TaxTMI Updates e-Newsletter
May 26,2023

Show-cause notice - cancellation of GST registration - principles of natural justice - opportunity to be heard - non-compliance with Rule 25 of the Central Goods and Services Tax Rules, 2017 - remand for fresh consideration - speaking order

Show-cause notice - cancellation of GST registration - principles of natural justice - opportunity to be heard - Validity of the show-cause notice dated 25.01.2023 and the order dated 14.02.2023 cancelling the petitioner's GST registration. - HELD THAT: - The show-cause notice did not disclose any discernible reason for proposing cancellation and therefore failed to apprise the petitioner of the case he was required to meet. The purpose of a show-cause notice is to enable the noticee to respond effectively and to permit the authority to take an informed decision. No adverse order could properly be passed without informing the petitioner of the reasons and affording an opportunity of hearing. The impugned order proceeded on the basis that the taxpayer was non-existent at the principal place of business but was issued and passed without adequate reasons and without compliance with the requirements of natural justice. Consequently the impugned order is void for want of adequate notice and breach of the principles of natural justice. [Paras 9, 10, 11]

The show-cause notice and the cancellation order cannot be sustained and are set aside as having been passed in violation of the principles of natural justice.

Remand for fresh consideration - non-compliance with Rule 25 of the Central Goods and Services Tax Rules, 2017 - speaking order - opportunity to be heard - Whether the matter should be remitted for fresh consideration and the directions required for such reconsideration. - HELD THAT: - The court remanded the matter to the concerned officer because the respondents had proceeded on an assumption of non-existence without affording the petitioner a meaningful opportunity to be heard and without evident compliance with the relevant Rules (including the contention as to non-compliance with Rule 25). The petitioner was permitted to file a response with supporting documents and to appear before the officer at a specified date and time. The officer was directed to consider the petitioner's objections, including the procedural objection regarding Rule 25, and to pass a reasoned speaking order within a stipulated short period. [Paras 11, 13, 14]

Matter remitted to the concerned officer for fresh consideration after giving the petitioner an opportunity to be heard; officer to decide objections (including alleged Rule 25 non-compliance) and pass a speaking order within the directed time.

Final Conclusion: The petition succeeds: the show-cause notice and cancellation order are set aside for breach of natural justice; the matter is remanded for fresh consideration after affording the petitioner an opportunity to be heard and for the concerned officer to pass a speaking order within the directed timeframe.

Penalty under Section 129(3) of the Central Goods and Services Tax Act - Show cause notice under Section 129(1)(a) - Principles of natural justice - Extension of e-way bill validity under Rule 138(10) - third proviso - Remand for fresh consideration after opportunity of hearing

Show cause notice under Section 129(1)(a) - Penalty under Section 129(3) of the Central Goods and Services Tax Act - Principles of natural justice - Validity of the penalty order where the show cause notice and the order determining penalty were issued simultaneously without affording an opportunity of hearing. - HELD THAT: - The Court found on the material that the notice under Section 129(1)(a) and the order imposing penalty under Section 129(3) were recorded on the same date by the same authority, with no interim opportunity of hearing or any record of the assessee's appearance prior to passing the penalty order. Such simultaneity rendered the notice a formalism and deprived the petitioner of the statutorily mandated opportunity to respond. The requirement of hearing inherent in Section 129 and the broader rules of natural justice therefore stood violated, making the determination of penalty unsustainable. [Paras 8, 9, 12]

The penalty order was quashed as having been passed in contravention of the statutory requirement to afford an opportunity of hearing.

Remand for fresh consideration after opportunity of hearing - Extension of e-way bill validity under Rule 138(10) - third proviso - Extent of further adjudication required and the remedial direction following quashing of the penalty order. - HELD THAT: - Having quashed the impugned penalty, the Court remitted the matter to the Joint Commissioner of State Tax, Magadh Division, Gaya, for fresh consideration. The remand is for the authority to consider the petitioner's response to the show cause notice after affording due opportunity of hearing and in accordance with the statutory provisions; the Court noted the State's contention that the e-way bill had expired and that extension under the third proviso to Rule 138(10) was not available absent an application within the prescribed timeframe, but did not decide the merits on that factual/technical point, leaving it open for the authority to determine on reconsideration. [Paras 10, 11, 12]

Matter remanded to the Joint Commissioner for fresh consideration after hearing the petitioner and on merits in accordance with law.

Refund of amount deposited in relation to appeal - Entitlement and direction for refund of the portion deposited by the petitioner for maintaining the appeal. - HELD THAT: - The Court recorded that it was not in dispute that the petitioner was entitled to refund of 25 percent of the amount earlier deposited for maintaining his appeal. In consequence of the quashing and remand, the Court directed that the said refund be made to the petitioner within one week from his appearance before the proper officer on the specified date. [Paras 13]

Directed refund of 25 percent of the amount deposited for maintaining the appeal to the petitioner within the timeframe ordered.

Final Conclusion: Writ petition allowed: the penalty order is quashed for non-compliance with the requirement of hearing; the matter is remanded to the Joint Commissioner, Magadh Division, Gaya, for fresh adjudication after affording the petitioner an opportunity of hearing; and the petitioner is directed to be refunded 25% of the amount deposited for maintaining the appeal within the period specified by the Court.

Cancellation of GST registration - appeal against cancellation under Section 107 of the West Bengal Goods and Services Tax Act, 2017 - rejection of appeal on ground of delay - power of Appellate Authority to extend/condone delay - liberty to apply for extension of time and consideration in accordance with law

Rejection of appeal on ground of delay - power of Appellate Authority to extend/condone delay - liberty to apply for extension of time and consideration in accordance with law - Impugned order rejecting the appeal as barred by delay was set aside and petitioners were granted liberty to seek condonation of delay from the Appellate Authority. - HELD THAT: - The Appellate Authority, having statutory power to extend the time for filing an appeal, ought to be given an opportunity to consider an application for extension. The appeal against the cancellation order was filed without any prayer for extension; therefore the Appellate Authority's order rejecting the appeal on the ground of delay was set aside to enable the petitioners, for ends of justice, to apply for extension. The petitioners must apply for condonation within one week and, if so applied, the Appellate Authority shall consider the application in accordance with law. The High Court expressly declined to adjudicate the merits of the petitioners' claimed reasons for delay and recorded that those merits remain unexamined. [Paras 7, 8, 9, 10, 11]

Order dated August 30, 2022 rejecting the appeal for delay is set aside; petitioners granted liberty to apply for extension within one week and Appellate Authority to consider such application in accordance with law; merits not decided.

Final Conclusion: Writ petition disposed by setting aside the Appellate Authority's order rejecting the appeal for delay and by granting petitioners liberty to apply for condonation of delay within one week; consideration of such application left to the Appellate Authority in accordance with law; no decision on merits.

Cancellation of anticipatory bail - Conditions of bail - Willful concealment - Prior intimation and movement restrictions - Influencing witnesses and destruction of evidence - Cooperation with investigation - Restitution/reversal as condition for bail - Test for cancellation of bail

Conditions of bail - Willful concealment - Cancellation of anticipatory bail - Deposit of passport as condition of bail and alleged concealment of passport/renewal - HELD THAT: - The court found that the accused's passport had expired in 1998 and he had not renewed or been shown to possess any new passport. The Investigating Officer (IO) had no information of any renewal or foreign travel using such a passport. On the material before the court there was no evidence of willful concealment by the accused or of use of any passport in contravention of the bail condition. The court noted that further investigation by the IO remained open but, on the present record, the condition cannot be said to have been violated. [Paras 5, 6, 7, 8]

No violation of the passport-deposit condition established; therefore this ground does not justify cancellation of bail.

Prior intimation and movement restrictions - Conditions of bail - Failure to give prior intimation and share Google pin on leaving the NCR - HELD THAT: - The IO stated that the accused left for Raxaul, Bihar on 16.02.2023 without prior intimation or sharing the Google pin. The defence did not dispute that this occasion occurred but explained it as a single instance due to family medical urgency. The court observed that the accused had otherwise complied with summonses and attended investigations on multiple dates. Given that this was a single breach and not part of repeated non-compliance, the court considered a warning sufficient rather than cancellation of bail. [Paras 9, 10]

Single breach of the prior-intimation condition established but insufficient to justify cancellation; warning issued.

Influencing witnesses and destruction of evidence - Conditions of bail - Allegation that the accused influenced witnesses or tempered with evidence after grant of bail - HELD THAT: - The IO alleged that co-accused Manish had been attempted to be influenced by the accused, but particulars were not provided. Manish is a co-accused and not a prosecution witness; no complaint against him has been filed to date. Admissions by the accused regarding destruction/formatting/sale of his mobile phone pertain to acts that occurred prior to grant of bail. The IO did not identify any instance of influencing witnesses or tampering with evidence occurring after the bail order. On this basis the court held that no post-bail contravention of the non-interference condition was made out. [Paras 11, 12, 13, 14, 15]

No established post-bail influencing of witnesses or destruction of evidence; this ground does not support cancellation.

Cooperation with investigation - Conditions of bail - Alleged failure to cooperate with investigation and to appear when summoned - HELD THAT: - The defence demonstrated that the accused attended investigation on multiple dates (07.02.2023-09.02.2023, 20.02.2023-22.02.2023, and 27.02.2023-02.03.2023) and that his statements were recorded on several occasions. The IO admitted that the accused had joined the investigation on the cited dates. The court held that the allegation of non-cooperation was without basis on the record before it. [Paras 16, 17, 18]

Accused cooperated with the investigation; no breach found warranting cancellation.

Restitution/reversal as condition for bail - Conditions of bail - Compliance with the bail condition to refund/reverse amounts to the department - HELD THAT: - The defence produced a record showing an entry dated 02.02.2023 reversing Input Tax Credit against the firm's GST registration, which the defence contends satisfies the bail condition to reverse the refund. The IO disputed the correctness of the department's claim but did not deny the existence of the reversal entry. On the material before the court, and absent a successful dispute of the produced record, the court held that the condition was not shown to have been violated. The court observed that the department remains free to investigate further if it disputes the genuineness or effect of the entry. [Paras 19, 20, 21, 22]

No established breach of the restitution/reversal condition on the record; this ground does not justify cancellation.

Test for cancellation of bail - Cancellation of anticipatory bail - Whether supervening circumstances or cogent material justify cancellation of the anticipatory bail - HELD THAT: - Applying the established principle that cancellation of already granted bail requires cogent and overwhelming circumstances such as interference with administration of justice, evasion, or abuse of bail, the court examined each alleged contravention. Except for a solitary breach of the prior-intimation condition, none of the alleged violations were substantiated on the record as post-bail misconduct. The solitary breach, viewed in context of overall attendance and cooperation, did not meet the threshold for cancellation. Therefore the application to cancel bail failed. [Paras 23, 24]

No supervening circumstances shown to warrant cancellation; application dismissed.

Final Conclusion: The application by the DGGI for cancellation of the anticipatory bail is dismissed for lack of cogent grounds: passport non-deposit not shown to be concealment, a single instance of failing to give prior intimation attracts only a warning, allegations of influencing witnesses and non-cooperation are not established, and the restitution condition is shown on the record to have been complied with or remains open for departmental verification.

Assessment of trust - Deduction u/s 11 - Capitation fee and its effect on charitable status - taxation of trust's income at the maximum marginal rate under Section 164(2) - ITAT held that receipt of fee in the nature of capitation fee by the Appellant Trust in excess of the permissible fee would rendered the Appellant Trust ineligible for deduction under Section 11 - whether whole of the income of the Appellant Trust was liable to be taxed at the maximum marginal rate contrary to Section 164(2)? -

High Court [2023 (5) TMI 968 - BOMBAY HIGH COURT] admitted the appeal under Section 260A on two substantial questions of law-(i) whether excess receipts characterised as capitation fee disqualify the trust from deduction under Section 11, and (ii) whether the trust's income is chargeable at the maximum marginal rate contrary to Section 164(2)-for determination in the Court (Registry directed to obtain Tribunal papers); the application for interim relief was rejected

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

At the request of the learned counsel for the petitioner, we grant time to the petitioner for payment of arrears by way of eight equal monthly installments, beginning from 01.05.2023 till 01.12.2023.

TP Adjustment - HELD THAT:- By passing the impugned judgment and order, the High Court has relied upon its earlier decision in the case of Principal Commissioner of Income Tax and Another vs. M/s Softbrands India Pvt. Ltd. [2018 (6) TMI 1327 - KARNATAKA HIGH COURT]

As required to be noted that the decision of the Karnataka High Court in the case of Softbrands India Pvt. Ltd., (supra) fell for consideration before this Court in the recent decision of this Court in the case of SAP Labs India Private Limited [2023 (4) TMI 859 - SUPREME COURT] - Therefore, the matter is now required to be remitted back to the High Court to decide the Appeal afresh in accordance with law and on its own merits and in light of the observations made by this Court in the case of Sap Labs India Private Limited (supra).

The impugned judgment and order passed by the High Court insofar as it relates to transfer pricing is hereby quashed and set aside. The matter is remanded back to the High Court to consider the issues/questions with respect to transfer pricing afresh in accordance with law and in light of the observations made by this Court in Sap Labs India Private Limited (supra)

Revision u/s 263 - as per HC [2019 (10) TMI 927 - BOMBAY HIGH COURT] basis to invoke section 263 factually did not exist as there was due enquiry by the AO during the assessment proceedings leading to the assessment order the issues resolved by the High Court are pure questions of fact

HELD THAT:- The issues resolved by the High Court are pure questions of fact and in the absence of any question of law being involved, no case to interfere with the impugned order passed by the High Court of Judicature at Bombay, is made out.

Special Leave Petition dismissed.

Maintainability of writ petition in presence of alternative statutory remedy - exercise of discretionary judicial restraint under Article 226 - tests for refusal of writ when alternative remedy exists (Whirlpool/Godrej Sara Lee criteria) - scope of appeal under Section 246A - requirement to file return despite claim of exemption under Section 10(26)

Maintainability of writ petition in presence of alternative statutory remedy - exercise of discretionary judicial restraint under Article 226 - tests for refusal of writ when alternative remedy exists (Whirlpool/Godrej Sara Lee criteria) - scope of appeal under Section 246A - Whether the High Court should entertain the writ petition or require the petitioner to pursue the statutory appellate remedy. - HELD THAT: - The Court applied the established tests for exercising restraint where an alternative remedy exists, as summarised from Whirlpool and reiterated in Godrej Sara Lee, noting the narrow exceptions where a writ petition may be entertained (enforcement of fundamental rights, breach of natural justice, proceedings wholly without jurisdiction, or challenge to vires). The petition did not present a palpable breach of natural justice, nor an absence of jurisdiction, nor a viable vires challenge. Notices and proceedings were issued under the relevant provisions and, on the material before the Court, the defects relied upon by the petitioner were arguable factual or legal contentions suitable for the statutory appellate forum. The Court also took into account the petitioner's conduct in repeatedly ignoring notices and failing to furnish material, observing that such conduct did not warrant exercise of extraordinary discretion to retain the matter. The Court further held that Section 246A contains no express limitation confining the appellate authority from examining the core issues raised, and therefore a regular appeal against the orders under Section 147 is an adequate and efficacious remedy. [Paras 25, 26, 27, 28, 29]

Writ petition not entertained on merits; petitioner directed to approach the appellate forum by way of regular appeal, with latitude on delay and the Department not to press limitation if appeal is filed within four weeks.

Requirement to file return despite claim of exemption under Section 10(26) - adjudication of merits concerning exemption under Section 10(26) - Whether the Court would decide the substantive question as to the applicability of exemption under Section 10(26) and the attendant obligation to file returns for the assessment years in question. - HELD THAT: - The Court expressly declined to adjudicate the substantive legal question on the applicability of Section 10(26) or the contention that an assessee wholly exempt under that provision is not obliged to file a return under Section 139(1). The matter of whether the exemption applies and whether a return was required was left open for determination by the appellate forum; the High Court recorded that it had not gone into the merits and that the appellate authority is free to decide the legal issues in accordance with law. The Court also directed that the appellate forum should deal with any limitation objection with latitude in view of the time the matter spent in the High Court. [Paras 16, 17, 30, 31, 32]

Substantive legal issues regarding exemption under Section 10(26) and filing obligations not decided; left to the appellate forum for adjudication.

Final Conclusion: The High Court declined to entertain the petition on merits and, applying established tests for restraint where an alternative remedy exists, directed the petitioner to pursue a regular appeal under Section 246A; the Court did not decide the merits on exemption under Section 10(26) and left those questions to the appellate forum, granting latitude on delay if the appeal is filed within four weeks.

Section 41(1) of the Income-tax Act - allowance or deduction made in the assessment - assessment or reassessment requirement for invocation of Section 41(1) - taxability of remission or cessation of trading liability as business income

Section 41(1) of the Income-tax Act - allowance or deduction made in the assessment - assessment or reassessment requirement for invocation of Section 41(1) - taxability of remission or cessation of trading liability as business income - Whether Section 41(1) is attractable to tax the amount of interest waived where no return was filed and no allowance or deduction was made in assessment for earlier years. - HELD THAT: - Section 41(1) applies only where an allowance or deduction has been made in an assessment or reassessment for any year in respect of the loss, expenditure or trading liability, and subsequently remission or cessation of that liability results in receipt of amount or benefit. The Assessing Officer recorded that the assessee had not filed returns for earlier years and therefore had not claimed the interest expenditure in any assessment. The Tribunal's direction to prepare statements of total income from books does not alter the statutory prerequisite that an allowance must have been made in an assessment. Reliance on the decision in Rayala Corporation supports the strict requirement that the amount must have been allowed as a deduction in earlier years before Section 41(1) can be invoked. Given that the assessee had not filed returns from A.Y. 2003-04 onwards and no assessment or reassessment exists showing allowance of the interest expenditure, the statutory condition for charging the waived interest under Section 41(1) is absent. The Commissioner (Appeals) correctly held that Section 41(1) did not arise and directed deletion of the addition; the High Court finds no error in that conclusion. [Paras 13, 14, 16, 17]

Section 41(1) is not applicable where no allowance or deduction was made in any assessment for earlier years; the waiver of interest is not taxable under Section 41(1) in the facts of this case.

Final Conclusion: Appeal allowed; questions of law answered in favour of the assessee and against the Revenue; the ITAT order is set aside and the CIT(A)'s order restoring deletion of the addition is restored.

High Pitched Assessment / Local High Pitched Committee - prima facie scrutiny - Out of turn / priority hearing of appeals - Stay of recovery conditioned on deposit (20% of gross demand) - Principles of natural justice in administrative grievance forums - Judicial review - irrationality / Wednesbury unreasonableness

High Pitched Assessment / Local High Pitched Committee - prima facie scrutiny - Principles of natural justice in administrative grievance forums - Whether the Local High Pitched Committee was required to undertake an in depth adjudicatory examination or to provide a personal hearing, and whether its conclusion that the assessment was not high pitched was irrational or violative of natural justice. - HELD THAT: - The Court held that the Local High Pitched Committee's mandate is to decide entitlement to out of turn hearing on a prima facie basis and not to conduct the full adjudicatory exercise that belongs to the appellate authority. The Committee was entitled to evaluate the material on record sufficiently to determine whether there was a prima facie case of a high pitched assessment, non observance of natural justice or gross negligence by the Assessing Officer. The record shows the Committee noted the assessee's failures to comply with multiple notices and that the lone compliance did not supply supporting documents demanded by the AO; it recorded reasons why the addition under section 68 was sustained. On that basis the Court found no irrationality or patent violation of natural justice in the Committee's reasons and disposition. [Paras 16, 18, 19]

The Committee's prima facie assessment and its conclusion that the assessment for AY 2018 19 was not high pitched was not irrational and did not offend principles of natural justice.

Out of turn / priority hearing of appeals - Stay of recovery conditioned on deposit (20% of gross demand) - Whether the petitioner was entitled to out of turn hearing or unconditional stay of recovery despite not complying with the departmental requirement to deposit 20% of the demand. - HELD THAT: - The Court noted that CBDT guidance contemplates priority/out of turn disposal in specified situations but departmental practice and instructions require consideration of stay applications subject to payment of at least 20% of gross demand. The petitioner did not comply with the 20% deposit requirement when requested. The department has already granted conditional stay for AY 2018 19 on payment in monthly installments (effectively permitting deposit of the 20% demand in installments). Given the departmental position and the petitioner's non compliance, the Court did not find grounds to direct an unconditional out of turn hearing or an unconditional stay. [Paras 8, 20]

The requirement to satisfy the departmental condition (payment of at least 20% of gross demand) stands; no entitlement to unconditional out of turn hearing or unconditional stay was found where the petitioner failed to comply.

Judicial review - irrationality / Wednesbury unreasonableness - Constitutionality challenge to administrative instructions - Whether the petition succeeds in impugning the constitutionality of the CBDT instruction constituting Local High Pitched Committees or in quashing the impugned administrative orders and minutes. - HELD THAT: - The Court declined to embark upon a broader constitutional examination of the CBDT instruction or an extensive re appraisal of the administrative minutes. Having reviewed the material and the Committee's recorded reasons, the Court found no basis to hold the instruction ultra vires or to quash the administrative decisions. The petitioner's statutory and constitutional contentions were not substantiated so as to warrant upsetting the Committee's conclusion or departmental orders. [Paras 14, 21]

The challenge to the CBDT instruction and the applications to quash the impugned orders/minutes fail; the petition is dismissed.

Final Conclusion: The writ petition is dismissed as meritless: the Local High Pitched Committee's prima facie determination was not irrational or violative of natural justice; the departmental condition of deposit (20% of gross demand) for stay/out of turn relief remains operative and was not dispensed with; consequently the constitutional and quashing challenges to the CBDT instruction and related administrative orders are rejected.

Order under Section 148A(d) of the Income Tax Act - Assessment Year 2018-19 - Filing of legible annexures - Interim relief - Condonation of delay and laches - Verification whether assessment order has been passed

Filing of legible annexures - Interim relief - Petitioner's application for interim relief conditioned on filing legible copies of annexures. - HELD THAT: - The court allowed CM No.3228/2023 but made the grant of relief conditional upon the petitioner filing legible copies of the annexures at least three days before the next date of hearing. This direction implements the procedural requirement for record availability and is a pre-condition to further consideration of the petitioner's interim application. [Paras 1]

Application allowed subject to the petitioner filing legible copies of the annexures at least three days before the next date of hearing.

Order under Section 148A(d) of the Income Tax Act - Assessment Year 2018-19 - Verification whether assessment order has been passed - Condonation of delay and laches - Direction to the revenue to state whether an assessment order pursuant to the Section 148A(d) notice has been passed, and to place such order on record if passed. - HELD THAT: - The petition pertains to AY 2018-19 and the petitioner informed the court that no assessment order has been passed following the Section 148A(d) order dated 31.03.2022. The revenue, asserting delay and laches on the part of the petitioner, was directed to obtain instructions and inform the court on the next date whether an assessment order has in fact been passed. If an assessment order has been passed, the revenue was ordered to place it on record. The court listed the matter for further hearing on 14.02.2023. The court did not adjudicate the merits of the assessment or the contention on delay; it remanded the factual question of whether an assessment order exists for verification and record placement. [Paras 4, 5, 6, 7, 8]

Revenue to return with instructions whether an assessment order has been passed and to place such order on record if it exists; matter listed on 14.02.2023.

Final Conclusion: The court granted the interim application conditionally on filing legible annexures and directed the revenue to verify and state whether an assessment order for AY 2018-19 pursuant to the Section 148A(d) order has been passed, placing any such order on record; further hearing listed for 14.02.2023.

Addition as unexplained expenditure - genuineness of transactions verified under notice u/s 133(6) - onus on assessee to prove genuineness by cogent evidence - brushing aside documentary evidence without adverse findings not permissible - taxability in the relevant assessment year - opening balances

Addition as unexplained expenditure - genuineness of transactions verified under notice u/s 133(6) - brushing aside documentary evidence without adverse findings not permissible - onus on assessee to prove genuineness by cogent evidence - Whether the additions of the amounts disallowed as unexplained expenditure in respect of two creditors could be sustained where the assessee had produced invoices, bank payment details and ledger confirmations but the notices to creditors returned unserved - HELD THAT: - The Assessing Officer issued notices under section 133(6) to sundry creditors and, because replies from two creditors were not obtained, treated the corresponding purchases as unexplained and added them to the assessee's income. The assessee, during assessment, furnished invoices, bank statements showing payment entries, ledger accounts and confirmations (and during appellate proceedings provided a comparative table reconciling the assessee's books with the creditors' books). The AO did not record any specific adverse findings discrediting these documents nor explain why they were unacceptable, but merely proceeded to make additions. The Tribunal relied on the settled principle that when an assessee places documentary evidence in support of a claim, the AO must examine and, if rejecting them, record cogent reasons; documents cannot be brushed aside on mere surmise. On the material before it the Tribunal found the invoices, bank payments and ledger confirmations supported the genuineness of the transactions (save for an explained difference in one case) and the AO's unexplained rejection of that evidence did not sustain the additions; accordingly the additions were deleted. [Paras 9, 10]

Additions made as unexplained expenditure in respect of the two creditors are deleted and the related grounds of appeal are allowed.

Taxability in the relevant assessment year - opening balances - right income taxable in the right assessment year - Whether small differential amounts added by the AO as unexplained balances, which were in fact opening balances carried forward from previous years, were taxable in AY 2017-18 - HELD THAT: - The disputed small amounts were shown by the assessee to be opening balances originating from earlier years and not transactions pertaining to the assessment year 2017-18. The principle applied is that income or adjustments must be taxed in the correct assessment year. Since the additions related to amounts carried forward and did not pertain to the year under consideration, the AO's additions were not sustainable. [Paras 11, 12, 13]

The additions corresponding to the differential opening balances are deleted and the related grounds of appeal are allowed.

Final Conclusion: The appeal is allowed: the additions disallowing purchases as unexplained expenditure are deleted for lack of cogent adverse findings against the documents produced, and the small differential amounts treated as opening balances are not taxable in AY 2017-18.

Taxation of partnership firm income - taxability of partners' share of profit - addition under section 69A for unexplained income - seized material as basis for assessment - settlement before the Settlement Commission

Taxation of partnership firm income - taxability of partners' share of profit - seized material as basis for assessment - Whether the Assessing Officer was justified in making an addition of Rs.74,06,250/- in the hands of the assessee by treating the 'partner divided' amount shown in seized documents as the assessee's unexplained income. - HELD THAT: - The Tribunal noted that the seized document (page no.79) related to the 'Himgiri' project executed by M/s Platinum Developers, a partnership firm in which the assessee is a 25% partner. The firm had been assessed to tax, and submissions and the firm's books of account were placed on record before the assessing officer and under section 153C in the firm's proceedings. M/s Platinum Developers had also filed proceedings before the Settlement Commission offering the undisclosed income (apparent from the seized material) to tax in the hands of the firm. The CIT(A) correctly held that income of the firm, especially where the firm has been assessed to tax or has offered the income for taxation through appropriate proceedings, cannot be brought to tax again in the hands of individual partners merely on the basis of seized papers. The assessing officer erred in treating the 'partner divided' entry as the assessee's personal unexplained income and making an addition in the assessee's hands without properly taking into account the firm-level assessment/settlement proceedings and the submissions filed. Applying these principles, the Tribunal found no infirmity in the CIT(A)'s conclusion deleting the addition.

Addition of Rs.74,06,250/- made in the assessee's hands was deleted; CIT(A)'s order upheld.

Settlement before the Settlement Commission - taxation of partnership firm income - Whether the fact that the partnership firm had filed an application before the Settlement Commission, offering the undisclosed income apparent from seized material to tax in the firm's hands, precluded making the addition in the assessee's hands. - HELD THAT: - The Tribunal recorded that M/s Platinum Developers filed an application before the Settlement Commission disclosing the undisclosed income reflected in the seized documents and that the firm was separately assessed. The CIT(A) accepted the contention that the income belonged to the firm and had been offered for taxation at the firm level; consequently, the same income could not be taxed again in the hands of the partners. The Tribunal agreed with this reasoning and declined to interfere with the deletion made by the CIT(A).

The firm-level settlement/assessment precluded treating the same amounts as the assessee's unexplained income; the deletion was maintained.

Final Conclusion: Revenue's appeal is dismissed; the Tribunal upholds the CIT(A)'s deletion of the addition of Rs.74,06,250/- for AY 2017-18, concluding that the amounts shown in the seized documents related to the partnership firm and were to be taxed at the firm level rather than in the hands of the individual partner.

Exemption under section 54F of the Income Tax Act - ownership of more than one residential house - habitual residence as indicium of residential house - location of residence (India or abroad) not material for proviso

Exemption under section 54F of the Income Tax Act - ownership of more than one residential house - habitual residence as indicium of residential house - location of residence (India or abroad) not material for proviso - Whether the assessee was entitled to claim exemption under section 54F where he co-owned and habitually resided in a property abroad at the time of transfer of the original asset. - HELD THAT: - The Tribunal examined the proviso to section 54F which disqualifies the exemption where the assessee "owns more than one residential house, other than the new asset, on the date of transfer of the original asset." The provision does not specify that the other residential house must be situated in India. Evidence on record showed that the assessee was a co-owner of the property in the USA and habitually resided at that address (also reflected in the passport), and the claim that the property was a mere farm house was not accepted. On these findings the Tribunal held that the assessee owned another residential house on the date of transfer and therefore became ineligible for exemption under section 54F. Grounds raised by the Revenue concerning the time-limit for construction/purchase were rendered infructuous by this primary finding and were not adjudicated on merits. [Paras 7, 8, 9]

Benefit of exemption under section 54F denied as the assessee owned another residential house at the time of transfer; related grounds on time-limit held infructuous.

Final Conclusion: The Revenue's appeal is allowed: the Tribunal denied the assessee the benefit of section 54F for AY 2011-12 on the ground that the assessee owned another residential house at the time of transfer, rendering ancillary challenges on the three-year time-limit unnecessary.

Disallowance under section 14A read with Rule 8D - treatment of expenses capitalised as pre-operative expenses / Capital Work in Progress - no disallowance where no expenditure is claimed against taxable or exempt income - rule of consistency in tax treatment - verification of opening and closing investment for computation under Rule 8D - treatment of expenditure for exempt income per Godrej & Boyce

Disallowance under section 14A read with Rule 8D - treatment of expenses capitalised as pre-operative expenses / Capital Work in Progress - no disallowance where no expenditure is claimed against taxable or exempt income - treatment of expenditure for exempt income per Godrej & Boyce - rule of consistency in tax treatment - Whether disallowance under section 14A read with Rule 8D is leviable where the assessee has debited expenses to Profit & Loss Account but has not claimed them in the computation of income because they were treated as pre operative expenses and capitalised as Capital Work in Progress. - HELD THAT: - The Tribunal found that the Assessing Officer made the disallowance solely because no section 14A disallowance had been made in the computation, disregarding the assessee's explanation and documentary record that expenses amounting to Rs.3,16,78,497/- were debited to the profit and loss account but were disallowed in the computation and capitalised as pre operative expenditure under Capital Work in Progress. The Tribunal held that during the year the assessee had no business income and had not claimed those expenses as deductible business or other sources expenses; consequently, there was no expenditure claimed that related to earning exempt income and no basis to make the section 14A/Rule 8D disallowance. The Tribunal noted that the CIT(A) misapplied the Supreme Court's decision in Godrej & Boyce by not appreciating that the statutory object of section 14A is to deny deduction of expenditure claimed against exempt income, which was not the case here. The Tribunal also observed that identical disallowances for earlier years had been deleted by earlier appellate orders and that the rule of consistency should apply where facts remain the same. [Paras 8]

Grounds 1 and 2 allowed; disallowance under section 14A/Rule 8D deleted for AY 2013 14 on the stated facts.

Verification of opening and closing investment for computation under Rule 8D - Disallowance under section 14A read with Rule 8D - Whether the Assessing Officer's computation of average investment (and resultant Rule 8D computation) should be verified and corrected. - HELD THAT: - The CIT(A) directed verification of the opening and closing amounts of investment used in the Rule 8D calculation because the AO had taken inconsistent figures from earlier years (notably treating the opening/closing investment figures inconsistently across years). The Tribunal reiterated that direction and directed the Assessing Officer to verify the opening and closing investment figures from the relevant records, after affording the assessee a reasonable opportunity of hearing, before making any computation under Rule 8D. [Paras 9]

Direction reiterated: AO to verify opening and closing investment amounts for Rule 8D computation, with reasonable opportunity to the assessee.

Final Conclusion: The appeal is allowed: the section 14A/Rule 8D disallowance is deleted on the facts insofar as expenses were not claimed but capitalised as pre operative expenditure; separately, the AO is directed to verify the opening and closing investment figures for any Rule 8D computation after giving the assessee a reasonable opportunity of hearing.

Unexplained cash deposits and burden to explain source - characterisation of income under deeming provisions (section 69A and residuary sections) - taxation of additions under section 115BBE and retrospective applicability of amendments - relevance of CBDT guidance on cash deposits during demonetisation

Unexplained cash deposits and burden to explain source - relevance of bank inquiries and documentary proof for loan, savings or agricultural receipts - Whether the addition of cash deposits made during the demonetisation period could be sustained where the assessee failed to satisfactorily explain the source. - HELD THAT: - The Tribunal noted that the Assessing Officer made an addition after finding that cash deposits aggregating Rs.16.60 lakh during 9.11.2016-31.12.2016 were not satisfactorily explained. The Commissioner (Appeals) granted substantial relief by accepting the assessee's explanation in relation to a loan of Rs.10 lakh and deleted Rs.11.60 lakh of the addition, but upheld an addition of Rs.5 lakh because the assessee did not produce evidence of alleged agricultural income, past savings or retiring benefits and the withdrawals shown in bank statements did not account for all deposits. Before the Tribunal the assessee did not furnish additional evidence to substantiate those remaining deposits. In these circumstances and having regard to the appellate authority's reduction and absence of further evidence, the Tribunal found no reason to interfere with the appellate authority's conclusion and dismissed the ground seeking further deletion. [Paras 11]

Addition sustained to the extent affirmed by the CIT(A); ground seeking further deletion dismissed.

Taxation of additions under section 115BBE and retrospective applicability of amendments - applicability of amended charging provision only from its effective date - Whether the addition should be taxed under the enhanced rates introduced by the Second Amendment Act 2016 (as incorporated in section 115BBE) for the assessment year in question, notwithstanding that the relevant events preceded the amendment's effective date. - HELD THAT: - The Tribunal followed a coordinate bench decision which held that where additions arise from events (search/survey or other occurrences) that took place before the amendment to section 115BBE came into force, the enhanced charging mechanism could not be applied retrospectively. The Tribunal observed that the amendment giving effect to higher rates and denial of deductions became effective after the date on which the relevant facts arose, and that the CIT(A) was correct in directing the Assessing Officer to compute tax at normal rates applicable prior to the Second Amendment Act 2016. Accordingly, the Tribunal allowed the ground and directed taxation of the addition at the pre-amendment rates. [Paras 12, 13, 14]

Addition to be taxed at normal rates prevailing prior to the amendment; amended higher rates under section 115BBE not applied retrospectively.

Final Conclusion: Appeal partly allowed: the assessing officer's addition is sustained to the extent affirmed by the CIT(A) (remaining deletion refused), but the tax on the addition is to be computed at the normal pre-amendment rates rather than under the retrospectively applied enhanced provision; appeal otherwise dismissed.

Deduction under section 42 - Classification of oil wells as plant and machinery for depreciation - Depreciation at 60% under Entry III(8)(xii) of Appendix I to the Income Tax Rules, 1962 - Additional depreciation under section 32(1)(iia) for extraction of mineral oil - Adjustment of foreign exchange gain to block of assets under section 43A (realised v. unrealised) - Deduction under section 80IB(9) - whether each well constitutes separate undertaking and retrospective operation of Explanation - Deduction under section 37 for payments to head office-'make available' / treaty interpretation - Capital v. revenue characterisation of preliminary drilling, renovation and repairs expenditure - Disallowance under section 40A(3) for cash payments - Disallowance under section 40(a)(ia) for short/non-deduction of TDS - Depreciation on intangible / commercial rights (participating interest) and admissibility of depreciation on goodwill

Deduction under section 42 - Deduction claimed under section 42 was not allowable. - HELD THAT: - The Assessing Officer rejected the claim under section 42 on the ground that the Product Sharing Contracts did not contain provisions entitling the assessee to deductions under that section. The assessee's own subsequent reliance on Supreme Court and earlier ITAT decisions led the Tribunal to dismiss the ground in favour of the Revenue. [Paras 5]

Ground No. 2 dismissed.

Classification of oil wells as plant and machinery for depreciation - Depreciation at 60% under Entry III(8)(xii) of Appendix I to the Income Tax Rules, 1962 - Oil wells and oil-field equipment are part of plant and machinery and are eligible for depreciation at 60% under Entry III(8)(xii); Assessing Officer to recompute depreciation on opening WDV and verify additions. - HELD THAT: - The Tribunal followed earlier decisions of the jurisdictional High Court and its own orders in the assessee's case, holding that oil wells and associated field equipment constitute plant and machinery. The DRP's requirement of 'distribution' to attract the entry was rejected. The AO was directed to recompute depreciation on opening WDV and to call for details for additions made during the year to allow depreciation accordingly. [Paras 6, 8]

Grounds No. 2.1 and 2.2 allowed; AO directed to recompute and verify additions.

Additional depreciation under section 32(1)(iia) for extraction of mineral oil - Assessee entitled to claim additional depreciation under section 32(1)(iia) for plant and machinery used in mineral oil extraction, subject to verification of statutory conditions. - HELD THAT: - Following the Tribunal's earlier decision in the assessee's case and reasoning of the Supreme Court that extraction of mineral oil amounts to 'production', the Tribunal held the assessee eligible for additional depreciation. The matter was restored to the AO to verify that the statutory conditions of section 32(1)(iia) (including non-use prior to installation) are satisfied before allowing the claim. [Paras 10, 11]

Ground No. 2.3 allowed; claim restored to AO for verification and computation.

Adjustment of foreign exchange gain to block of assets under section 43A (realised v. unrealised) - Whether the foreign exchange gain reduced from the block of assets under section 43A is realised or unrealised is to be determined by the Assessing Officer after verification. - HELD THAT: - The AO and DRP recorded that the assessee failed to demonstrate whether the foreign exchange gain was realised or unrealised. Given the lack of conclusive demonstration, the Tribunal remanded the issue to the AO to verify the nature of the foreign exchange gain and then apply section 43A as per law. [Paras 12, 13]

Ground No. 3 is restored to the file of the AO for verification of realised/unrealised character and consequential computation.

Deduction under section 80IB(9) - whether each well constitutes separate undertaking and retrospective operation of Explanation - Adjudication on entitlement under section 80IB(9) deferred pending Supreme Court determination; matter remitted to AO for fresh adjudication in light of Supreme Court directions. - HELD THAT: - The question whether each well is a separate 'undertaking' and whether the Explanation operates retrospectively is sub judice before the Supreme Court. Prior Gujarat High Court decisions struck down retrospective Explanation, but the Supreme Court has stayed finalisation of such matters. Following earlier practice in the assessee's own cases, the Tribunal refrained from deciding and set aside the issue to the AO to decide in accordance with the Supreme Court's eventual ruling. [Paras 15]

Grounds Nos. 4 and 5 set aside to the file of the AO for fresh adjudication in light of the Supreme Court proceedings.

Deduction under section 37 for payments to head office-'make available' / treaty interpretation - Payments to head office characterised as fees for services were held not to satisfy the 'make available' criterion under the India-US Treaty and therefore deduction under section 37 is allowable (subject to TDS considerations addressed elsewhere). - HELD THAT: - The Tribunal observed that merely supplying reports does not satisfy the 'make available' requirement and, on the facts, the Department failed to show that knowledge or technology was made available such that the branch would not require future head office services. The Tribunal noted that technical services are not caught by the embargo in section 44C and placed reliance on favorable authorities and the DRP decision in the succeeding year where the Department allowed the claim. On that basis the DRP's disallowance for AY 2007-08 was reversed. [Paras 17, 18, 19, 20]

Ground No. 6 allowed; deduction of technical service charges to head office permitted.

Capital v. revenue characterisation of preliminary drilling, renovation and repairs expenditure - Preliminary drilling expenditure held revenue; certain renovation and repair items allowed as revenue while identified capital items were held capital but eligible for depreciation on verification. - HELD THAT: - Preliminary drilling expenses were incurred to test feasibility and no enduring capital asset resulted; following authority, they were held revenue in nature. Office renovation expenditure was dissected: items like dismantling and minor works were allowed as revenue, while purchases of furniture and certain assets were capital and not allowable as revenue but directed to be depreciated by the AO after verification. Repairs and maintenance largely related to creation of capital assets (detailed break-up by DRP) and were held capital; depreciation to be allowed where appropriate following verification. [Paras 26, 27, 28, 29, 30]

Ground No. 7 allowed (preliminary drilling revenue). Ground No. 9 dismissed on capital nature but Ground No. 9.1 allowed for depreciation; Ground No. 10 dismissed but Ground No. 10.1 allowed for depreciation on verification.

Disallowance under section 40A(3) for cash payments - Disallowance under section 40A(3) of 20% on cash payment for sweets sustained where assessee failed to produce supporting evidence. - HELD THAT: - The assessee could not furnish evidence to substantiate the cash payment claim. In absence of supporting evidence, the Tribunal found no infirmity in the DRP's application of the statutory disallowance provision. [Paras 32, 33]

Ground No. 11 dismissed.

Disallowance under section 40(a)(ia) for short/non-deduction of TDS - Disallowance under section 40(a)(ia) for inadvertent short-deduction (exclusion of surcharge) deleted; correct remedy is proceedings under section 201 and relevant authorities favor the assessee. - HELD THAT: - Relying on High Court authority (Future First Info Services), the Tribunal held that mere inadvertent short deduction due to exclusion of surcharge does not justify disallowance under section 40(a)(ia) and that the appropriate course is action under section 201. On that basis the DRP's disallowance was set aside. [Paras 35, 36]

Ground No. 12 allowed; disallowance under section 40(a)(ia) deleted.

Depreciation on intangible / commercial rights (participating interest) and admissibility of depreciation on goodwill - Claim for depreciation on amount paid for participating interest / goodwill not finally adjudicated; issue remanded to Assessing Officer for detailed examination of nature of asset, correct category under section 32 and supporting documents. - HELD THAT: - The DRP had disallowed depreciation treating the amount as goodwill or otherwise not falling within prescribed intangible categories. The Tribunal rejected the assessee's vested-right argument and held that earlier allowance, if erroneous, can be re-examined. As the AO had not examined in detail whether the payment represented goodwill, other intangible commercial right, or otherwise, the Tribunal set aside the issue to the AO to determine the true nature of the asset and admissibility of depreciation after verification. [Paras 37, 38]

Grounds Nos. 13 and 13.1 allowed for statistical purposes and remitted to the AO for fresh examination.

Deduction under section 80G - Assessee's claim for deduction under section 80G not allowed by AO is remitted for verification and grant as per law. - HELD THAT: - The Tribunal observed omission in assessment and remitted the claim to the AO to allow deduction under section 80G after necessary verification. [Paras 50]

Ground No. 9 (AY 2008-09) set aside to AO for verification and decision.

Consequential reliefs and recomputations - Several issues required recomputation or consequential allowance of depreciation by AO after verification (e.g., recompute depreciation on opening WDV, allow depreciation where capitalisation accepted). - HELD THAT: - The Tribunal directed the Assessing Officer in multiple places to recompute depreciation, verify additions and statutorily mandated conditions, and thereafter allow additional or normal depreciation as directed in the respective findings. [Paras 8, 11, 27, 30, 52]

AO to carry out recomputations and verification as directed across the two assessment years.

Final Conclusion: The Tribunal partly allowed the assessee's appeals for A.Y. 2007-08 and A.Y. 2008-09: claims under section 42 were dismissed; oil wells and oil-field equipment held to be plant and machinery eligible for 60% depreciation and additional depreciation under section 32(1)(iia) allowed subject to verification; certain expenditures (preliminary drilling, specified renovation items) treated as revenue while identified capital items to attract depreciation; technical service charges to head office allowed; cash disallowance under section 40A(3) and other capital/revenue categorizations partly sustained; short-TDS disallowance under section 40(a)(ia) deleted; several issues (foreign exchange gain under section 43A, section 80IB(9) entitlement, admissibility of depreciation on participating interest/goodwill, and certain consequential items) were remanded to the Assessing Officer for fresh consideration or verification in accordance with the directions given.

Deduction under Section 80IA(4) - effluent treatment plant as part of a water treatment system - eligibility conditions and certificate requirement under Section 80IA(7) - CBDT Circular No.1/2006 recognising effluent treatment as infrastructure facility - revised return filing with Form 10CCB

Deduction under Section 80IA(4) - effluent treatment plant as part of a water treatment system - CBDT Circular No.1/2006 recognising effluent treatment as infrastructure facility - Claim for deduction under Section 80IA(4) by the assessee in respect of its effluent treatment operations. - HELD THAT: - The Tribunal upheld the view of the CIT(A) that the assessee's operations fall within the scope of an eligible "water treatment system" under the explanation to sub-section (4) of Section 80IA. The CBDT Circular No.1/2006 was applied to hold that effluent treatment plants and their conveyance systems qualify as part of a water treatment system and therefore as an "infrastructure facility" for the purposes of Section 80IA, subject to other conditions. The assessee adduced the manufacturing/process description showing receipt of an aqueous effluent stream containing dissolved salts (Potassium Carbonate, Sodium Carbonate, Potassium Hydroxide), concentration in multi-effect evaporators, crystallisation, filtration and recovery of products and mother liquor; and held consents from the Maharashtra Pollution Control Board for setting up/operation of the ETP/WTP. The Tribunal found no merit in the AO's characterisation that the assessee was merely a manufacturer and not an operator of an eligible infrastructure facility, and accepted the CIT(A)'s conclusion that the activities constitute effluent treatment falling within Section 80IA(4). [Paras 6, 7, 8]

Deduction under Section 80IA(4) allowed; assessee's effluent treatment operations qualify as an infrastructure facility.

Eligibility conditions and certificate requirement under Section 80IA(7) - revised return filing with Form 10CCB - Validity of the claim where Form No.10CCB and the working for Section 80IA(4) were filed electronically with a revised return on 19/02/2018. - HELD THAT: - The Tribunal rejected the Revenue's contention that the deduction was inadmissible because the audit certificate in Form 10CCB and working were filed only with a revised return. Section 80IA(7) requires that the accounts of the undertaking be audited and the audit report furnished as per Section 44AB; the AO did not point to any specific non-fulfilment of those conditions. The assessee explained that the audit report and working were obtained earlier but inadvertently omitted for AY 2017-18 and were correctly filed electronically with the revised return; the AO did not treat the revised return as invalid nor identify any deficiency in the documents when they were before him during assessment. On these facts the Tribunal found no legal or factual basis to deny the deduction on this ground and dismissed the additional ground raised by the department. [Paras 9]

Filing of Form No.10CCB and working with the revised return did not disentitle the assessee to the deduction; the Revenue's additional ground dismissed.

Final Conclusion: On the facts and in law the Tribunal affirmed the CIT(A)'s allowance of the Section 80IA(4) deduction in respect of the assessee's effluent treatment operations and rejected the Revenue's objection to the revised filing of Form 10CCB; the Revenue's appeal is dismissed.

Benefit under India-UK DTAA - permanent establishment under Article 5(2)(k) - fees for technical services under Article 13 - business profits taxable only if permanent establishment - reimbursement/disbursements not taxable as income - section 90(2) - treaty entitlement prevailing over domestic law

Benefit under India-UK DTAA - section 90(2) - treaty entitlement prevailing over domestic law - Assessee entitled to claim benefit under the India-UK DTAA - HELD THAT: - The Tribunal followed earlier coordinate-bench decisions in the assessee's own case for preceding and subsequent years and found no change in facts or law to warrant deviation. The Assessing Officer's contention that the LLP could not be a 'person' or 'resident' for treaty purposes as per UK taxation treatment was not held to be a ground for denial where the profits are taxed in the UK (either in the firm or in the hands of its partners). In view of the consistent precedent in the assessee's own cases, the Tribunal allowed the plea that the assessee is entitled to the benefits of the India-UK DTAA, applying section 90(2) to give effect to the treaty entitlement. [Paras 11]

Grounds 7-9 allowed; assessee entitled to DTAA benefits.

Fees for technical services under Article 13 - Income received by the assessee is not taxable as Fees for Technical Services under Article 13 - HELD THAT: - On analysis of the nature of services rendered (legal advisory, due diligence and related legal documentation), the Tribunal held that the services did not 'make available' technical knowledge, skill, experience or know how to the recipients such that they could perform similar tasks independently in future. Relying on its coordinate-bench reasoning in the assessee's earlier years, the Tribunal found no transfer of technical know how and concluded the income does not fall within Article 13 as FTS; consequently it is not taxable as FTS nor under section 9 in view of section 90(2). [Paras 15]

Grounds 10-11 allowed; income not FTS under the DTAA.

Permanent establishment under Article 5(2)(k) - business profits taxable only if permanent establishment - Assessee does not have a Permanent Establishment in India under Article 5(2)(k) - HELD THAT: - Article 5(2)(k) requires services to be furnished through personnel in the State for periods aggregating more than 90 days (or 30 days for associated enterprises). The uncontroverted record showed employees of the assessee were present in India for only 13 days during the relevant period; the Revenue produced no material to establish a fixed place of business or satisfy other Article 5 criteria. Since there is no PE and the income is not FTS, the income cannot be taxed as business profits in India under the DTAA or, therefore, under domestic law in view of section 90(2). [Paras 19]

Grounds 3-5 allowed; no PE in India for 2014-15.

Reimbursement/disbursements not taxable as income - Amounts charged as disbursements (reimbursement of actual expenditure) are not taxable income - HELD THAT: - The assessee invoiced certain amounts as disbursements for travel and hotel accommodation and provided a breakup and supporting details. The Revenue did not dispute that these amounts represented reimbursements of actual expenditure. The Tribunal held that such disbursements are not in the nature of income and therefore cannot be charged to tax. [Paras 22]

Grounds 12-13 allowed; disbursements not taxable.

Initiation of penalty proceedings - Initiation of penalty proceedings under section 271(1)(c) dismissed as premature - HELD THAT: - The Tribunal found the initiation of penalty proceedings to be premature in the circumstances of the case and therefore did not sustain the initiation at this stage. [Paras 25]

Ground 17 dismissed as premature.

Final Conclusion: The appeal is partly allowed: the assessee is held entitled to India UK DTAA benefits; the receipts are neither FTS nor attributable to a PE in India; disbursements are not taxable; penalty initiation is dismissed as premature; several consequential and quantification issues were rendered academic.

Conformity with Indian Standard 17049 - import policy condition - prohibited import - provisional release - mixed question of fact and law

Conformity with Indian Standard 17049 - import policy condition - prohibited import - Whether the imported Raw Petroleum Coke (RPC) with sulphur content in excess of 7% conforms to IS 17049 and whether such non-conformity amounts to violation of the DGFT licence/policy condition for import. - HELD THAT: - The High Court observed that the licence under which the respondent imported RPC required conformity with IS 17049 (which prescribes maximum sulphur limits for RPC and CPC) and that, prima facie, RPC having sulphur content in excess of 7% appears not to conform to the Standard and therefore raises the question of breach of the import condition. The Court emphasised that, because the item is treated as a prohibited import unless licence conditions are satisfied, the determinative test is whether the imported goods themselves meet the licence conditions rather than whether an ultimate manufactured product might satisfy sulphur limits. This was held to be a mixed question of fact and law which the Tribunal had not examined on merits and therefore required fresh consideration.

Remanded to the Tribunal to decide on whether the imported RPC conforms to IS 17049 and whether there is a violation of the licence/policy condition.

Provisional release - import policy condition - conformity with Indian Standard 17049 - Whether the Tribunal's direction for provisional release of the RPC (having sulphur content more than 7%) was lawful when the licence and policy conditions require compliance by the importer with the prescribed standard. - HELD THAT: - The Court recorded that the Tribunal and the Commissioner had approved provisional release based on the respondent's status as a calciner and on the intended end-product sulphur levels, but did not make a specific finding whether the imported RPC itself satisfied the licence conditions. The High Court found this approach incorrect as the policy imposes mandatory compliance by the importer with import conditions for the goods imported; the Tribunal's conclusion that no harm would be caused by provisional release was not persuasive absent an inquiry into conformity. Consequently, the propriety of provisional release is a matter requiring fresh adjudication by the Tribunal on the merits and in accordance with law.

Remanded to the Tribunal to reconsider the correctness of provisional release in light of whether the imported goods comply with the licence/policy conditions.

Final Conclusion: The revenue appeal is allowed; the Tribunal's order is set aside and the matter is remanded to the Tribunal for fresh consideration of whether the imported RPC conforms to IS 17049 and whether provisional release was permissible, with liberty to the parties to make submissions and an early hearing directed.

Writ of Certiorari - interim injunction against coercive recovery - violation of court orders - set aside administrative communication issued in violation of interim orders - threat of action under Section 142(1)(c)(iii) of the Customs Act, 1962

Interim injunction against coercive recovery - violation of court orders - set aside administrative communication issued in violation of interim orders - Writ of Certiorari - Whether the impugned communication dated 03.05.2023 calling upon the petitioner to pay the penalty and threatening action could be sustained despite earlier interim orders restraining coercive recovery. - HELD THAT: - The Court noted that interim orders dated 22.09.2020 and 21.04.2021, passed by the Division Bench, restrained the Department from taking coercive steps for recovery in respect of the dispute pending adjudication/remand. The impugned letter dated 03.05.2023 called upon the petitioner to remit the penalty within seven days and warned of action under the statutory provision, notwithstanding those interim orders. The Court found no justification for issuance of that communication while the earlier interim orders remained in force, observed that action taken (including attachment of bank account) had earlier been held to be in violation of the Division Bench orders, and held that the communication was clearly in breach of the judicially recorded injunction. In exercise of writ jurisdiction, the Court set aside the impugned communication as arbitrary and illegal for being contrary to the interim directions that the respondents were bound to respect. [Paras 5, 6, 7, 8]

Impugned communication dated 03.05.2023 set aside; respondents directed to respect the interim orders dated 22.09.2020 and 21.04.2021.

Final Conclusion: Writ petition allowed; the communication dated 03.05.2023 is quashed for being in breach of earlier interim orders restraining coercive recovery, and the respondents are directed to respect those interim orders.

Anticipatory bail - custodial interrogation for further investigation - mis-declaration of export consignments - prohibition on export of specified goods - responsibility of consignor and ICD after LET EXPORT order - summons under the Customs Act, 1962 - Arnesh Kumar principle concerning grant of bail in offences punishable with imprisonment of less than seven years

Anticipatory bail - prohibition on export of specified goods - custodial interrogation for further investigation - mis-declaration of export consignments - Arnesh Kumar principle concerning grant of bail in offences punishable with imprisonment of less than seven years - Whether anticipatory bail should be granted to the applicant in respect of allegations of export of prohibited red sandal logs and related mis-declaration. - HELD THAT: - The Court held that anticipatory bail could not be granted. The determinative considerations were that the consignment allegedly contained a large quantity of a prohibited item (red sandal logs), the panchnama showed extensive mis-declaration, and the value and sensitivity of the item necessitate thorough investigation to unravel the conspiracy and possible involvement of persons at the ICD or outsiders. The applicant, being the consignor/sender, failed to account for basic particulars such as the proposed recipient and E-way bill details in response to summons under the Customs Act, 1962, which suggested non-cooperation or concealment of material information. In these circumstances custodial interrogation was considered necessary to enable the Directorate of Revenue Intelligence to pursue investigative leads. The Court further observed that the ratio in Arnesh Kumar, relied upon by the applicant, did not outweigh the need for custodial interrogation given the nature, scale and sensitivity of the alleged offence and the applicant's unexplained ignorance of crucial transactional details. Accordingly, the balance of convenience and public interest weighed against grant of anticipatory bail. [Paras 10, 11, 12]

Application for anticipatory bail dismissed; earlier interim anticipatory bail order vacated and custodial interrogation considered necessary for further investigation.

Final Conclusion: The application under Section 438 CrPC for anticipatory bail was dismissed; the Court refused to enlarge the applicant on anticipatory bail given the alleged large-scale export of a prohibited item, the applicant's unexplained lack of information about the consignment and recipient, and the consequent necessity of custodial interrogation; the earlier interim protection was vacated.

Abetment - intention/mens rea for abetment - requirement of cogent evidence to prove abetment - failure to record material witness statement - principles of natural justice - opportunity to defend

Abetment - intention/mens rea for abetment - requirement of cogent evidence to prove abetment - failure to record material witness statement - Whether penalty under Sections 112(a) and 112(b) of the Customs Act, 1962 could be imposed on the appellant for allegedly abetting mis-declaration and undervaluation of imported consignments. - HELD THAT: - The Tribunal found that the core allegation was that the appellant visited the DRI office to facilitate clearance of consignments found to be mis-declared and under-valued and thereby abetted the offence. To constitute abetment, however, there must be proof of instigation, conspiracy or intentional aid - active conduct or intention to facilitate the illegal act. The record showed that the consignments had already been intercepted and found mis-declared; there was no evidence that the appellant instigated, conspired or intentionally aided the importers prior to or in the course of commission of the offence. Crucially, a person (Shri Sameer Sharma) alleged to have accompanied and persuaded the appellant - and identified in the investigation as a tout - had also visited the DRI office, yet his statement was not recorded. In these circumstances the Revenue failed to produce cogent evidence linking the appellant to intentional abetment. Although the appellant raised a plea of denial of adequate opportunity to inspect relied documents and to file a reply, the Tribunal's determinative reasoning rests on absence of material evidence of abetment and lack of any recorded statements or proof showing the appellant intentionally aided the illicit importation. [Paras 6, 7, 8, 9, 10]

Penalty under Sections 112(a) and 112(b) not imposable for want of evidence of intentional abetment; impugned penalty order set aside.

Principles of natural justice - opportunity to defend - Whether the appellant was denied reasonable opportunity of defence in adjudication. - HELD THAT: - The appellant contended that he was not granted reasonable opportunity to peruse relied documents and to file a reply to the show-cause notice. The Tribunal noted the plea but resolved the appeal on the substantive ground that the Revenue failed to prove abetment by cogent evidence and that a material witness's statement was not recorded; the absence of proof of intentional aiding was decisive. The Tribunal therefore did not base its decision solely on any procedural infirmity but observed the appellant had raised lack of opportunity as part of his defence. [Paras 2, 3, 8]

The denial of reasonable opportunity was noted, but the appeal was allowed principally because the Revenue failed to establish intentional abetment; no separate order of remand on procedural grounds was made.

Final Conclusion: The appeal is allowed: the Tribunal set aside the penalty imposed under Sections 112(a) and 112(b) of the Customs Act, 1962 on the ground that the Revenue failed to prove intentional abetment by cogent evidence (including omission to record statement of a material witness); the impugned penalty order is quashed with consequential relief, if any, to the appellant.

Liability of Customs House Agent under CHALR-2004 - knowledge and scienter of CHA in misdeclaration - standard of proof for revocation of CHA licence - Regulation 13(d) and 13(n) of CHALR-2004 - Regulation 22 CHALR-2004 - initiation and dropping of proceedings - penalty under Regulation 20 of CHALR-2004

Knowledge and scienter of CHA in misdeclaration - standard of proof for revocation of CHA licence - Regulation 13(d) and 13(n) of CHALR-2004 - Regulation 22 CHALR-2004 - initiation and dropping of proceedings - Whether the adjudicating authority was correct in dropping proceedings under Regulation 22 of CHALR-2004 against M/s Gee Pee International in the absence of evidence establishing knowledge or participation by the CHA in suppression/misdeclaration - HELD THAT: - The Tribunal accepted the Inquiry Officer's finding that there was no evidence to show that the CHA had knowledge of the alleged "code words" or of the wholesale prices recorded in the purchase register relied upon by DRI. The adjudicating authority's conclusion that the material produced (statements recorded under Section 108 and the purchase register) did not establish the CHA's involvement in suppression of identity or under-valuation was treated as justified. The record showed that the CHA's role was limited to arranging delivery on the basis of invoices supplied by importers, that there was no finding that those invoices were forged, and that the CHA had no access to the importer's purchase register or role in price negotiations. The Tribunal emphasised that imputing knowledge or culpability to the CHA required positive evidence and could not rest on presumption or generalized association with other adjudicated matters; each case must be decided on its own facts. In view of the absence of affirmative proof that the CHA failed to advise clients, report non-compliance, or otherwise acted without due diligence, the dropping of proceedings was upheld as being in accordance with the applicable standard of proof for revocation or penal action against a CHA. [Paras 3, 5, 6, 7]

Proceedings under Regulation 22 of CHALR-2004 against M/s Gee Pee International were rightly dropped for want of evidence of knowledge or participation in misdeclaration; the departmental appeal is dismissed.

Final Conclusion: The appeal filed by the revenue against the order dropping proceedings under Regulation 22 CHALR-2004 was dismissed; the adjudicating authority's conclusion that no charge was established against the CHA for violations of Regulation 13(d) and 13(n) was upheld for want of positive evidence of knowledge or suppression by the CHA.

Penalty under Section 114 - Penalty under Section 114AA - Admissibility and reliability of statement of co-accused - Requirement of Section 138B for production and cross-examination of maker of statement - Confiscation of foreign currency as prohibited goods

Penalty under Section 114 - Penalty under Section 114AA - Admissibility and reliability of statement of co-accused - Requirement of Section 138B for production and cross-examination of maker of statement - Whether the penalty imposed on the appellant under Section 114 and Section 114AA of the Customs Act, 1962 is sustainable when based on the statement of a co-accused which was not produced for examination and cross-examination in accordance with Section 138B. - HELD THAT: - The Tribunal found no evidence that the seized foreign currency was given by the appellant to the co-accused Mr. Manoj Phulwani. The adjudication relied upon Mr. Phulwani's statement that he received the currency from the appellant, but Revenue failed to comply with the mandate of Section 138B. Section 138B requires that a person who made a statement relied upon in adjudication be examined as a witness and, if the adjudicating officer admits that statement in evidence, be made available for cross-examination by the noticee. Sub section (2) of Section 138B extends that requirement to proceedings before authorities other than courts. Because Mr. Phulwani was not produced for examination and cross-examination, his statement could not be treated as a reliable piece of evidence against the appellant. In the absence of independent corroborative evidence linking the appellant to the seized currency, the imposition of penalty on the basis of the untested statement was unsustainable. The Tribunal therefore set aside the impugned order insofar as it imposed penalty on the appellant and allowed the appeal, awarding consequential benefits to the appellant. [Paras 20, 21]

Penalties imposed on the appellant under Section 114 and Section 114AA were set aside because the statement of the co-accused relied upon by Revenue was not produced for examination and cross-examination as required by Section 138B and therefore could not be relied upon.

Final Conclusion: Appeal allowed; the imposition of penalty on the appellant under Section 114 and Section 114AA of the Customs Act, 1962 is set aside because the statement of the co-accused was not produced and tested in accordance with Section 138B; appellant entitled to consequential relief.

Exemption under import notification - interpretation of "Extra High Tension Cable" - reliance on precedent - dictionary definition versus statutory/technical definition

Exemption under import notification - interpretation of "Extra High Tension Cable" - dictionary definition versus statutory/technical definition - reliance on precedent - Respondents are entitled to the benefit of Notification No.12/2012 dated 17.03.2012 Sl.No.376 for import of 132 KV Extra High Tension cables. - HELD THAT: - The Tribunal applied its earlier decision in Commissioner of Customs (Port), Kolkata v. Tata Steel Ltd., where the issue arose whether the term "Extra High Tension" in a customs notification should be governed by the McGraw Hill dictionary definition relied upon by the department. The earlier decision held that the McGraw Hill definition relates to cathode ray tubes and is confined to that technical context, whereas the imported cables at 132 kV fall within the statutory/technical understanding of "Extra High Tension" as exceeding 33,000 volts. Relying on that precedent, the Tribunal concluded that the adjudicating authority's denial was unsustainable and that the import of the 132 kV cables falls within the exemption under the notification. The Tribunal found no distinction warranting a departure from the cited decision and therefore upheld the Commissioner (Appeals) orders allowing the benefit. [Paras 5, 7, 8]

Appeals dismissed; impugned orders upholding grant of Notification No.12/2012 Sl.No.376 in favour of the respondents are upheld.

Final Conclusion: The Tribunal dismissed the Revenue appeals and upheld the adjudication in favour of the importers, allowing the exemption under Notification No.12/2012 Sl.No.376 for the 132 kV Extra High Tension cables, following its earlier decision in the Tata Steel Ltd. matter.

Power to strike off name and dissolve company under Section 248 of the Companies Act, 2013 - restoration of name to the register under Section 252 of the Companies Act, 2013 - effect of dissolution and realisation of claims under Section 250 of the Companies Act, 2013 - non-filing of financial statements for two preceding years as basis for striking off - burden on appellant to satisfy the tribunal with cogent evidence of continued operation

Power to strike off name and dissolve company under Section 248 of the Companies Act, 2013 - restoration of name to the register under Section 252 of the Companies Act, 2013 - non-filing of financial statements for two preceding years as basis for striking off - burden on appellant to satisfy the tribunal with cogent evidence of continued operation - effect of dissolution and realisation of claims under Section 250 of the Companies Act, 2013 - Whether the NCLT erred in rejecting the appeal under Section 252 and in refusing to restore the company's name which had been struck off by the ROC under Section 248. - HELD THAT: - The Appellate Tribunal affirmed the NCLT's rejection of the restoration appeal. The ROC followed the prescribed procedure (notice in Form STK-1, public notice in STK-5 and STK-7) on the basis that the company had not filed financial statements/annual returns since 31.03.2016 and was non-operational. The appellant had admitted before the NCLT that inter-se litigation and a managerial deadlock prevented holding board meetings and approval of financial statements, and failed to produce cogent evidence of ongoing business, revenue, or GST compliance. The arbitral proceedings relied upon did not establish operational activity and, in any event, Section 250 preserves the dissolved company's capacity to realise claims and does not mandate restoration where statutory grounds for striking off are established. Granting restoration in such circumstances would undermine the statutory scheme under Section 248. On these findings the NCLT did not err in refusing restoration. [Paras 13, 16, 17, 18, 19]

Appeal dismissed; NCLT correctly refused restoration of the company's name and upheld the ROC's striking off.

Final Conclusion: The Tribunal dismissed the appeal and upheld the striking off by the ROC: the appellant failed to discharge the burden of proving that the company was operational and the statutory procedure for striking off was properly followed; restoration was therefore not warranted.

Protection of investors in securities - Power of stock exchange to suspend or delist securities - SEBI's regulatory powers under Section 11 and Section 11B - Delisting mechanism and rights of public shareholders in compulsory delisting - Right of appeal to the Securities Appellate Tribunal - Norms for revocation of suspension by a recognised stock exchange

Protection of investors in securities - SEBI's regulatory powers under Section 11 and Section 11B - Delisting mechanism and rights of public shareholders in compulsory delisting - Statutory and regulatory framework suffices to protect investors and provides a robust mechanism for dealing with errant/vanishing companies. - HELD THAT: - The Court accepted the respondents' submissions and statutory scheme demonstrating that SEBI, the SCRA and the Delisting Regulations together furnish a comprehensive framework to protect investor interests. The judgment records the functions and powers under Section 11 and Section 11B of the SEBI Act, the listing, suspension and delisting powers under the SCRA and the Securities Contract (Regulation) Rules, 1957, and the rights and procedures under the SEBI (Delisting of Equity Shares) Regulations (including provisions governing compulsory delisting and rights of public shareholders). The Court observed that these provisions include disclosure obligations, procedural safeguards, penal provisions and institutional mechanisms (such as coordination committees and regional task forces) directed at preventing fraud and addressing vanishing companies, and concluded that, on the material placed before it, investor interest is protected under the existing statutory and regulatory regime. [Paras 38, 39, 43, 44, 46]

The statutory and regulatory scheme is adequate to safeguard investors and no further directions are required in this PIL.

Power of stock exchange to suspend or delist securities - Norms for revocation of suspension by a recognised stock exchange - The stock exchange is empowered to suspend or withdraw admission to dealings and to frame revocation norms, and the new revocation norms considered by BSE are permissible in the interest of investors. - HELD THAT: - The Court noted Rule 19 of the Securities Contracts (Regulation) Rules, 1957 and the Bye-laws of the Bombay Stock Exchange which expressly permit suspension, withdrawal and withdrawal of admission to dealings, subject to recording reasons and affording a reasonable opportunity to the company. The BSE's proposed norms for revocation of suspension (including demat, information memorandum, compliance conditions, lock-in of promoters' holdings, website, reinstatement fees and post-revocation monitoring) were recorded as having been approved in the interest of investors and not extraneous or unreasonable. The Court accepted that such norms are intended to enable informed investor decision-making and to preserve market sanctity. [Paras 27, 28, 31, 32, 33]

The bye-laws, rules and the BSE's revocation norms fall within the powers of the exchange and are justified in the interest of investors.

Right of appeal to the Securities Appellate Tribunal - Delisting mechanism and rights of public shareholders in compulsory delisting - Aggrieved companies and investors have efficacious remedies, including appeal to the Securities Appellate Tribunal and protections under the Delisting Regulations for compulsory delisting. - HELD THAT: - The Court highlighted the statutory right of a listed company or an aggrieved investor to appeal orders of a recognised stock exchange under Section 21A(2) and Section 23L of the SCRA and the procedural safeguards in the Delisting Regulations (including appointment of valuers, determination of fair value, acquisition obligations on promoters and consequences of compulsory delisting). The availability of these remedies and procedural safeguards formed part of the basis for the Court's conclusion that the existing regime provides effective redressal mechanisms. [Paras 41, 42, 45, 46]

Effective remedies and procedural safeguards exist, including appeal to the Securities Appellate Tribunal and statutory protections for public shareholders in compulsory delisting.

Final Conclusion: Having considered the pleadings and the statutory and regulatory regime explained by the respondents, the Court found that SEBI, the SCRA, the SCRR and the Delisting Regulations provide a comprehensive framework to protect investors and offer efficacious remedies; accordingly, the public interest petition is disposed of with no further directions.

Summary order. Civil appeal dismissed as barred by limitation: there was a delay of 21 days in filing the appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016, which exceeded the maximum condonable period; pending applications disposed of.

Limitation - date of default - continuing default gives fresh right - Section 7 of the Insolvency & Bankruptcy Code, 2016 - Loan Recall Notice as date of default - adjustment of payments against instalments - exclusion of limitation period by Supreme Court order (Suo moto WP No. 3 of 2020)

Date of default - adjustment of payments against instalments - continuing default gives fresh right - Whether the Adjudicating Authority correctly treated 09.05.2016 as the date of default for computing limitation in the Section 7 application. - HELD THAT: - The Tribunal held that the Adjudicating Authority erred in treating 09.05.2016 - the date of disbursement - as the date of default. The loan agreement and Schedule II showed a moratorium on principal until 19.07.2017 and receipts between 02.06.2016 and 24.01.2019 were adjusted towards instalments up to 19.07.2018. In those circumstances the first instalment that remained due and unpaid was 19.08.2018, and subsequent events (including the Loan Recall Notice) gave rise to fresh defaults. It is settled that every subsequent default gives a fresh right to sue; therefore the Financial Creditor could elect to sue on 19.08.2018 or on the date the entire loan was recalled and became due. The Adjudicating Authority wrongly ignored subsequent defaults and incorrectly relied on the disbursement date as the only relevant date for limitation. [Paras 16, 19, 21, 23]

09.05.2016 is not the correct date of default; 19.08.2018 (first unpaid instalment) or 28.03.2022 (date on which entire loan was recalled and became due) were available dates of default and the Adjudicating Authority erred in its computation.

Limitation - Section 7 of the Insolvency & Bankruptcy Code, 2016 - exclusion of limitation period by Supreme Court order (Suo moto WP No. 3 of 2020) - Whether the application filed on 04.04.2022 under Section 7 was within the period of limitation. - HELD THAT: - Applying the Supreme Court's order in Suo moto Writ Petition No. 3 of 2020 (which excluded the period from 15.03.2020 to 28.02.2022 for limitation purposes and provided a further 90 day respite from 01.03.2022), the Tribunal found that an application filed on 04.04.2022 was within the extended/adjusted limitation period. Since the appellant had chosen 28.03.2022 as the date of default in its Section 7 petition and, alternatively, the first unpaid instalment dated 19.08.2018 also falls within a fresh period of limitation triggered by subsequent defaults, the Section 7 application filed on 04.04.2022 could not be treated as time barred. [Paras 21, 23, 24]

The Section 7 application filed on 04.04.2022 was within limitation in view of the Supreme Court's exclusion and respite; the petition is not time barred.

Final Conclusion: The impugned order dismissing the Section 7 petition as barred by limitation is set aside; the Section 7 application is revived and remitted to the Adjudicating Authority for adjudication in accordance with law.

Acknowledgment of debt - Section 18 of the Limitation Act - electronic communication under the IT Act - authentication and signature of documents - attachment to e-mail vs acknowledgement in main body of e-mail - limitation bar to initiation of CIRP under Section 9 of the IBC

Acknowledgment of debt - Section 18 of the Limitation Act - attachment to e-mail vs acknowledgement in main body of e-mail - authentication and signature of documents - Whether the e-mail dated 05.05.2017 and the attached statement of accounts constitute a valid acknowledgment of debt under Section 18 of the Limitation Act so as to extend the period of limitation. - HELD THAT: - The Tribunal held that electronic transmission does not dispense with the statutory requirement of an acknowledgment in writing signed by the party against whom the right is claimed. While Section 4 of the IT Act recognises electronic records as satisfying writing requirements, it does not abrogate requirements of authentication applicable to paper documents. The e-mail's main body merely contained the cryptic remark 'FYI' and did not itself contain an unequivocal admission of liability. The statement of accounts was an external attachment which lacked signature, date and company seal; therefore its provenance and generation date could not be ascertained beyond doubt. Reliance on an unsigned external attachment cannot be treated as an authenticated acknowledgment under Section 18. The Karnataka decision relied upon by the appellant was distinguished because in that case the acknowledgment appeared in the main body of the e-mail; the present facts involved reliance on an unauthenticated attachment. Given the summary jurisdiction of the Adjudicating Authority, it was not incumbent on it to adjudicate disputed questions of authenticity at length; it was reasonable to reject the attachment as constituting the required acknowledgment. [Paras 34, 35, 36, 37, 38]

The e-mail dated 05.05.2017 and the attached, unsigned statement of accounts do not constitute a valid, signed acknowledgment under Section 18 of the Limitation Act and therefore cannot extend the limitation period.

Limitation bar to initiation of CIRP under Section 9 of the IBC - electronic communication under the IT Act - authentication and signature of documents - Whether the Adjudicating Authority erred in dismissing the Section 9 petition as time barred. - HELD THAT: - The Tribunal agreed with the Adjudicating Authority's finding that the date of default was 08.07.2016 and that the Section 9 application filed on 22.01.2020 was beyond the three year limitation period unless validly extended. Because the purported acknowledgment by e-mail/attachment did not meet the requirements of Section 18, there was no material on record to extend limitation. The Adjudicating Authority, exercising summary jurisdiction, appropriately declined to admit the Section 9 application on the ground of limitation; issues as to authenticity and disputed quality of goods further reinforced that the e-mail could not be treated as an unambiguous acknowledgment of debt. [Paras 8, 14, 19, 20, 21]

The Adjudicating Authority did not err in rejecting the Section 9 application as barred by limitation; the appeal is dismissed.

Final Conclusion: The Tribunal upheld the Adjudicating Authority's dismissal of the Section 9 petition as time barred: the e mail and its unsigned attachment did not constitute a valid acknowledgment under Section 18 of the Limitation Act and therefore did not extend the limitation period; appeal dismissed.

Jurisdiction of National Company Law Tribunal under Section 60(5) - powers and duties of liquidator under Section 35 - non-obstante clause - eviction of occupier of liquidation estate - binding precedents of a three Member NCLAT Bench upheld by the Supreme Court

Jurisdiction of National Company Law Tribunal under Section 60(5) - binding precedents of a three Member NCLAT Bench upheld by the Supreme Court - eviction of occupier of liquidation estate - Whether the impugned order of the Adjudicating Authority directing the liquidator to file an eviction suit in a civil court should be set aside for having failed to apply binding NCLAT precedent upheld by the Supreme Court. - HELD THAT: - The Tribunal held that the Adjudicating Authority failed to notice and apply the three Member Bench decision of this Appellate Tribunal in Jhanvi Rajpal Automotive Pvt. Ltd., which was thereafter upheld by the Supreme Court. That precedent addresses situations where the lease has expired and the assets are owned by the corporate debtor, and it supports NCLT/NCLAT jurisdiction to direct vacation of premises forming part of the liquidation/resolution estate so as not to frustrate time bound insolvency proceedings. In view of the binding nature of that three Member Bench decision as affirmed by the Supreme Court, the impugned order which permitted the liquidator to file an eviction suit in a civil court without applying the precedent was erroneous. The Tribunal therefore set aside the Adjudicating Authority's order and remitted the matter for fresh disposal in accordance with law and the binding precedent. [Paras 18, 19, 20, 21]

Impugned order dated 10.02.2021 is set aside; matter remitted to the Adjudicating Authority to pass fresh orders in accordance with law and the binding precedent.

Powers and duties of liquidator under Section 35 - non-obstante clause - eviction of occupier of liquidation estate - Scope and exercise of Adjudicating Authority's competence-remand for fresh consideration of whether and how to exercise jurisdiction in respect of vacation/possession of premises forming part of the liquidation estate. - HELD THAT: - The Tribunal identified that the Adjudicating Authority did not apply the binding three Member Bench reasoning and therefore did not correctly adjudicate the question whether the liquidator could obtain an order for vacation of premises under the Code (having regard to Section 35 duties and Section 60(5) non obstante jurisdiction). Rather than deciding the matter on merits in conformity with the binding precedent, the Adjudicating Authority directed the parties to approach civil courts. The Tribunal remanded the issue so that the Adjudicating Authority may reconsider and pass a fresh order in accordance with law, applying the applicable statutory provisions governing the liquidator's powers and the binding judicial pronouncements. [Paras 15, 16, 21]

Issue remitted to the Adjudicating Authority for fresh consideration and disposal in accordance with law.

Final Conclusion: The impugned NCLT order dated 10.02.2021 is set aside because the Adjudicating Authority failed to apply a binding three Member NCLAT decision (upheld by the Supreme Court); the matter is remanded to the Adjudicating Authority to hear and decide afresh in accordance with law and the binding precedent.

Locus standi of the financial creditor to initiate proceedings - assignment of debenture holder rights and stepping into shoes of original debenture holder - enforcement action under the Inter Creditor Agreement - consequences of event of default under Debenture Trustee Document (Clauses 9.2 and 9.8) - admission of a section 7 application under the Insolvency and Bankruptcy Code, 2016

Locus standi of the financial creditor to initiate proceedings - assignment of debenture holder rights and stepping into shoes of original debenture holder - Whether Respondent No.1 (Catalyst Trusteeship Ltd.), as assignee of the debenture holder, had locus to issue acceleration/enforcement notice and file the Section 7 application - HELD THAT: - The Tribunal found that the Assignment Agreement transferred all rights, entitlements and claims of the original debenture holder to Respondent No.1, enabling it to step into the shoes of the debenture holder. The Debenture Trustee had issued a Demand Notice on instructions of the Financial Creditor, and the Corporate Debtor did not reply to that notice or to the subsequent Acceleration and Enforcement Notice. The admitted existence of debt and default in the Corporate Debtor's reply, together with the Assignment Deed, established the Financial Creditor's entitlement to enforce remedies. The Appellant's contention that only the Debenture Trustee could take action was rejected on the facts, since the Financial Creditor had the assigned rights and had caused the demand notice to be issued.

Respondent No.1 had locus to issue the acceleration/enforcement notice and to file the Section 7 application; the contention to the contrary is rejected.

Enforcement action under the Inter Creditor Agreement - consequences of event of default under Debenture Trustee Document (Clauses 9.2 and 9.8) - Whether the terms of the Debenture Trustee Document and the Inter Creditor Agreement precluded the Financial Creditor from initiating enforcement proceedings - HELD THAT: - The Tribunal examined relevant provisions of the Inter Creditor Agreement and the Debenture Trustee Document. Clause 5.1.3 of the Inter Creditor Agreement contemplates that any Finance Party may exercise rights on events of default (subject to specified standstill/approval provisions where applicable). Clause 5.6 preserves the right of any Finance Party to bring legal proceedings and requires cooperation among finance parties. Clause 9.2 of the Debenture Trustee Document lists actions the Debenture Trustee may take on default; however Clause 9.8 begins with "Notwithstanding anything to the contrary contained in this Deed" and expressly preserves the Debenture Holders' and Debenture Trustee's unqualified right to avail remedies available to lenders under applicable law. Given that the Debenture Trustee had issued the demand on the Financial Creditor's instructions, another creditor had also initiated Section 7 proceedings, and the Financial Creditor held assigned rights, the Tribunal held that the contractual framework did not bar the Financial Creditor from issuing the Acceleration Notice or initiating the insolvency petition.

Provisions of the Debenture Trustee Document and Inter Creditor Agreement did not preclude the Financial Creditor from initiating enforcement proceedings; Clause 9.8 has overriding effect and the Financial Creditor was entitled to act.

Admission of a section 7 application under the Insolvency and Bankruptcy Code, 2016 - Whether the Adjudicating Authority erred in admitting the Section 7 application filed by Respondent No.1 - HELD THAT: - The Tribunal noted that debt and default were not disputed by the Corporate Debtor in its reply and that the Corporate Debtor failed to respond to demand and acceleration notices. On the basis of admitted debt/default and the Financial Creditor's assigned rights, the Tribunal found no infirmity in the Adjudicating Authority's conclusion to admit the Section 7 petition. The Appellant's subsequent opportunity to make a settlement offer was not pursued, and no merit was found in grounds raised to interfere with admission.

The Adjudicating Authority rightly admitted the Section 7 application; the admission is upheld.

Final Conclusion: The Appeal is dismissed. The Tribunal upholds the Adjudicating Authority's admission of the Section 7 petition: the Financial Creditor, having received assigned rights and having caused the demand notice to be issued, had locus to invoke enforcement remedies and to file the insolvency petition; the contractual provisions relied upon by the Appellant did not bar such action.

Operational debt - claim as right to remedy for breach of contract under Section 3(6)(b) of the IBC - compulsory registration under Section 17(b) of the Registration Act, 1908 - effect of unstamped or insufficiently stamped document where the agreement was acted upon by the parties

Operational debt - claim as right to remedy for breach of contract under Section 3(6)(b) of the IBC - Debt claimed for unpaid license/office service fees on premature termination during the lock-in period is an operational debt - HELD THAT: - The Tribunal held that Section 3(6)(b) of the Code treats a right to remedy for breach of contract as a "claim" and Section 3(11) includes such a claim within the definition of "debt." The agreement provided for a 36-month lock-in during which the corporate debtor could not terminate; the corporate debtor terminated the agreement prematurely and thereby committed a breach giving rise to a right to payment. The Adjudicating Authority erred in holding that the amount claimed was not an operational debt; the claim accrued on account of default and was properly the subject of a Section 9 application. The Tribunal relied on the Larger Bench decision in Jaipur Trade Expocentre recognising unpaid license fees as operational debt and overruled contrary three-member precedent relied upon by the respondent. [Paras 16, 19]

The claimed amount arising from premature termination during the lock-in period is an operational debt and the Section 9 petition ought to have been admitted.

Compulsory registration under Section 17(b) of the Registration Act, 1908 - The agreement was not a compulsorily registrable document under Section 17(b) of the Registration Act, 1908 - HELD THAT: - The Tribunal examined the nature of the agreement which expressly disclaims creation of any right, title or interest in immovable or movable property and is a personal services/providers agreement. Since the instrument did not purport or operate to create, declare, assign, limit or extinguish any right, title or interest in immovable property, it was not compulsorily registrable under Section 17(b). The Adjudicating Authority's conclusion to the contrary was fallacious. [Paras 20, 21]

The agreement was not required to be registered under Section 17(b) and thus was not a compulsorily registrable instrument.

Effect of unstamped or insufficiently stamped document where the agreement was acted upon by the parties - Deficiency of stamp/that the agreement was not originally engrossed on stamped paper was inconsequential to the existence of the operational debt where the agreement was executed and acted upon by the parties - HELD THAT: - Although the respondent asserted that the stamp paper was antedated and unsigned, the record showed that the parties executed the agreement, the corporate debtor took possession and paid the monthly fees up to a point, and the agreement was acted upon. In a Section 9 proceeding the Adjudicating Authority's task is to determine whether an operational debt is due; mere non-engrossment on stamped paper did not negate the claim when the agreement was executed and acted upon. Therefore the Adjudicating Authority erred in discounting the agreement on this ground. [Paras 22, 23, 24]

The stamp-related defect did not vitiate the operational creditor's claim and was not a ground to reject the Section 9 application.

Final Conclusion: The appeal is allowed; the order dated 08.04.2022 rejecting the Section 9 application is set aside. The Adjudicating Authority is directed to admit the Section 9 application within one month from production of the copy of this order, subject to any settlement between the parties during that period.

Maintainability of intervention before admission of Section 7 proceedings - right of homebuyers to intervene in corporate insolvency resolution process - initiation of insolvency proceedings versus admission of application - exceptional circumstances permitting intervention in pending insolvency proceedings

Maintainability of intervention before admission of Section 7 proceedings - right of homebuyers to intervene in corporate insolvency resolution process - Application by homebuyers for intervention in proceedings under Section 7 before admission of the Section 7 petition was not maintainable. - HELD THAT: - The Tribunal examined whether the intervention petition filed by homebuyers during pendency of a Section 7 petition (prior to its admission) could be maintained. It accepted the practicality that permitting such intervention at the pre admission stage could lead to a multiplicity of applications by numerous homebuyers and thereby impede the statutory timelines and the interest of the Financial Creditor prosecuting the Section 7 petition. The Tribunal considered precedents where intervention was refused pre admission and distinguished decisions relied upon by the applicants: Ashmeet Singh Bhatia and CFM Asset Reconstruction were treated as either concerned with a different provision (interpretation of initiation of proceedings under Section 65) or based on exceptional factual matrices (very large exposure) and were not to be treated as laying down a general rule. In contrast, decisions such as Surinder Pal Singh and Prayag Polytech support the view that there is no general right to intervene before admission and that aggrieved parties may move after admission. Applying these principles to the facts (homebuyers booked units not complete and numerous), the Tribunal found no rationale to permit intervention at the pre admission stage and upheld the Adjudicating Authority's dismissal of the intervention petition. [Paras 10, 11, 12, 13, 14]

Intervention petition by the homebuyers dismissed as not maintainable prior to admission of the Section 7 application.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority rightly dismissed the pre admission intervention petition by the homebuyers, subject to the possibility of filing appropriate applications if the Section 7 petition is admitted.

Alternative and efficacious remedy - writ jurisdiction under Article 226 - exhaustion of statutory remedies - violation of principles of natural justice - order wholly without jurisdiction - maintainability of writ petition seeking relief against tax assessment order

Alternative and efficacious remedy - writ jurisdiction under Article 226 - exhaustion of statutory remedies - maintainability of writ petition seeking relief against tax assessment order - Whether the writ petition under Article 226 is maintainable when an alternative statutory remedy of appeal under the GST / service tax appellate regime is available. - HELD THAT: - The Court applied the settled principle that ordinarily a writ under Article 226 should not be entertained where an effective alternative statutory remedy exists and when rights created by statute prescribe a particular remedy. The Court examined the petitioners' contentions and the impugned order and concluded that none of the exceptional circumstances that justify bypassing the statutory remedy (enforcement of fundamental rights, violation of natural justice, order wholly without jurisdiction, or challenge to the vires of legislation) are present. The Court observed that the respondent had considered the petitioners' submissions, given opportunity of personal hearing and decided the matter on merits; therefore, the appropriate forum for challenge is the appellate authority under the statutory scheme. In view of these considerations, and having regard to the authorities relied upon, the Court refrained from exercising writ jurisdiction and dismissed the petition at the motion stage, relegating the petitioners to the appellate remedy before the Customs, Central Excise and Service Tax Appellate Tribunal, East Regional Bench, Kolkata. [Paras 8, 9, 11, 12, 13]

The writ petition is not maintainable in the presence of an alternative and efficacious statutory remedy and is dismissed; the petitioners are relegated to the statutory appellate forum.

Violation of principles of natural justice - order wholly without jurisdiction - maintainability of writ petition - Whether the impugned order suffers from want of notice, failure to consider exemption claims, or denial of opportunity such as to amount to violation of natural justice or render the order wholly without jurisdiction. - HELD THAT: - On scrutiny of the impugned order and the record, the Court found that the departmental order had considered the petitioners' replies, addressed limitation and non-disclosure issues, and referred to the audited financial statements and returns. The Court recorded that opportunity of personal hearing was afforded and concluded that the points raised by the petitioners were dealt with in the order; although the order may be open to challenge on merits, it could not be characterized as wholly without jurisdiction nor as a proceeding in which principles of natural justice were violated. Consequently, the exceptions to the rule of exhaustion of statutory remedies were not attracted. [Paras 10, 11]

The impugned order does not disclose a violation of natural justice nor is it wholly without jurisdiction; the petitioners' contentions were considered in the order.

Final Conclusion: The writ petition challenging the assessment order is dismissed at the motion stage for want of maintainability in view of an alternative and efficacious statutory remedy; petitioners are relegated to the appellate authority under the relevant tax regime (period of filing from 16.05.2023 to 22.05.2023 treated as time bona fide spent pursuing the wrong forum).

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - natural justice - verification by designated committee - opportunity of hearing - waiver of interest and penalty - incomplete and selective declaration - interpretation liberally to further object of scheme - Article 14 of the Constitution

Natural justice - verification by designated committee - opportunity of hearing - incomplete and selective declaration - waiver of interest and penalty - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Article 14 of the Constitution - interpretation liberally to further object of scheme - Validity of summary rejection of the petitioner's SVLDRS application on the ground of 'incomplete and selective declaration' without affording opportunity of hearing and in light of deposited tax dues - HELD THAT: - The SVLDR Scheme and its Rules envisage verification by the designated committee and, where the committee's estimate exceeds the declarant's amount, an electronic estimate must be issued and an opportunity of hearing afforded (Section 127; Rule 6). Summary rejection of a declaration without providing the opportunity of hearing is contrary to those statutory safeguards and the principles of natural justice. The petitioner had deposited the tax dues relating to the audit objections before the cut off date and thus, under the Scheme, was entitled to waiver of interest and penalty; the only defect in the declaration was an omission to include certain duty amounts in the duty details columns, which was a curable clerical error that did not change the ultimate payable amount (nil after relief). Given the Scheme's object to broadly relieve legacy disputes and its provisions for hearing and correction (including correction of arithmetical/clerical errors), excluding a declarant on account of an obvious, non material omission-without affording the statutory hearing-would be arbitrary, offend Article 14 and frustrate the Scheme's purpose. Applying the principle that remedial schemes must be interpreted liberally to further their object, the rejection was unsustainable and the matter must be reconsidered in accordance with the Scheme, allowing the declarant appropriate process. [Paras 23, 24, 26, 28, 29]

The summary rejection of the petitioner's declaration is set aside as violative of natural justice and Article 14; the designated authority is directed to process the declaration in accordance with the SVLDR Scheme, affording any required opportunity of hearing and permitting correction, and to do so expeditiously.

Final Conclusion: Writ petition allowed; impugned rejection set aside and designated authority directed to process the petitioner's SVLDR declaration in accordance with the Scheme (including affording opportunity of hearing/correction) expeditiously, preferably within eight weeks.

Liability under reverse charge for supply of manpower versus job work - meaning and applicability of "body corporate" for levy of service tax - job work amounting to manufacture - principle of unjust enrichment in refund claims - application of section 11-B of the Central Excise Act, 1944 to refunds where tax was paid by mistake of fact or law

Liability under reverse charge for supply of manpower versus job work - meaning and applicability of "body corporate" for levy of service tax - Whether the respondent was liable to pay service tax under the reverse charge mechanism as recipient of "manpower recruitment or supply agency" services or whether the arrangement constituted job work carried out by the contractor (and whether the respondent was a "body corporate" for levy). - HELD THAT: - The Appellate Tribunal upheld the Commissioner (Appeals) finding after examining both agreements that the contractor performed job work in the assessee's premises using his own manpower, and was not supplying manpower as envisaged by the Notification. The Commissioner (Appeals) conclusion that the contractor was assigned a special task to be completed on the appellant's premises and that bills were raised as job work was held to be borne out by the agreements and ledger entries. The Tribunal further noted that the Commissioner (Appeals) also found that the activities undertaken by the contractor amounted to manufacture, a conclusion not seriously disputed by the Department. On these bases the finding that the respondent was not liable under reverse charge because the arrangement was job work (and not supply of manpower to a "body corporate") was affirmed. [Paras 6, 9, 10, 11]

Findings of the Commissioner (Appeals) that the contractor performed job work (amounting to manufacture) and that the respondent was not liable to pay service tax under reverse charge were upheld.

Principle of unjust enrichment in refund claims - Whether the Commissioner (Appeals) was justified in relying on the Chartered Accountant's certificate and trial balance to hold that unjust enrichment did not arise, thereby permitting refund. - HELD THAT: - The Tribunal found no illegality in the Commissioner (Appeals) reliance on the Chartered Accountant's certificate and the trial balance to conclude that the principles of unjust enrichment were not attracted. The appellate finding that the department could not demonstrate unjust enrichment from the payments was accepted. [Paras 12]

The Commissioner (Appeals) lawfully relied on the CA certificate and financial records and correctly held that unjust enrichment did not preclude refund.

Application of section 11-B of the Central Excise Act, 1944 to refunds where tax was paid by mistake of fact or law - Whether limitation under section 11-B of the Central Excise Act applies to the respondent's refund claim where service tax was paid under a mistake of fact/law. - HELD THAT: - The Tribunal held that section 11-B's limitation is not attracted where payment was made purely on account of a mistake in understanding the Notification and there was no compulsion or legal duty to make the payment. The decision applied and followed precedents of High Courts which held that payments made under a mistaken notion, lacking the colour of levy, are not refunds of duty within section 11-B and therefore not barred by that limitation. Having accepted that the respondent paid service tax by mistake and that the levy lacked authority, the Tribunal concluded section 11-B could not be invoked to deny the refund. [Paras 13, 14, 15, 16]

Section 11-B does not bar the refund claim where service tax was paid by mistake of fact or law; the refund claim is not time-barred on that ground.

Final Conclusion: The appeal is dismissed: the Commissioner (Appeals)'s conclusions that the arrangement was job work (not supply of manpower to a "body corporate"), that unjust enrichment did not arise, and that section 11-B limitation does not apply to a refund claimed for tax paid by mistake are upheld, and the respondent is entitled to the refund.

Pre-deposit under Sabka Vishwas (Legacy Dispute Resolution) Scheme - appropriation of pre-deposit - entitlement to discharge certificate under SVLDR Scheme - quashing of penalties - no further recovery where confirmed demand and interest not contested

Pre-deposit under Sabka Vishwas (Legacy Dispute Resolution) Scheme - appropriation of pre-deposit - entitlement to discharge certificate under SVLDR Scheme - no further recovery where confirmed demand and interest not contested - Whether the appellant was entitled to benefit under the SVLDR Scheme and issuance of discharge certificate having made payments in excess of the amount appropriated in the OIO. - HELD THAT: - The Tribunal found that the appellant had paid the entire confirmed demand and interest and had produced evidence of GAR-7 challans and SVLDRS filings. The Department, however, treated only the amount appropriated in the OIO as deposited for SVLDR purposes (Rs.5,00,000), despite earlier payment of a larger sum in the course of investigation and further pre-deposits. The Court held that because the appellant was not contesting the confirmed demand and interest and had, in substance, deposited amounts sufficient for SVLDR relief, the Department erred in declining to treat the broader pre-deposits as qualifying payments and in refusing to issue the SVLDR discharge certificate; the failure to recognise the deposits at the initial stage resulted in denial of scheme benefit to the appellant. [Paras 5, 6]

Appellant was entitled to the benefit of the SVLDR Scheme in respect of the confirmed demand given the payments made; the Department's limited treatment of the amount appropriated in the OIO was erroneous and resulted in denial of the discharge certificate.

Quashing of penalties - no further recovery where confirmed demand and interest not contested - Whether the penalties imposed on the appellant should be sustained. - HELD THAT: - The Tribunal recorded that the appellant was not contesting the confirmed service tax demand and interest and that, taking into account the payments and the appellant's position under the SVLDR Scheme, the penalties previously imposed lacked justification within the circumstances of the case. Applying this view, the Tribunal exercised its appellate power to set aside the penalties and to declare that no further amount was recoverable from the appellant. The order also noted that no refund was due to the appellant. [Paras 7]

Penalties imposed are set aside; no further amount is recoverable from the appellant and no refund is due.

Final Conclusion: The appeal is allowed to the extent that the Department's limited appropriation of deposits for SVLDR purposes was set aside; the appellant is entitled to the benefit of the Scheme having made the requisite payments, the penalties are quashed, no further recovery is permissible, and no refund accrues to the appellant.

Scope of Rule 3(4) of the Cenvat Credit Rules, 2004 - cross utilisation of Cenvat credit for payment of service tax on output services - definition and nexus requirement of input service under the Cenvat Credit Rules - utilisation of Cenvat credit for payment of service tax on Supply of Tangible Goods service - imposition of penalty under the Finance Act, 1994 for failure to discharge service tax electronically and contravention of statutory provisions - relevance of judicial precedents on merged/pooled credit and reverse charge utilisation

Scope of Rule 3(4) of the Cenvat Credit Rules, 2004 - cross utilisation of Cenvat credit for payment of service tax on output services - definition and nexus requirement of input service under the Cenvat Credit Rules - utilisation of Cenvat credit for payment of service tax on Supply of Tangible Goods service - Whether Cenvat credit availed on input services connected to the appellant's manufacturing activity could be used to discharge service tax liability on the output service of Supply of Tangible Goods for the periods April Sep (FY 2016 17) and Oct March (FY 2016 17). - HELD THAT: - The Tribunal examined Rule 3(4) of the Cenvat Credit Rules, 2004 which expressly permits utilisation of Cenvat credit for payment of service tax on any output service. While the definition of "input service" requires that a service be used in relation to providing an output service or in relation to manufacture and clearance of final products, the admissibility of utilisation turns on whether cross utilisation is barred. The impugned orders had found absence of nexus because the credits were earned in respect of services used for manufacturing at the Thane unit and were utilised against service tax on Supply of Tangible Goods provided at other units. The Tribunal, however, accepted the appellant's submissions and authorities holding that with the 2004 Rules cross utilisation/merger of credit is permissible and Rule 3(4)(e) allows utilisation of Cenvat credit for payment of service tax on output services. The Tribunal distinguished the Revenue's relied decisions as addressing different factual or legal issues (notably reverse charge or denial of credit) and relied on High Court decisions and precedents that have upheld utilisation of pooled/merged credit for payment of service tax on output services. Applying that principle to the facts for the stated periods, the Tribunal concluded that utilisation of the available Cenvat credit to discharge the service tax liability was not impermissible and therefore the demand founded on disallowance of such utilisation could not be sustained. [Paras 2, 4, 5]

Utilisation of the appellant's Cenvat credit to discharge the service tax liability on the Supply of Tangible Goods service for the specified periods was permissible; the demand founded on disallowance of that utilisation was unsustainable.

Imposition of penalty under the Finance Act, 1994 for failure to discharge service tax electronically and contravention of statutory provisions - consequences of disallowance of Cenvat utilisation on demand, interest and penalty - Whether the consequential demand, interest and penalties confirmed by the authorities (including penalties under the Finance Act, 1994) could be sustained once utilisation of Cenvat credit was held to be permissible for the periods April Sep (FY 2016 17) and Oct March (FY 2016 17). - HELD THAT: - The Tribunal's primary conclusion that Cenvat utilisation for payment of the service tax was permissible rendered the foundational premise for the demand and the consequential imposition of interest and penalties unsupportable. As the demand for service tax based on disallowed utilisation was set aside, the attendant interest and penalties confirmed for that demand could not stand. The Tribunal therefore found no merit in the impugned confirmation of demand, interest and penalties and allowed the appeal. [Paras 1, 2, 4, 5]

The confirmed demand, and the interest and penalties imposed insofar as they flowed from disallowance of the Cenvat utilisation, were set aside.

Final Conclusion: The impugned order of the Commissioner (Appeals) upholding the demand, interest and penalties was set aside and the appeal allowed, holding that utilisation of the appellant's Cenvat credit for payment of service tax on the Supply of Tangible Goods service for the stated periods was permissible under the Cenvat Credit Rules, 2004.

Admissibility of Cenvat credit where input services are received and utilized at the factory despite invoices being issued in the head office - procedural defect in invoices versus substantive benefit - invoices in the name of head office are curable and condonable - rejection of credit on technical grounds is impermissible - invocation of extended period on ground of suppression

Admissibility of Cenvat credit where input services are received and utilized at the factory despite invoices being issued in the head office - procedural defect in invoices versus substantive benefit - invoices in the name of head office are curable and condonable - Cenvat credit cannot be denied solely because service invoices bear the head office address when the services were received and used in the factory unit and supporting invoices establish such receipt and utilisation. - HELD THAT: - The Tribunal found on the material before it that the services were received and utilized in the appellant's factory premises and that sample invoices furnished by the appellant established this fact. Consistent precedents of the Tribunal were noted to the effect that substantive benefit of input services cannot be denied on purely procedural or technical defects in invoicing, and that invoices issued in the name of the head office are curable or condonable defects where the input services are actually received and used by the factory unit. The adjudicating authorities had not given reasons to reject the documentary evidence of utilisation at the factory. Applying those authorities, the Tribunal concluded that denial of credit on the sole ground that invoices carried the head office address was not justified. The Tribunal therefore allowed the appeal and granted consequential relief. [Paras 7, 9]

Appeal allowed; demand set aside insofar as it was founded on the ground that invoices bore the head office address and consequential relief granted.

Final Conclusion: The Tribunal allowed the appeal, holding that Cenvat credit could not be denied merely because invoices were raised in the head office name when the services were received and utilised in the factory; the technical defect in invoicing was curable and did not justify the confirmed demand.

Non-speaking order - principles of natural justice - requirement to consider submissions in reply to show cause notice - cross-examination of witnesses requested in proceedings - remand for fresh speaking adjudication - directions for expeditious disposal on remand

Non-speaking order - principles of natural justice - requirement to consider submissions in reply to show cause notice - Validity of the impugned adjudication order in view of the adjudicating authority's alleged failure to consider the appellants' written submissions and requests. - HELD THAT: - The Tribunal examined the adjudicating authority's order and the appellants' written reply running into extensive submissions. It noted that the Commissioner recorded the show cause notice and proceedings at length but disposed of the appellants' detailed submissions by a single paragraph (reproduced in the judgment). The Tribunal found that the impugned order did not reflect consideration of the submissions which the appellants had placed on record and therefore amounted to a non-speaking order. An order passed without due consideration of the defence materials and submissions violates the principles of natural justice and cannot be sustained. [Paras 4]

Impugned order set aside as non-speaking and violative of the principles of natural justice.

Cross-examination of witnesses requested in proceedings - remand for fresh speaking adjudication - directions for expeditious disposal on remand - Relief and directions appropriate on finding of procedural infirmity, including treatment of the request for cross-examination and timeline for redetermination. - HELD THAT: - Having set aside the impugned order, the Tribunal remanded the matter to the original adjudicating authority for passing a speaking order which must take into account the submissions made in reply to the show cause notice and consider the appellants' request for cross-examination of Shri Kamlesh S. Patil. The Tribunal explicitly left all substantive issues open for fresh consideration by the adjudicating authority. In view of the age of the matter, the Tribunal directed completion of remand proceedings within three months from receipt of the order and directed the appellants to cooperate to meet this timeline. [Paras 5]

Matter remanded to the original authority for de novo speaking adjudication, including consideration of cross-examination request; all issues kept open; remand to be completed within three months.

Final Conclusion: Appeals allowed by setting aside the impugned order as non-speaking and remanding the matter to the original adjudicating authority for a speaking adjudication that considers the appellants' submissions and request for cross-examination; remand to be completed within three months.

Classification under Entry 71 of Schedule III to the Karnataka Value Added Tax Act, 2003 - printed materials other than books meant for reading - residuary category under Section 4(1)(b)(iii) of the Karnataka Value Added Tax Act, 2003 - tariff item No. 49.01 of the Central Excise Tariff (Chapter 49) - binding effect of Central Excise classification on VAT authorities

Classification under Entry 71 of Schedule III to the Karnataka Value Added Tax Act, 2003 - printed materials other than books meant for reading - tariff item No. 49.01 of the Central Excise Tariff (Chapter 49) - Photo identity cards sold by the assessee fall within Entry 71 of Schedule III to the KVAT Act as printed materials other than books meant for reading. - HELD THAT: - The Court compared Entry 71 of Schedule III of the KVAT Act with Tariff item No. 49.01 of Chapter 49 of the CET Act, noting that Chapter 49 covers "other products of the printing industry." The CET explanatory scope treats "printed" to include reproduction by duplicating machines, production under computer control, embossing, photographing and similar processes; photo identity cards are produced using computerised printing, embossing of holograms and affixation of photographs and therefore fall within "other products of the printing industry" under Heading 49.01. The Chapter expressly excludes specific items and photo identity cards are not among those exclusions. On that basis the Court held that photo identity cards are printed materials (other than books) within Entry 71 and are not excluded from that Entry. [Paras 12, 13, 14, 15, 18]

Photo identity cards are classifiable under Entry 71 of Schedule III to the KVAT Act as printed materials other than books meant for reading.

Binding effect of Central Excise classification on VAT authorities - residuary category under Section 4(1)(b)(iii) of the Karnataka Value Added Tax Act, 2003 - The VAT authorities cannot disregard a classification accepted by the Central Excise Authority; consequently photo identity cards are not taxable under the residuary category in Section 4(1)(b)(iii) of the KVAT Act. - HELD THAT: - The Court applied the principle that when an item is cleared under a particular tariff by the Central Excise Authority, the VAT authority is bound by that classification. Relying on that settled position (as noted in the judgment), the Court rejected Revenue's contention that photo identity cards are custom, non-generic goods falling only under the residuary category. Because the Central Excise classification brings photo identity cards within Chapter 49/Heading 49.01, VAT classification must follow and the residuary tax head cannot be applied. [Paras 16, 17, 18]

The VAT authorities are bound by the Central Excise classification and therefore photo identity cards do not fall under the residuary category of Section 4(1)(b)(iii) but under Entry 71.

Final Conclusion: Revision petition allowed; substantial questions of law answered in favour of the assessee; the tribunal and assessing authority orders confirming taxation under the residuary entry are set aside and photo identity cards are held to be classifiable under Entry 71 of Schedule III to the KVAT Act (printed materials other than books) and taxed accordingly.

Taxability of internet and cable services - transfer of right to use goods deemed sale - electromagnetic waves not goods - notice proposing demand must specify goods and transaction - jurisdiction to assess where dealer failed to register - strict interpretation of taxing statutes

Jurisdiction to assess where dealer failed to register - notice proposing demand must specify goods and transaction - Validity of the assessment proceedings and notices issued by the Assessing Officer where the notice alleged supply of goods but did not identify specific goods or sale transactions, and the contention that the order was maintainable under the provision empowering assessment of unregistered dealers. - HELD THAT: - The Tribunal's finding that the notices were vague and without legal basis is upheld. The AO's notices merely made bald allegations of supply of goods without referring to particular goods or specific sale transactions, and therefore lacked the necessary particulars to sustain a demand. Although the Revenue contends that the order should be treated as one under the provision for assessing dealers who fail to register, the High Court accepted the Tribunal's view that the notice itself was defective. The Court emphasised that strict interpretation of taxing statutes is required and that no tax can be levied by implication; the notices did not fall within the four corners of the statutory levy and thus the assessments were not maintainable on the material before the AO. [Paras 7, 11, 12]

Notices and assessment orders were defective for being vague and lacking legal basis; Tribunal rightly held them to be without sufficient jurisdictional foundation.

Taxability of internet and cable services - transfer of right to use goods deemed sale - electromagnetic waves not goods - strict interpretation of taxing statutes - Whether charges collected for supplying and installation of goods in respect of internet and cable services amount to taxable sale under the KVAT Act. - HELD THAT: - Relying on authorities adduced by the assessee, the Court accepted the legal proposition that electromagnetic waves are not goods and merely act as carriers of information; they are not consumed by the customer. In the relationship between the cable/internet service provider and the customer there is no sale of tangible goods. The Court also noted that where installation charges are received it must be ascertained whether there is an implied transfer of cable or an exclusive transfer of property; absent such a finding, the transaction cannot be treated as a sale. Given these conclusions and the requirement of strict construction of taxing statutes, the Tribunal correctly held that the receipts in question did not constitute taxable turnover under the KVAT Act. [Paras 7, 8, 10, 11]

Charges for providing internet and cable services, including related installation receipts, do not constitute taxable sale under the KVAT Act on the facts found; the Tribunal's conclusion of non-taxability is affirmed.

Final Conclusion: The revision petition is dismissed; the substantial questions of law are answered in favour of the assessee and against the Revenue, and the KAT's order dated December 18, 2018 in STA Nos. 701 and 702/2016 is confirmed.