TaxTMI Updates e-Newsletter
May 24,2023

Intermediary - zero-rated supplies - refund of Input Tax Credit - place of supply - cost plus remuneration - interpretation of commercial agreement - remand for fresh consideration

Intermediary - zero-rated supplies - refund of Input Tax Credit - cost plus remuneration - interpretation of commercial agreement - remand for fresh consideration - Whether the petitioner is an intermediary for the period April 2018 to March, 2019 and thereby precluded from claiming refund of input tax credit as zero-rated supplies, and whether the matter requires fresh adjudication. - HELD THAT: - The Court found that the Adjudicating Authority's conclusion that the petitioner was an intermediary rested on a selective reading of the Agreement and lacked analysis of the actual work performed by the petitioner or empirical material linking remuneration to sales. Clause 2.4 and related provisions were read in isolation by the Adjudicating Authority and, absent corroborative evidence, did not establish that the fee was sales-linked rather than a cost-plus payment. The Court observed that determination of whether an entity is an intermediary depends on the actual functions performed and the factual matrix, and noted the petitioner had earlier succeeded for nearby periods. In view of these deficiencies, the Court set aside the impugned appellate order and the original order and remanded the matter to the Adjudicating Authority for fresh decision after examining the actual work performed and any relevant documents (including invoices and the reconciliation statement referred to in the original order). The Adjudicating Authority was directed to take into account the Court's decisions in M/s Ernst and Young Limited v. Additional Commissioner, CGST Appeals-II, Delhi & Anr. and M/s Ohmi Industries Asia Private Limited v. Assistant Commissioner, CGST when deciding afresh. [Paras 7, 8, 9, 10]

Impugned appellate order and the Order-in-Original dated 10.01.2020 set aside; matter remanded to Adjudicating Authority to decide afresh on whether the petitioner is an intermediary and entitled to refund of ITC for April 2018 to March, 2019 after examining actual work and relevant documents.

Final Conclusion: The High Court set aside the appellate and original orders and remitted the issue of intermediary status and entitlement to refund of input tax credit for April 2018 to March, 2019 to the Adjudicating Authority for fresh adjudication, permitting the Authority to call for documents (including invoices and the reconciliation statement) and directing it to consider the cited decisions while deciding afresh.

Game of skill vs game of chance - predominance test - betting and gambling as nomen juris - Actionable claims (Schedule III) - exclusion of lottery, betting and gambling - supply and Schedule III exclusion under CGST Act - writ jurisdiction under Article 226 - challenge to show-cause notice - exceptions to alternate remedy rule

Game of skill vs game of chance - predominance test - betting and gambling as nomen juris - Actionable claims (Schedule III) - exclusion of lottery, betting and gambling - supply and Schedule III exclusion under CGST Act - Whether online or offline Rummy and other games that are substantially/preponderantly based on skill, when played with or without stakes, amount to 'betting and gambling' for the purposes of Entry 6 of Schedule III to the CGST Act and thus fall within taxable actionable claims. - HELD THAT: - The Court applied established precedent and the predominance test to conclude that a game in which the exercise of skill predominates over chance remains a game of skill even when played for stakes. Decisions of the Supreme Court (R.M.D. Chamarbaugwala I & II, K. Satyanarayana, K.R. Lakshmanan) and subsequent High Court rulings were treated as authoritative for the proposition that competitions dependent to a substantial degree on skill are not gambling. The Court rejected the Revenue's attempt to treat staking as an independent act of forecasting that converts a skill game into gambling, distinguishing prize-competition jurisprudence (RMDC-1/2) which addressed different factual categories (newspaper prize competitions and forecasts). The statutory scheme under GST was analysed: Schedule III excludes actionable claims other than lottery, betting and gambling from supply; where a platform merely facilitates play and holds players' prize-pool funds in trust and charges a platform fee (on which GST is paid), it is not supplying actionable claims of lottery/betting/gambling. The Court relied on principles that terms which have acquired a judicial/constitutional meaning (nomen juris) must be read in that legal sense; accordingly, 'betting and gambling' in Entry 6 of Schedule III must be interpreted consistently with the constitutional and judicial meaning and does not cover games of skill. Applying these principles to the facts, Rummy (online or offline) was held to be substantially and preponderantly a game of skill and therefore not within 'betting and gambling' for GST purposes.

Rummy and other games that are substantially and preponderantly games of skill, whether played online or offline and whether played with stakes or without stakes, do not amount to 'betting and gambling' under Entry 6 of Schedule III to the CGST Act; such activities are not taxable as lottery/betting/gambling under the impugned show-cause notice.

Writ jurisdiction under Article 226 - challenge to show-cause notice - exceptions to alternate remedy rule - prematurity of challenge to SCN - Whether writ petitions challenging the impugned Show Cause Notice (and related provisional measures) were maintainable in the High Court. - HELD THAT: - The Court considered the doctrine of alternate remedies and the exceptions permitting exercise of writ jurisdiction (as summarised from Radha Krishan Industries v. State of Himachal Pradesh and related authority). Because the petitioners specifically contended that the impugned SCN was issued without jurisdiction or contrary to settled constitutional and judicial principles (i.e., classification of games of skill), the Court held that the writ jurisdiction was appropriately invoked. The Court identified established exceptions where a writ court may interfere with a show-cause notice (notice without jurisdiction, abuse of process, premeditation/prejudgment, violation of natural justice, vires of enactment, etc.) and found the petitioners' contention that the SCN was without jurisdiction or authority to be a fit case for exercise of writ jurisdiction. The Court therefore declined the Revenue's contention of prematurity.

The writ petitions challenging the impugned Show Cause Notice were maintainable and hence entertained; the objections to maintainability/prematurity were rejected.

Final Conclusion: The writ petitions were allowed: the Show Cause Notice dated 23.09.2022 was quashed. The Court held that rummy and other games that are substantially and preponderantly games of skill (online or offline, with or without stakes) do not constitute 'betting and gambling' under Entry 6 of Schedule III to the CGST Act and are not taxable as lottery/betting/gambling as alleged in the impugned notice; related petitions were disposed of and interim orders stood dissolved.

Ex-parte assessment - assessment under Uttar Pradesh Goods and Services Tax Act - burden to produce relevant documents in response to show cause notice - assessment based on seized records and diary entries - appellate scrutiny and reduction of assessment - penalty and interest under the UP GST regime

Ex-parte assessment - burden to produce relevant documents in response to show cause notice - Validity of the ex-parte assessment made when the petitioner did not produce relevant documents despite opportunity to do so - HELD THAT: - The Court accepted the factual finding that the petitioner failed to produce relevant documents before the Assessing Authority after issuance of show cause notice, although some records were not produced at the time of the raid. The judgment notes that inability to produce documents during the raid did not preclude subsequent production before the Assessing Authority; the petitioner did not avail that opportunity. The Assessing Authority therefore proceeded to pass an ex-parte assessment. The Appellate Authority examined both the return filed by the petitioner and the documents seized by the Special Investigation Branch and found sufficient material to justify reassessment. On this basis the High Court found no infirmity in upholding an assessment made in the absence of the appellant's documents where the appellant did not supply them subsequently in response to the show cause notice.

The ex-parte assessment was not vitiated by the petitioner's non-production of documents and the appellate scrutiny of available records cured any challenge to the assessment process.

Assessment based on seized records and diary entries - appellate scrutiny and reduction of assessment - penalty and interest under the UP GST regime - Correctness of the quantification of turnover, tax, penalty and interest and the reduction effected by the Appellate Authority - HELD THAT: - The Appellate Authority evaluated the return for the financial year 2017-18 (July 2017 to March 2018), which recorded taxable receipts and tax paid, alongside documents recovered during the raid, including a diary showing booking, advance and balance figures. The appellate forum observed discrepancies between advances recorded in the seized diary and those declared in the return; on that basis it fixed a quantified liability lower than the ex-parte assessment. The High Court found that the Appellate Authority had considered each relevant document - both those submitted by the petitioner and those recovered by the Special Investigation Branch - and reached a reasoned conclusion reducing the assessed amount. The Court rejected the submission that the original assessment was merely presumptive, endorsing the appellate authority's fact-based adjustment.

The reduction of assessed turnover, tax, penalty and interest by the Appellate Authority was justified and the impugned appellate order contains no error.

Final Conclusion: The writ petition is dismissed. The impugned appellate order confirming and quantifying the liability after examining returns and seized documents is upheld and the challenge to the ex-parte assessment and its quantum is rejected.

Statutory right of appeal before the Appellate Tribunal - stay of recovery under Sub Section (9) of Section 112 of the B.G.S.T. Act on deposit - non constitution of the Appellate Tribunal and its effect on limitation - limitation period to commence only after constitution and assumption of office by President/State President of the Tribunal - equitable limitation on open ended stays where remedy is deferred by State action - obligation to present/file appeal once the Tribunal is constituted

Stay of recovery under Sub Section (9) of Section 112 of the B.G.S.T. Act on deposit - non constitution of the Appellate Tribunal and its effect on limitation - Petitioner entitled to statutory stay of recovery under Sub Section (9) of Section 112 of the B.G.S.T. Act despite non constitution of the Tribunal, subject to deposit conditions. - HELD THAT: - The Court held that the petitioner's statutory remedy under Section 112 could not be defeated by the respondents' failure to constitute the Tribunal. Consequently, subject to deposit of a sum equal to 20 per cent of the remaining disputed tax (if not already deposited) in addition to amounts deposited under Sub Section (6) of Section 107, the petitioner is entitled to the stay envisaged by Sub Section (9) of Section 112. The Court recorded that recovery proceedings and any steps taken in that regard shall be deemed stayed. The order is in line with earlier similar relief granted by this Court in SAJ Food Products Pvt. Ltd. v. State of Bihar & Others. The grant of stay recognises the prejudice to the assessee caused by the State's non constitution of the Tribunal and ensures access to the statutory appellate remedy.

Stay of recovery granted on deposit of 20 per cent of the remaining disputed tax (in addition to earlier deposit), and recovery proceedings are deemed stayed.

Obligation to present/file appeal once the Tribunal is constituted - equitable limitation on open ended stays where remedy is deferred by State action - The stay granted is not open ended; the petitioner must file the statutory appeal before the Tribunal once it is constituted, failing which authorities may proceed. - HELD THAT: - To balance equities, the Court directed that the petitioner must present/file the appeal under Section 112 after constitution and functioning of the Tribunal and upon the President or State President entering office, observing the statutory requirements. The Court emphasised that the interim relief granted on account of the respondents' default in constituting the Tribunal cannot operate indefinitely; if the petitioner elects not to file the appeal within the period that may be specified upon constitution, the respondent authorities are at liberty to proceed in accordance with law. Thus the interim stay is conditional and limited to permit eventual exercise of the statutory appellate remedy.

Petitioner required to file appeal after the Tribunal is constituted; if appeal is not filed within the period to be specified, authorities may proceed further as per law.

Final Conclusion: Writ petition disposed: interim stay of recovery under Section 112(9) granted subject to specified deposits, and petitioner directed to file the statutory appeal once the Appellate Tribunal is constituted; absent filing within the stipulated period, authorities may resume proceedings.

Presence of advocate during recording of statement - advocate at visible but not audible distance - videography of recording of statement at petitioner's cost - recording of voluntary statement under the Maharashtra Goods and Service Tax Act, 2017

Presence of advocate during recording of statement - advocate at visible but not audible distance - recording of voluntary statement under the Maharashtra Goods and Service Tax Act, 2017 - Petitioner's right to have his Advocate present at a visible but not audible distance during recording of his voluntary statement under Section 70 of the Maharashtra Goods and Service Tax Act, 2017, was allowed. - HELD THAT: - The Court, having heard the parties and having regard to earlier orders annexed to the petition, permitted the Advocate to remain present at the time of recording of the petitioner's statement provided the Advocate is at a visible but not at an audible distance. The Special Public Prosecutor for respondent No.2 raised no objection to such presence. The Court therefore directed that the Advocate be allowed to remain present on the stated conditions while the statement is recorded under the relevant provision of the Maharashtra GST law. [Paras 6]

Presence of Advocate at visible but not audible distance during recording of the petitioner's voluntary statement is permitted.

Videography of recording of statement at petitioner's cost - recording of voluntary statement under the Maharashtra Goods and Service Tax Act, 2017 - Permission to videograph the recording of the petitioner's statement, at the petitioner's cost, and provision of a copy to the petitioner after issuance of show cause notice. - HELD THAT: - The Special Public Prosecutor for respondent No.2 did not object to videography provided it was at the petitioner's cost. The Court accordingly permitted the videography of the recording, ordered that it be carried out at the petitioner's expense, and directed that a copy of the videography be handed over to the petitioner after the show cause notice is issued to him. [Paras 6]

Videography of the petitioner's statement is permitted at the petitioner's cost, and a copy shall be handed over after issuance of the show cause notice.

Final Conclusion: The petition was allowed: the petitioner's Advocate may be present at a visible but not audible distance during recording of the petitioner's voluntary statement under the Maharashtra GST law, videography of the recording is permitted at the petitioner's cost, and a copy of the videography shall be supplied to the petitioner after the show cause notice is issued.

Right to presence of Advocate at visible but not audible distance during recording - Videography of recording at petitioner's cost - Writ of Mandamus under Article 226 - Voluntary statement under Section 70 of the Maharashtra Goods and Services Tax Act, 2017

Right to presence of Advocate at visible but not audible distance during recording - Voluntary statement under Section 70 of the Maharashtra Goods and Services Tax Act, 2017 - Petitioner's entitlement to have his Advocate present at a visible but not audible distance during recording of his voluntary statement under Section 70 of the Maharashtra GST Act, 2017. - HELD THAT: - The petition sought a direction permitting the Advocate to be present when the petitioner's voluntary statement under Section 70 is recorded. The learned Special Public Prosecutor for respondent No.2 expressly stated there was no objection to the Advocate being present at a visible but not audible distance. The Court, having regard to prior orders relied on by the petitioner (Exhibits E-L) and the respondent's concession, granted the relief sought and permitted the Advocate to remain present at a visible but not audible distance during the recording of the petitioner's statement. [Paras 5, 6]

Advocate may be present at a visible but not audible distance during recording of the petitioner's voluntary statement.

Videography of recording at petitioner's cost - Writ of Mandamus under Article 226 - Permission to videograph the recording of the petitioner's statement and the conditions relating thereto. - HELD THAT: - The petitioner sought permission to videograph the recording of his statement. The Special Public Prosecutor for respondent No.2 raised no objection to videography provided it is at the petitioner's cost. Having considered the submissions and the annexed orders, the Court allowed videography at the petitioner's expense and directed that a copy of the videograph be handed over to the petitioner after issuance of the show cause notice. [Paras 6]

Videography of the recording permitted at the petitioner's cost, with a copy to be handed over to the petitioner after show cause notice is issued.

Final Conclusion: The writ petition is allowed: the petitioner's Advocate is permitted to be present at a visible but not audible distance during recording of the petitioner's voluntary statement under Section 70 of the Maharashtra GST Act, 2017, and videography of the recording is permitted at the petitioner's cost, with a copy to be given after show cause notice; the petition is disposed of in these terms.

Cancellation of GST registration for continuous non-filing of returns - Maintainability of appeal barred by statutory limitation - Revival of GST registration on compliance by filing returns and payment of tax, interest, penalty and fees - Prohibition on utilization of Input Tax Credit pending departmental scrutiny - Directional relief by writ in exercise of jurisdiction to permit revival subject to conditions

Cancellation of GST registration for continuous non-filing of returns - Maintainability of appeal barred by statutory limitation - Whether the petition challenging cancellation of GST registration for continuous non-filing of returns could be entertained despite the appellate remedy being time-barred, by extending the Court's earlier equitable direction. - HELD THAT: - The Court noted that the petition sought to set aside cancellation of registration effected for failure to file monthly returns for a continuous period of six months. Though the appellate authority correctly observed that the statutory appeal was beyond the period of limitation, the High Court exercised its writ jurisdiction and applied the relief earlier granted in Suguna Cutpiece Centre and subsequent similar decisions. The Court held that, in the circumstances pleaded (personal illness in the petitioner's family and reliance on staff/accountant), equitable relief could be extended by directing compliance measures for revival rather than by permitting time-barred appellate relief. The Court therefore allowed the petition by imposing conditional directions for compliance and revival, following the precedent.

Writ petition allowed by extending the relief and directions as in the earlier Suguna Cutpiece Centre decision despite the appeal being time-barred; cancellation set aside subject to compliance conditions.

Revival of GST registration on compliance by filing returns and payment of tax, interest, penalty and fees - Prohibition on utilization of Input Tax Credit pending departmental scrutiny - Directional relief by writ in exercise of jurisdiction to permit revival subject to conditions - What conditions must be complied with for revival of the cancelled GST registration when relief is granted by writ? - HELD THAT: - Relying on the terms of paragraph 229 of Suguna Cutpiece Centre and subsequent consistent decisions, the Court directed that the petitioner must file all returns for periods prior to cancellation (if not already filed), pay the tax due along with interest, and pay the fine/fee for belated filing within the period specified in that order. The Court further directed that such payments shall not be adjusted from any unutilised Input Tax Credit; any Input Tax Credit already utilised or to be utilised must be subjected to departmental scrutiny and approval by competent officers before being allowed for utilisation. The petitioner must also file returns and pay GST for the period subsequent to cancellation with payment in cash, and respondents may impose restrictions to prevent undue passing of ITC or bill trading. On fulfillment of these conditions the registration shall be revived forthwith; respondents were directed to facilitate necessary changes in the portal to permit compliance within the timelines stated in the precedent.

Revival ordered on the specified conditional compliance: filing returns, payment of tax/interest/penalty/fee in cash, restricted treatment and departmental scrutiny of Input Tax Credit, and administrative facilitation by respondents.

Final Conclusion: The writ petition challenging cancellation of GST registration is allowed by extending the relief and conditional directions earlier laid down in Suguna Cutpiece Centre and subsequent decisions; registration shall stand revived on satisfactory compliance with the prescribed conditions and subject to departmental scrutiny of Input Tax Credit. No costs.

Input tax credit - plant and machinery - foundation and structural support - works contract services - construction of an immovable property - blocked credits

Plant and machinery - foundation and structural support - input tax credit - blocked credits - construction of an immovable property - Eligibility of input tax credit on works contract services and structural works for installation of specified machineries and on structures which cover or form part of civil construction - HELD THAT: - The Authority applied the definition of plant and machinery in the explanation to section 17(5) to distinguish between (a) foundation and structural supports that are part of plant and machinery and (b) land, building or other civil structures excluded from plant and machinery. Photographs and the chartered engineer's certificate were examined. For the Sand mill and Spray dryer the foundation and structural support fall within the explanation and are eligible for input tax credit provided they are not capitalised; however an adjacent shed depicted in the photographs is a civil structure and therefore its ITC is blocked. For the HAG machine the foundation and structural support similarly qualify for ITC (subject to non-capitalisation) but the roof and its supports are civil structure and excluded from ITC. The ETP consists of tanks and box civil structures which are excluded from plant and machinery; accordingly ITC on the ETP's foundation or structural works is not available. Applying the same principle and relying on analogous rulings, the foundation/installation works for the Transformer/DG (and the adjoining civil control-room structure) are civil in character and ITC is not available. The Authority therefore allowed ITC only to the extent the works are bona fide foundation or structural supports of machinery as defined, and rejected ITC for parts that are civil structures or sheds/roofs covering the machines. [Paras 16, 17, 18, 19, 20]

ITC is available for works contract services only to the extent they constitute foundation and structural support included within the definition of plant and machinery (subject to non-capitalisation); ITC is blocked for civil structures such as sheds, roofs, ETP tanks and transformer/DG house which fall within the exclusion in section 17(5).

Input tax credit - works contract services - foundation and structural support - Eligibility of input tax credit on steel (TMT bars) procured and used in works contract services for making foundations to fix machineries to earth - HELD THAT: - The Authority considered whether goods (steel TMT bars) used in execution of works contract for foundations that constitute plant and machinery (i.e., foundation and structural supports) are eligible for ITC. Applying the explanatory definition that includes such foundation and structural supports within plant and machinery, the Authority held that input tax credit on steel used in making foundations is admissible to the extent the underlying works qualify as foundation/structural support of plant and machinery as decided above. Conversely, steel used in construction of excluded civil structures (sheds, roofs, ETP tanks, transformer house) would not attract ITC. [Paras 11, 16, 19, 20]

ITC on steel (TMT bars) used in works contract for foundations is eligible only to the extent the works constitute foundation/structural support of plant and machinery; steel used in excluded civil structures does not qualify for ITC.

Final Conclusion: The Authority ruled that ITC on works contract services and materials is admissible only insofar as those works and goods constitute foundation and structural supports included within the statutory definition of plant and machinery (subject to non-capitalisation). ITC is denied for civil structures (sheds, roofs, ETP tanks, transformer/DG housing) which are excluded under section 17(5); ITC on steel (TMT bars) follows the same qualification.

Reopening of assessment - Deemed dividend - addition u/s 2(22)(e) - change of opinion - information received from the Deputy Commissioner of Income Tax, Company Circle V(1) constituted new information - HC [2018 (10) TMI 373 - MADRAS HIGH COURT] decided substantial question of law in favour of revenue - HELD THAT:- Appeal admitted - List immediately after summer vacations.

Deemed dividend addition u/s 2(22)(e) - Addition on account of income from house property as per the provisions of Section 22 read with Section 23 and Addition u/s 40A - HC [2019 (1) TMI 1017 - MADHYA PRADESH HIGH COURT] held assessee being not a member/shareholder of the concerned company the loan/advance received from such company is not deemed dividend u/s 2(22)(e) - payments made to specified persons on rates more that fair market rates - As per HC no substantial question of law arises for consideration - Revenue appeal dismissed - HELD THAT:- In terms of Circular No. 17/2019 dated 08.08.2019 issued by Government of India, Ministry of Finance, Department of Revenue, Central Board Direct Taxes, Judicial Section, since the amount of tax involved is low, we are not inclined to interfere with the impugned order. SLP dismissed.

Reopening of assessment under section 148 read with section 147 - Reason to believe - Prima facie material for reopening - Judicial review limited to existence of prima facie material - Formation of opinion by the Assessing Officer - Insider trading/bulk deal as basis for reassessment

Reopening of assessment under section 148 read with section 147 - Reason to believe - Prima facie material for reopening - Formation of opinion by the Assessing Officer - Insider trading/bulk deal as basis for reassessment - Judicial review limited to existence of prima facie material - Validity of the notice under section 148 seeking reopening of assessment for Assessment Year 2017-2018 - HELD THAT: - The court applied settled principles that section 147/148 permits reopening where the Assessing Officer has a 'reason to believe'-a prima facie cause or justification based on cogent material-without requiring final proof of escapement at the notice stage. The Assessing Officer relied on information arising from assessment proceedings of a family member (Smt. Paru M. Jaykrishna) showing large claims of long term capital gains and transfers by promoters to various family trusts through bulk deal/insider trading; he drew an inference that similar promoter-share transfers and allotments affected the petitioner trust and hence formed the requisite belief that taxable income may have escaped assessment. The court held that the existence of such material, its prima facie relation to the petitioner, and the Assessing Officer's formation of opinion based on those facts justified issuance of the reopening notice; correctness or sufficiency of that material is not subject to detailed judicial scrutiny at the notice stage, and can be tested by the assessee before the assessing authority during reassessment proceedings. The petitioner's contentions that the reopening rested on incorrect or mechanical facts and that certain figures appeared for the first time did not negate the prima facie foundation for reopening, which the court found to be present. [Paras 5, 6, 7]

The reopening notice dated 28.3.2021 under section 148 for Assessment Year 2017-2018 was valid; the petition challenging the notice is dismissed.

Final Conclusion: The High Court dismissed the petition and upheld the Assessing Officer's decision to reopen the assessment for Assessment Year 2017-2018, holding that prima facie material and a formed reason to believe justified issuance of the section 148 notice.

Scope of assessment under Section 153A - incriminating material found during search under Section 132 - interference with completed assessments under Section 153A - jurisdiction of the Assessing Officer in post-search assessments

Scope of assessment under Section 153A - incriminating material found during search under Section 132 - interference with completed assessments under Section 153A - Whether additions in assessment proceedings under Section 153A in respect of a completed/unabated assessment can be sustained in absence of any incriminating material found during the course of search under Section 132. - HELD THAT: - The Court applied and followed the law laid down by the Supreme Court in Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell P. Ltd., which approved the view in Kabul Chawla and Saumya Construction. Section 153A requires the AO to issue notices and make assessments for the six assessment years but, insofar as completed assessments are concerned, interference by the AO under Section 153A is permissible only on the basis of some incriminating material unearthed in the course of search/requisition or other material discovered in the search that was not disclosed earlier. The Court noted that although Section 153A does not expressly state that additions must be strictly based on seized material, the assessment cannot be arbitrary or without nexus to the seized material; completed assessments may be reopened under Section 153A only where such incriminating material exists. Applying this principle to the facts, the Court observed that no incriminating material was found at the assessee's premises during search and therefore the additions made in the completed assessment could not be sustained. The Court concluded that the substantial questions of law raised were answered adversely to the Revenue by the binding Supreme Court authority and that the Tribunal and CIT(A) were correct in deleting the additions. [Paras 4, 5, 7]

Additions made in respect of the completed assessment in absence of any incriminating material found during search are not sustainable; the deletions by the CIT(A) and Tribunal are affirmed.

Final Conclusion: Appeal dismissed. The Supreme Court decision in Abhisar Buildwell P. Ltd. settles that completed assessments cannot be reopened under Section 153A in absence of incriminating material found during search; no substantial question of law arises in favour of the Revenue.

Reopening of assessment under the amended reassessment regime (section 148A) - principles of natural justice in reassessment proceedings - treatment of notices issued under the unamended section 148 as show cause notices under section 148A(b) - consideration of reply/objections furnished to pre amendment notice as response under the amended regime - remand for fresh decision by the Assessing Officer

Principles of natural justice in reassessment proceedings - treatment of notices issued under the unamended section 148 as show cause notices under section 148A(b) - consideration of reply/objections furnished to pre amendment notice as response under the amended regime - Whether the order passed under section 148A(d) and the consequential notice under section 148 should be set aside and the matter remanded because the assessee's objections to the earlier notice remained undecided and the assessee was deprived of an opportunity to be heard. - HELD THAT: - The Court held that the amended scheme introduced by section 148A requires that an assessee be afforded an opportunity to be heard and that any reply furnished must be considered before issuing a notice under section 148. In view of the Supreme Court's directions treating notices issued under the unamended section 148 as show cause notices under section 148A(b), the petitioner, who had filed detailed objections to the earlier notice, was entitled to have those objections treated as the response to the show cause notice and to have them considered. The Assessing Officer had left the objections undecided and thereafter an order under section 148A(d) was recorded on the portal, depriving the assessee of the statutory opportunity to have its reply considered. To cure the breach of natural justice and to give effect to the Ashish Agarwal directions, it is reasonable and appropriate that the reply cum objections filed earlier be treated as the response to the show cause notice under the amended regime and that the Assessing Officer decide afresh after considering those objections. The Court did not enter upon merits of the reopened assessment but directed remand for fresh consideration within the stated time frame and set aside the impugned order and consequential notice only for the limited purpose stated. [Paras 5, 6]

The proceedings are remanded. The Assessing Officer shall treat the objections dated 11.10.2021 as the response to the show cause notice dated 23.05.2022 under section 148A(b), consider them and decide the matter afresh in accordance with law within eight weeks; the order under section 148A(d) dated 30.07.2022 and the consequential notice dated 30.07.2022 are set aside.

Final Conclusion: Writ petition allowed. The order under section 148A(d) and the consequential notice under section 148 are set aside for the limited purpose stated; matter remanded to the Assessing Officer to decide afresh after considering the earlier reply cum objections within eight weeks. The Court has not expressed any view on the merits of the reopened assessment.

Re-opening of assessment - notice under Section 148 of the Income Tax Act - interim restraint on passing final assessment order - opportunity to produce evidence before the Assessing Officer - dropping of reassessment proceedings - prima facie absence of shell company

Joining of additional parties - Serious Fraud Investigation Office (SFIO) - Permission to move application to bring SFIO on record and joinder of newly added parties - HELD THAT: - The Court recorded the petitioner s counsel s request to join the Serious Fraud Investigation Organisation and directed that the application for joinder may be moved by the petitioner. The matter was directed to be stood over to enable movement of that application and for further consideration on the listed date. This is a procedural direction permitting the petitioner to apply to add the newly proposed party; the Court did not finally adjudicate the merits of joinder.

Application for joinder of SFIO may be moved; matter stood over for further consideration.

Notice under Section 148 of the Income Tax Act - re-opening of assessment - interim restraint on passing final assessment order - opportunity to produce evidence before the Assessing Officer - dropping of reassessment proceedings - prima facie absence of shell company - Interim relief in challenge to reassessment notice for A.Y.2018-19 and related procedural consequences - HELD THAT: - The Court examined the factual matrix that reassessment proceedings for A.Y.2013-14 and A.Y.2014-15 had been dropped and noted that the present notice under Section 148 for A.Y.2018-19 arose from information including a Suspicious Transaction Report concerning substantial cash withdrawals. While observing prima facie that there did not appear to be a case of the petitioner being a shell company, the Court held that reassessment proceedings would continue. For the limited purpose of interim relief, the Court directed that the petitioner be given an opportunity to produce all requisite material before the Assessing Officer. The Court restrained the Assessing Officer from passing the final assessment order without the permission of this Court and recorded that none of its observations shall prejudice the parties rights before the Assessing Officer.

Reassessment proceedings may continue; petitioner to be allowed to produce material; final assessment order shall not be passed without the Court s permission; interim protection granted.

Final Conclusion: The Court permitted the petitioner to move an application to join the SFIO and stood the matter over for that purpose; it declined to quash the reassessment proceedings for A.Y.2018-19 but granted limited interim relief by directing that the petitioner be allowed to place requisite material before the Assessing Officer and by restraining the passing of the final assessment order without the Court s permission, while noting that prior reassessment proceedings for A.Y.2013-14 and A.Y.2014-15 had been dropped.

Invocation of section 41(1) as deeming income on cessation or remission of liability - Write-off of bad debts and entitlement to deduction under section 36(1)(vii)/36(2) read with judicial principles in TRF Ltd and Khyati Realtors - Obligation under Rule 46A when admitting additional evidence at appellate stage - Computation of disallowance under section 14A and applicability of Rule 8D - Additional depreciation for generation of electricity treated as 'manufacture or production' for section 32(1)(iia) - Disallowance under section 40(a)(ia) and retrospective effect of curative proviso - Onus under section 68 - identity, genuineness and creditworthiness of creditors

Invocation of section 41(1) as deeming income on cessation or remission of liability - Whether additions under section 41(1) could be sustained for outstanding creditor balances shown in assessee's books for AY 2007-08 and 2008-09 - HELD THAT: - For AY 2007-08 the Tribunal held that section 41(1) cannot be invoked merely because a creditor's claim is time-barred; several additions made by AO and confirmed by CIT(A) were deleted on facts where ledgers, reconciliations and other books showed subsistence of liability. However, in respect of the large liability appearing for Presidential Trading FZC the assessee did not produce documentary proof before CIT(A) that the bank had taken over the liability or details of recovery proceedings before DRT; consequently that specific issue was restored to the file of CIT(A) for fresh examination and verification of supporting documents. For AY 2008-09 the Tribunal recorded that CIT(A) had examined parties and deleted most additions but admitted some; because additional documents were accepted at appellate stage without giving AO opportunity to comment, and because certain liabilities required further verification, the matter was remitted to CIT(A) to allow AO to take cognizance and to verify the additional evidence. The Tribunal emphasised the settled principle that mere limitation does not establish cessation/remission so as to attract section 41(1). [Paras 7, 36, 39, 41, 42]

Deletions of several section 41(1) additions were directed; the large Presidential Trading FZC liability (AY 2007-08) and residual disputed section 41(1) matters (AY 2008-09) were restored/remitted for fresh verification by CIT(A) (and for AO's comments where additional evidence was admitted).

Write-off of bad debts and entitlement to deduction under section 36(1)(vii)/36(2) read with judicial principles in TRF Ltd and Khyati Realtors - Whether claimed write-offs of bad debts (export and domestic) were allowable and whether AO/CIT(A) correctly disallowed amounts in AY 2007-08 and 2008-09 - HELD THAT: - The Tribunal reviewed Supreme Court precedents: TRF Ltd (write-off in books suffices post-1-4-1989) and Khyati Realtors (additional requirements - proper accounting treatment and proof that debt had been included in computation of income in the year of write-off or earlier). Applying these principles, the Tribunal held that (i) allowance cannot be denied merely because write-off exceeds RBI guidelines or because assessee claimed export incentives; (ii) where CIT(A) had confirmed disallowances because it was not clear whether debts/written-off amounts had been offered to tax in earlier years, the matter must be verified. Accordingly, for both export and domestic debt write-offs the Tribunal set aside the matter for verification to ascertain whether the amounts written off had earlier been taken into account in computation of income as required by Khyati Realtors; relief cannot be denied solely on RBI norms or concurrent section 80HHC claims. [Paras 9, 10, 13, 14, 15]

The deletions made by CIT(A) were sustained in part; large portions of disallowance were set aside and remitted to CIT(A)/AO to verify whether the written-off debts had been reflected in income in earlier years; no disallowance could be maintained solely on RBI limits or on the basis of section 80HHC claims.

Computation of disallowance under section 14A and applicability of Rule 8D - Quantum of disallowance under section 14A in respect of exempt dividend income for AY 2007-08 - HELD THAT: - The AO computed disallowance under section 14A read with Rule 8D. Relying on the assessee's concession and appellate reasoning (and precedents on retrospective application of Rule 8D), the Tribunal restricted the disallowance to the amount of exempt income actually earned in the year. The Tribunal accepted that Rule 8D's notified applicability date affects computation and, in the facts, limited the disallowance to Rs. 2,85,000 (the exempt income) rather than the larger AO computation. [Paras 20, 21, 22]

Section 14A disallowance reduced and restricted to the amount of exempt income earned in the year; Department's ground partly allowed.

Additional depreciation for generation of electricity treated as 'manufacture or production' for section 32(1)(iia) - Whether additional depreciation on windmills installed by the assessee is allowable as 'manufacture or production of article or thing' under section 32(1)(iia) - HELD THAT: - The Tribunal followed High Court and ITAT precedents holding that generation of electricity by windmills constitutes 'manufacture or production' and hence qualifies for additional depreciation. On facts the assessee fulfilled conditions and produced requisite forms; CIT(A)'s allowance was upheld. [Paras 24, 25, 27]

Claim for additional depreciation in respect of windmills was allowed; Department's appeal dismissed on this issue.

Disallowance under section 40(a)(ia) and retrospective effect of curative proviso - Validity of deletions by CIT(A) of additions under section 40(a)(ia) for non-deduction of TDS (professional fees, interest, NAFED entries, FBT) - HELD THAT: - The Tribunal upheld CIT(A)'s findings. It accepted that interest paid to banks did not require TDS; that entries reversed or shown to be bonafide/typographical needed no disallowance; and relied on case law recognising retrospective/curative effect of the proviso to section 40(a)(ia) where recipient had offered the income to tax. The Department did not point to specific infirmities in CIT(A)'s factual findings. [Paras 29, 30, 32, 33]

CIT(A)'s deletions of the section 40(a)(ia) additions were upheld; Department's appeal dismissed on these grounds.

Onus under section 68 - identity, genuineness and creditworthiness of creditors - Whether addition under section 68 in respect of loans from promoters/directors was sustainable for AY 2008-09 - HELD THAT: - CIT(A) accepted confirmations, banked instruments, PAN and assessment history of the lenders; found that identity, genuineness and creditworthiness were not doubted and that only the form of signature (authorised signatory) was questioned by AO. The Tribunal observed that authorities support deletion where primary onus is satisfied and transactions are through banking channels; in the facts there was no basis to sustain addition. [Paras 56, 57, 58]

Addition under section 68 deleted; CIT(A)'s order upheld and Department's appeal dismissed on this issue.

Obligation under Rule 46A when admitting additional evidence at appellate stage - Whether admission by CIT(A) of additional documents without giving AO opportunity to comment violated Rule 46A and the appropriate remedy - HELD THAT: - The Tribunal noted that CIT(A) accepted and relied upon documents produced at appellate stage which the AO had not been given opportunity to examine or comment upon. Citing precedents, the Tribunal held that such admission without furnishing AO a reasonable opportunity violates Rule 46A(3). In the circumstances, rather than deciding merits afresh, the Tribunal remitted the matter to CIT(A) to allow AO to take cognizance of the additional evidence and furnish comments in conformity with Rule 46A. [Paras 39, 40, 41, 42]

Matter set aside and remitted to CIT(A) to obtain AO's comments and re-examine the additional evidence in compliance with Rule 46A.

Section 71(3) - classification and set-off of business loss vis-a -vis capital loss - Correct classification and treatment of loss on sale of Hateshwari shares (business loss vs short-term capital loss) for AY 2008-09 - HELD THAT: - The Tribunal observed absence on the record of clear entries in return or investment schedule and the parties agreed that factual re-examination was appropriate. Rather than adjudicating on classification, the Tribunal remitted the issue to the AO/CIT(A) for verification and re-examination of facts. [Paras 47, 48, 49]

Issue remitted for fresh examination by AO (and/or CIT(A)) to determine correct classification and treatment.

Rectification/verification of computation where typographical error is alleged - Whether the total loss for the year was wrongly computed due to a typographical/arithmetical error for AY 2008-09 - HELD THAT: - The assessee pointed to an apparent arithmetic/typographical error in the assessment order's computation. The Tribunal directed that the assessing officer undertake verification/rectification to ensure the computation matches the return/profit & loss account figures. [Paras 51, 52]

Matter remitted to the assessing officer for verification and rectification of computation.

Final Conclusion: The cross appeals for AY 2007 08 and 2008 09 were partly allowed and partly remitted. Several additions under section 41(1) and disallowances on bad debts were deleted on facts, but substantial disputed items were restored/remitted for verification (notably the large Presidential Trading FZC liability and various write offs) to permit fresh scrutiny and to comply with evidentiary/procedural requirements (including Rule 46A). The Tribunal upheld allowance of additional depreciation for windmills and deleted contested section 40(a)(ia) and section 68 additions on the recorded facts, restricted section 14A disallowance to the exempt income, and directed factual re examination where computation or classification errors were alleged.

Validity of show-cause notice under section 274 read with section 271(1)(c) - Requirement to frame specific charge: concealment of income vis-a -vis furnishing inaccurate particulars of income - Omnibus or vague notice vitiating penalty proceedings - Penalty proceedings must stand on their own and not be cured by assessment order - Burden of proof and shift of onus after assessee's explanation

Validity of show-cause notice under section 274 read with section 271(1)(c) - Omnibus or vague notice vitiating penalty proceedings - Requirement to frame specific charge: concealment of income vis-a -vis furnishing inaccurate particulars of income - Show-cause notice was defective for failure to specify and frame the specific limb of section 271(1)(c) applicable to the assessee, and that defect vitiated the penalty proceedings. - HELD THAT: - The Tribunal held that section 274 requires that an assessee be given a written opportunity specifying the exact charge to be met; a vague or omnibus notice that does not strike out inapplicable portions and does not indicate whether the case is one of concealment or of furnishing inaccurate particulars fails that requirement. The assessment order, though recording initiation of penalty, cannot cure a defective show-cause notice because penalty proceedings must stand on their own; non-framing of a specific charge is fatal and not a curable defect under the principles adopted by binding precedents. The Bench rejected the Revenue's contention that opportunity could be oral, by order-sheet or that the assessment order supplies the requisite notice, holding that written notice specifying the charge is imperative to satisfy natural justice. Applying these principles to the facts, the AO invoked both limbs interchangeably in the assessment order and did not mark the appropriate limb in the show-cause notice; hence no specific charge was framed and the notice was issued mechanically and was unsustainable in law. [Paras 4, 5, 7, 8, 11]

The notice was defective for not framing a specific charge and thereby vitiated the penalty proceedings.

Penalty proceedings must stand on their own and not be cured by assessment order - Burden of proof and shift of onus after assessee's explanation - Because the show-cause notice was defective, the penalty levied under section 271(1)(c) was not sustainable and was deleted; consideration of the merits became academic. - HELD THAT: - The Tribunal, after considering authorities on onus and the requirement of specific charge, concluded that absence of a proper notice goes to the root of the penalty proceedings. Even though the assessee had offered explanations and relevant judicial decisions address burden-shifting once an explanation is offered, the primary adjudicatory defect - failure to frame the specific charge - rendered further inquiry into merits unnecessary. Applying established case law, the Bench deleted the penalty as the requisite statutory and natural justice requirements for imposing penalty were not met. [Paras 3, 9, 11, 12]

Impugned penalty under section 271(1)(c) is deleted; merits need not be adjudicated.

Final Conclusion: The appeal is allowed: the Tribunal set aside the penalty imposed under section 271(1)(c) for AY 2009-10 on the ground that the show-cause notice failed to frame the specific charge (concealment v. furnishing inaccurate particulars), rendering the penalty proceedings vitiated; consequential consideration of merits was rendered academic.

Tax collection at source (TCS) under section 206C - Exemption from TCS by furnishing declaration in Form No. 27C under section 206C(1A) read with Rule 37C - Time for delivery of Form No.27C to the Commissioner under section 206C(1B) is directory - Remand to Assessing Officer for examination of Form No.27C and verification as per Rule 37C - Penalty under section 221 set aside where foundational demand is set aside

Exemption from TCS by furnishing declaration in Form No. 27C under section 206C(1A) read with Rule 37C - Time for delivery of Form No.27C to the Commissioner under section 206C(1B) is directory - Tax collection at source (TCS) under section 206C - Whether filing of declaration in Form No.27C relieves the seller from obligation to collect TCS and the effect of the time prescribed for delivery of the declaration to the Commissioner. - HELD THAT: - The Tribunal held that a seller specified under section 206C is obliged to collect TCS unless the buyer furnishes the prescribed declaration in Form No.27C under section 206C(1A) read with Rule 37C. Where such declaration is produced by the seller, the declaration must be examined by the assessing authority and forwarded to the Principal Chief Commissioner/Commissioner as required by law. The Tribunal followed the coordinate view that the statutory direction in section 206C(1B) to deliver one copy of the declaration "on or before the seventh day of the month next following the month in which the declaration is furnished" is directory rather than mandatory; consequently late transmission to the Commissioner does not automatically defeat the substantive exemption under section 206C(1A). Applying these principles, the Tribunal set aside the impugned orders and restored the matter to the AO to examine the Form No.27C declarations on merits, including verification under Rule 37C (such as countersignature by a Chartered Accountant where relevant), and to pass an adjudication in accordance with law after affording the assessee a reasonable opportunity of hearing. [Paras 5, 6, 7]

Impugned orders under section 206C(1)/206C(7) set aside and matter remitted to the AO to examine and verify Form No.27C and forward the declaration to the Commissioner as required; benefit of Form No.27C to be decided on merits.

Penalty under section 221 set aside where foundational demand is set aside - Whether the penalty imposed under section 221 can be sustained where the demand under section 206C has been set aside and remitted for fresh consideration. - HELD THAT: - The Tribunal observed that the penalty under section 221 was consequential upon the AO's order treating the assessee as in default for non-payment of tax collected as TCS. Having set aside the foundational orders under section 206C and remitted the matter for fresh examination of Form No.27C, the Tribunal held that the consequential penalty cannot be sustained because the underlying demand has been quashed for reconsideration. On the principle that when the foundation (the demand) falls, the superstructure (penalty) also falls, the Tribunal set aside the penalty orders and allowed the appeals on this ground. [Paras 8, 9]

Penalty orders under section 221 set aside because the foundational TCS demand has been set aside and remitted for fresh consideration.

Final Conclusion: The appeals are allowed: orders assessing TCS under section 206C(1)/206C(7) for the stated assessment years are set aside and remitted to the AO for examination and verification of Form No.27C in accordance with law; consequential penalties under section 221 are set aside.

Disallowance under section 43B - processing under section 143(1) - treatment of statutory tax liability in profit & loss account - remand for fresh adjudication - applicability of findings across assessment years

Disallowance under section 43B - processing under section 143(1) - treatment of statutory tax liability in profit & loss account - remand for fresh adjudication - Disallowance of unpaid GST liability in the intimation under section 143(1) as disallowed by auditor in Form 3CD under section 43B and whether that disallowance should be sustained. - HELD THAT: - The audit report (Form 3CB/3CD) recorded a disallowance of unpaid GST liability under section 43B, and the intimation issued under section 143(1) reflected that disallowance. The CIT(A) upheld the disallowance on the ground that the assessee failed to demonstrate that the GST liability had not been routed through the profit & loss account, and the assessee had not furnished audited financial statements before the CIT(A). The assessee before the Tribunal sought an opportunity to file audited financial statements to show that the GST liability was not debited to the profit & loss account. The Revenue did not oppose remand. The Tribunal noted that the assessee had furnished profit & loss items in the return and that the CIT(A) ought to have examined the details before concluding there was no such evidence. In the interest of justice and to afford the assessee an opportunity to place the audited financial statements and for the AO to adjudicate afresh as per law, the Tribunal set aside the matter to the file of the AO for fresh adjudication. [Paras 3, 4, 5, 9]

Matter set aside to the file of the AO for fresh adjudication; assessee granted opportunity to furnish audited financial statements and particulars to contest the disallowance; appeal allowed for statistical purposes.

Applicability of findings across assessment years - remand for fresh adjudication - Whether the findings and relief granted for Assessment Year 2018-2019 apply to Assessment Year 2020-21. - HELD THAT: - The issue raised for AY 2020-21 was identical to that for AY 2018-19. The parties and the Tribunal proceeded on the basis that the determination made for AY 2018-19 would be applied to AY 2020-21. Accordingly, the Tribunal applied the same conclusion-setting the matter aside for fresh adjudication and allowing the appeal for statistical purposes-to AY 2020-21 as well. [Paras 10, 11]

Findings for AY 2018-19 applied to AY 2020-21; appeal for AY 2020-21 allowed for statistical purposes.

Final Conclusion: Both appeals (Assessment Years 2018-2019 and 2020-21) are set aside to the file of the Assessing Officer for fresh adjudication to enable the assessee to furnish audited financial statements and other details regarding the routing of the GST liability; both appeals are allowed for statistical purposes.

Deduction under section 80P(2)(a)(i) - Belated filing of return and entitlement to deductions - Characterisation as Primary Agricultural Credit Society (PACS) and scope of section 80P(4) - Application of binding precedents and remand for fresh adjudication

Belated filing of return and entitlement to deductions - Deduction under section 80P(2)(a)(i) - Whether belated filing of return barred the assessee from claiming deduction under section 80P(2)(a)(i). - HELD THAT: - The Tribunal considered the Jurisprudence of the Hon'ble Kerala High Court in Chirakkal Service Co-operative Bank Ltd. which held that returns filed beyond the periods under sections 139(1)/139(4) or in response to notices under sections 142(1)/148 can be accepted and acted upon and that claims for exemptions under Chapter VIA (including claims referable to section 80P) accompanying such returns must be considered when returns are accepted in law. Applying that principle, the Tribunal held that the Ld. CIT(A)'s denial of the claim solely on the ground of belated filing could not be sustained. The Tribunal therefore rejected the omission/failure-to-file argument as a bar to considering the section 80P claim for the AYs before it. [Paras 3, 4]

Belated filing does not, by itself, preclude consideration of the section 80P(2)(a)(i) claim; the Ld. CIT(A)'s reliance on belated filing is set aside.

Characterisation as Primary Agricultural Credit Society (PACS) and scope of section 80P(4) - Application of binding precedents and remand for fresh adjudication - Whether the assessee qualifies as a Primary Agricultural Credit Society (PACS) for the purpose of deduction under section 80P(2)(a)(i) and whether the denial by the authorities was sustainable without applying binding Supreme Court precedent. - HELD THAT: - The Tribunal noted that the AO and the Ld. CIT(A) treated the assessee as a co-operative bank (thereby invoking the exclusion in section 80P(4)) on the basis that it provided banking services to the general public, and concluded it was not a PACS. The Tribunal observed that the authorities did not have the benefit of the Supreme Court's decision in Malvilayi Service Co-operative Bank Ltd., which clarified the scope of section 80P(2)(a)(i), the proper reading of section 80P(4), and the approach to loans to non-members under applicable state law. In view of that binding precedent, the Tribunal found it appropriate to set aside the Ld. CIT(A)'s order and restore the matter to the file of the AO for fresh examination and decision in accordance with the ratio in Malvilayi, including assessment of whether any profits attributable to loans to non-members should be disallowed. [Paras 5, 6]

Issue remanded to the Assessing Officer for fresh adjudication in light of the Supreme Court's decision in Malvilayi Service Co-operative Bank Ltd.; earlier conclusions of AO/Ld. CIT(A) set aside to that extent.

Final Conclusion: The Tribunal allowed the appeals for statistical purposes: the denial of deduction on the sole ground of belated filing was set aside, while the question whether the assessee qualifies as a PACS for deduction under section 80P(2)(a)(i) was restored to the Assessing Officer for fresh decision in accordance with the Supreme Court's ratio in Malvilayi Service Co-operative Bank Ltd. The pending stay petitions were dismissed as infructuous.

Revisionary jurisdiction under section 263 of the Income-tax Act - order deemed erroneous for lack of inquiries / verification (Explanation 2 to section 263) - exemption under section 10(38) - exempt long-term capital gains (shares) - verification of source of investment in immovable property - verification of interest income and interest expense claimed against house property - remand for fresh assessment and enquiry

Revisionary jurisdiction under section 263 of the Income-tax Act - order deemed erroneous for lack of inquiries / verification (Explanation 2 to section 263) - exemption under section 10(38) - exempt long-term capital gains (shares) - verification of source of investment in immovable property - verification of interest income and interest expense claimed against house property - remand for fresh assessment and enquiry - Assessment framed under section 143(3) is erroneous and prejudicial to revenue for want of necessary enquiries and verifications regarding exempt long term capital gains, source of property investments and interest income/expenses; PCIT's revision under section 263 upheld and matter remitted to AO for fresh assessment and verification. - HELD THAT: - The Tribunal found that the case was selected for complete scrutiny to examine suspicious sales and claimed exemption under section 10(38) in respect of share transactions, but the Assessing Officer did not issue specific queries, did not conduct independent verifications, nor placed any inquiry notes on record. The AO similarly failed to verify the source of payments for immovable property purchases and did not call for details supporting declared interest income or the interest expense claimed against house property. In view of Explanation 2 to section 263 and settled precedent cited in the order, absence of such inquiries renders the assessment order erroneous and prejudicial to the interest of revenue. Applying that principle to the material on record, the Tribunal found no infirmity in the Principal Commissioner's conclusion that the assessment required revision. The Tribunal therefore sustained exercise of revisionary power and directed fresh assessment after calling for necessary details and conducting in depth verification of genuineness of share transactions (including mode and source of payment and demat transfer), economic reasons for the sharp price appreciation, source of investment in immovable properties and substantiation of interest income and claimed interest expenses. [Paras 8, 9]

The order under section 263 was upheld; the assessment dated 02/05/2017 is set aside and the AO directed to make fresh assessment with requisite verifications.

Final Conclusion: Appeal dismissed. The Tribunal affirms the Principal Commissioner's view that the assessment was erroneous for lack of necessary enquiries into exempt LTCG on share sales, source of property investments and interest income/expenses, and remands the matter to the Assessing Officer for fresh assessment and detailed verification.

Share premium taxation under Section 56(2)(viib) of the Income Tax Act - Discounted Cash Flow (DCF) valuation under rule 11UA of the Income Tax Rules - rejection of valuation based on hindsight comparison with subsequent performance - allowability of ESOP expenses - precedential effect of jurisdictional High Court decisions

Share premium taxation under Section 56(2)(viib) of the Income Tax Act - Discounted Cash Flow (DCF) valuation under rule 11UA of the Income Tax Rules - rejection of valuation based on hindsight comparison with subsequent performance - Validity of deletion of addition made under Section 56(2)(viib) in respect of share premium where valuation was by DCF. - HELD THAT: - The assessee adopted the Discounted Cash Flow method for valuation, a recognized methodology under Section 56(2)(viib) read with rule 11UA. The Assessing Officer rejected the DCF valuation by comparing projections used in the valuation with the company's subsequent actual performance. The Tribunal agreed with the CIT(A) that rejection of a DCF valuation merely on the ground that subsequent results differed from earlier projections amounts to impermissible hindsight. The CIT(A) applied relevant precedent and found the valuation report prepared on the basis of projections and DCF to be acceptable; the Tribunal found no infirmity in that conclusion and upheld the deletion of the addition.

The deletion of the addition under Section 56(2)(viib) was upheld; the AO's rejection of DCF valuation on the basis of subsequent performance was disapproved.

Allowability of ESOP expenses - precedential effect of jurisdictional High Court decisions - Allowability of ESOP expenditure disallowed by the AO. - HELD THAT: - The CIT(A) allowed the ESOP expenditure claim following the jurisdictional Delhi High Court's decisions holding that ESOP-related expenditure is an allowable deduction. The Tribunal observed that the issue is squarely covered by that High Court precedent and, therefore, declined to interfere with the CIT(A)'s order deleting the disallowance.

The deletion of the disallowance of ESOP expenses was sustained.

Final Conclusion: Both impugned additions were set aside: the Tribunal upheld the CIT(A)'s deletion of the share premium addition by accepting the DCF valuation and disapproved reliance on hindsight, and sustained the CIT(A)'s allowance of ESOP expenditure in view of binding jurisdictional precedent; the Revenue's appeal is dismissed.

Deductibility of commission and salary as business expenditure wholly and exclusively for purpose of business - burden of proof on the assessee to substantiate claimed business expenditure - reliance on notices under section 133(6) for verification of payments - disallowance unjustified in absence of adverse evidence despite confirmations and bank payments

Deductibility of commission and salary as business expenditure wholly and exclusively for purpose of business - burden of proof on the assessee to substantiate claimed business expenditure - reliance on notices under section 133(6) for verification of payments - disallowance unjustified in absence of adverse evidence despite confirmations and bank payments - Deletion of disallowance of commission expense of Rs. 8,18,150/- - HELD THAT: - The Tribunal found that the assessee, a financial consultant/Direct Sales Agent, had furnished names, addresses, PANs and bank evidence for commission payments and that notices under section 133(6) were issued on test check basis to two persons who responded confirming receipt of commission. The Assessing Officer recorded only vaguely that some notices were returned unserved or replies were not received and did not identify which notices or parties. No adverse material was produced to contradict the confirmations or bank payments. In the absence of any adverse evidence and given the confirmations received on test check, the Tribunal held that the Assessing Officer was not justified in disallowing the commission expenses which were incurred wholly and exclusively for the purpose of business, and accordingly directed deletion of the disallowance. [Paras 8]

Disallowance of commission payment deleted.

Deductibility of commission and salary as business expenditure wholly and exclusively for purpose of business - burden of proof on the assessee to substantiate claimed business expenditure - reliance on notices under section 133(6) for verification of payments - disallowance unjustified in absence of adverse evidence despite confirmations and bank payments - Deletion of disallowance of salary expenses of Rs. 5,16,000/- - HELD THAT: - The Tribunal observed that the assessee furnished the names, addresses, PANs and salary details of six employees and that notices under section 133(6) were issued on test check to two employees who admitted employment and receipt of salary. The Assessing Officer's record merely noted that some notices were returned without specifying which ones or producing contrary material. In absence of any adverse evidence contradicting the employees' confirmations or the salary payments, the Tribunal held that the Assessing Officer was not justified in making the disallowance and directed deletion of the disallowance of salary expenses. [Paras 11]

Disallowance of salary expenses deleted.

Final Conclusion: Both the disallowances-of commission and of salary expenses-were deleted by the Tribunal on the ground that the assessee had furnished requisite details and confirmations, no adverse material was produced by the revenue, and the Assessing Officer's vague references to unserved notices did not justify disallowance; the appeal is allowed.

Application for settlement under Section 245C - definition of 'case' in Section 245A(b) - commencement and conclusion of assessment proceedings - reopening under section 147 and notice under section 148 - Explanation to Clause (b) of Section 245A - purposive versus literal interpretation

Definition of 'case' in Section 245A(b) - commencement and conclusion of assessment proceedings - reopening under section 147 and notice under section 148 - Validity of settlement applications under Section 245C for Assessment Years 2012-13 and 2013-14 - whether a 'case' was pending on the date of application. - HELD THAT: - The Court held that for the purpose of Section 245A(b) as in force on 15.12.2016 a 'case' means a proceeding for assessment which is actually pending before the Assessing Officer on the date of the settlement application. Explanation (i) makes proceedings under Section 147 relevant only from the date a notice under Section 148 is issued; in the absence of any notice under Section 148 no reassessment proceedings could be treated as pending. Applying these principles to the facts, no notice under Section 148 had been issued to the petitioners in respect of the assessment years in question, and therefore there were no pending proceedings for reassessment or assessment for AY 2012-13 and AY 2013-14 on the date the settlement applications were filed. The Commission's conclusion that the applications for those years were invalid for want of a 'case' pending was upheld. [Paras 9, 10, 17, 20]

Applications for settlement in respect of Assessment Years 2012-13 and 2013-14 were invalid because no 'case' was pending on the date of the applications.

Application for settlement under Section 245C - Explanation to Clause (b) of Section 245A - Maintainability of settlement applications for Assessment Years 2014-15, 2015-16 and 2016-17. - HELD THAT: - The Commission found, and the Court accepted, that the proceedings for AY 2015-16 and AY 2016-17 had not concluded within the two-year period from the end of the relevant assessment year and therefore fell within the scope of Explanation (iv) to Clause (b) of Section 245A. The applications insofar as they related to AY 2014-15, AY 2015-16 and AY 2016-17 were accordingly held to be maintainable. [Paras 6, 9]

Settlement applications for Assessment Years 2014-15, 2015-16 and 2016-17 were maintainable.

Purposive versus literal interpretation - Explanation to Clause (b) of Section 245A - Whether Section 245A(b) must be read purposively to avoid an alleged anomalous result arising from legislative amendments. - HELD THAT: - The petitioners' submission that a purposive departure from the literal text was required - on the ground that deletion of an earlier proviso left its Explanation producing an absurd result - was examined in light of the legislative history. The Court concluded that deletion of the proviso expanded the scope of 'any proceeding for assessment' but that the retained Explanation appropriately delineates when reassessment proceedings under Section 147 are to be treated as commenced (i.e., from issuance of a Section 148 notice). There was no ambiguity or absurdity warranting rejection of the statute's plain meaning, and the literal construction was upheld. [Paras 12, 14, 16, 19, 20]

Literal interpretation of Section 245A(b), as informed by its Explanation and legislative history, is correct; purposive modification was not warranted.

Final Conclusion: The petitions are dismissed. The Settlement Commission's decisions that the applications for AY 2012-13 and AY 2013-14 were invalid for want of any 'case' pending are affirmed, while applications for AY 2014-15, AY 2015-16 and AY 2016-17 were held maintainable; no departure from the literal construction of Section 245A(b) was called for.

Use of co-accused's statement as substantive evidence - identification by co-accused - failure to cross-examine co-accused and principles of natural justice - penalty under section 112 of the Customs Act - confiscation of goods concealed with indigenous goods

Use of co-accused's statement as substantive evidence - identification by co-accused - Voluntary statement of a co-accused and prompt identification by the driver can constitute substantive evidence to connect the appellant to smuggled goods and sustain confiscation and penalty. - HELD THAT: - The Tribunal accepted that the driver, whose statement was recorded under section 108 of the Customs Act, promptly identified the appellant at the Custom House as the owner of the seized foreign-origin goods. The Court treated that voluntary, un-retracted statement as a material piece of evidence capable of connecting the appellant to the contravention. Reliance was placed on precedent recognizing that a co-accused's voluntary statement, when not retracted, may be used as substantive evidence. The appellant's failure to provide particulars of the purported friend who allegedly asked him to inquire about the vehicle weakened his explanation and reinforced the probative value of the identification and the co-accused's statement. [Paras 5, 7, 8]

The co-accused's voluntary, un-retracted statement and the prompt identification by the driver satisfactorily connect the appellant to the seized contraband and sustain the confiscation and penalty.

Failure to cross-examine co-accused and principles of natural justice - Non-provision of an opportunity to cross-examine the co-accused did not vitiate the adjudication or penalty where the co-accused's statement was voluntary and not retracted. - HELD THAT: - The Tribunal examined the contention that absence of cross-examination of the driver rendered the proceedings violative of natural justice. Having found the statements to be voluntary and not retracted, the Tribunal held that failure to afford cross-examination in the circumstances did not amount to a breach warranting interference. The reasoning accords with authority upholding admissibility and use of such statements despite lack of cross-examination where voluntariness and reliability are established. [Paras 6, 8]

The omission to permit cross-examination of the co-accused does not invalidate the use of his voluntary, un-retracted statement nor require setting aside the penalty.

Penalty under section 112 of the Customs Act - Omission to specify the sub-clause of section 112 in the imposition of penalty is not fatal where the nature of the offence is discernible from the charge and proceedings. - HELD THAT: - The Tribunal acknowledged that ideally the specific sub-clause should have been cited, but held that such omission was not of a magnitude to vitiate the penalty so long as the nature of the offence was clear from the charges. Consequently, the penalty imposed under section 112 could be sustained despite the non-mention of the exact sub-clause. [Paras 7]

The penalty under section 112 is not invalidated by the non-mention of the sub-clause where the nature of the offence is discernible.

Final Conclusion: The Tribunal dismissed the appeal, holding that the voluntary, un-retracted statement of the co-accused and prompt identification by the driver constituted substantive evidence connecting the appellant to the seized foreign-origin goods; non-provision of cross-examination and omission to specify the sub-clause of section 112 did not vitiate the confiscation and penalty.

Revocation of customs broker license - Know Your Customer (KYC) documents - Authorization from importer versus trusted intermediary - Regulation 10(a) of Customs Broker Licensing Regulations, 2018 - Regulation 17 of Customs Broker Licensing Regulations, 2018 - Proportionality of punishment

Revocation of customs broker license - Regulation 17 of Customs Broker Licensing Regulations, 2018 - Whether the revocation of the appellant's customs broker licence was justified on the facts and under Regulation 17 of CBLR, 2018. - HELD THAT: - The Tribunal found that the departmental proceedings stemmed from a complaint which, on inquiry, indicated a prior commercial association and a possible financial dispute between the complainant and the intermediary who supplied the documents. The inquiry report did not find the KYC documents to be forged, nor did it find offences such as undervaluation or misdeclaration in relation to the consignments. The Department had not shown any loss or injury resulting from the appellant's conduct, nor that the consignments themselves raised customs offences. In these circumstances the Tribunal held that the facts did not disclose a case warranting revocation under Regulation 17, since the inquiry had effectively exonerated the appellant of any serious breach and the procedural lapse identified did not amount to conduct justifying the extreme sanction of licence revocation.

Revocation of the customs broker licence set aside.

Know Your Customer (KYC) documents - Authorization from importer versus trusted intermediary - Regulation 10(a) of Customs Broker Licensing Regulations, 2018 - Whether authorization under Regulation 10(a) must be obtained directly from the importer or may be accepted from an intermediary. - HELD THAT: - On the material, the KYC documents and authorization were provided to the appellant via the clearing and forwarding agent, who in turn had received them from a person known to and associated with the importer. The Tribunal agreed with the inquiry officer and relevant precedents that Regulation 10(a) does not impose an absolute requirement that authorization be obtained directly from the importer; a customs broker may accept authorization through a trusted intermediary where the intermediary is connected with the importer and there are no indicia of forgery or fraud. The Tribunal emphasised that this does not mean authorization can be accepted from any unrelated person; there must be a reasonable basis not to doubt the genuineness of the documents and the identity/connection of the intermediary with the importer.

Acceptance of authorization via a trusted intermediary was permissible on the facts; no culpable breach of Regulation 10(a) was established in substance.

Proportionality of punishment - Revocation of customs broker license - Whether the punishment imposed was proportionate to the procedural lapse found. - HELD THAT: - Having concluded that any violation was procedural and did not involve forgery, misdeclaration or undervaluation, and that no loss or injury was demonstrated, the Tribunal held that the extreme sanction of licence revocation and forfeiture of security was disproportionate. The Tribunal applied the principle that punishment must be commensurate with the offence and reduced the sanction to a token penalty appropriate to the lapse, while restoring the licence and security.

Forfeiture set aside; penalty reduced to a token amount.

Final Conclusion: The revocation of the appellant's customs broker licence and forfeiture of security deposit were set aside; the penalty imposed was reduced to Rs. 5,000; the appeal is partly allowed.

Restriction on import of second-hand goods under Para 2.17 of the Foreign Trade Policy 2009-2014 and Para 2.33/2.33A of HBP - import of old and used Digital Multifunction Printers prior to 28.02.2013 - enhancement of declared customs value based solely on Chartered Engineer's certificate - requirement of corroborative evidence for treating declared value as mis-declared - confiscation for mis-declaration of value

Restriction on import of second-hand goods under Para 2.17 of the Foreign Trade Policy 2009-2014 and Para 2.33/2.33A of HBP - import of old and used Digital Multifunction Printers prior to 28.02.2013 - No import licence was required for import of the impugned old and used Digital Multifunction Printers imported prior to 28.02.2013. - HELD THAT: - The Tribunal applied its earlier decision in Bhawani Enterprises, which followed the Madras High Court's view that up to 28-02-2013 there was no restriction on import of the subject goods. On the facts, identical goods had been held not to require a licence for import during the relevant period. The impugned consignments were second-hand Digital Multifunction Printers imported before 28-02-2013 and hence fell within that settled position. No contrary material was shown to bring the imports within any licensing restriction under the cited policy provisions for the period in question.

The impugned goods did not require a specific import licence for imports made prior to 28-02-2013; the Commissioner (Appeal)'s finding on this point is upheld.

Enhancement of declared customs value based solely on Chartered Engineer's certificate - requirement of corroborative evidence for treating declared value as mis-declared - confiscation for mis-declaration of value - Value cannot be enhanced and declared value treated as mis-declared solely on the basis of a Chartered Engineer's certificate in absence of other corroborative evidence. - HELD THAT: - Following the Tribunal's reasoning in Bhawani Enterprises, mere enhancement of value on the basis of a Chartered Engineer's certificate is insufficient to establish mis-declaration of value. The Commissioner (Appeal) correctly found that except for the C.E.'s certificate there was no other material on record to indicate that the declared value was mis-declared. In the absence of corroborative evidence, enhancement founded only on the C.E. certificate cannot justify confiscation or rejection of the declared value.

Enhancement of the declared customs value cannot be sustained on the Chartered Engineer's certificate alone; the Commissioner (Appeal)'s finding disallowing such enhancement is upheld.

Final Conclusion: Since the issues regarding licensing for imports before 28-02-2013 and the inadmissibility of value enhancement based solely on a Chartered Engineer's certificate have been settled by precedent and applied to the facts, the Tribunal finds no infirmity in the Commissioner (Appeal)'s order and dismisses the Revenue's appeal.

Seizure under Section 110 of the Customs Act - onus to prove foreign origin and smuggled nature of non notified goods under Section 123 of the Customs Act - confiscation and option of redemption with redemption fine under Sections 111/115/125 of the Customs Act - provisional release and appropriation of security - burden of proof on the Revenue to establish smuggling by positive evidence

Seizure under Section 110 of the Customs Act - burden of proof on the Revenue to establish smuggling by positive evidence - Whether the Revenue discharged the statutory onus to prove that the seized cut betel nuts were of foreign origin and smuggled, thereby justifying seizure and confiscation. - HELD THAT: - The Tribunal found that seizure under Section 110 must rest on a reasonable belief that goods are smuggled or of foreign origin. Although specific information and non production of transport documents supported seizure at the interdiction stage, the goods were non notified and Section 123 casts the onus on the department to prove smuggled character by positive evidence. The appellants produced an invoice and traced procurement to a Customs auction; the department relied on assertions (including a laboratory report and various factual inferences such as delay in claiming, alleged storage period and mismatch of auction lots) but led no cogent positive evidence to negate the appellants' proof. The Tribunal held that argumentative negatives, assumptions about modus operandi, or probabilities (e.g., absence of carriage documents, perishable nature, alleged long storage) do not discharge the statutory onus. In absence of affirmative and conclusive evidence establishing foreign origin and smuggling, the confiscation could not be sustained. [Paras 4, 5, 6]

The Revenue failed to discharge the burden to prove smuggled foreign origin; confiscation and related measures were not sustainable on the evidence.

Provisional release and appropriation of security - confiscation and option of redemption with redemption fine under Sections 111/115/125 of the Customs Act - Whether the appellants' production of invoice and procurement from a departmental auction discharged their initial onus and entitled them to relief from confiscation and redemption liabilities. - HELD THAT: - The Tribunal accepted that the appellants discharged their initial onus by producing Invoice No.133 and evidencing purchase from M/s Shree Shai Systems, which in turn accounted for procurement from a Customs auction at Forbesganj. Given that the department did not meaningfully contest the allegation that the supplier had purchased the goods at auction, and having failed to lead positive evidence to establish smuggling, the appellants' documentary proof called for the department to negate that provenance. The Tribunal observed that peripheral inferences (age of goods, mould, delay in claiming, alleged mismatch in composition of auctioned lots) without affirmative proof do not rebut the appellants' case. Consequently, the order confirming confiscation, provisional release conditions and redemption fine was set aside in favour of the appellants. [Paras 5, 6, 7]

Appellants' documentary proof of purchase from a Customs auction discharged their initial onus; appellate order confirming confiscation and related penalties set aside.

Final Conclusion: The appeals are allowed: the order in appeal confirming confiscation and penalties is set aside because the Revenue failed to prove that the non notified cut betel nuts were of foreign origin and smuggled; the appellants' proof of purchase from a Customs auction was accepted and the confiscation/penalty measures could not be sustained.

Oppression and mismanagement - vacation of office under section 167(1)(b) - eligibility under section 196(3) - status quo - appointment of Special Officer - summary dismissal for non-adjudication - remand for fresh consideration

Eligibility under section 196(3) - vacation of office under section 167(1)(b) - Validity of NCLT's dismissal of CA No. 1584/KB/2019 on the ground that the petitioner was not 'currently holding' office and hence ineligible under section 196(3). - HELD THAT: - The Tribunal found that NCLT accepted at face value the company's contention that the petitioner had ceased to hold office by reason of alleged absence from board meetings and therefore could not claim relief under section 196(3). The appellate bench held that this inference was premised on an incorrect appreciation of facts because the appellants had repeatedly raised that their non-attendance was caused by obstructive acts of the respondents and that NCLT did not examine or adjudicate those allegations before treating the cessation as established. Consequently, the conclusion in the Impugned Order that petitioner was not 'currently holding' the office for the purpose of section 196(3) was erroneous. [Paras 28]

Part of the Impugned Order dismissing CA No. 1584/KB/2019 on the basis of ineligibility under section 196(3) is set aside.

Oppression and mismanagement - summary dismissal for non-adjudication - Validity of dismissal of IA No. 112/KB/2019 which raised issues of continuing oppression and mismanagement but was dismissed as consequential to CA No. 1584/KB/2019. - HELD THAT: - IA No. 112/KB/2019 contained multiple allegations of oppression and mismanagement and complained of non-compliance with earlier interim orders. The Tribunal observed that NCLT did not consider or adjudicate those issues on merits but dismissed IA No.112 as a necessary consequence of its finding on CA No.1584. Given that the dismissal of CA No.1584 was itself set aside for being premised on an incorrect conclusion, the consequential dismissal of IA No.112 without adjudication was also erroneous. [Paras 29]

Impugned dismissal of IA No. 112/KB/2019 is set aside for being founded on the same erroneous premise and for lack of adjudication on allegations of oppression and mismanagement.

Oppression and mismanagement - appointment of Special Officer - remand for fresh consideration - Validity of dismissal of CP No. 42/KB/2016 as not maintainable and whether the company petition's allegations of oppression and mismanagement were adjudicated. - HELD THAT: - CP No. 42/KB/2016 contained extensive pleadings alleging acts of oppression and mismanagement and sought various interim and substantive reliefs, including appointment of a Special Officer. The appellate bench noted that NCLT dismissed the petition summarily without considering the multiple issues and prayers and without examining whether the Special Officer's enquiries (the appointment of which had been affirmed by higher fora) had produced any report bearing on mismanagement. The Tribunal found this to be a basic and fatal error of non-adjudication and concluded that the dismissal amounted to a summary disposal contrary to the need to examine the pleaded grievances. [Paras 30, 31]

Impugned dismissal of CP No. 42/KB/2016 is set aside and the matter is remanded to NCLT, Kolkata for fresh consideration of the petition and all connected applications, with opportunity of hearing to all parties.

Status quo - appointment of Special Officer - Whether the earlier interim orders (status quo and clarificatory directions) and the NCLT order appointing a Special Officer should remain in effect while the matter is re-considered. - HELD THAT: - Given the setting aside of the Impugned Order and the remand for fresh adjudication on the allegations of oppression and mismanagement, the appellate bench directed continuity of the earlier interim regime to preserve the position pending fresh adjudication. The order explicitly continued the effect of the status quo order dated 3.5.2016, the clarificatory order dated 18.8.2016, and the NCLT order dated 1.10.2019 concerning the Special Officer while the Tribunal re-examines the matters on remand. [Paras 32]

The earlier 'status quo' order dated 3.5.2016, clarificatory order dated 18.8.2016 and NCLT order dated 1.10.2019 shall continue to remain in effect pending fresh consideration.

Final Conclusion: The impugned NCLT order dated 1.4.2022 is set aside in its entirety. Parts of that order dismissing CA No.1584/KB/2019 and IA No.112/KB/2019 and concluding CP No.42/KB/2016 to be not maintainable are quashed; CP No.42/KB/2016 and all connected applications (including the contempt application) are remanded to NCLT, Kolkata for fresh adjudication with opportunity of hearing, and the interim directions including the status quo and related orders and the order appointing the Special Officer shall continue in force while the matter is reconsidered.

Computation of period of limitation - time for filing appeal under Section 61(2) of the Insolvency and Bankruptcy Code, 2016 and condonation up to 15 days - exclusion of the day of pronouncement in computation of limitation under Section 12 of the Limitation Act, 1963 and Rule 3 of the NCLAT Rules, 2016 - exclusion of time requisite for obtaining a certified copy under Section 12(2) of the Limitation Act, 1963 - applicability of Section 238A of the Insolvency and Bankruptcy Code, 2016 - e filing versus presentation under Rule 22 and Rule 103 of the NCLAT Rules, 2016

Computation of period of limitation - time for filing appeal under Section 61(2) of the Insolvency and Bankruptcy Code, 2016 and condonation up to 15 days - exclusion of the day of pronouncement in computation of limitation under Section 12 of the Limitation Act, 1963 and Rule 3 of the NCLAT Rules, 2016 - exclusion of time requisite for obtaining a certified copy under Section 12(2) of the Limitation Act, 1963 - Whether the appeal was filed within the period of limitation prescribed by Section 61(2) of the IBC and whether periods are excludable for computation of limitation. - HELD THAT: - Section 61(2) prescribes a primary period of thirty days with a discretionary extension of up to fifteen days by NCLAT. Section 238A makes the Limitation Act applicable "as far as may be" to appeals before NCLAT. Rule 3 of the NCLAT Rules and Section 12(1) of the Limitation Act require exclusion of the day from which the period is reckoned; accordingly the date of pronouncement (26 August 2022) is excluded. Further, Section 12(2) mandates exclusion of the time requisite for obtaining a certified copy where an application for the copy is made within the limitation period. In the present case an application for a certified copy was filed and received by the Registry within the primary 30 day period and the certified copy was provided thereafter; therefore the period taken by the court to supply the certified copy (5 September to 15 September 2022) must be excluded. Counting days after excluding the date of pronouncement and including the exclusion for obtaining the certified copy yields that the e filing made on 10 October 2022 fell on the 45th day, which is within the statutory outer limit (30 + 15 days). The appellant also offered an explanation for the short residual delay which the Court found sufficient for condonation within the statutory framework. [Paras 24, 25, 26, 28, 29]

The appeal was within the outer limit of 45 days; the period for obtaining a certified copy is excludable and the appellant's short delay is condonable within Section 61(2). The NCLAT's dismissal on limitation grounds is set aside.

E filing versus presentation under Rule 22 and Rule 103 of the NCLAT Rules, 2016 - administrative clarification on computation of limitation by Registrar of NCLAT - Whether the administrative orders and practices concerning e filing and computation of limitation affected the limitation computation in this case and whether any administrative irregularity warranted denying relief. - HELD THAT: - The Court examined the sequence of administrative directions: the SOP of 3 January 2021 mandating hard copies alongside e filing, the Registrar's order of 21 October 2022 (to be effective 1 November 2022) directing computation from presentation under Rule 22, and the subsequent order of 24 December 2022 clarifying limitation to be computed from date of e filing with seven days to file the hard copy. The Court noted that these administrative communications created uncertainty and were subject to "flip flops." While emphasizing the need to transition decisively to e filing, the Court treated the administrative confusion as a background factor and did not allow it to defeat the appellant's entitlement: on the facts the appeal was e filed on 10 October 2022 and a physical copy was filed on 31 October 2022, both occurring prior to effective operation of the 21 October order; the Registrar's later withdrawal did not prejudice the appellant's right to have the appeal adjudicated on merits. [Paras 20, 21, 22, 30, 31]

Administrative inconsistencies regarding e filing and presentation did not justify dismissal; the Court criticised the practice of requiring duplicate physical filing alongside e filing and directed that the appeal be restored for adjudication on merits.

Final Conclusion: The NCLAT order dismissing the appeal on limitation grounds is set aside. The appeal is held to have been instituted within the statutory outer limit, the time for obtaining a certified copy is excludable, and the short delay is condonable; the matter is restored to the NCLAT for disposal on merits. The Court urged modernization of tribunal rules to ensure consistent e filing practices and directed circulation of the judgment to the NCLAT Chairperson and relevant Union Secretaries.

Admission of Section 10 application - Natural justice in insolvency admission proceedings - Section 65 - rejection of application filed fraudulently and maliciously - Moratorium under Section 14 and its applicability to leased aircraft - Possession and deregistration of aircraft leased prior to CIRP admission - Liberty to invoke Section 60(5) for adjudication of possession and related claims

Admission of Section 10 application - Natural justice in insolvency admission proceedings - Whether a corporate applicant is required to serve notice on creditors or give creditors a prior hearing before admission of a Section 10 application - HELD THAT: - The statutory scheme for a Section 10 application does not impose an obligation on the corporate applicant to serve the application on all creditors prior to filing. The Rules require service to the Board (and earlier iterations required dispatch to the registered office) but do not mandate circulation to creditors. The Adjudicating Authority may, in its discretion, hear objectors who appear, but absence of prior notice to creditors or failure to give pre-admission opportunity as a matter of course does not vitiate the admission process where objectors have been heard. Granting time to file objections is to be exercised sparingly and on sound discretion so as not to frustrate the time bound scheme of the Code. [Paras 11, 13, 17, 19]

No statutory requirement exists to issue notice to creditors before admission of a Section 10 application; the Adjudicating Authority may hear objectors appearing at the hearing and admission will not be vitiated merely for lack of prior service.

Section 65 - rejection of application filed fraudulently and maliciously - Admission of Section 10 application - Whether allegations that a Section 10 application was filed fraudulently and with malicious intent require the Adjudicating Authority to first permit filing and decide a Section 65 application before admitting the Section 10 application - HELD THAT: - The statutory scheme contemplates that allegations of fraud or malicious intent can be dealt with under Section 65. The Tribunal has recognised that where initiation is found to be fraudulent and malicious, the Adjudicating Authority may reject a Section 10 application even if debt and default are proved. However, there is no absolute bar to admitting a Section 10 application where allegations have been raised orally at the admission hearing; the Adjudicating Authority may admit and still entertain a subsequently filed Section 65 application. In the present facts the oral objections and materials before the Adjudicating Authority did not demonstrate sufficient evidence of fraudulent or malicious intent to mandate rejection at the admission stage. The appellants are granted liberty to file a Section 65 application with supporting pleadings and materials, and the Adjudicating Authority must consider it on its merits. [Paras 20, 21, 27, 37]

Adjudicating Authority is not obliged to defer admission of a Section 10 application until a Section 65 application is filed and decided; where prima facie material shows fraud or malice, Section 65 may be applied to reject a Section 10 application, and objectors are entitled to file Section 65 which the Adjudicating Authority must decide in accordance with law.

Moratorium under Section 14 and its applicability to leased aircraft - Possession and deregistration of aircraft leased prior to CIRP admission - Liberty to invoke Section 60(5) for adjudication of possession and related claims - Whether leases terminated by lessors prior to admission of CIRP render the aircraft outside the moratorium and permit lessors to take possession/export, and whether the IRP may be restrained from claiming possession - HELD THAT: - The Appeals challenge the Adjudicating Authority's admission order on the ground that lessors terminated leases prior to admission and thereby placed the aircraft outside the assets available to the IRP and outside moratorium protection. The Appellate Tribunal has not adjudicated these questions on merits. Given that the Adjudicating Authority did not decide these contentions, the Tribunal considered it appropriate to leave factual and legal determination on termination, applicability of moratorium, deregistration and entitlement to possession to the Adjudicating Authority. The parties (lessors and IRP) are granted liberty to approach the Adjudicating Authority by appropriate applications under Sections 65 and/or 60(5) with supporting material, and the Adjudicating Authority is directed to decide those applications in accordance with law. [Paras 38, 40, 41]

Issues relating to applicability of moratorium to aircraft whose leases were terminated prior to admission, and claims to possession and deregistration, are not finally decided and are remitted to the Adjudicating Authority for fresh consideration; parties are at liberty to file appropriate applications.

Final Conclusion: The admission order dated 10.05.2023 under Section 10 is upheld; absence of prior notice to creditors does not invalidate admission where objectors were heard; allegations of fraud/malice can be addressed under Section 65 and appellants are granted liberty to file such application; disputes regarding termination of leases, applicability of the moratorium to the aircraft and entitlement to possession/deregistration are remitted to the Adjudicating Authority for determination and parties are permitted to approach it under the appropriate provisions.

Condonation of delay - sufficient cause - Section 61(2) proviso of the Insolvency and Bankruptcy Code, 2016 - Appeal not duly constituted

Condonation of delay - sufficient cause - Section 61(2) proviso of the Insolvency and Bankruptcy Code, 2016 - Whether the Appellant has shown sufficient cause for condonation of delay of 15 days in filing the Appeal under the proviso to Section 61(2) of the Code. - HELD THAT: - The Appellate Tribunal examined timelines and the reasons advanced for the delay. The Impugned Order was communicated to the Appellant within two to three days of its passing, leaving the statutory 30-day period largely available to take steps for filing the appeal. The Appellant's explanation that he resides in Orissa and needed to engage local counsel in Chennai was held to be inadequate to constitute a "sufficient cause" under the proviso to Section 61(2). The Tribunal noted that the Appellant had about 25 days (if not more) to make requisite arrangements and that the plea of residence abroad or distant residence did not justify extending the period. On this basis the application for condonation of delay was not found to fall within the limited 15-day extension permissible under the proviso and was rejected. [Paras 9, 10, 11]

Application for condonation of delay dismissed; Appeal held not to be duly constituted and therefore dismissed.

Final Conclusion: The application for condonation of delay was dismissed for want of sufficient cause; consequently the Appeal was not admitted and is dismissed.

Place of Provision of Services Rules, 2012 - territorial nexus / extraterritorial operation - withdrawal of exemption under Mega Exemption Notification No.25/2012 ST - reverse charge mechanism / person liable to pay service tax under Section 68(2) - charging and rule making powers of the Central Government - valuation / machinery provision for determining value of service - abatement under Notification No.26/2012 ST - show cause notices and refund claims under the service tax scheme

Place of Provision of Services Rules, 2012 - territorial nexus / extraterritorial operation - Section 66C(2) of the Finance Act, 1994 - Validity of Section 66C(2) and the Place of Provision of Services Rules, 2012 - HELD THAT: - The court held that Section 66C(1)-(2) and the Place of Provision of Services Rules, 2012 are not constitutionally infirm merely because they may operate extra territorially. Parliament and the Government can, by rule and notification, determine place of provision having regard to the nature of service and tax services that have territorial nexus with India. Precedents of the Supreme Court (including Electronics Corporation of India and GVK Industries) and the approach in Union of India v. Mohit Minerals support the view that extra territorial aspects are permissible so long as there is a real nexus with India. Consequently the challenge to Section 66C(2) and to Notification No.28/2012 ST (POPSR, 2012) fails.

Section 66C(2) and the Place of Provision of Services Rules, 2012 are upheld; challenge dismissed.

Withdrawal of exemption under Mega Exemption Notification No.25/2012 ST - charging and rule making powers of the Central Government - Validity of Notification No.1/2017 ST withdrawing Sl.No.34(c) exemption in Mega Exemption Notification No.25/2012 ST - HELD THAT: - The court applied settled authorities that the power to grant an exemption includes the power to withdraw or modify it in public interest. The withdrawal of the exemption by Notification No.1/2017 ST was within the executive power to amend exemption notifications, and challenges to that withdrawal are not sustainable. Reliance was placed on Kasinka Trading and subsequent Supreme Court decisions recognising the executive's power to rescind exemptions.

Notification No.1/2017 ST (withdrawal of the exemption) is valid; challenge dismissed.

Reverse charge mechanism / person liable to pay service tax under Section 68(2) - Notification No.30/2012 ST as amended by Notifications Nos.3/2017 and 15/2017 - definition of person liable to pay tax in Rule 2(1)(d) of Service Tax Rules, 1994 - Whether Steamer Agents and Importers (the two petitioner categories) can be validly made liable to pay service tax for ocean freight by the impugned notifications and whether the consequential notifications are enforceable against them - HELD THAT: - The court recognised the legislative framework permitting the Government to shift liability by notification under Section 68(2). However, on factual and legal analysis it found that steamer agents and importers are not the recipients of the overseas sea transport services (particularly in CIF contracts where freight is contracted and paid by the foreign seller and the overseas shipping line is the actual recipient), there is no privity or information necessary to compute value, and the consequential amendments attempting to cast them as 'persons liable to pay' suffer from defects in application. The court observed that Sl.12 to Notification No.30/2012 ST only contemplates making the recipient (actual recipient) liable for 100% of tax; the impugned amendments attempted to cast third parties (steamer agents/importers) as recipients in circumstances where they are not. The court further noted practical problems of valuation and absence of machinery to determine ocean freight in CIF contracts, rendering demands unsustainable as against the petitioners for the period in dispute.

There is no scope for demanding service tax from the steamer agents and importers for the covered period in view of defects in the impugned notifications as applied to them; consequential notifications need not be struck down abstractly but cannot be enforced against these petitioners for the period between 22.01.2017 and 30.06.2017.

Valuation / machinery provision for determining value of service - Rule 6(7CA) / option to pay at compounded rate - Validity and enforceability of the compounded/valuation mechanism (Rule 6(7CA)) and its application to importers/steamer agents - HELD THAT: - The court noted the difficulty of valuing ocean freight for CIF contracts where importers lack the information and there is no privity with overseas shipping lines. Although a compounded option (1.4% of CIF) was provided by Rule 6(7CA)/Notification No.16/2017 ST, the court held that the fundamental defect is that the petitioners are not recipients of the service; thus the compounded scheme cannot be imposed on them. The court treated the valuation/machinery concern as part of the practical and legal infirmities in seeking to recover tax from these petitioners.

The compounded valuation mechanism cannot sustain demands against steamer agents/importers for the period in dispute because they are not service recipients and lack the requisite information to be charged.

Abatement under Notification No.26/2012 ST - Circular No.206/4/2017 paras 4 & 4.1 - Challenge to paras 4 and 4.1 of Circular No.206/4/2017 (denial of abatement) and related abatement issues - HELD THAT: - The court observed that the circular was issued in the background of the withdrawal of exemption and the Government's view that foreign shipping lines cannot claim the conditional abatement (because they are zero rated in their home jurisdiction and cannot take CENVAT). The petitioners' grievance was effectively denial of abatement; the court found no basis to hold the circular ultra vires in the light of the other conclusions that the Government's notifications effect the withdrawal of the exemption and that, in any event, the petitioners are not recipients of the taxed service for the period in question.

Challenge to paras 4 and 4.1 of Circular No.206/4/2017 fails.

Show cause notices and refund claims under the service tax scheme - Mafatlal refund procedure - Validity of the specific show cause notices issued to petitioners and the procedure for refund claims - HELD THAT: - Applying its findings that the impugned notifications could not be enforced against these petitioners for the period between 22.01.2017 and 30.06.2017, the court quashed the specific show cause notices listed in Table 5. For amounts already paid, the court directed petitioners to file refund claims within 30 days and directed the respondents to decide refund applications in accordance with the Supreme Court's decision in Mafatlal within stipulated timeframes (60/90 days as applicable). This is a directive for administrative disposal consistent with established law.

The show cause notices in Table 5 are quashed; petitioners may file refund claims within 30 days and respondents to dispose of them in accordance with Mafatlal within the prescribed timeline.

Final Conclusion: The challenges to Section 66C(2), the Place of Provision of Services Rules, 2012 and the principal Notifications withdrawing the exemption fail; however, because steamer agents and importers are not the recipients of the overseas sea transport services for the period between 22.01.2017 and 30.06.2017, the impugned demands cannot be sustained against them and the specific show cause notices listed are quashed. Petitioners seeking refunds shall file claims within 30 days and such claims shall be decided in accordance with Mafatlal within the directed period.

Interest on deposited amounts - power under Section 11BB of the Central Excise Act to grant interest on delayed refund - binding effect of a writ court's order on intra parties - delay in pronouncement and effect of lockdown/extension of limitation - monetary threshold for revenue appeals under CBIC circular

Interest on deposited amounts - power under Section 11BB of the Central Excise Act to grant interest on delayed refund - binding effect of a writ court's order on intra parties - Tribunal's authority and correctness in awarding interest on amounts deposited with the Government from date of deposit until transfer to the Registrar General of the High Court. - HELD THAT: - The Court upheld the Tribunal's grant of interest. It held that statutory power to grant interest in respect of delayed refunds exists (as reflected in Section 11BB) and that such power extends to appellate authorities including the Tribunal in the facts of this case. Further, the right to interest was reinforced by earlier orders of the High Court in the writ proceedings, which bound the parties and established entitlement to interest at the quantified rate; the Tribunal limited the award to interest from the date of recovery till the date of transfer to the Registrar General. In view of these statutory and interlocutory foundations and the exceptional procedural history, the Court found no error in the Tribunal's exercise of its power to award interest. [Paras 15]

Tribunal was justified in granting interest on the deposited amounts from the date of deposit up to transfer to the Registrar General, and the award of interest is sustained.

Delay in pronouncement and effect of lockdown/extension of limitation - Whether the Tribunal's delayed pronouncement rendered its order non est and required rehearing. - HELD THAT: - The Court rejected the submission that the delay between reservation and delivery of the Tribunal's judgment rendered the order non est. It observed that the period of reservation fell within the lockdown and that higher courts had extended limitation periods; accordingly the delay was not unreasonable and did not vitiate the order. The Court therefore declined to order a rehearing. [Paras 15]

Delay in pronouncement did not invalidate the Tribunal's order and no rehearing was necessary.

Monetary threshold for revenue appeals under CBIC circular - Maintainability of the revenue's appeal before the High Court in view of the CBIC circular fixing a monetary limit for pursuing revenue appeals. - HELD THAT: - The Court noted that the net interest amount sanctioned and refunded falls below the monetary threshold prescribed by the Board's circular for pursuing revenue appeals to the High Court. In the absence of any exceptional circumstance bringing the case within the circular's exceptions, the appeal was found liable to fail on this score as well. [Paras 16]

Revenue's appeal is non-suited on the ground of the Board's monetary-limit circular and accordingly fails.

Final Conclusion: The appeal is dismissed; there is no substantial question of law requiring interference with the Tribunal's order awarding interest, and the connected application for stay is closed.

Cenvat credit admissibility on invoices addressed to unregistered premises - Interpretation of Rule 4A of the Service Tax Rules, 1994 - Interpretation of Rule 9 of the Cenvat Credit Rules, 2004 - Once Rule 4A and Rule 9 requirements are satisfied, Cenvat credit cannot be denied for unregistered premises - Requirement of ISD/centralized registration for availing or distributing Cenvat credit - Procedural irregularity versus substantive entitlement to credit

Cenvat credit admissibility on invoices addressed to unregistered premises - Interpretation of Rule 4A of the Service Tax Rules, 1994 - Interpretation of Rule 9 of the Cenvat Credit Rules, 2004 - Requirement of ISD/centralized registration for availing or distributing Cenvat credit - Procedural irregularity versus substantive entitlement to credit - Denial of Cenvat credit on the ground that input service invoices were addressed to locations not included in the appellant's centralized registration. - HELD THAT: - The Tribunal examined the requirements of Rule 4A(1) of the Service Tax Rules, 1994 and Rule 9 of the Cenvat Credit Rules, 2004. Rule 4A(1) prescribes particulars required on invoices issued by service providers (including name, address, registration number of the provider, name and address of recipient, description and value of service and service tax payable). Rule 9(1) and its proviso permit allowance of Cenvat credit where the duty-paying document, even if not containing all particulars, contains details of duty/service tax, description of the taxable service, assessable value, registration number of the person issuing the invoice and name and address of the premises, and the proper officer is satisfied that the services have been received and accounted for. Applying these provisions, the Tribunal held that there is no requirement in Rule 4A that the invoice must contain the registration number of the recipient availing Cenvat credit. Further, once the statutory document requirements under Rule 4A and Rule 9 are met and the services qualify as input services deployed for taxable output services, credit cannot be denied merely because invoices were addressed to unregistered branches or different premises. The Tribunal rejected the proposition that registration as an Input Service Distributor or centralized registration is the sole mode to distribute or avail credit, noting authorities to the effect that substantive compliance and deployment of services suffices and that technical/ procedural lapses alone cannot defeat entitlement to credit. On these grounds the impugned order denying credit for lack of registration of certain premises was set aside. [Paras 6, 7, 8, 9]

Impugned order denying Cenvat credit on the ground of invoices being in the name of unregistered locations is unsustainable and is set aside.

Final Conclusion: The Tribunal allowed the appeal, holding that where the requirements of Rule 4A of the Service Tax Rules, 1994 and Rule 9 of the Cenvat Credit Rules, 2004 are satisfied and the services are input services deployed for taxable output, Cenvat credit cannot be denied solely on account of invoices being addressed to premises not included in the appellant's centralized registration; the impugned order is set aside.

Substantial exemption - procedural conditions condonable - export of goods - exemption for transport of goods by road - beneficial provision interpretation - CBEC Circular No. 334/13/2009-TRU

Export of goods - exemption for transport of goods by road - procedural conditions condonable - substantial exemption - Whether service charges for Transport of Goods by Road used in relation to export are eligible for exemption despite non compliance with procedural formalities (EXP 1/EXP 2). - HELD THAT: - The Tribunal found that the rendering of the transport service for export purposes was not in dispute and that the conditions in the exemption notifications which were not complied with related only to procedural formalities for verification. Reliance was placed on CBEC Circular No. 334/13/2009 TRU and judicial authorities holding that technical or procedural conditions in exemption notifications can be condoned and that a beneficial substantive exemption should not be denied on account of such lapses. Given that the substantive requirement - services rendered in relation to export - was satisfied, the Tribunal held that failure to file the prescribed forms amounted to a curable procedural defect and could not defeat the entitlement to exemption.

Entitlement to exemption for Transport of Goods by Road in relation to export upheld; procedural non compliance (EXP 1/EXP 2) held condonable and cannot defeat the substantive exemption.

Substantial exemption - beneficial provision interpretation - Whether the demand of service tax, interest and penalty (including imposition of penalty under Section 78) in respect of the Transport of Goods by Road service should be sustained where exemption applies. - HELD THAT: - Since the Tribunal concluded that the Transport of Goods by Road charges were exempt as they related to export and procedural lapses were condonable, the foundational basis for the confirmed demand, interest and penalty failed. The Tribunal applied the corollary that once the substantive exemption claim is accepted, consequential demands and penalties premised on non payment cannot be sustained.

Demand, interest and penalty in respect of the Transport of Goods by Road service set aside; the appeal allowed.

Final Conclusion: The order of the Commissioner (Appeals) is set aside; the appellant's entitlement to exemption for transport services in relation to export upheld and consequential demand, interest and penalty quashed, and the appeal is allowed.

Voluntarily Compliance Encouragement Scheme (VCES) 2013 - effect of VCES declaration and acceptance - immunity from penalty and interest under VCES - Renting of Immovable Property Services - appropriation of payment - scope of show cause notice after VCES payment

Voluntarily Compliance Encouragement Scheme (VCES) 2013 - effect of VCES declaration and acceptance - immunity from penalty and interest under VCES - scope of show cause notice after VCES payment - Whether proceedings initiated by the show cause notice are liable to be dropped where the assessee has filed a declaration and paid 100% of the tax dues under VCES 2013 and the declaration was not rejected by the designated authority. - HELD THAT: - The adjudicating authority found that the respondent filed a declaration under VCES-2013 and paid 100% of the tax dues; VCES-2 (acknowledgement) was issued and no VCES-3 rejecting the payment was received. The audit/enquiry conditions for eligibility were satisfied as no investigation or audit barred the respondent from opting for VCES as on the relevant date. In these circumstances, the Commissioner accepted the declaration and, in view of the statutory effect of VCES, held that payment under VCES 2013 confers immunity from penalty, interest and other proceedings; consequently the show cause proceedings did not survive and were dropped. The Tribunal found no infirmity in this reasoning and held that acceptance of a valid VCES declaration and payment of 100% tax dues precludes continuation of the SCN proceedings for the declared periods. [Paras 6, 7, 8]

SCN proceedings dropped insofar as tax liabilities were discharged by payment under VCES 2013 and the declaration was accepted.

Appropriation of payment - scope of show cause notice after VCES payment - Whether the Commissioner was obligated to appropriate amounts paid by the assessee under VCES against the demand raised in the show cause notice. - HELD THAT: - The Revenue contended that the Commissioner should have appropriated the amounts paid by the respondent. The Tribunal noted that the respondents themselves had paid amounts exceeding the demand in the SCN and that the payments constituted valid VCES discharges which were not rejected. In terms of the statutory scheme, the assessee is not entitled to refund of amounts paid under VCES; however, appropriation of the total amount paid would have been a formal exercise unnecessary to the adjudication of the SCN and beyond the scope of that notice. Given that 100% tax was paid under VCES and the payment stood accepted, there remained no lesser demand which the Commissioner could confirm. Accordingly, failure to undertake a separate appropriation did not render the dropping of the SCN invalid. [Paras 8]

No obligation on the Commissioner to effect a separate appropriation in the adjudication of the SCN where full VCES payment was made and accepted; omission does not vitiate dropping of the demand.

Final Conclusion: Revenue's appeal dismissed; the adjudicating authority correctly dropped the demand where the assessee's VCES declaration and payment of 100% tax dues were accepted, and there was no legal error in not undertaking a separate appropriation of the amounts paid.

Refund of unutilized Cenvat credit - non-utilizable Cenvat credit on cessation/closure of business - refund on exit from Modvat/Cenvat scheme or surrender of registration - vested right to Cenvat credit - conditions of claim including debit from Cenvat account and prescribed format - Rule 5B of the Cenvat Credit Rules read with Notification 12/2014

Refund of unutilized Cenvat credit - non-utilizable Cenvat credit on cessation/closure of business - refund on exit from Modvat/Cenvat scheme or surrender of registration - vested right to Cenvat credit - Entitlement to refund of the unutilized Cenvat credit reflected in the ST-3 return for October 2015 to March 2016 where the service provider died, the business ceased and registration was surrendered. - HELD THAT: - The Tribunal examined whether the refund claim for the unutilized Cenvat credit could be denied on the ground that the claim did not fall within the categories specified under Rule 5B/Notification relied upon by the lower authorities. It applied established precedent holding that where accumulated Cenvat credit becomes non-utilizable because the assessee has ceased operations or exited the Modvat/Cenvat scheme, there is no bar to granting refund of such credit. The Tribunal referred to and followed the line of authorities upholding refund upon closure or surrender of registration, and treated the right to Cenvat credit as a vested right which accrues to the assessee and cannot be frustrated by closure. The Tribunal distinguished decisions relied upon by the respondent as factually different where credit accumulation arose from changes in law rather than cessation of operations. In the facts of this case the credit balance was accepted to be unutilized and the business had ended due to the death of the proprietor and surrender of registration; applying precedent and the principle of vested right, the Tribunal allowed the appeal and granted consequential relief to the legal heir. [Paras 12, 15]

Appeal allowed; refund of the unutilized Cenvat credit granted with consequential relief to the appellant's legal heir.

Final Conclusion: The Tribunal allowed the appeal and directed grant of refund of the unutilized Cenvat credit reflected for October 2015 to March 2016, holding that cessation of business and surrender of registration entitles the assessee (and consequently the legal heir) to cash refund of non utilizable credit, following established precedents and recognising the vested nature of the credit.

Cenvat credit admissibility - definition of input service - nexus between input service and output service - Rule 14 recovery - Input Service Distributor liability - penalty and interest consequent to disallowance

Cenvat credit admissibility - definition of input service - nexus between input service and output service - Cenvat credit availed on the disputed input services (including Air Travel Services, car hiring, hotel and insurance services) is admissible for the periods under dispute - HELD THAT: - The Tribunal applied the amended definition of 'input service' and earlier precedents to conclude that the disputed services fall within the definition of input service and were used for accomplishing the business purpose connected to manufacture of final products. The Tribunal observed that prior decisions favourable to the appellant covered the same or earlier periods and that denial of credit on the ground advanced by the Department was not sustainable. In consequence, the disallowance of Cenvat credit by the original authority and its confirmation were set aside insofar as they related to these services. [Paras 3]

Disallowance of Cenvat credit on the disputed services is not sustainable and credit is allowable for the periods in dispute; appeal allowed.

Rule 14 recovery - Input Service Distributor liability - penalty and interest consequent to disallowance - Rule 14 (provision for recovery of wrongly availed Cenvat credit) cannot be invoked against an Input Service Distributor and consequent demands, interest and penalties premised on such invocation are unsustainable - HELD THAT: - The Tribunal reiterated that Rule 14 applies to the person who avails or utilises Cenvat credit (manufacturer or provider of output service) and not to an Input Service Distributor that merely distributes credit. Since the corporate office of the appellant was registered as an Input Service Distributor and merely distributed credit to manufacturing units, proceedings invoking Rule 14 for recovery from the appellant were inappropriate. Consequently, demands, interest and penalties based on such recovery proceedings could not be sustained. The Tribunal further noted that the present show cause notices were sequel to earlier proceedings which the Tribunal had already allowed for earlier periods, and therefore the subsequent proceedings had to be considered in the light of that order and allowed. [Paras 3]

Proceedings and demands under Rule 14 against the appellant as Input Service Distributor are not maintainable; associated interest and penalties cannot be sustained; appeal allowed.

Final Conclusion: The appeal is allowed: the Tribunal set aside the disallowance and recovery proceedings in respect of the disputed input services and held that Rule 14 could not be invoked against the appellant as an Input Service Distributor, rendering the consequential interest and penalties unsustainable.

Place of removal - transaction value - exclusion of cost of transportation under Rule 5 of Central Excise Valuation Rules, 2000 - factory gate sale - valuation under Section 4 of the Central Excise Act - insurance and freight and effect on ownership/point of sale - invoice under Rule 52A / Board Circular on direct dispatch to consignee

Place of removal - transaction value - exclusion of cost of transportation under Rule 5 of Central Excise Valuation Rules, 2000 - factory gate sale - Whether freight and insurance charged separately for carriage from the factory to project site are includible in the assessable/transaction value where invoices show direct dispatch from the factory to the ultimate customer and the price is ex-works. - HELD THAT: - On the materials (sample invoices) the Tribunal found that goods were dispatched directly from the appellant's factory to the ultimate customer and that freight and insurance were shown as borne/paid by the customer and charged separately. The Board Circular (Rule 52A) and the authorities relied upon establish that where goods are invoiced and dispatched from the factory gate to the consignee, and the buyer bears freight/insurance charged separately, the transaction value for excise is the invoice value at the place of removal and the actual cost of transportation from the place of removal to place of delivery is excluded under Rule 5. The Tribunal examined precedent (including Ispat Industries and decisions applying Section 4 and Rules 5/7) and held that buyer's premises cannot be equated to the place of removal merely by reason of delivery or arrangement of transit insurance; the determinative question is when and where property/ownership passes. On the facts before it there was no evidence that the goods were first removed to the EPD (Chennai) or that sale was at the buyer's premises; accordingly the freight element was not part of the transaction value liable to duty. Applying these legal principles to the invoices and documentary record, the Tribunal concluded that the demand for duty, penalty and interest based on including freight in assessable value was without merit and set aside the impugned order. [Paras 4, 5]

Freight and insurance charged separately for carriage from the factory to the project site are excluded from assessable value; place of removal was the factory gate and the demand based on treating EPD Chennai as place of removal was set aside.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned order-in-appeal and held that on the materials the place of removal was the factory gate for the period in question and transportation charges to the project site are not includible in the transaction/assessable value.

Allowing further time for filing C forms - acceptance of Form-C at appellate stage - proviso to Section 84 vis-a -vis proviso to Rule 12(7) - power of assessing and appellate authorities to reopen assessment / rectification / implied ancillary powers - condonation of delay

Acceptance of Form-C at appellate stage - allowing further time for filing C forms - Authorities erred in refusing to accept Form-C declaration filed after completion of assessment but produced at the appellate stage. - HELD THAT: - The Court held that the consistent refusal by the assessing, appellate, revisional and reviewing authorities to accept the Form-C produced at the appellate stage was contrary to law. The judgment relied on the reasoning in the Full Bench decision of the Madras High Court which construed the proviso to the statutory provision (Section 84) as empowering the prescribed authority to allow further time on sufficient cause and distinguished it from the more restrictive proviso in the rule (Rule 12(7)). The Court further noted that the Supreme Court in State of A.P. v. M/s. Hyderabad Asbestos Cement Production Ltd. recognised the appellate authority's power to receive Form C even at the appellate stage. Applying these principles, the Court concluded that Form-C produced at the appellate stage ought not to have been summarily rejected and the authorities below were wrong in their approach. [Paras 2, 3]

Orders refusing to accept Form-C at the appellate stage set aside; the authorities' stand held contrary to law.

Power of assessing and appellate authorities to reopen assessment / rectification / implied ancillary powers - When an authority is satisfied that sufficient cause exists to allow further time for filing C forms, appropriate corrective action (including reopening or rectification) must follow to give effect to that power. - HELD THAT: - The Court endorsed the Full Bench's reasoning that where the assessing authority (or appellate authority exercising like power) is satisfied about sufficient cause, it must follow up with necessary steps-such as reopening the assessment or rectification-by invoking statutory or ancillary powers to implement the allowance of further time. The absence of an express procedural provision for reopening does not preclude implementation when the substantive power to allow further time exists and demands corrective action. [Paras 2]

Implementation of the power to allow further time cannot be withheld for lack of express procedural provision; ancillary powers suffice to effect corrective action.

Remand for verification of Form-C - Matter remanded to the assessing officer to accept the Form-C declaration, verify its genuineness and, if genuine, grant concessional rate of tax. - HELD THAT: - Having found the authorities' refusal contrary to law, the Court set aside the impugned orders and remitted the matter to the assessing officer with a direction to accept the Form-C declaration filed by the appellant, verify the genuineness of the declaration and, upon satisfaction, extend the concessional rate. The Court specified a timeline for this exercise to be completed following filing of the Form-C by the appellant. [Paras 4]

Writ allowed, impugned orders set aside and matter remanded to assessing officer to verify and act on the Form-C within 30 days of its filing.

Condonation of delay - Delay in filing the intra-Court appeal of 202 days was condoned. - HELD THAT: - The Court examined the affidavit supporting the application for condonation of delay and was satisfied that sufficient cause had been shown for the delay. Accordingly, the application for condonation was allowed and the delay in preferring the appeal was condoned. [Paras 1]

Application for condonation of delay allowed; delay of 202 days condoned.

Final Conclusion: Appeal allowed; impugned orders set aside. Delay in filing the appeal condoned; matter remanded to the assessing officer to accept and verify the Form-C declaration and, if genuine, grant concessional rate of tax within 30 days of filing. No order as to costs.

Refund of tax determined on assessment - Statutory time limit for refund applications and power to condone delay - Condonation of delay in refund application - Duty of the prescribed authority to consider sufficiency of explanation - Limits of revisional jurisdiction where primary fact finding is vested in the assessing authority

Refund of tax determined on assessment - Statutory time limit for refund applications and power to condone delay - Whether the refund quantified by the assessment order could be denied solely on the ground of delay without considering the explanations furnished for condonation - HELD THAT: - The Court noted that the assessment order had already quantified an amount as refundable to the petitioner for the assessment year 2012-13. The statute and rules prescribe a time limit for filing refund applications but also empower the prescribed authority to admit applications beyond the period if satisfied that the dealer had sufficient cause. The Superintendent of Taxes' order dated 29.08.2019 rejected the refund application as time barred and, on its face, did not record any consideration of the explanations furnished by the petitioner seeking condonation of delay. The revisional authority did examine and reject the explanations, but the Court held that the primary statutory duty to consider whether sufficient cause existed lies with the assessing/prescribed authority at the first instance. Reliance on earlier authorities was noted: M/s. Shiv Shankar Dal Mills and decisions of this Court (including C. Ex. Appeal No. 8/2016 and W.P.(C) No. 6314/2017) where it was held that refunds held payable should not be withheld by mere invocation of limitation without proper consideration; and N. Balakrishnan on the liberal construction of "sufficient cause". Applying these principles, the Court concluded that the Superintendent's failure to notice or record any consideration of the grounds rendered the rejection unsustainable, and the matter required fresh adjudication by the prescribed authority in the light of the explanations and the entitlement already recorded in the assessment order. [Paras 13, 14, 15, 18, 19]

The Superintendent of Taxes' order rejecting the refund as time barred is set aside and the matter is remanded to the Superintendent for fresh decision on the refund claim and condonation of delay after considering the explanations.

Limits of revisional jurisdiction where primary fact finding is vested in the assessing authority - Condonation of delay in refund application - Whether the revisional authority could sustain rejection of the refund application where the assessing authority did not record consideration of the explanations for delay - HELD THAT: - The Court observed that the revisional authority proceeded to reject the revision by holding the explanations to be not bona fide or not sufficient. However, the statutory scheme vests the initial power to admit a belated refund application (upon satisfaction of sufficient cause) in the prescribed/assessing authority. Where the assessing authority's order contains no discernible consideration of the grounds for delay, the revisional authority's enquiry cannot substitute for a proper primary assessment of those grounds. Consequently, the revisional order dated 25.02.2021 was interfered with and set aside because the prerequisite consideration by the assessing authority had not occurred. [Paras 14, 15, 21]

The Additional Commissioner of Taxes' revisional order is quashed insofar as it upholds the rejection without the assessing authority having first considered the explanations; the revisional order is set aside.

Remand for fresh decision - Remedial direction following quashing of departmental orders - HELD THAT: - In view of the failure of the assessing authority to record consideration of the explanations and the consequent illegality of the impugned order, the Court ordered that the matter be remitted to the Superintendent of Taxes, Guwahati Unit A, to re decide the refund application and the question of condonation of delay. The Court required the Superintendent to re decide the matter within four weeks from receipt of the certified copy of the order, bearing in mind the assessment order which already quantified the refundable amount and applying the legal principles discussed. [Paras 20, 21]

Matter remitted to the Superintendent of Taxes to re decide the refund application and the question of condonation within four weeks; impugned orders set aside.

Final Conclusion: The writ petition is allowed: the order dated 29.08.2019 of the Superintendent of Taxes and the revisional order dated 25.02.2021 are set aside; the refund application and the question of condonation of delay are remitted to the Superintendent of Taxes, Guwahati Unit A, for fresh decision within four weeks of receipt of certified copy of this order.

Exemption for Direct Export Sales under Section 5(1) of the Central Sales Tax Act, 1956 - Exemption for Sales in the Course of Export under Section 5(3) of the Central Sales Tax Act, 1956 - Acceptance of Form H after assessment - Proviso to Rule 12(7) read with Rule 12(10) of the CST (Registration & Turnover) Rules, 1957 - COVID-19 pandemic as justification for delay in filing evidentiary forms - Remand for fresh consideration and opportunity of hearing

Acceptance of Form H after assessment - Proviso to Rule 12(7) read with Rule 12(10) of the CST (Registration & Turnover) Rules, 1957 - COVID-19 pandemic as justification for delay in filing evidentiary forms - Whether the assessing/revising authority was justified in refusing to accept Forms 'H' and other documentary evidence filed after the original assessment on the ground that they were produced post-assessment under Rule 12(10). - HELD THAT: - The Court found on the material that the petitioner did not file Forms 'H' before the original assessment of 03.11.2020 because of restrictions caused by the COVID-19 pandemic and that this fact is judicially noticeable. The Court treated earlier decisions of this Court and other High Courts as applicable, which have directed authorities to consider post-assessment production of Forms 'H' in appropriate circumstances and to reopen assessment for that purpose. Having considered the competing contentions, the Court concluded that the mere fact of production after assessment did not preclude consideration where a plausible justification (here the pandemic) existed and where the forms prima facie established the character of the sales. Consequently the matter was remitted to the revising/assessing authority to consider the Forms 'H' and other evidence, afford the petitioner an opportunity of hearing, and pass an appropriate order on merits after verification. [Paras 9, 10, 11, 14, 15]

The revising authority's refusal to accept Forms 'H' solely because they were filed after assessment was not allowed to stand; the matter is remitted for fresh consideration of the Forms 'H' and other material with an opportunity of hearing and decision on merits.

Exemption for Direct Export Sales under Section 5(1) of the Central Sales Tax Act, 1956 - Exemption for Sales in the Course of Export under Section 5(3) of the Central Sales Tax Act, 1956 - Remand for fresh consideration and opportunity of hearing - Whether the Revised Assessment Order dated 09.03.2023 refusing to grant exemption under Sections 5(1) and 5(3) by not accepting Forms 'H' should be set aside and the matter reconsidered on merits. - HELD THAT: - The Court set aside the portion of the revising order that refused to accept Forms 'H' and other material produced in support of claimed exemptions under Sections 5(1) and 5(3), and directed that after considering the submitted Forms and evidence and after affording hearing to both parties, the authority shall pass an appropriate order on merits expeditiously. The Court relied on precedent where authorities were directed to reopen assessment and examine post-assessment Forms 'C'/'H' where justified. The remand is for substantive reconsideration and verification of genuineness and entitlement to exemption, not merely for mechanical acceptance or rejection. [Paras 15]

The Revised Assessment Order dated 09.03.2023 is set aside to the extent it refused to accept Forms 'H' and other relevant material; the matter is remitted for fresh adjudication on the merits after opportunity of hearing.

Final Conclusion: Writ petition allowed; the revising authority's refusal to accept Forms 'H' and other evidentiary material filed after the original assessment is set aside and the matter remitted to the authority to consider those materials, afford hearing to the parties and pass a fresh, reasoned order on merits expeditiously. No costs.

Taxable event - giving of connection to the subscriber (including activation of set top box) - Proprietor as taxable person (ultimate management and responsibility) - Principal-agent relationship between MSO and LCO (LCO acting on behalf of MSO) - Entertainment Provider excludes Cable Operator - Effect of the 101st Constitutional Amendment on Entry 62, List II - taxation of entertainments reserved to local self government institutions - Scope of transition provision under Section 19 of the 101st Amendment - limited to laws relating to tax on goods or services - Repeal and saving by State GST enactment cannot revive entertainment tax not saved by Section 19 - Ambiguity in taxing statute construed in favour of taxpayer

Taxable event - giving of connection to the subscriber (including activation of set top box) - Proprietor as taxable person (ultimate management and responsibility) - Principal-agent relationship between MSO and LCO (LCO acting on behalf of MSO) - Entertainment Provider excludes Cable Operator - The petitioner MSO is the 'Proprietor' and therefore the taxable person under the Bihar Entertainment Tax Act, 1948 for the periods in dispute. - HELD THAT: - The Court examined the definitions in the Act and the contractual arrangements between the MSO and the LCO and concluded that the statutory concept of 'Proprietor' corresponds to the MSO while 'Cable Operator' corresponds to the LCO. The charging provision makes the taxable event the giving of a connection to the subscriber, which in the modern system includes supply and activation of a set top box. The agreement and ancillary documents (activation invoices, monthly subscription invoices and revenue sharing clauses) demonstrate that set top boxes are supplied and activated at the instance of the MSO through the LCO, and the LCO functions as intermediary on behalf of the MSO. Clauses restricting the LCO from independent retransmission and the MSO's pervasive control over head end, CAS and subscriber management underscore the proximate nexus between the MSO and the act of offering entertainment. The Court applied the reasoning in Purvi Communication and related authorities to hold that, as a matter of statutory construction and fact, the MSO is the person liable to tax under the Bihar enactment. [Paras 24, 25, 29, 30, 31]

MSO is the proprietor and taxable person under the Bihar Entertainment Tax Act, 1948 for the disputed periods.

Effect of the 101st Constitutional Amendment on Entry 62, List II - taxation of entertainments reserved to local self government institutions - Scope of transition provision under Section 19 of the 101st Amendment - limited to laws relating to tax on goods or services - Repeal and saving by State GST enactment cannot revive entertainment tax not saved by Section 19 - The levy and collection under the Bihar Entertainment Tax Act, 1948 cannot be sustained after the 101st Constitutional Amendment and the impugned assessment is set aside on that ground; further, the transitional provision in Section 19 does not save entertainment tax because it is limited to laws relating to tax on goods or services. - HELD THAT: - The Court analysed the effect of the 101st Amendment and the redrafted Entry 62 to List II and held that the amendment retained taxes on entertainments and amusements only insofar as they are levied and collected by Panchayats, Municipalities, Regional Councils or District Councils. Section 19's non obstante saving applies only to State laws relating to tax on goods or services (or both) and therefore does not preserve pre amendment State enactments imposing taxes other than on goods or services. Consequently, the Bihar Entertainment Tax Act, 1948, which provided for levy and collection by State commercial tax authorities, could not survive the amendment as a State enactment exercisable in the pre amendment form. The Court observed that the State could have enacted a new law consistent with the amended Entry 62 and included repeal and saving provisions within the one year window under Section 19, but no such enactment or applicable saving for entertainment tax existed. Although the Court found the MSO to be the taxable person under the Act, it concluded that post 101st Amendment the authorities are denuded of power to levy and collect under the unamended Act, and the impugned assessment must therefore be set aside. [Paras 36, 37, 39, 40, 41]

Impugned assessment orders set aside because the Bihar Act's levy and collection by State authorities do not survive the 101st Amendment and Section 19 does not save entertainment tax; accordingly the writ petition is allowed on this ground.

Final Conclusion: Although the MSO was held to be the 'Proprietor' and thus the taxable person under the Bihar Entertainment Tax Act, 1948 for the periods in dispute, the impugned assessment orders are set aside and the writ petition is allowed on the constitutional ground that the 101st Amendment and the amended Entry 62 to List II denuded State authorities of the power to levy and collect the entertainment tax as provided in the unamended Act and the transitional provision in Section 19 does not save such a levy.

Section 11(6) of the Arbitration and Conciliation Act, 1996 - Section 12(5) of the Arbitration and Conciliation Act, 1996 - Seventh Schedule to the Arbitration and Conciliation Act, 1996 - ineligibility of arbitrator on conflict of interest - party autonomy versus independence and impartiality of arbitrator - Article 299 of the Constitution - arbitration clause empowering State to appoint a serving employee as sole arbitrator - Perkins Eastman precedent on appointment and ineligibility

Article 299 of the Constitution - party autonomy versus independence and impartiality of arbitrator - A contract expressed to be made in the name of the President of India does not exclude the application of statutory prescriptions concerning conflict of interest and ineligibility of arbitrators under the Arbitration Act. - HELD THAT: - The Court examined the scope and purpose of Article 299, noting it prescribes formalities for contracts made in exercise of executive power but does not confer substantive immunity from general statutory law. Relying on precedent and constitutional purpose, the Court held that Article 299 only prescribes form and execution and cannot be invoked to render inapplicable statutory protections against conflict of interest embodied in the Arbitration Act. Consequently, the fact that the contract is expressed to be made by the President of India does not exempt the Union from compliance with Section 12(5) and the Seventh Schedule. [Paras 10, 11, 12, 13, 14]

Article 299 does not create immunity from Section 12(5) of the Arbitration and Conciliation Act, 1996; the submission of immunity was rejected.

Section 12(5) of the Arbitration and Conciliation Act, 1996 - Seventh Schedule to the Arbitration and Conciliation Act, 1996 - ineligibility of arbitrator on conflict of interest - An arbitration clause empowering the Secretary, Ministry of Home Affairs to have a serving officer of the Ministry of Law appointed as sole arbitrator is in conflict with Section 12(5) read with Paragraph 1 of the Seventh Schedule and is unenforceable. - HELD THAT: - The Court reproduced Section 12(5) and Paragraph 1 of the Seventh Schedule and explained that the amended statutory scheme renders persons who are employees of a party ineligible to be appointed as arbitrators notwithstanding any prior agreement. The clause in the tender which permits the appointing authority (a Secretary of the Ministry and therefore an employee of the State) to nominate a serving officer of the Ministry of Law (also an employee of the State) to act as sole arbitrator falls within the ineligible category. Given the statutory mandate operates 'notwithstanding any prior agreement', the Court concluded the arbitration clause insofar as it authorises such an appointment cannot be given effect to. [Paras 9, 15, 17, 18, 19]

The clause empowering appointment of a serving Government officer as sole arbitrator is contrary to Section 12(5) and Paragraph 1 of the Seventh Schedule and cannot be enforced.

Perkins Eastman precedent on appointment and ineligibility - arbitration clause empowering State to appoint a serving employee as sole arbitrator - The precedents relied upon by the respondent (including Central Organisation for Railway Electrification and related decisions) do not render the present arbitration clause valid; those authorities are distinguishable where empanelment or appointment related to retired persons or multi-member tribunals. - HELD THAT: - The Court analysed the respondent's reliance on earlier decisions permitting appointment of retired employees or multi-member tribunals and distinguished them from the present case. Prior authorities upholding appointment or empanelling of retired officers or panels for technical expertise do not cover a clause that permits a serving employee of the State to be appointed as sole arbitrator by an appointing authority who is also a serving State officer. The Court observed Perkins Eastman and TRF principles prohibit a person with an interest in the dispute from appointing a sole arbitrator and that the Railway/Voestalpine line of cases are materially different in composition and purpose; consequently those precedents do not validate the clause here. [Paras 6, 7, 20, 21]

Central Organisation for Railway Electrification and similar decisions are distinguishable and do not justify upholding the challenged clause permitting appointment of a serving Government officer as sole arbitrator.

Section 11(6) of the Arbitration and Conciliation Act, 1996 - ineligibility of arbitrator on conflict of interest - Relief under Section 11(6) is appropriate and an independent arbitrator is to be appointed to adjudicate disputes under the tender conditions. - HELD THAT: - Having found the arbitration clause's provision for appointment of a serving Government officer as sole arbitrator to be contrary to Section 12(5) and the Seventh Schedule, the Court exercised its power under Section 11(6) to appoint an independent arbitrator. The appointment is subject to mandatory disclosures under the amended Section 12 to ensure independence and impartiality. The Court selected a former judge of this Court to act as Sole Arbitrator to resolve the disputes arising under and in connection with the Conditions of Tender. [Paras 19, 22]

Application under Section 11(6) allowed; Ms. Justice Indu Malhotra (former judge) appointed as Sole Arbitrator subject to statutory disclosures.

Final Conclusion: The Court held that the arbitration clause empowering the Secretary, Ministry of Home Affairs to appoint a serving officer of the Ministry of Law as sole arbitrator is contrary to Section 12(5) read with Paragraph 1 of the Seventh Schedule and cannot be given effect; Article 299 does not furnish immunity from this statutory prescription. The application under Section 11(6) is allowed and Ms. Justice Indu Malhotra (former judge) is appointed as Sole Arbitrator, subject to mandatory disclosures under the amended Section 12.