion: Impugned order dated 29 February, 2016 set aside; appeal allowed as the Appellant's conduct of the IELTS test for the period 1 April, 2012 to 30 June, 2012 is not taxable as 'commercial training or coaching' nor was there sufficient evidence of consideration for any coaching to justify the demand.

Demand based on mismatch between service tax returns and Form 26AS - Burden on revenue to examine reasons for discrepancies - Presumption against treating Form 26AS entries as proof of consideration for services - Requirement to establish consideration and applicability of exemptions or abatement before raising demand

Demand based on mismatch between service tax returns and Form 26AS - Burden on revenue to examine reasons for discrepancies - Requirement to establish consideration and applicability of exemptions or abatement before raising demand - Validity of a service tax demand raised solely on the basis of a difference between figures in ST-3 returns and Form 26AS. - HELD THAT: - The Tribunal found that the Revenue compared amounts declared in the appellant's ST-3 returns with figures in Form 26AS and, without further inquiry, issued a show cause notice and confirmed a demand. The court held that Revenue cannot lawfully raise a demand merely on the basis of such a difference without first examining why the discrepancy exists. It is not permissible to presume that the entire differential represents consideration for services rendered. Revenue must investigate and establish that the amounts reflected in Form 26AS constitute taxable consideration and must consider whether any exemption, abatement or other lawful explanation accounts for the difference before confirming liability.

The demand sustained solely on the basis of the discrepancy between ST-3 returns and Form 26AS is unsustainable; the impugned order is set aside and the appeal is allowed.

Final Conclusion: The appeal is allowed; the impugned demand and penalty confirmed only on the basis of discrepancy between ST-3 returns and Form 26AS are set aside because Revenue failed to examine whether the differential constituted taxable consideration or was explained by exemptions/abatement.

Validity of discharge certificate under VCES issued under Sub-section (7) of Section 107 of the Finance Act, 2013 - Bar on reopening proceedings by virtue of Section 108 of Finance Act, 2013 - Effect of a declaration being substantially false under VCES - Renting of Immovable Property Service - tax liability for the period from 01.04.2011 to 31.12.2012

Validity of discharge certificate under VCES issued under Sub-section (7) of Section 107 of the Finance Act, 2013 - Bar on reopening proceedings by virtue of Section 108 of Finance Act, 2013 - Effect of a declaration being substantially false under VCES - Impugned show cause notice and proceedings reopening assessment after issuance of VCES discharge certificate are invalid in law. - HELD THAT: - The appellant filed a declaration under the VCES on 07.10.2013, received acknowledgement (VCES-2) and was issued a discharge certificate (VCES-3) on 30.10.2013 in terms of Sub-section (7) of Section 107 of the Finance Act, 2013. Section 108 of the Finance Act, 2013 provides that once a discharge certificate under Sub-section (7) of Section 107 is issued, the revenue has no authority to reopen proceedings in respect of the declaration made. The show cause notice dated 01.10.2014, which alleged that the VCES declaration was substantially false and sought to revive liability for the declared period, therefore ran contrary to the statutory bar created by Section 108. Consequently the impugned proceedings and order based on that show cause notice are bad in law and cannot be sustained.

Impugned show cause notice and consequent proceedings set aside; appeal allowed.

Final Conclusion: The tribunal held that issuance of VCES discharge certificate under Section 107(7) coupled with the bar in Section 108 precluded reopening of proceedings; the impugned proceedings for the period April 2011 to December 2012 were therefore bad in law and the appeal was allowed.

Taxability under Business Support Services - guarantee given by an individual director in personal capacity - commission paid to director for providing guarantee - administrative clarification by Central Board of Excise & Customs (TRU) letter dated 28/02/2006 - reliance on administrative clarification in adjudication

Taxability under Business Support Services - guarantee given by an individual director in personal capacity - commission paid to director for providing guarantee - administrative clarification by Central Board of Excise & Customs (TRU) letter dated 28/02/2006 - Whether commission paid to the company director for a personal guarantee for bank loans is taxable as 'Business Support Services'. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) set aside the demand confirmed by the original authority after relying on Para 3.13 of the TRU letter dated 28/02/2006 issued by the Central Board of Excise & Customs, which clarified that the activity in question does not fall within 'Business Support Services'. The Revenue did not dispute the applicability of that clarification. In the absence of any contention by the Revenue against the administrative clarification relied upon by the Commissioner (Appeals), the Tribunal found no merit in the Revenue's appeal and upheld the view that the activity is not taxable under 'Business Support Services'.

Appeal dismissed; the transaction is not taxable as 'Business Support Services' in view of the TRU clarification relied upon by the Commissioner (Appeals).

Final Conclusion: The Revenue's appeal is rejected; the Commissioner (Appeals)'s order setting aside the demand was upheld on the basis of the TRU clarification which was not contested by the Revenue.

Steamer Agent Service - taxability of services rendered directly or indirectly to a shipping line - definition of Steamer Agents including services in connection with ships' husbandry, dispatch and booking or canvassing for cargo - exemption for receipts in foreign exchange

Steamer Agent Service - taxability of services rendered directly or indirectly to a shipping line - The services rendered by the appellant fall within the definition of Steamer Agent Service and are taxable. - HELD THAT: - The Tribunal examined the agency agreements between the appellants and the foreign entities and found that the agreements appoint the appellants as agents for movement of goods and provide for mutual exchange of information and the provision of cargo documents. There is no mention in the agreements of booking of space as the operative activity; however the rendering of such services and provision of documents is incidental to cargo agent services provided to a shipping line. In view of the inclusive language of the definition of Steamer Agents which covers services undertaken "directly or indirectly" in connection with shipping lines (including booking, advertising or canvassing for cargo or services in connection with ships' husbandry or dispatch), the Tribunal accepted the Department's contention that the appellants' activities are covered and therefore taxable as Steamer Agent Service. The Tribunal distinguished the appellant's reliance on cases concerning booking and selling of space on the ground that the factual matrix in those decisions differs from the present agreements. [Paras 5]

The claim that the services are not taxable because they relate only to booking or resale of space was rejected; the services are held to be Steamer Agent Service and taxable.

Exemption for receipts in foreign exchange - The question of eligibility for exemption on the ground that remuneration was received in foreign exchange is not finally decided and is remanded for verification. - HELD THAT: - The appellants asserted that their remuneration was received in foreign exchange and thus might be exempt for certain periods under the notifications relied upon. The Tribunal found prima facie merit in the contention but noted that the appellants did not produce any evidence before the original or revisional authorities to substantiate receipt and non-repatriation of foreign exchange. At the instance of the appellants, and without prejudice to the Department's position, the Tribunal directed remand to the original adjudicating authority for verification of the books of account and supporting evidence and for determination of eligibility for the exemption and appropriate quantification if eligibility is established. [Paras 5, 6]

Matter remanded to the original authority to verify records, decide the appellants' eligibility for exemption in respect of receipts in foreign exchange and to quantify relief if applicable.

Final Conclusion: The appeal is allowed to the extent that the matter is remanded for verification and quantification of the appellants' claim for exemption on account of receipts in foreign exchange; on the substantive question the Tribunal upholds the finding that the services rendered fall within Steamer Agent Service and are taxable.

Immunity of international financial institutions from taxation - Fiction of provider-receiver under Section 66A and reverse charge implications - Exemption for services consumed wholly within a Special Economic Zone - Proviso (c) to exemption Notification for SEZ - refund versus upfront exemption

Immunity of international financial institutions from taxation - Fiction of provider-receiver under Section 66A and reverse charge implications - Requirement to pay Service Tax on lending/financial charges paid to International Finance Corporation and Asian Development Bank set aside - HELD THAT: - The Tribunal held that the Adjudicating Authority's view of subjecting the recipient to tax despite statutory immunities granted to IFC and ADB was unsustainable. The Division Bench decision in Coastal Gujarat Power Ltd. was applied: the statutes granting IFC and ADB immunity preclude levying tax on services provided by them and displace the fiction created by Section 66A to treat the recipient as the provider for taxation. Subsequent administrative clarifications/Circulars (01.01.2019 and 15.01.2019) confirming exemption under the respective Acts and extending the clarification to Service Tax reinforced the conclusion that services by IFC and ADB are not taxable and that the Department proposed withdrawal of its Supreme Court appeal. In consequence, the finding of liability for Service Tax on charges paid to IFC and ADB was set aside. [Paras 16, 20]

Adjudicating Authority's demand in respect of services received from International Finance Corporation and Asian Development Bank is set aside.

Exemption for services consumed wholly within a Special Economic Zone - Proviso (c) to exemption Notification for SEZ - refund versus upfront exemption - Service Tax demand in respect of lending/financial charges paid to PROPARCO set aside to the extent found paid prior to amendment; post-amendment liability rejected on facts - HELD THAT: - The demand relating to the period prior to 20 May, 2009 was recorded to have been discharged by the Appellant and the Adjudicating Authority failed to appropriate those payments; that part of the demand was therefore set aside. For the period after 20 May, 2009 the Tribunal accepted the Appellant's case that the loan proceeds from PROPARCO were taken and used for construction and placing into operation of the Kochi LNG Terminal within the SEZ so as to qualify as services "consumed wholly within the Special Economic Zone" under Notification No. 09/2009-ST as amended by Notification No. 15/2009-ST. The show cause notice did not allege that the funds were actually used outside the SEZ; PROPARCO's indicative terms and conditions supported that the facility was for the Kochi project. The Adjudicating Authority's inference that the services could not be regarded as wholly consumed within SEZ was therefore without basis. The Tribunal concluded that the Appellant satisfied the proviso introduced on 20 May, 2009 and set aside the impugned order accordingly. [Paras 21, 41]

Impugned demand in respect of services received from PROPARCO is set aside: the pre-20 May, 2009 payment stands appropriated and the post-20 May, 2009 demand is rejected on the basis that services were consumed wholly within the SEZ.

Final Conclusion: The appeal is allowed. The adjudicating order dated 29 October, 2015 is set aside insofar as it levied Service Tax on charges paid to International Finance Corporation and Asian Development Bank, and insofar as it required payment (or re payment) for charges paid to PROPARCO (the pre 20 May, 2009 tax having been paid and the post 20 May, 2009 demand being rejected as services consumed wholly within the SEZ).

Limitation under Section 85(3) and 85(3A) - condonation of delay - appeal filed within extended period

Limitation under Section 85(3) and 85(3A) - condonation of delay - appeal filed within extended period - Order of the Commissioner (Appeals) dismissing the appeal as barred by limitation set aside and matter remanded for fresh consideration of a condonation application. - HELD THAT: - The adjudicating order dated 30 April, 2014 was received by the appellant on 12 June, 2014. Section 85(3A) prescribes a two month limitation for appeals in cases where the order is made on or after assent to the Finance Bill, 2012, with a further one month extension discretionary for the Commissioner (Appeals) to condone delay. The appeal was filed on 3 September, 2014, i.e., beyond two months but within the one month discretionary extension. The appellant contends a bona fide belief that a three month limitation under Section 85(3) applied, and there is no record of objection having been taken by the Commissioner (Appeals) earlier. In these circumstances the Tribunal found it appropriate to permit the appellant to move a condonation application and to have the Commissioner (Appeals) decide it on merits without being influenced by observations in the present order. [Paras 10, 11]

Order dated 29 December, 2015 passed by the Commissioner (Appeals) is set aside and the matter is remanded with liberty to the appellant to file an application for condoning the delay; the Commissioner (Appeals) shall examine the application on merits.

Final Conclusion: The Commissioner (Appeals) order dismissing the appeal on the ground of limitation is set aside; the appellant is granted liberty to file a condonation application within one month and the Commissioner (Appeals) is directed to decide it on merits afresh.

Remand for verification of evidence - failure to consider material on record - non-application of mind by adjudicating authority - verification of VAT/sales-tax records - classification of services - works contract vis-a -vis erection, commissioning and installation

Failure to consider material on record - non-application of mind by adjudicating authority - verification of VAT/sales-tax records - Whether the adjudicating authority erred in rejecting and not examining the Dy. Commissioner's report based on verification of balance sheets, invoices and VAT/sales-tax assessment orders, and whether the adjudication should be remitted for fresh consideration. - HELD THAT: - The Tribunal found that the Dy. Commissioner had carried out document verification of balance sheets, bills and Commercial Tax Department assessment orders and produced a report dated 30 January, 2012 together with the supporting documents. The adjudicating authority, however, recorded that the report contained no factual verification without examining the documents produced. That finding was held to be made without application of mind because the report and enclosures demonstrably arose from verification of records. In consequence, the Tribunal held that the matter could not be properly adjudicated without the adjudicating authority verifying the documents relied upon by the Dy. Commissioner, affording the appellant a reasonable opportunity to be heard, and then passing an appropriate order in accordance with law. [Paras 6, 7, 8]

Impugned order set aside and the matter remanded to the adjudicating authority to verify the Dy. Commissioner's report and supporting documents, give the appellant a reasonable opportunity to present its case, and thereafter decide the matter afresh in accordance with law.

Classification of services - works contract vis-a -vis erection, commissioning and installation - Whether the Tribunal itself would decide the classification of the appellant's activity as 'works contract service' or 'erection, commissioning and installation service'. - HELD THAT: - The Tribunal explicitly declined to decide the classification question at this stage. It observed that classification would be considered by the adjudicating authority when the matter is remitted for fresh adjudication after verification of the Dy. Commissioner's report and documents. Thus, no substantive determination on classification was made by the Tribunal. [Paras 8]

Classification left open for the adjudicating authority to decide upon fresh consideration following verification and opportunity to the appellant.

Final Conclusion: The Tribunal set aside the adjudication order and remitted the matter to the adjudicating authority to verify the Dy. Commissioner's report and supporting documents, afford the appellant a reasonable opportunity to be heard, and pass a fresh order in accordance with law; the question of service classification was left undecided for fresh adjudication.

Valuation of taxable service - consideration - reimbursement - free supply of goods - management, maintenance or repair service - diesel filling as a distinct service - Rule 5(1) struck down as ultra vires Section 67

Valuation of taxable service - consideration - reimbursement - Whether the amounts reimbursed by the service recipients towards diesel form part of the gross amount charged and are taxable as consideration for the management, maintenance or repair services. - HELD THAT: - Section 67(1) makes the value for service tax the gross amount charged by the service provider for the taxable service, and the Explanation to Section 67 defines "consideration" as any amount payable for the taxable services. The agreements show a separate, nominal service charge for diesel filling and a distinct reimbursement mechanism for the cost of diesel procured from authorised stations. Following the Supreme Court decisions in Intercontinental Consultants and Bhayana Builders, amounts reimbursed for expenses or goods supplied by the recipient are not "gross amount charged" for the taxable service where no price is charged by the service provider for such goods and there is no nexus between that amount and the taxable service. Here, the diesel cost was reimbursed upon verification and no service corresponding to the value of diesel was rendered by the appellants; therefore the reimbursed diesel value cannot be included in the gross value chargeable to service tax. [Paras 27, 28, 30, 31]

Amounts reimbursed towards diesel are not part of the gross amount charged and are not taxable as consideration for the management, maintenance or repair services.

Diesel filling as a distinct service - free supply of goods - management, maintenance or repair service - Whether diesel used or supplied for diesel-filling activities is an "input" whose value must be included in the taxable value of the service provider's management/maintenance service, or whether diesel filling is itself the taxable service with a separate consideration. - HELD THAT: - The contract expressly separates the activity of diesel filling (with a specified monthly fee) from the procurement/payment of diesel, which is to be procured from authorised filling stations and reimbursed. The Department's characterization of diesel as an input to the broader maintenance service disregards the contractual allocation of a distinct service for diesel filling. The Supreme Court's reasoning in Bhayana Builders establishes that value of goods supplied free by the recipient does not enter into the gross amount charged for the taxable service. On the facts, diesel-filling is a service for which a separate consideration is charged; diesel value reimbursed does not constitute consideration for that service and cannot be treated as an input value to expand the taxable base. [Paras 26, 30, 31]

Diesel filling is a distinct service with its own consideration; the reimbursed cost of diesel cannot be treated as an input value to be included in the taxable value of the management/maintenance service.

Rule 5(1) struck down as ultra vires Section 67 - valuation of taxable service - Whether reliance on Rule 5(1) of the Service (Determination of Value) Rules, 2006 could sustain inclusion of reimbursed diesel costs in the taxable value. - HELD THAT: - Rule 5(1) treats expenditures or costs incurred by the service provider in the course of providing taxable service as consideration includible in value. However, the Supreme Court in Intercontinental Consultants held that Rule 5(1) goes beyond the scope of Section 67 and is ultra vires insofar as it seeks to include reimbursable expenses and free supplies by the recipient in the gross amount charged for the service. The impugned orders' reliance on Rule 5(1) is therefore unsustainable in light of that precedent and the statutory scheme of Section 67. [Paras 32]

The impugned reliance on Rule 5(1) cannot sustain inclusion of reimbursed diesel costs; Rule 5(1) is inapplicable insofar as it purports to expand valuation beyond Section 67.

Final Conclusion: The Tribunal set aside the impugned orders and allowed the appeals: reimbursed diesel costs are not includible in the gross amount charged for service tax purposes, diesel-filling is a distinct service with separate consideration, and reliance on Rule 5(1) to include such reimbursements is unsustainable.

Short term accommodation service - exemption under Notification No.31/2011 dated 25th April, 2011 - tariff threshold for exemption - evidentiary weight of ledger entries versus departmental website - burden of verification by the appellate authority - set aside of demand including interest and penalty

Short term accommodation service - exemption under Notification No.31/2011 dated 25th April, 2011 - tariff threshold for exemption - Entitlement to exemption for short term accommodation services where tariff was below Rs. 1,000 per room per day under the Notification - HELD THAT: - The appellant's case was that the tariff charged for short term accommodation was below the Rs. 1,000 threshold and therefore qualified for exemption under the Notification, resulting in nil service tax liability. The Tribunal found that the Commissioner (Appeals) did not properly reject the appellant's ledgers and that the appellate authority ought to have verified the ledgers and vouchers before preferring information allegedly available on a website. In the absence of any credible evidence relied upon by the Commissioner (Appeals) to displace the ledger entries, the Tribunal held the observation rejecting the exemption claim to be unsustainable and set aside the demand insofar as it related to the amounts claimed exempt for the specified financial years. [Paras 3, 4]

Demand for service tax in respect of short term accommodation for the stated years set aside and appeal allowed to that extent.

Evidentiary weight of ledger entries versus departmental website - burden of verification by the appellate authority - Validity of Commissioner (Appeals)'s reliance on information 'recorded on their website' instead of verifying the appellant's ledger entries and vouchers - HELD THAT: - The Tribunal held that the Commissioner (Appeals) merely relied on the Department's investigation and website entries without rejecting the ledgers or conducting independent verification of the appellant's records. The appellate authority was required to examine the ledger entries and supporting vouchers and be satisfied on the evidence before concluding that the exemption claim was not maintainable. Because no credible evidence was placed to justify privileging the website information over the appellant's records, the Tribunal found the reliance on the website untenable and set aside the impugned findings. [Paras 3]

Observation preferring website information over the appellant's ledgers held unsustainable; impugned finding set aside.

Final Conclusion: The appeal is allowed; the confirmed service tax demands for financial year 2012-13 and financial year 2013-14, along with interest and penalty thereon, are set aside to the extent indicated and the matter is decided in favour of the appellant.

Refund under notification - reversal of credit - eligibility for refund despite procedural lapse - time limit for claiming refund under notification (one year) - scope of adjudicating authority vis-a -vis show cause notice

Reversal of credit - refund under notification - eligibility for refund despite procedural lapse - time limit for claiming refund under notification (one year) - scope of adjudicating authority vis-a -vis show cause notice - Whether the appellant was entitled to the refund claimed under the Notifications for the stated periods and whether procedural lapses or the contents of the SCN justified denial of refund. - HELD THAT: - The Tribunal accepted the appellant's undisputed contention that reversal of credit had been effected and disclosed in its returns for the relevant period. Although Clause 3(e) of the relied Notification prescribes a one year period for claiming refund, the orders of the lower authorities show no dispute on the appellant's satisfaction of the other conditions of the Notification. The Court applied the settled principle that a mere procedural lapse should not deprive an assessee of the substantial benefit of a beneficial Notification, particularly where there is no allegation of breach of any other statutory provision or rule. The appellant rectified deficiencies pointed out in the SCN and there are no negative or contrary findings on eligibility; consequently the denial of refund was found to be unsustainable. The Tribunal therefore did not consider it necessary to delve further into arguments about the adjudicating authority traversing beyond the SCN once eligibility was established and procedural defects were cured. [Paras 4]

Impugned order rejecting the refund was set aside; appeal allowed and refund granted with consequential benefits as per law.

Final Conclusion: The Tribunal allowed the appeal, holding that the appellant had satisfied the conditions for refund (including reversal of credit disclosed in returns), that procedural lapses did not defeat the claim, and setting aside the order rejecting the refund with consequential reliefs.

Taxability of Business Support Service - sale versus service characterisation - invocation of extended period of limitation - requirement of positive evidence of suppression and intent to evade - penalty unsustainable in absence of mala fide - re quantification of demand within normal period

Taxability of Business Support Service - sale versus service characterisation - Whether the appellant's activities amounted to sale of goods or were taxable as Business Support Service and whether the demand confirmed on merits was sustainable. - HELD THAT: - The Tribunal examined the agreement between the appellant and M/s (n) Code Solutions and accepted the finding that the appellant acted as a Local Registering Authority (LRA) performing verification, approval/rejection of applications, revocation requests and other functions under the procedural control and Certificate Practice Statement of M/s (n) Code Solutions. The transaction was therefore held not to be a mere sale of goods but a service performed in terms of the agreement; the appellant's activities could not be characterised as sale because they were required to carry out functions as directed by the certifying authority. On this basis the concurrent conclusion of the lower authorities that the activity fell within Support Service of Business or Commerce was upheld and the demand for service tax was sustained on merits.

The demand confirmed on merits for Business Support Service is upheld and the appeal on this ground is rejected.

Invocation of extended period of limitation - requirement of positive evidence of suppression and intent to evade - penalty unsustainable in absence of mala fide - re quantification of demand within normal period - Whether the demand could be sustained by invoking the extended period of limitation and whether penalty could be imposed in the absence of positive evidence of suppression and intent to evade. - HELD THAT: - The Judicial Member analysed the record and noted that the appellants had reflected the transactions in their statutory books, raised invoices and filed audited balance sheets with other tax authorities; correspondence with the Commissioner and the Controller of Certifying Authorities was also on record. Both suppression and intent to evade must be separately established to invoke the extended period. The authorities below had merely recorded that value was not disclosed with intent to evade without pointing to positive evidence of deliberate suppression. Given the disclosure in books and the existence of bona fide contests and precedent authorities bearing on the legal position, the Tribunal concluded that there was no positive evidence of mala fide and that the extended period could not be invoked. Consequently the penalty was held to be unjustified and was set aside. A small portion of the demand falling within the normal period was to be re quantified and recovered with applicable interest.

The extended period invocation is not sustainable; the demand is time barred except for a small part within the normal period to be requantified and recovered, and the penalty is set aside.

Final Conclusion: Majority decision: though the appellant's activity is taxable as Business Support Service and the demand is sustained on merits, the invocation of the extended period of limitation is not justified for lack of positive evidence of suppression and intent to evade; penalty is quashed and a limited portion of the demand within the normal period is to be re quantified and recovered with applicable interest.

Business auxiliary services - production or processing of goods for, or on behalf of the client - job work - service tax liability - manufacture under the Central Excise Act, 1944

Business auxiliary services - production or processing of goods for, or on behalf of the client - job work - service tax liability - Whether the job work carried out by the respondent attracted service tax as business auxiliary services for the period 10.09.2004 to 31.07.2005, distinguishing the position prior to and after 16.06.2005. - HELD THAT: - The Tribunal noted that the definition of business auxiliary services before 16.06.2005 referred to "production of goods on behalf of the client" and was amended w.e.f. 16.06.2005 to "production or processing of goods for, or on behalf of the client." The assessee rendered processing and related job-work activities for its clients using raw materials supplied by those clients. The authorities below found, and the Tribunal agreed, that the respondent performed processing for the client and did not effect production of goods on behalf of the client for delivery to a third party. The scope of the work (heat treatment, end finishing, testing, coating, stamping, loading, inspection releases) amounted to processing/job work and not manufacture within the concept relied upon by the department. A plain reading of the relevant definition does not require a third party arrangement, but on the facts the services were for the clients and not on behalf of them to others; accordingly the services were not exigible to service tax for the relevant period. The Tribunal found no infirmity in the findings of the lower authorities and upheld their conclusion that the demand was not sustainable. [Paras 3, 4, 5]

The departmental appeal is rejected and the impugned order holding that the job work services were not exigible to service tax during the relevant period is upheld.

Final Conclusion: The appeal by the revenue is dismissed; the Tribunal upholds the lower authorities' finding that the job work constituted processing for the clients (not production on behalf to third parties) and therefore was not chargeable to service tax for the period under challenge.

Doctrine of bias (nemo judex in causa sua) - Natural justice - Reasonable apprehension of bias - Justice must be seen to be done - Transfer of pending appeal on bias grounds

Doctrine of bias (nemo judex in causa sua) - Reasonable apprehension of bias - Transfer of pending appeal on bias grounds - Whether the petitioner's appeal pending before Commissioner (Appeals), Ludhiana should be transferred on the ground of reasonable apprehension of bias arising from the fact that the officer who reviewed and directed filing of the appeal is husband of the officer holding charge of the Appellate Authority. - HELD THAT: - The Court applied the settled principles of bias as a limb of natural justice, observing that nemo debet esse judex in propria causa and that the test is whether a reasonable, fully informed person would apprehend a real likelihood of bias. While actual bias need not be shown, the apprehension must be reasonable and based on cogent circumstances rather than surmise. The facts examined were: the Assistant Commissioner dropped a show cause notice; the Commissioner reviewed that order and directed the Assistant Commissioner to file an appeal; the appeal was filed pursuant to that review; and the Commissioner (Appeals) hearing the appeal is the spouse of the Commissioner who reviewed and directed the appeal. Having regard to the relationship and the chain of events, the Court held that a reasonable apprehension of bias existed such that the interest of justice required transfer of the appeal for fresh adjudication. The Court emphasised that nothing decided herein is an expression on the merits of the underlying dispute and confined its decision to the necessity of removing any reasonable suspicion of improper interference with administration of justice. [Paras 6, 11, 12, 13]

The communication refusing transfer is set aside and the petitioner's appeal is transferred to another Commissioner (Appeals) for fresh hearing and decision.

Final Conclusion: Writ petition allowed. Communication dated 05.11.2018 refusing transfer is quashed; the petitioner's appeal is transferred from Commissioner (Appeals), Ludhiana to Commissioner (Appeals), Jalandhar to be decided afresh after hearing the parties, without any expression on the merits.

Cenvat credit of storage/handling racks - definition of "input" - relationship with the manufacture of final product - Exclusion Clause (E) - limitation and extended period - bonafide belief and absence of mala fides

Cenvat credit of storage/handling racks - definition of "input" - relationship with the manufacture of final product - Exclusion Clause (E) - Entitlement of the appellant to avail cenvat credit of duty paid on heavy duty racks used in the factory - HELD THAT: - The Tribunal applied precedent holding that racks used for storage and handling of raw materials, work-in-process and finished goods constitute a process integrally connected with manufacture and therefore fall within the ambit of "input." The Commissioner (Appeals) had relied on the post 1.3.2011 amended definition of "input" but did not cite any provision specifically excluding racks. The Exclusion Clause (E) excludes goods that have no relationship with the manufacture of a final product; since the use of racks has been held to have such relationship, Exclusion (E) is not attracted. In view of consistent Tribunal decisions cited, the use of racks is related to manufacture and not excluded from input credit. [Paras 4, 6, 8]

Racks are eligible for cenvat credit; Exclusion Clause (E) does not apply.

Limitation and extended period - bonafide belief and absence of mala fides - Whether the demand could be sustained by invoking the extended period of limitation - HELD THAT: - The Tribunal noted that, in light of prior decisions uniformly holding racks to be cenvatable, the assessee entertained a bonafide belief that the credit was allowable and had reflected the credit in its cenvat account. No mala fide on the part of the assessee was found and the Department did not demonstrate circumstances justifying invocation of the extended period. Consequently, the demand was held to be time barred. [Paras 9]

Demand is barred by limitation; extended period cannot be invoked.

Final Conclusion: The impugned order is set aside; the appeal is allowed on merits and on limitation grounds with consequential benefits to the appellant.

Availment of cenvat credit on supplementary invoices - requirement of receipt of inputs immediately for credit (Rule 4(1) CCR, 2004) - time bar of six months for taking credit on invoice (Rule 9(1)(b) CCR, 2004) - suppression, fraud or collusion as bar to credit on supplementary invoice - effect of departmental circular clarifying six months limitation (Circular No. 990/14/2014)

Availment of cenvat credit on supplementary invoices - requirement of receipt of inputs immediately for credit (Rule 4(1) CCR, 2004) - time bar of six months for taking credit on invoice (Rule 9(1)(b) CCR, 2004) - Entitlement to take cenvat credit on the basis of supplementary invoices and compliance with the temporal conditions for such availment. - HELD THAT: - The Tribunal recognised that supplementary invoices issued by the input manufacturer may form the basis for availment of cenvat credit, subject to the conditions in Rule 4(1) and Rule 9(1)(b) of the Cenvat Credit Rules, 2004. Those conditions require (a) credit to be taken immediately on receipt of inputs and (b) credit to be availed within six months from issue of the invoice, and also exclude credit where additional duty became recoverable on account of fraud, collusion or willful suppression. In the present case the supplementary invoices were dated March and May 2013 whereas the impugned credits were taken in March 2014, December 2014 and January 2015. The Tribunal found that the appellant neither availed credit immediately on receipt of inputs nor within six months of the invoices, thereby contravening the clear temporal rules governing such availment. The statutory language was applied strictly and no extension was allowed by reason of the appellant's contention regarding delayed receipt of invoices. [Paras 5]

Appellant was not entitled to the cenvat credit claimed on the supplementary invoices because the statutory time conditions in Rule 4(1) and Rule 9(1)(b) were not complied with; the claim is barred by the time limits and disallowed.

Effect of departmental circular clarifying six months limitation (Circular No. 990/14/2014) - re credit after reversal and concealment/suppression - Whether the appellant could treat the impugned entries as re credit after reversal or rely on Circular No. 990/14/2014 or RTI responses to evade the statutory six month bar. - HELD THAT: - The Tribunal noted Circular No. 990/14/2014 which clarifies that the six month limitation applies when credit is taken for the first time on the eligible document and does not apply for taking re credit of an amount earlier reversed, provided conditions are met. However, the appellant had concealed earlier cenvat credit entries and could not legitimately characterise the present claim as re credit. The Tribunal further held that RTI applications and the appellant's plea of not having received invoices in time do not permit extending the statutory time limits; the rules are to be read strictly and concealment/suppression precludes a favourable view. Consequently, neither the circular nor the RTI evidence justified allowing the delayed availment of credit. [Paras 5]

Appellant cannot avail the protection of the circular or claim re credit because of prior concealment, and the RTI based explanation does not excuse non compliance with the statutory six month limit; denial of credit is affirmed.

Final Conclusion: The Tribunal upheld the adjudicating authority and Commissioner(Appeals): supplementary invoices may support cenvat credit in principle, but because the appellant failed to take credit immediately and within six months of the invoices and had concealed earlier entries, the claimed credit was time barred and properly disallowed; the appeal is dismissed.

Service of notice - effective date of service - service by registered post with acknowledgement - extended period of limitation - appeal dismissed on limitation - remand for fresh consideration

Service of notice - effective date of service - service by registered post with acknowledgement - Date on which the order-in-original was effectively communicated for the purpose of computing limitation for filing appeal - HELD THAT: - The Tribunal examined the mode and purpose of service under Section 37C and the facts that the factory premises were closed when the order-in-original was left with the security guard. The court held that effective service must put the requisite person on notice so they can take steps, and that mere delivery to the security guard when the management was not available did not constitute proper service. The order was actually delivered to the management at the city office when the security guard handed over the notice to the proper person; that event alone could be treated as the effective date of service. [Paras 6]

The earlier date when the order was left with the security guard is not the effective date of service; the effective date of service is when the notice reached the proper person (as occurred later).

Extended period of limitation - appeal dismissed on limitation - remand for fresh consideration - Validity of the show cause notice insofar as it invoked the extended period of limitation and consequential dismissal of the appeal for being time-barred - HELD THAT: - Although the appellant contended that the show cause notice erroneously invoked the extended period and that the appeal was within time if proper service date is taken, the Tribunal did not adjudicate the extended-period contention on merits. Instead, having held that the effective date of service was later, the Tribunal set aside the impugned order which dismissed the appeal on limitation and remitted the matter to the Commissioner (Appeals) to decide the appeal on merits including issues relating to limitation and the invocation of the extended period. [Paras 6]

Impugned order dismissed on limitation is set aside and the question of validity of invoking the extended period is remanded to the Commissioner (Appeals) for fresh adjudication on merits.

Final Conclusion: Impugned order set aside; effective date of service is the date when the notice reached the proper person, not when left with the security guard, and the appeal is remitted to the Commissioner (Appeals) for fresh decision on merits including the limitation issue.

Refund of duty paid for non-operative period - compounded levy scheme - pro-rata payment proviso for first-time applicants - levy of excise duty contingent on manufacture (Section 3) - interpretation of notification proviso - precedential effect of Jupiter Industries - refund where no manufacture

Compounded levy scheme - pro-rata payment proviso for first-time applicants - interpretation of notification proviso - Whether the second proviso to condition 3 of Notification No. 17/2007-CE, 2007 restricts pro-rata calculation of duty to first-time applicants so as to deny refund for non-operative days in a month to regular compounding assessees - HELD THAT: - The proviso expressly deals with calculation of duty liability for the month in which an assessee makes application for availing the compounding procedure for the first time, directing pro-rata computation for that initial month. The tribunal held that the proviso governs discharge of duty liability on grant of the initial application and does not address, still less preclude, refund claims arising from periods within a month when manufacture did not occur. Consequently, the condition cannot be read as a blanket bar on refund for non-operative days for assessees who have been regularly opting for the compounding scheme. [Paras 5]

The proviso applies only to first-time applications and does not preclude refund of duty paid for periods when machines were not functional for regular compounding assessees.

Levy of excise duty contingent on manufacture (Section 3) - refund of duty paid for non-operative period - precedential effect of Jupiter Industries - refund where no manufacture - unjust enrichment and refund - Whether duty can be levied for periods when no manufacture takes place and, consequently, whether refunds are maintainable where duty was collected in respect of non-operative machines - HELD THAT: - Levy of excise duty is contingent on manufacture as mandated by Section 3 of the Central Excise Act; duty can only be collected for periods during which manufacture is in progress. Where machines were dismantled or not operating for part or whole of a month, there was no manufacture in relation to those machines and no leviable duty for those periods. The tribunal applied the reasoning in Jupiter Industries and related authorities that refund is appropriate where duty has been collected in respect of non-existent or non-operative production, subject to considerations of unjust enrichment only if duty had been passed on to buyers - which cannot arise where no goods were manufactured. On that basis the adjudicatory authorities' denial of refund was held unsustainable. [Paras 6, 7, 8, 9]

Duty cannot be levied for periods when manufacture did not occur; refund of duty collected in respect of non-operative machines is allowable, and the impugned denial of refund is set aside.

Final Conclusion: The impugned order rejecting the refund claim is set aside; the appeal is allowed and the appellant is entitled to refund for duty paid in respect of the non-operative periods of its cold rolling machines for the months in question.

Brand name versus house mark - eligibility for exemption under notification by reason of packaging/marking - identification on container/packing not equating to product mark - interpretation of explanation to exemption notification

Brand name versus house mark - eligibility for exemption under notification by reason of packaging/marking - Whether the embossment/inscription 'SBL WORLD CLASS HOMOEOPATHY' on retail packs is a brand/product mark disqualifying the assessee from benefit of the exemption notification or a house mark permitting the exemption. - HELD THAT: - The Tribunal examined the nature of the inscription on the retail pack in light of the explanation to the exemption notification and binding authority relied upon by the parties. It accepted the Commissioner (Appeals)'s finding that the embossment is an identification of the manufacturer (a house mark) used uniformly on all products and does not operate as a product-specific brand name which would establish a nexus between the particular medicine and the manufacturer. The Tribunal noted that SBL is an abbreviation of the assessee's name and 'WORLD CLASS HOMOEOPATHY' does not denote a distinct product mark; the packaging merely identifies the manufacturer as required by drug control rules. The Tribunal found that the Department did not demonstrate that the mark was registered as a trade mark or that it functioned as a product-identifying brand (as opposed to a house mark) and, applying the reasoning in Astra Pharmaceuticals as adopted by the Commissioner (Appeals), concluded that the inscription does not disentitle the assessee from the notification benefit.

The inscription 'SBL WORLD CLASS HOMOEOPATHY' is a house mark and not a brand/product mark; the assessee remains eligible for exemption under the notification.

Final Conclusion: Revenue's appeal is dismissed; the exemption claimed under the notification is available because the marking on the packaging is a house mark and does not amount to a brand/product name which would disqualify the assessee.

Transaction value - subsidy under investment promotion scheme - deductibility of sales tax/VAT actually paid - use of VAT 37B challans as payment - remission versus subsidy distinction - precedential effect of Super Synotex

Transaction value - subsidy under investment promotion scheme - use of VAT 37B challans as payment - remission versus subsidy distinction - precedential effect of Super Synotex - Whether subsidy disbursed under the Rajasthan Investment Promotion Scheme-2010 (in the form of VAT 37B challans) is includible in the transaction value for levy of Central Excise duty. - HELD THAT: - The Tribunal held that where the scheme requires the assessee to deposit the full amount of VAT collected and subsequently a portion is disbursed back as subsidy by issuance of VAT 37B challans which can be utilised for discharge of VAT liability in later periods, such disbursement does not form part of the transaction value for excise duty. The court distinguished the decision in Super Synotex on the ground that Super Synotex dealt with a remission scheme under which a specified lesser portion of VAT was to be deposited and the balance retained by the assessee; by contrast, under the Rajasthan Scheme the entire VAT is required to be deposited and the financial assistance is granted thereafter as subsidy. Relying on prior Tribunal decisions (including Shree Cement, Welspun and Maihar Cement) that treated VAT 37B challans issued under such state investment/subsidy schemes as equivalent to actual payment for the purpose of Section 4(3)(d) principles, the court concluded that the financial assistance granted under the Rajasthan Scheme cannot be included in the transaction value. The impugned reasoning treating utilisation of 37B challans as not actual payment was rejected and the appellate order sustaining excise demand on that basis was set aside. [Paras 12, 13, 16]

Financial assistance granted under the Rajasthan Investment Promotion Scheme-2010 (disbursed by VAT 37B challans) is not includible in the transaction value; the impugned order is set aside and the appeals are allowed.

Final Conclusion: The Commissioner(Appeals) order holding the subsidy under the Rajasthan Investment Promotion Scheme-2010 to be part of the transaction value for central excise is quashed; the appeals are allowed.

Entitlement to exemption under Notification No. 67/95 of Central Excise - manufacture versus purchase of tooling used captively - application of mind by adjudicating authority and appellate commissioner

Entitlement to exemption under Notification No. 67/95 of Central Excise - manufacture versus purchase of tooling used captively - application of mind by adjudicating authority and appellate commissioner - Whether the appellant manufactured the tooling in question so as to forfeit benefit of Notification No. 67/95, and whether the orders of the authorities below were sustainable having regard to the material on record. - HELD THAT: - The Tribunal found from the record that the invoices for the tooling were issued by the manufacturer (M/s OCL Iron and Steel Ltd./TCL and steel ltd.) and that the appellant had purchased the tooling rather than manufactured it. The adjudicating authority and the Commissioner (Appeals) proceeded in a routine manner and, according to the Tribunal, failed to apply judicial mind, at times adopting material from earlier proceedings without examining the facts of the impugned period. Because the appellant was not the manufacturer of the tooling in question, the premise for denying benefit under the Notification did not survive; thus demand of duty could not be sustained. The Tribunal therefore set aside the impugned order and allowed the appeal with consequential benefits. [Paras 6, 7]

Impugned order set aside; appeal allowed as appellant did not manufacture the tooling and hence duty demand under the Notification does not arise.

Final Conclusion: The Tribunal allowed the appeal, holding that the appellant purchased the tooling (and did not manufacture it), the authorities below failed to apply their mind, and the demand under the Notification was unsustainable; the impugned order is set aside with consequential benefits.

Liability of principal manufacturer for duty on scrap generated at job worker - prohibition of double demand of excise duty - entitlement to cenvat credit for duty paid by job worker - permission under Rule 4(6) of Cenvat Credit Rules, 2004

Liability of principal manufacturer for duty on scrap generated at job worker - prohibition of double demand of excise duty - entitlement to cenvat credit for duty paid by job worker - Appellant is not liable to pay duty on scrap generated at the job worker when the job worker has already discharged excise duty on such scrap. - HELD THAT: - The Tribunal noted that the job worker admittedly paid duty on the scrap generated during processing. The demand raised against the appellant would therefore amount to seeking duty twice on the same goods, which is impermissible. The Tribunal relied on its earlier decision in National Engineering Industries Ltd. holding that waste and scrap generated by the job worker in processing goods sent by the principal manufacturer do not attract liability on the principal; and on the decision of the High Court of Bombay in Rocket Engineering Corporation Ltd. which held that the principal manufacturer is not required to pay duty where scrap generated at the job worker's end has not been returned and has already suffered duty. In the factual matrix, the appellant had permission under Rule 4(6) of the Cenvat Credit Rules, 2004 and cleared inputs on job work challan; Honda (the job worker) paid duty on the scrap. Applying the foregoing authorities and the principle that the same excise duty cannot be exigible twice, the Tribunal concluded that no further duty is payable by the appellant on such scrap. [Paras 7, 8, 9]

Impugned demand for duty on scrap is set aside and the appeal is allowed.

Final Conclusion: The impugned order demanding duty on scrap generated at the job worker's premises is set aside: as the scrap has already suffered duty at the job worker's end, the principal manufacturer is not liable to pay duty and the appeal is allowed with consequential relief, if any.

Sufficient cause for condonation of delay - pre-deposit requirement and its burden on statutory appeal - limitation under Section 35B(3) and condonation under Section 35B(5) - effect of higher court order granting liberty to file appeal within a specified period

Sufficient cause for condonation of delay - pre-deposit requirement and its burden on statutory appeal - effect of higher court order granting liberty to file appeal within a specified period - Whether the delay of 578 days in filing the statutory appeal could be condoned under Section 35B(5) of the Central Excise Act, 1944. - HELD THAT: - The Tribunal noted that the impugned order was communicated on 12 May 2017 and the statutory three month period under Section 35B(3) expired on 12 August 2017, but the appeal was filed on 11 March 2019, resulting in a delay of 578 days. The appellant, a Director named in the show cause notice and penalty order, had participated in the writ proceedings before the High Court and the Special Leave Petition before the Supreme Court. The Supreme Court, by order dated 23 January 2018, dismissed the SLP but granted liberty to file a statutory appeal before the Tribunal within thirty days, stating that if so filed it would be considered on merits subject to pre deposit; thus the Supreme Court effectively offered a limited period for filing the appeal before the Tribunal. The Tribunal held that the appellant was not required to await any company resolution to file his individual appeal and, being a party to earlier litigation, could not claim ignorance of procedure. There was no explanation for the substantial delay from 23 January 2018 until 29 January 2019, and the only detailed explanation related to the brief period immediately preceding filing (arranging pre deposit and travel). Reliance on precedents favouring liberal condonation (including Collector, Land Acquisition, Anantnag and other State appeal cases) was found inapposite because the appellant failed to explain the long unexplained inaction and was an individual party affected by the order. On this basis the Tribunal concluded there was no sufficient cause to condone the delay under Section 35B(5). [Paras 9, 10, 11, 13, 15]

Application for condonation of delay rejected and the appeal dismissed for want of prosecution within the prescribed period.

Final Conclusion: The Tribunal refused to condone a 578 day delay in filing the appeal under Section 35B(5), holding that the Director, being party to earlier proceedings and aware of the Supreme Court's liberty order, failed to furnish sufficient cause for the prolonged inaction; the condonation application was rejected and the appeal dismissed.

Books of account rejection - assessment based on survey material - adverse inference from seized documents - re-assessment during pendency of appeal - appellate scrutiny of evidence produced at first appeal - estimate of turnover from diary and loose papers - no substantial question of law in revision

Books of account rejection - appellate scrutiny of evidence produced at first appeal - Validity of rejecting the assessee's books and the effect of producing books of account and loose papers first at the appellate stage. - HELD THAT: - The Court noted that the books of account and the copies of the loose papers were placed before the first appellate authority after a gap of about one and a half years and were not produced before the assessing authority. The Tribunal and the first appellate authority examined the material placed before them and formed conclusions on the correctness of the disclosed turnover. Given that the authorities below considered the records produced at the appellate stage and adjusted the demand accordingly, the High Court found no error in their factual appraisal warranting interference under revision jurisdiction.

The rejection of books by the assessing authority and the appellate treatment of accounts first produced at the appellate stage did not furnish a legal ground to upset the Tribunal's order; revision dismissed.

Assessment based on survey material - adverse inference from seized documents - estimate of turnover from diary and loose papers - Whether the assessment and re-assessment based on the diary and loose papers recovered during survey were justified and whether the estimate of turnover was sustainable. - HELD THAT: - The Court recorded that a diary recovered from the manager and 20 loose papers were treated by the assessing authority as indicia of unrecorded sales, and adverse inference was drawn. The assessing authority made an estimate and later re-assessed during pendency of appeal. The first appellate authority and the Tribunal evaluated the survey material, the nature of the business (continuous restaurant and bar operations) and the fact that the manager was not produced for statement, and arrived at a reduced demand by applying an estimate derived from the seized material. The High Court held that the estimate was based on material recovered during survey and that the appellate and Tribunal findings constituted a permissible factual conclusion.

Estimate and assessment founded on the diary and loose papers were matters of fact appropriately considered by the authorities below; no interference warranted.

Re-assessment during pendency of appeal - no substantial question of law in revision - Whether the re-assessment made during the pendency of the first appeal and subsequent appellate adjustments raised any substantial question of law for this Court to decide in revision. - HELD THAT: - The Court observed that the original assessment merged with the re-assessment and that the first appellate authority proceeded to decide the appeal on available material. The Tribunal further reduced the demand after considering the record. The High Court concluded that the matters decided by the Tribunal involved evaluation of evidential material and factual inferences rather than a point of law fit for interference in revision jurisdiction.

The revision does not raise any substantial question of law; it is dismissed.

Final Conclusion: The revision is dismissed. The Tribunal's factual findings on rejection of books, assessment based on survey material (diary and loose papers), and the adjustments made on appeal do not disclose any substantial question of law warranting interference.

Rate of tax on old, discarded and unserviceable machinery, stores or vehicles - Notification amending tax rate with retrospective application from 1st April, 1992 - Additional evidence on appeal under Section 12B - Admissibility of CSD declaration certificate as after-acquired documentary evidence - Remand for fresh consideration by Tribunal

Rate of tax on old, discarded and unserviceable machinery, stores or vehicles - Notification amending tax rate with retrospective application from 1st April, 1992 - The correct rate of tax payable on sales of old, discarded and unserviceable items for the period in question. - HELD THAT: - The notification regime originally prescribed a lower rate for old, discarded, unserviceable or obsolete machinery, stores or vehicles, and the entry at serial no.32 of the notification dated 7.9.1981 was amended by notification dated 31.3.1992 substituting the earlier rate with 4% with effect from 1.4.1992. The period under adjudication commences on 1.4.1997 and ends 31.3.1998. None of the authorities below took the amended notification into account. Since the amended rate of 4% applied with effect from 1.4.1992, that rate governs the transactions in the assessment year 1997-98 and must be given effect to. [Paras 10, 11, 12, 14]

Tax on the sales of the disputed old, discarded and unserviceable items for assessment year 1997-98 is to be at the rate of 4%.

Additional evidence on appeal under Section 12B - Admissibility of CSD declaration certificate as after-acquired documentary evidence - Remand for fresh consideration by Tribunal - Whether the Tribunal was justified in refusing to admit and grant benefit of the CSD declaration certificate produced after the first appellate order. - HELD THAT: - Section 12B permits production of additional oral or documentary evidence before the appellate authority or the Tribunal where such evidence was wrongly refused by the assessing authority or, despite due diligence, was not within the assessee's knowledge or could not be produced earlier. The declaration certificate from the CSD canteen was issued to the assessee after the first appellate order and produced subsequently; the Tribunal rejected the claim without adequately considering these circumstances and recorded only that the application for taking the document on record was filed long after. Given that the certificate came into existence after the assessment and after the first appeal decision, and on the material before the High Court the rejection was unjustified, the matter requires reconsideration by the Tribunal under Section 12B. [Paras 15, 16, 17, 18, 20]

The Tribunal's rejection of the claim based on non-fulfillment of Section 12B conditions is set aside and the matter is remitted to the Tribunal for fresh consideration of admissibility and grant of benefit, if any, in accordance with Section 12B.

Final Conclusion: Revision allowed in part: the disputed sales of old, discarded and unserviceable items for assessment year 1997-98 shall be taxed at 4%; the Tribunal's refusal to admit the CSD declaration is set aside and the matter is remitted to the Tribunal to decide under Section 12B (with directions to pass an order under Section 11(8) preferably within three months).

Revision under Section 10-B - Revision by Commissioner - Assessment revision for omission to consider inquiry and survey reports - Findings of fact

Revision under Section 10-B - Assessment revision for omission to consider inquiry and survey reports - Findings of fact - Validity of the Deputy Commissioner (Executive)'s exercise of power under Section 10-B to revise the assessing authority's order and the correctness of the factual findings and revised assessment upheld by the Tribunal. - HELD THAT: - The Deputy Commissioner (Executive) called for and examined the record of the assessing authority and found that the assessment order had been passed without considering the inquiry report and the survey report which disclosed substantial stock and discrepancies in the stock board. On that basis the Deputy Commissioner invoked the revisionary power under Section 10-B, re-estimated the turnover and taxed the assessee accordingly. The Tribunal dismissed the appeal against the revisionary order. The High Court examined the material relied upon by the Deputy Commissioner and the Tribunal and concluded that the Deputy Commissioner had legitimately exercised the power under Section 10-B to satisfy himself as to the legality and propriety of the subordinate order, since the assessing authority had ignored material inquiry and survey findings. The Court treated the conclusions as findings of fact based on the inquiry and survey material and therefore not amenable to interference in revision. The Court found no infirmity in holding that the stock and goods found at inquiry/survey pertained to the assessee and that the assessing authority's omission to consider that material rendered the original order susceptible to revision under Section 10-B.

The Deputy Commissioner (Executive)'s revision under Section 10-B and the Tribunal's confirmation of that revision are sustained; the revision petition is dismissed.

Final Conclusion: The Tribunal's order confirming the Deputy Commissioner (Executive)'s revision under Section 10-B is affirmed. The revision under Section 11 is dismissed.

Validity of termination of teacher in affiliated private unaided college - Mandatory prior approval of Vice-Chancellor for dismissal under Section 35(2) of the Uttar Pradesh State Universities Act, 1973 - Binding effect of Vice-Chancellor's order on college management - Maintaining writ against private unaided affiliated college - Inapplicability of precedent under repealed statute - Reinstatement and fresh departmental proceedings in compliance with statutory procedure

Mandatory prior approval of Vice-Chancellor for dismissal under Section 35(2) of the Uttar Pradesh State Universities Act, 1973 - Termination dated 24.04.2017 was invalid for non-compliance with the mandatory prior approval requirement under Section 35(2) of the Act and University Regulations. - HELD THAT: - The college was affiliated to the CCS University and therefore bound by the Act. Section 35(2) requires that any decision of the management to dismiss or remove a teacher must be reported to and approved by the Vice-Chancellor before it takes effect. The Vice-Chancellor had earlier held the prior termination to be void for lack of such approval and the college accepted that order and conducted departmental proceedings. The fresh termination dated 24.04.2017 was made without complying with the statutory requirement and thus is patently unsustainable. [Paras 6, 8]

Termination dated 24.04.2017 set aside as contrary to Section 35(2) of the Act.

Binding effect of Vice-Chancellor's order on college management - Maintaining writ against private unaided affiliated college - A private unaided college affiliated to the University is bound by the Act and the Vice-Chancellor's order; the High Court's conclusion that the writ was not maintainable was incorrect. - HELD THAT: - Because the college accepted and acted upon the Vice-Chancellor's order setting aside the earlier termination, it could not selectively accept parts of that order and ignore its obligations. Affiliation to the University imports compliance with statutory provisions; therefore challenges to termination are justiciable and the High Court's nonspeaking dismissal on maintainability failed to consider the statutory scheme and consequences of the Vice-Chancellor's order. [Paras 5, 8]

Writ was maintainable and the High Court's order holding otherwise is set aside.

Inapplicability of precedent under repealed statute - Reliance on Executive Committee of Vaish Degree College vs. Lakshmi Narain was misplaced and inapplicable. - HELD THAT: - The cited decision arose under the repealed Agra Universities Act, 1926 which did not contain provisions analogous to Section 35(2). The earlier case recognised that the college management there was not bound by statutory provisions; that factual and legal matrix differs from the present statutory regime under the Uttar Pradesh State Universities Act, 1973. Reliance on a judgment under a repealed Act that lacks comparable statutory mandate was therefore incorrect. [Paras 9]

Lakshmi Narain (supra) held inapplicable to the present case.

Reinstatement and fresh departmental proceedings in compliance with statutory procedure - Consequential relief and future course: appellant entitled to reinstatement; management may proceed afresh in accordance with law and Vice-Chancellor to consider any request for approval on merits. - HELD THAT: - Given that the termination was set aside for being in breach of the statutory requirement, the appellant is held entitled to reinstatement. The management is not precluded from initiating fresh proceedings but must follow the statutory procedure; any application for prior approval must be considered by the Vice-Chancellor independently and without being influenced by observations in the present order. Determination of back wages is to await the Vice-Chancellor's decision if fresh proceedings are initiated. [Paras 15]

Appellant reinstated; management may proceed afresh in accordance with law; Vice-Chancellor to consider approval afresh; back wages to await such decision.

Final Conclusion: The appeal is allowed: the termination dated 24.04.2017 is set aside for non-compliance with Section 35(2) of the Uttar Pradesh State Universities Act, 1973; the appellant is entitled to reinstatement; the college may, if it chooses, initiate fresh departmental proceedings subject to the statutory requirement of prior approval by the Vice-Chancellor, who shall decide any request on its merits; the question of back wages shall await that decision.

Communication of policy terms to the insured - Exclusionary clauses in insurance policy - Concurrent findings of fact - Burglary and housebreaking requiring forcible and violent entry

Communication of policy terms to the insured - Concurrent findings of fact - Exclusionary clauses in insurance policy - Validity of the NCDRC's reversal of the District Forum and SCDRC where both fora had found that the exclusionary conditions of the insurance policy were not communicated to the insured. - HELD THAT: - Both the District Forum and the SCDRC made concurrent findings of fact that the insurer did not furnish the exclusionary conditions and special conditions of the policy to the insured. Those factual findings were determinative: if the exclusionary terms were not communicated to the insured they could not be invoked against the insured. The NCDRC erred in reversing the concurrent factual findings and proceeded to decide the effect of the exclusionary clause on the merits despite the factual conclusion that the clause had not been made known to the complainant. The Supreme Court restored the view that where exclusionary terms were not communicated, the insurer cannot rely on them to repudiate the claim, and such a factual finding should not have been set aside by the revisional forum.

Allow the appeal; set aside the NCDRC order; restore the order of the District Forum.

Burglary and housebreaking requiring forcible and violent entry - Exclusionary clauses in insurance policy - Applicability of the Court's decision in United India Insurance Co. Ltd. v. Harchand Rai Chandan Lal when exclusionary terms are in fact communicated to the insured. - HELD THAT: - The Court clarified that the law laid down in Harchand Rai, which construes an exclusion to require forcible and violent entry for a burglary/housebreaking claim to succeed, remains good law and applies where the exclusionary terms have been validly communicated to the insured. The present case is factually distinguishable because the exclusionary terms were found not to have been supplied to the insured; accordingly the Harchand Rai principle was inapplicable on the facts of this matter.

Where exclusionary terms are communicated to the insured, the principle in Harchand Rai applies; in the present case the principle does not apply because the terms were not communicated.

Final Conclusion: The appeal is allowed; the NCDRC's revisional order is set aside and the District Forum's award is restored on the concurrent factual finding that the insurer did not communicate the exclusionary terms to the insured; the Court clarified that the Harchand Rai rule regarding forcible and violent entry remains applicable where exclusionary terms have been properly communicated.

Territorial jurisdiction under Section 142(2) of the Negotiable Instruments Act, 1881 - exclusive jurisdiction where the payee's branch maintaining the account is situated - retrospective operation of Section 142A(1) of the Negotiable Instruments Act, 1881 - transfer of pending cases to the court having jurisdiction under amended Section 142

Territorial jurisdiction under Section 142(2) of the Negotiable Instruments Act, 1881 - exclusive jurisdiction where the payee's branch maintaining the account is situated - Place of trial for offences under Section 138 determined by the branch where the payee/holder in due course maintains the account and not by mere presentation point or other acts. - HELD THAT: - The Court found on the material on record that the complainant's bank account was maintained at the Base Branch, Meerut, U.P., and that the cheques were delivered for collection to that bank. Applying the amended provision, Section 142(2) of the Negotiable Instruments Act, 1881, as it stands after the 2015 amendment, the place where the payee's account is maintained is the determinative territorial locus for inquiry and trial of offences under Section 138. The use of the word 'only' in Section 142(2) establishes exclusivity of that forum. On these facts, the learned trial Court's conclusion that the matter fell within Meerut's territorial jurisdiction was legally correct and in consonance with the amended statutory scheme and the authorities construing it. [Paras 13, 14]

Territorial jurisdiction to try the Section 138 complaints lies in Meerut, where the complainant's bank account is maintained.

Retrospective operation of Section 142A(1) of the Negotiable Instruments Act, 1881 - transfer of pending cases to the court having jurisdiction under amended Section 142 - Section 142A(1) validates and gives retrospective effect to transfers under the amended Section 142 and requires pending cases to be treated as having been transferred to the court having jurisdiction under the amended provision. - HELD THAT: - The Court accepted that Section 142A(1) of the Negotiable Instruments Act confers retrospective effect to the amended Section 142(2) and validates transfer of pending proceedings to the court having jurisdiction under that subsection. Reliance on the Supreme Court's decisions discussed in the judgment (including Bridgestone India Pvt. Ltd.) supports that conclusion. Consequently, earlier orders directing transfer under the Ordinance/Amendment are to be treated as valid transfers and the subsequent revisional order setting aside those transfer directions was inconsistent with the law. The impugned revisional order was therefore set aside and the trial Court's transfer orders restored. [Paras 15, 16, 17, 18]

Section 142A(1) operates retrospectively to validate transfers under amended Section 142(2); pending cases must be transferred to the court having jurisdiction under the amended provision, and the previous transfer directions stand restored.

Final Conclusion: Petitions allowed. The revisional order of 22.03.2016 is set aside; the trial Court's orders of 21.08.2015 and 15.10.2015 transferring the complaint cases to Meerut are restored and the records are to be transmitted to the concerned CMM at Meerut within three weeks.

Applicability of State arbitration statute vis-a -vis the Arbitration and Conciliation Act, 1996 - effect of an arbitration agreement selecting the Arbitration and Conciliation Act, 1996 - non-obstante clause in State enactment and repugnancy - precedential effect of Supreme Court determinations and doctrine of stare decisis - recall of earlier court direction to refer disputes to State Tribunal

Applicability of State arbitration statute vis-a -vis the Arbitration and Conciliation Act, 1996 - effect of an arbitration agreement selecting the Arbitration and Conciliation Act, 1996 - non-obstante clause in State enactment and repugnancy - Whether the Bihar Public Works Contract Dispute Arbitration Act, 2008 applies to the disputes between the parties, notwithstanding an arbitration clause in the contract providing for arbitration under the Arbitration and Conciliation Act, 1996, and whether the Court should recall its earlier direction to refer the parties to the State Tribunal. - HELD THAT: - The Court examined the statutory scheme of the Bihar Act, 2008 and the agreement between the parties which contains Clause-25 providing that arbitration shall be conducted in accordance with the Arbitration and Conciliation Act, 1996. Having regard to authoritative pronouncements of the Supreme Court and this Court, the Court held that where the contract expressly provides for arbitration pursuant to the Arbitration and Conciliation Act, 1996, the State Act will not apply. The judgment noted the distinction between State Acts that received presidential assent and those which did not, and recognised earlier decisions of this Court (Nilkamal Ltd.) and the Apex Court (M/s Brahmaputra Infrastructure Ltd.) as determinative in the present factual matrix. Applying those precedents and the contractual stipulation, the Court concluded that the Bihar Act, 2008 does not govern the present dispute and that the earlier direction to move the State Tribunal must be recalled to permit invocation of remedies under the Arbitration and Conciliation Act, 1996. The Court therefore recalled its prior order and granted liberty to the petitioner to seek appointment of an arbitrator under the Central Act. The Court also extended interim protection for a limited period to preserve the petitioner's rights while it pursues remedies under the Arbitration and Conciliation Act, 1996. [Paras 12, 13, 14]

Order dated 04.10.2018 (and the direction to approach the State Tribunal) is recalled; petitioner is granted liberty to invoke remedies under the Arbitration and Conciliation Act, 1996 and interim protection is extended for eight weeks.

Final Conclusion: The review petition is allowed: the Court recalled its earlier direction to refer the dispute to the Bihar Public Works Contract Dispute Arbitration Tribunal and permitted the petitioner to seek appointment of an arbitrator under the Arbitration and Conciliation Act, 1996, while extending interim protection for eight weeks.

Section 311 Cr.P.C. - power to summon and recall witnesses - Section 138 Negotiable Instruments Act - summary proceedings for cheque dishonour - Summoning of expert witness to prove tax returns or detect alleged tax irregularities - Right to fair trial and opportunity to adduce defence evidence - Abuse of process and protraction of proceedings

Section 311 Cr.P.C. - power to summon and recall witnesses - Section 138 Negotiable Instruments Act - summary proceedings for cheque dishonour - Summoning of expert witness to prove tax returns or detect alleged tax irregularities - Right to fair trial and opportunity to adduce defence evidence - Abuse of process and protraction of proceedings - Whether the trial court erred in rejecting the application under Section 311 Cr.P.C. to summon the Assistant Commissioner of Commercial Tax to give evidence regarding sales tax returns filed for April-2016 to March-2017 in a Section 138 NI Act complaint. - HELD THAT: - The Court examined the application seeking summons of the Assistant Commissioner of Commercial Tax on the stated grounds that the official, as an expert, could explain the procedure for submitting returns and point out deficiencies, mistakes, false filing or illegal sales transactions in the complainant's business for the period April-2016 to March-2017. The record showed that the complainant had already produced the sales tax returns for April-2016 to March-2017 and that the cheque in question was issued on 27.03.2017; there was no claim that returns were undisclosed. The petitioner's application did not demonstrate that the Assistant Commissioner's evidence was necessary to substantiate a defence; instead it sought an inquiry into the complainant's business and tax affairs. The Court noted the summary character of Section 138 proceedings and accepted that permitting examination of an expert to probe alleged tax irregularities, where returns were already on record and the issuance of the cheque was not disputed, would amount to unnecessary fishing and a device to protract proceedings. While acknowledging the principle that an accused must be given a fair opportunity to adduce defence evidence, the Court found that the application failed to show materiality or necessity of the proposed witness evidence to the defence pleaded (for example, that the cheque was only given as security), and therefore the trial court did not err in refusing to summon the Assistant Commissioner under Section 311 Cr.P.C. [Paras 7, 8, 9]

The High Court upheld the trial court's rejection of the Section 311 application and dismissed the petition challenging that order.

Final Conclusion: Petition dismissed; no interference with the trial court's exercise of discretion in refusing to summon the Assistant Commissioner of Commercial Tax where the returns for April-2016 to March-2017 were on record, the necessity of the expert's evidence to the accused's defence was not shown, and allowing such evidence would amount to protraction of the summary proceedings under Section 138 NI Act.