TaxTMI Updates e-Newsletter
Jun 21,2019

Input tax credit - distribution of input credit among branches - electronic credit ledger - TRAN-1/TRANS1 filing - certificate by originating Commissionerate for transfer of ITC - verification by jurisdictional Commissionerate - mandamus under Article 226

Input tax credit - certificate by originating Commissionerate for transfer of ITC - verification by jurisdictional Commissionerate - Gujarat Commissionerate to verify the input tax credit availed by the petitioner and issue a certificate enabling distribution of transitional credit to petitioner's locations. - HELD THAT: - In light of orders of the Delhi High Court and the practical difficulty in distribution of transitional credit reflected in the TRANS1/TRAN1 filings but not in the electronic credit ledger, this Court directed the Gujarat Commissionerate to undertake verification of the credit availed by the petitioner and to issue the requisite certificate to enable further steps for distribution of input tax credit. The verification and issuance of the certificate are to be completed within four weeks of receipt of this order so that the procedural step required for transfer/availment of transitional credit is complied with expeditiously. [Paras 4]

Verification by the Gujarat Commissionerate and issuance of the certificate to the petitioner within four weeks ordered.

Final Conclusion: The writ petition is disposed insofar as the Gujarat Commissionerate is directed to verify the claimed transitional input tax credit and issue the certificate within four weeks; matter posted on 24th July 2019.

Summary order. Notice issued returnable on 17.07.2019; petition tagged with specified bunch of petitions listed on board at serial No.7; interim direction restraining authorities from taking any coercive steps against the petitioners; direct service permitted.

Cancellation of registration - non-filing of returns - revocation of cancellation under Section 30 - adequate opportunity to explain - assistance for technical glitches in filing returns

Cancellation of registration - non-filing of returns - adequate opportunity to explain - Validity of cancellation of the petitioner's registration where primary ground is non-filing of returns for the periods October 2018 to April 2019 and whether the petitioner should be permitted to file those returns for consideration. - HELD THAT: - The Court recorded that the registration certificate was cancelled primarily on account of non-filing of returns for the tax periods October 2018 to April 2019. Rather than adjudicating the substantive correctness of the cancellation on merits, the Court directed that the petitioner be permitted to submit the outstanding returns within a fixed time frame so that the respondent-authority may consider revocation under the statutory provision. The Court also observed that the petitioner's grievance about lack of adequate opportunity to explain non-filing can be addressed by allowing submission of the returns and fresh consideration by the authority. [Paras 2, 3, 4]

Petitioner directed to submit returns for October 2018 to April 2019 within two weeks from receipt of certified copy; respondent-authority to consider revocation of cancellation in accordance with law.

Revocation of cancellation under Section 30 - assistance for technical glitches in filing returns - Obligation of the respondent-authority on receipt of the outstanding returns and assistance to the petitioner for technical difficulties in filing. - HELD THAT: - The Court accepted the respondent's statement that the authority is empowered to revoke the cancellation under Section 30 if the outstanding returns are submitted, and directed the authority to consider such revocation in accordance with law. The Court further directed the respondent-authority to assist the petitioner in overcoming any technical glitches in filing the returns for the specified periods and for subsequent periods, so that the statutory process of reconsideration can proceed effectively. [Paras 3, 5]

Respondent-authority to consider revocation under Section 30 upon submission of returns and to provide technical assistance in filing the returns.

Final Conclusion: Writ petition disposed of by directing the petitioner to submit returns for October 2018 to April 2019 within two weeks from receipt of certified copy; on such submission the respondent-authority shall consider revocation of the registration under Section 30 and shall assist the petitioner with any technical issues in filing.

Penalty under section 271(1)(c) - quantification of penalty dependent on additions - exemption under sections 11 and 12 - consequential nature of penalty - pendency of Special Leave Petition not a ground for admission

Penalty under section 271(1)(c) - quantification of penalty dependent on additions - consequential nature of penalty - Whether the penalty imposed under section 271(1)(c) survives after deletion of the additions on which it was quantified. - HELD THAT: - The Court recorded that the Tribunal and this Court have held the assessee to be a charitable institution entitled to benefits under sections 11 and 12, thereby deleting the additions which formed the basis for quantifying the penalty. Sub clause (iii) of section 271(1)(c) ties the quantification of penalty to the additions made to income; where the addition is eliminated, the consequential penalty cannot subsist. The Tribunal applied this principle and the Court found no error in cancelling the penalty once the additions were deleted. [Paras 3, 5]

Penalty under section 271(1)(c) cancelled as consequential upon deletion of the additions.

Exemption under sections 11 and 12 - pendency of Special Leave Petition not a ground for admission - Whether the pendency of a Special Leave Petition against the High Court decision relied upon by the assessee is a ground to admit the Revenue's appeal. - HELD THAT: - The Revenue relied on the fact that the High Court decision upholding the assessee's entitlement under sections 11 and 12 was the subject of a Special Leave Petition pending in the Supreme Court. The Court held that mere pendency of an SLP does not, by itself, justify admission of the present appeal. Given that the quantum additions had been deleted by this Court and the penalty was consequential, there was no reason to admit the Revenue's appeal against the Tribunal's order cancelling the penalty. [Paras 4, 5]

Pendency of an SLP does not warrant admission of the appeal; no merit in the Revenue's contention.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's order cancelling the penalty is affirmed as the penalty was consequential upon deletions of additions under sections 11 and 12.

Application of Section 271(1)(c) to amounts determined under MAP/DTAA enforced under Section 90 - constitutionality of Section 271(1)(c) insofar as penalty on MAP adjustments - Explanation 7 to Section 271(1)(c) - Mutual Agreement Procedure (MAP) under Article 25 of DTAA - Rule 44H of the Income-tax Rules - penalty proceedings distinct from assessment proceedings - Article 253 and parliamentary power to implement treaties

Constitutionality of Section 271(1)(c) insofar as penalty on MAP adjustments - Section 90 of the Income Tax Act and effect of DTAA/Article 25 - Explanation 7 to Section 271(1)(c) - Validity of invoking Section 271(1)(c) (and Explanation 7) to impose penalty on amounts determined pursuant to MAP/DTAA implemented under Section 90 and Rule 44H. - HELD THAT: - The Court held that Section 271(1)(c) is intra vires the Constitution even when applied to amounts adjusted pursuant to a MAP/DTAA implemented under Section 90 and Rule 44H. Section 90 (read with Article 253) empowers Parliament/Central Government to implement international conventions and, where a DTA provision is more beneficial, the DTA prevails; but in the absence of an express provision in the DTA waiving penalty, penal provisions in the Income-tax Act continue to apply. Explanation 7 is a statutory deeming provision that permits treating transfer pricing additions as representing concealed income unless the assessee proves computation under Section 92C in good faith and with due diligence; it does not operate as an automatic or blind trigger for penalty. Penalty proceedings are a separate self-contained code distinct from assessment proceedings; imposition of penalty requires application of mind and material establishing concealment or inaccurate particulars. The authorities must consider, on facts, whether the MAP adjustment resulted from concealment or inaccurate particulars or was otherwise computed in good faith and with due diligence under Section 92C; if the MAP resolution annulled the assessment in its entirety so as to eliminate tax liability, penal consequences could not follow, but that situation did not arise on the facts before the Court. [Paras 22, 23, 29, 30]

Section 271(1)(c) is not unconstitutional insofar as it may be applied to amounts determined pursuant to MAP/DTAA implemented under Section 90 and the Rules; Explanation 7 does not mandate automatic penalty and authorities must apply the statutory tests.

Penalty proceedings distinct from assessment proceedings - application of Rule 44H implementing MAP resolutions - Whether the penalty order and notices in the present matters should be adjudicated by the competent authorities in light of the MAP resolution. - HELD THAT: - The Court emphasised that penalty proceedings are independent of assessment and must be initiated and decided on the basis of the conditions in Section 271(1)(c) and its explanations. Where a MAP resolution has adjusted the assessment, the onus rests on the assessee to prove that the adjusted amount is not due to concealment or inaccurate particulars and that the computation conformed with Section 92C in good faith and with due diligence; simultaneously, authorities cannot mechanically impose penalty without a speaking order disclosing satisfaction and application of mind. Given these considerations and the factual matrix in the petitions, the Court directed that the appellate forum consider the pending appeal against the penalty order on merits and that the petitioner be permitted to file objections to the notice in the other petition, with the Assessing Officer/Appellate Authority to decide the same expeditiously in accordance with law. [Paras 23, 30]

Appellate Authority to decide the appeal against the penalty order on merits; petitioner permitted to file objections to the penalty notice and the Assessing Officer to decide expeditiously in accordance with law.

Final Conclusion: Section 271(1)(c) (including Explanation 7) is held intra vires and may be applied to MAP/DTAA adjustments implemented under Section 90/Rule 44H, subject to statutory safeguards: penalties cannot be levied automatically and require application of mind and satisfaction of the conditions in the statute; the petitioner's penalty contest is to be adjudicated on merits by the appellate authority/Assessing Officer in an expedited manner.

Comparability in transfer pricing - functional comparability - exclusion of non-comparable entities - inclusion criteria for comparables - apportionment of operating expenses between eligible and non-eligible units - deduction under Section 10A - Section 80IA(8) - remand for fresh adjudication - application of binding precedent

Deduction under Section 10A - application of binding precedent - Whether the Tribunal's deletion of disallowance affecting deduction under Section 10A on account of disallowances under section 40(a)(ia) and 43B raises a substantial question of law. - HELD THAT: - The Court recorded that the question is governed by an earlier decision of this Court in CIT v. Gem Plus Jewellery India Pvt. Ltd., which concluded the point in favour of the assessee. As the issue is covered by binding precedent, the question does not give rise to any substantial question of law and therefore is not entertained. [Paras 3, 4]

Question not entertained as the point is concluded by preceding decision in favour of the assessee.

Comparability in transfer pricing - functional comparability - exclusion of non-comparable entities - Whether the Tribunal was justified in excluding Coral Hubs Ltd. and other named companies from the set of comparables in the transfer pricing exercise. - HELD THAT: - The Tribunal examined the activities and operating models of the suggested comparables and concluded they were functionally different from the assessee. In particular, Coral Hubs was engaged in e-publishing with an abnormally high operating margin and thus had a different operating model; Genesys provided geo-spatial services divergent from the assessee's activities; and Apitco had abnormally high operating margins and was functionally different. The High Court found these factual and functional distinctions adequate to sustain the Tribunal's exclusions and recorded that no question of law arises from those conclusions. [Paras 5, 9, 10, 11]

Tribunal's exclusion of the named companies as comparables is upheld; no question of law arises.

Inclusion criteria for comparables - comparability in transfer pricing - Whether the Tribunal was justified in including SIP Technologies and Exports Ltd. in the set of comparables despite it being loss-making in one year. - HELD THAT: - The Tribunal noted that SIP Technologies was not a consistently loss-making entity but incurred losses in only one of the three years under consideration. On that basis the Tribunal refused to exclude it from the comparable set. The High Court found no legal error in this fact-based conclusion and held that no question of law arises. [Paras 12]

Inclusion of SIP Technologies and Exports Ltd. as a comparable is sustained; no question of law arises.

Apportionment of operating expenses between eligible and non-eligible units - Section 80IA(8) - remand for fresh adjudication - deduction under Section 10A - Allocation of operating expenses between the assessee's two units (one eligible for deduction under Section 10A and one not) and whether the Tribunal decided this ground of appeal. - HELD THAT: - The Dispute Resolution Panel had applied the ratio of sales between eligible and non-eligible units (invoking Section 80IA(8)) to bifurcate operating expenses. The assessee challenged allocation, contending expenses pertained to individual units and should not be apportioned on turnover basis. The High Court examined the Tribunal's judgment and found no discussion or decision on this contentious allocation issue-indicating the Tribunal had overlooked it. The Court therefore directed that the Tribunal entertain and decide, on merits and confined to the question of allocation of operating expenses between the eligible and non-eligible units for deduction under Section 10A, and return its opinion. [Paras 13, 14, 15]

Proceedings remitted to the Tribunal to decide, on merits and confined to allocation of operating expenses between the two units for purposes of Section 10A.

Final Conclusion: The appeal is disposed of: the challenge to disallowances affecting Section 10A was not entertained in view of binding precedent; the Tribunal's exclusions and inclusion of specified comparables in the transfer pricing exercise are upheld with no substantial question of law; and the matter relating to apportionment of operating expenses between the assessee's eligible and non eligible units under Section 10A is remitted to the Tribunal for fresh decision confined to that issue.

Section 68 - identity, creditworthiness and genuineness of creditors - Adverse inference from non-appearance to summons and notices - Creditworthiness may be established by net worth, bank transactions or borrowed funds and is not limited to current year taxable income - Assessing Officer's duty to verify/follow up enquiries and not to reject evidence merely on doubt

Section 68 - identity, creditworthiness and genuineness of creditors - Adverse inference from non-appearance to summons and notices - Validity of deletion by CIT(A) of additions made under section 68 in respect of loans from M/s I World Business Solutions Pvt. Ltd. and M/s K G Embroidery Mills Ltd. - HELD THAT: - Tribunal examined the record and the CIT(A)'s findings (reproduced at paras 2.2.11-2.2.12 of the impugned order) and the documents produced by the assessee and the lenders. The lenders had filed income-tax returns, audited financial statements and bank statements showing the flow of funds, and interest paid by the assessee was reflected in the lenders' bank accounts and ITRs. There was no allegation by the AO of cash deposits into the lenders' accounts or any other adverse material. The Tribunal accepted the CIT(A)'s reasoning that identity, creditworthiness and genuineness were established by the documentary evidence and that mere non-appearance in response to summons could not, without further adverse material, justify sustaining the addition. Consequently the deletion of the additions of Rs. 1,11,00,000 and Rs. 15,00,000 was upheld as not suffering from any illegality. [Paras 6, 7]

Deletion of additions in respect of loans from I World Business Solutions Pvt. Ltd. and K G Embroidery Mills Ltd. upheld.

Section 68 - identity, creditworthiness and genuineness of creditors - Creditworthiness may be established by net worth, bank transactions or borrowed funds and is not limited to current year taxable income - Assessing Officer's duty to verify/follow up enquiries and not to reject evidence merely on doubt - Sustainability of additions under section 68 in respect of unsecured loans advanced by the remaining lenders (12 creditors) included in the assessment for AY 2014-15. - HELD THAT: - The Tribunal analysed the material placed on record for each creditor: bank statements showing payments from the creditors, interest credited to creditors' bank accounts and claimed in their ITRs, audited balance sheets demonstrating net worth, and confirmations filed in response to notices issued under section 133(6). The Tribunal reaffirmed that the tripartite test under section 68 is identity, creditworthiness and genuineness and held that creditworthiness cannot be equated solely with the current year taxable income; funds may legitimately originate from net worth, loans or past savings. Where the AO received documentary proof and replies under section 133(6) but relied chiefly on non appearance at summons or lower current year income to draw adverse inference, the Tribunal held that the AO should have pursued further verification rather than reject the materials on mere doubt. Applying these principles across the cited creditors, and having found no adverse material to discredit the documents, the Tribunal concluded that the assessee discharged its onus and the additions were not justified. [Paras 12, 21]

Additions under section 68 in respect of the remaining creditors set aside; assessee's appeal allowed.

Final Conclusion: For AY 2014-15 the Tribunal upheld the CIT(A)'s deletion of additions in respect of two creditors and allowed the assessee's appeal by directing deletion of the additions in respect of the remaining disputed creditors, holding that the assessee had established identity, creditworthiness and genuineness of the loan transactions and that the AO erred in drawing adverse inferences on mere doubt or non appearance without further verification.

Scope of the term 'education' under section 2(15) of the Income-tax Act - registration under section 12AA of the Income-tax Act - playschool versus elementary school distinction - franchise/commercial operation and charitable character - predominant object test for charitable character - public benefit/public character of a society

Scope of the term 'education' under section 2(15) of the Income-tax Act - playschool versus elementary school distinction - Whether the activities of the assessee (running a playschool under the Mother's Pride franchise) qualify as 'education' for the purposes of registration under section 12AA. - HELD THAT: - The Tribunal applied the test laid down by the Apex Court in Sole Trustee, Lok Sikshan Sansthan, holding that 'education' in s.2(15) denotes systematic scholastic instruction involving structured courses, training, accreditation and examination, and is not to be understood in an overly wide sense that would include informal or play-based activities. The assessee did not produce evidence that the institution had been upgraded to impart elementary education (class 1 onwards) as claimed; the material on record and the nature of the Mother's Pride chain showed it to be a playschool. Consequently, the activities carried on by the society did not qualify as 'education' under s.2(15), and the principal ground for refusal of registration (non-educational character of activities) was sustained.

The activities were held not to amount to 'education' under s.2(15); registration under section 12AA was rightly refused on this ground.

Predominant object test for charitable character - franchise/commercial operation and charitable character - Whether the predominance of profit-making or the commercial nature of the franchise arrangement required separate adjudication to deny charitable status. - HELD THAT: - The Tribunal observed that the question of the society's predominant object (whether profit-oriented) is a factual inquiry engaged only if the activity in question qualifies as a charitable activity (here, education). Because the Tribunal concluded that the assessee's activity did not qualify as 'education', it was unnecessary to undertake a separate inquiry into the predominance of profit or commercial features of the franchise agreement. The Court noted the established principle that predominance of object is determinative where the activity otherwise qualifies as charitable, but that principle was not reached on the facts.

No separate determination of predominant object was necessary; refusal of registration stands without reaching that factual inquiry.

Public benefit/public character of a society - Whether the composition of the society's membership (allegedly dominated by one family) defeated its character as a public charitable institution. - HELD THAT: - The Tribunal held that the identity of the managers or the fact that membership is largely from a single family is not decisive; what matters is whether the society's activities inure to the benefit of the public. The Tribunal accepted that exclusion of certain sections of the public for economic reasons does not by itself negate public character. However, given its primary finding that the activity did not constitute 'education' under the Act, membership composition became largely irrelevant to the registration issue.

Composition of membership did not by itself defeat public character; this consideration was immaterial in light of the finding that the activity was not 'education'.

Final Conclusion: The Tribunal dismissed the assessee's appeal and upheld the Commissioner's refusal to grant registration under section 12AA, holding that the society's activities amounted to a playschool (not 'education' under s.2(15)), thereby rendering further inquiries (predominant object, membership composition) unnecessary to deny registration.

Penalty under section 271(1)(c) - Explanation 5A to section 271(1)(c) - penalty under section 271AAA - additions made on estimate basis - penalty leviability where additions are based on estimation/presumption - distinction between assessment findings and penalty proceedings - search and seizure under section 132

Penalty under section 271(1)(c) - Explanation 5A to section 271(1)(c) - additions made on estimate basis - penalty leviability where additions are based on estimation/presumption - distinction between assessment findings and penalty proceedings - Deletion of penalty levied under section 271(1)(c) for AY 2010-11 where addition was sustained by the Tribunal at 15% of alleged bogus purchases. - HELD THAT: - The Tribunal in the quantum appeal had restricted the AO's addition to 15% of the alleged unverifiable purchases after assessing the evidence and relevant circumstances; the High Court confirmed that the Tribunal's disallowance was by way of estimation and rested on presumption. The AT applied the settled principle that an addition sustained on estimate/presumption does not, by itself, establish deliberate concealment or furnishing of inaccurate particulars necessary to attract section 271(1)(c). Reliance was placed on the jurisdictional High Court's reasoning in Krishi Tyre and other precedents which hold that estimation/guesswork without corroborative evidence of mala fide conduct cannot sustain penalty. The Tribunal's quantum findings cannot be gone behind in penalty proceedings and, on the facts, the AO failed to prove requisite conduct for penalty; Explanation 5A could not be invoked where the addition does not represent income plainly found from entries in books/documents but is an estimate. [Paras 5]

Penalty under section 271(1)(c) for AY 2010-11 deleted.

Penalty under section 271AAA - additions made on estimate basis - penalty leviability where additions are based on estimation/presumption - search and seizure under section 132 - Deletion of penalties levied under section 271AAA for AY 2011-12 and AY 2012-13 where additions were identical in character to the estimated addition in AY 2010-11. - HELD THAT: - The facts for AY 2011-12 and AY 2012-13 mirror AY 2010-11: additions arose from alleged bogus purchases detected after search and were restricted by the Tribunal to 15% as an estimated disallowance. Applying the same legal principle adopted for AY 2010-11 and precedents cited, the Tribunal held that additions founded on estimation/presumption do not establish the mens rea or corroborative evidence required to levy penalty under the special provision for specified years, section 271AAA. Consequently, the penalties based on such estimated additions are unsustainable and were deleted. [Paras 9]

Penalties under section 271AAA for AY 2011-12 and AY 2012-13 deleted.

Final Conclusion: Appeals allowed: penalty under section 271(1)(c) for AY 2010-11 and penalties under section 271AAA for AYs 2011-12 and 2012-13 are deleted because the additions sustaining the penalties were based on estimation/presumption and did not establish deliberate concealment or furnishing of inaccurate particulars.

Penalty under section 271(1)(c) - concealment of particulars of income - furnishing of inaccurate particulars of income - satisfaction recorded by the Assessing Officer - bonafide mistake

Penalty under section 271(1)(c) - concealment of particulars of income - satisfaction recorded by the Assessing Officer - Validity of penalty under section 271(1)(c) in respect of undisclosed cash sale consideration of Rs. 59,04,000/- - HELD THAT: - The Tribunal accepted the factual finding that the assessee failed to disclose receipt of cash sale consideration which came to light during assessment proceedings and was admitted by the assessee. The Assessing Officer recorded satisfaction in the assessment order and specifically treated non-disclosure of the cash consideration as concealment of particulars of income in the penalty order. The Tribunal held that where an assessment order records satisfaction it suffices for initiation of penalty proceedings under clause (c) of section 271(1). The fact that other additions attracted the limb of furnishing of inaccurate particulars did not render the charge in respect of undisclosed cash consideration uncertain, because the defaults in the case fell under both limbs. The plea of bonafide mistake was rejected on the basis that the cash consideration would not have been ascertainable from the sale deed alone unless disclosed to the tax consultant, and there was no case that the assessee had informed the consultant of the true facts. Consequently the levy of penalty in respect of the undisclosed cash consideration was held sustainable and the CIT(A)'s order upholding that penalty was affirmed.

The penalty under section 271(1)(c) sustained in respect of undisclosed cash sale consideration; CIT(A)'s order upholding the penalty is upheld.

Penalty under section 271(1)(c) - furnishing of inaccurate particulars of income - Validity of deletion of penalty insofar as it related to additions by disallowance of deductions under sections 54B and 54F - HELD THAT: - The Tribunal noted that additions made by the Assessing Officer by disallowing deductions under sections 54B and 54F were deleted in the quantum appeal and that the High Court had affirmed that deletion. Given that the underlying additions no longer subsisted, the CIT(A) rightly deleted the penalty insofar as it related to those disallowances. The Revenue's appeal against that deletion was found to be an attempt to keep the issue alive pending a possible outcome in the Supreme Court on quantum; the Tribunal held that re litigation was unnecessary where the addition itself had been finally adjudicated in favour of the assessee by the High Court and dismissed the Revenue's appeal.

Penalty deleted to the extent relating to disallowances under sections 54B and 54F; Revenue's appeal against that deletion dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s order sustaining penalty under section 271(1)(c) in respect of the undisclosed cash sale consideration and confirmed deletion of penalty insofar as it related to disallowances under sections 54B and 54F; both the assessee's and the Revenue's appeals are dismissed.

Reopening of assessment beyond four years and proviso to Section 147 regarding disclosure of material facts - depreciation/diminution in value of investments treated as business expenditure - RBI guidelines on classification and valuation of investments and mark-to-market of held-for-trading/available-for-sale securities - amortization of premium on government securities - change of opinion doctrine in reassessment

Reopening of assessment beyond four years and proviso to Section 147 regarding disclosure of material facts - change of opinion doctrine in reassessment - depreciation/diminution in value of investments treated as business expenditure - Validity of reopening the assessment for Assessment Year 2010-11 and consequential deletion of the disallowance of depreciation on investments - HELD THAT: - The Tribunal found that the assessee had filed the return, responded to notice under section 142(1), and that the claim of diminution in value of investments was specifically disclosed in the audited accounts and in reply to a specific query during the original assessment. The AO had accepted the claim in the original assessment framed under section 143(3). The proviso to Section 147 bars reopening after four years unless there was failure to disclose fully and truly material facts; on the record the claim and supporting RBI circulars and accounting treatment were placed before and considered by the AO in the original assessment. The reassessment therefore amounted to a mere change of opinion and the jurisdictional condition in the proviso was not satisfied. Consequently the notice under section 148 and the reassessment order framed under section 147 read with section 143(3) were quashed and the addition of the depreciation amount stood deleted. [Paras 11, 12, 13]

Reopening was invalid; reassessment quashed and the disallowance of depreciation for AY 2010-11 deleted.

Depreciation/diminution in value of investments treated as business expenditure - RBI guidelines on classification and valuation of investments and mark-to-market of held-for-trading/available-for-sale securities - amortization of premium on government securities - Allowability of depreciation (diminution) in the value of investments for Assessment Year 2012-13 - HELD THAT: - The Tribunal held that the assessee, being a bank, was required by RBI directives to classify certain securities as fluid/available-for-sale or held-for-trading and to mark them to market periodically; diminution on valuation dates is debited to profit and loss as depreciation in accordance with the RBI circular on classification and valuation of investments. Precedents, including the Tribunal's prior decision and the Gujarat High Court decision relied upon, support treating such diminution/amortization as allowable business expenditure. The lower authorities erred in disallowing the claim by observing that security-wise valuation or basis was not furnished and by relying on the existence of an investment fluctuation reserve; the Tribunal applied the RBI/CBDT guidance and earlier authorities and directed that the claimed diminution be allowed. [Paras 23, 24, 25]

Depreciation/diminution in value of investments of Rs. 57,95,185 for AY 2012-13 allowed; orders of lower authorities set aside.

Final Conclusion: Both appeals are allowed: the reassessment for AY 2010-11 is quashed and the disallowance of depreciation on investments is deleted; for AY 2012-13 the claimed diminution in value of investments is held allowable and the orders of the authorities below are set aside.

Valuation under Discounted Cash Flow (DCF) method - fair market value under section 56(2)(viib) - prescribed method under Rule 11UA(2)(b) - assessment of share premium based on valuer's report - opportunity to explain / principles of natural justice - remand for fresh consideration

Opportunity to explain / principles of natural justice - assessment of share premium based on valuer's report - Whether the Assessing Officer and the Commissioner (Appeals) gave the assessee adequate opportunity to substantiate and explain the projected cash flows used in the valuation report before making an addition under section 56(2)(viib). - HELD THAT: - The Tribunal found that although the assessee furnished a clarification dated 16.12.2016 explaining the sources and basis of the projected cash flows, neither the Assessing Officer nor the CIT(A) invited or examined the underlying material relied upon by the valuer. The Tribunal observed that valuation involves professional judgment and, where projections are challenged, the adjudicating authority should afford the assessee a proper opportunity to produce and explain the supporting material before rejecting the valuation. For these reasons the Tribunal concluded that the matter required fresh consideration by the Assessing Officer with an opportunity to the assessee to be heard and to produce/verifiy relevant material. [Paras 10]

Findings of the Assessing Officer and CIT(A) to the effect that the projected figures were unverifiable were set aside and the matter was remanded to the Assessing Officer for fresh decision after verification and hearing.

Valuation under Discounted Cash Flow (DCF) method - prescribed method under Rule 11UA(2)(b) - remand for fresh consideration - Whether the valuation of shares by the assessee using the DCF method could be sustained or rejected on merits by the revenue authorities in the absence of verification of projected cash flows and supporting data. - HELD THAT: - The Tribunal noted that the valuation was performed by a chartered accountant using the DCF approach contemplated by the rule relied upon by the assessee, and that the Assessing Officer and CIT(A) recorded objections to the projections but did not examine the primary material supporting those projections. Given the absence of examination of the underlying data and lack of opportunity to the assessee to clarify, the Tribunal declined to adjudicate the correctness of the DCF valuation on merits. Instead, it directed the Assessing Officer to verify all relevant aspects of the valuation method - including the projected cash flows, assumptions, and supporting material - and to arrive at a reasoned conclusion in accordance with law after giving the assessee an opportunity of hearing. [Paras 10]

Merits of the DCF valuation were not finally decided; the issue was remanded to the Assessing Officer for fresh verification and a reasoned decision after affording opportunity to the assessee.

Final Conclusion: The appeal is partly allowed for statistical purposes and the Tribunal remanded the contested valuation issues to the Assessing Officer for fresh consideration and verification of the projected cash flows and other relevant aspects of the valuation, directing that the assessee be afforded a proper opportunity of hearing and that a reasoned conclusion be recorded.

Double Taxation Avoidance Agreement - Article 23(4) - scope of transportation of personnel or materials - presumptive taxation under Section 44BB - treatment of service tax in gross receipts - interest under Section 234B and liability for advance tax

Double Taxation Avoidance Agreement - Article 23(4) - scope of transportation of personnel or materials - Income of the non-resident assessee was taxable under Article 23(4) of the India-Norway DTAA. - HELD THAT: - The Tribunal found the facts of the assessment year identical to those earlier decided in the assessee's own case for A.Y. 2005-06 and agreed with the CIT(A) that Article 23(4) must be read in its entirety, including the limb covering transportation of personnel or materials to an oil drilling site. The Assessing Officer had placed undue reliance on an isolated contractual clause and failed to consider the contract as a whole. In view of the earlier Tribunal decision on identical facts and the proper construction of Article 23(4), the income was held to attract the DTAA treatment. [Paras 7]

Ground No. 1 dismissed; DTAA Article 23(4) benefit allowed to the assessee.

Presumptive taxation under Section 44BB - treatment of service tax in gross receipts - Service tax collected by the assessee is not includible in gross receipts for computation of presumptive income under Section 44BB. - HELD THAT: - Relying on the decision of the Hon'ble Delhi High Court in Mitchell Drilling International (P.) Ltd., the Tribunal agreed that service tax collected by the assessee is not an amount received for rendering services but is collected to be passed on to the Government; therefore it is not part of 'gross receipts' for the purposes of Section 44BB(2) read with Section 44BB(1). The Tribunal held that contrary authorities relied upon by Revenue were distinguishable and the CIT(A)'s deletion of the addition was in consonance with the Delhi High Court precedent and subsequent Tribunal decisions. [Paras 10]

Ground No. 2 dismissed; service tax excluded from gross receipts for computation under Section 44BB.

Interest under Section 234B and liability for advance tax - Assessee is not liable to pay interest under Section 234B. - HELD THAT: - Applying the Uttarakhand High Court decision in Maersk Co. Ltd., the Tribunal held that where tax is required to be deducted at source by the payer, the non-resident payee may not be liable to pay advance tax under Section 208 and consequently not liable for interest under Section 234B. The Tribunal found the CIT(A)'s reliance on Maersk appropriate and that the circumstances did not mandate imposition of interest on the assessee. [Paras 13]

Ground No. 3 dismissed; no interest under Section 234B is payable by the assessee.

Final Conclusion: The Revenue's appeal is dismissed in entirety: DTAA Article 23(4) benefit upheld, service tax excluded from gross receipts for computation under Section 44BB, and no interest under Section 234B payable by the assessee.

Penalty under section 271AAB is discretionary, not mandatory - definition of "undisclosed income" in the Explanation to section 271AAB - distinction between income (inflow) and investment/expenditure (outflow) for penalty purposes - requirement for Assessing Officer to apply mind and arrive at a finding that disclosure qualifies as undisclosed income before imposing penalty - application of sections 274/275 procedural safeguards to penalty under section 271AAB - need for verification of jewellery valuation and year of acquisition before treating it as undisclosed income

Penalty under section 271AAB is discretionary, not mandatory - requirement for Assessing Officer to apply mind and arrive at a finding that disclosure qualifies as undisclosed income before imposing penalty - application of sections 274/275 procedural safeguards to penalty under section 271AAB - Whether imposition of penalty under section 271AAB is automatic on disclosure in a statement under section 132(4) or the Assessing Officer has discretion to impose penalty after considering facts and giving opportunity of hearing. - HELD THAT: - The Tribunal held that section 271AAB uses the expression "may" and, read with sub section (3) which makes sections 274 and 275 applicable "as far as may be", imposes a statutory duty on the Assessing Officer to issue notice, afford an opportunity and apply his mind before directing payment of penalty. Mere disclosure under section 132(4) does not ipso facto convert the disclosure into "undisclosed income" for penalty purposes; the AO must first determine that the disclosure satisfies the definition of "undisclosed income" in the Explanation to section 271AAB and then decide which clause of section 271AAB(1) is attracted and the quantum thereunder. The Tribunal followed and fortified earlier coordinate bench decisions holding that the levy is to be made on merits and is not mandatory or automatic.

Penalty under section 271AAB is discretionary; AO must consider the facts, give opportunity and record a finding that the disclosure constitutes "undisclosed income" before imposing penalty.

Definition of "undisclosed income" in the Explanation to section 271AAB - distinction between income (inflow) and investment/expenditure (outflow) for penalty purposes - Whether amounts surrendered as unaccounted expenditure on various real estate projects (recorded in seized loose papers pertaining to firms/companies) constitute "undisclosed income" of the assessee individually for levy of penalty under section 271AAB. - HELD THAT: - The Tribunal found the seized documents and the statement showed that the recorded expenditures pertained to specific projects of partnership firms/companies in which the assessee was partner/director and not to any business carried on by the assessee in his individual capacity. Entries in loose papers identified particular projects belonging to the firms/companies; some entries were also reflected in those entities' books. Relying on earlier coordinate bench authorities, the Tribunal held that outflows or expenditure entries in seized material do not necessarily represent undisclosed income of the individual; an investment or expenditure is an outflow and cannot be equated with income (inflow) unless the conditions of the Explanation to section 271AAB are satisfied and the AO establishes that the disclosed amount is the assessee's undisclosed income. On these facts the AO failed to establish that the surrendered project expenditure belonged to the assessee personally.

Penalty in respect of the surrendered amount attributable to unaccounted expenditure on real estate projects of firms/companies is not sustainable and is deleted.

Need for verification of jewellery valuation and year of acquisition before treating it as undisclosed income - definition of "undisclosed income" in the Explanation to section 271AAB - Whether the surrender relating to jewellery and silver items found at the assessee's residence/locker qualifies as "undisclosed income" and whether the penalty in respect thereof is sustainable. - HELD THAT: - The Tribunal observed defects in the departmental approach: valuation was done at prevailing rates without ascertaining year of acquisition or actual cost, no adequate enquiry was made to identify personal jewellery of family members or inherited items, and statutory/instructional allowances (e.g., minimum jewellery for female family members) were not applied. Given these lacunae the Tribunal held that the record did not permit a conclusive finding that the jewellery constituted undisclosed income of the assessee for the specified year. Rather than decide finally on merits, the Tribunal directed that the matter be restored to the Assessing Officer for verification of valuation, year of acquisition, status of items as family/stridhan or inherited, and for fresh consideration after affording the assessee opportunity of hearing.

Levy of penalty in respect of jewellery and silver items is set aside and remitted to the Assessing Officer for fresh verification and decision after giving opportunity of hearing.

Definition of "undisclosed income" in the Explanation to section 271AAB - distinction between income (inflow) and investment/expenditure (outflow) for penalty purposes - Whether the surrender of an unspecified amount for "any other irregularity or discrepancy" can form the basis for penalty under section 271AAB in absence of any finding of actual discrepancy or incriminating material. - HELD THAT: - The Tribunal noted there was no material or finding by the Assessing Officer of any discrepancy or irregularity corresponding to the surrendered amount. Following earlier decisions, it held that mere surrender of an amount without supporting incriminating material or a specific finding that it represents undisclosed income cannot ground a penalty under section 271AAB; penalty proceedings are distinct and require a finding that the amount meets the statutory definition of undisclosed income.

Penalty in respect of the surrender made as "any other irregularity or discrepancy" is not sustainable and is deleted.

Final Conclusion: The Tribunal partly allowed the appeal: (a) confirmed that imposition of penalty under section 271AAB is discretionary and requires the AO to apply mind, afford opportunity and record a finding that the disclosure qualifies as "undisclosed income"; (b) deleted the penalty insofar as it related to surrendered unaccounted expenditure attributable to firms/companies and the unspecified surrender for "other discrepancies"; and (c) set aside the penalty relating to jewellery and silver and remitted that issue to the Assessing Officer for verification and fresh decision after giving the assessee an opportunity of hearing.

Penalty under Section 271AAB is discretionary, not mandatory - Mere surrender in statement under Section 132(4) does not ipso facto attract penalty under Section 271AAB - Definition of "undisclosed income" in Section 271AAB requires income represented by inflow/entries or corresponding asset and does not include mere outflow/investment - Provisions of Sections 274 and 275 require issuance of show cause notice and opportunity of hearing before imposing penalty under Section 271AAB - Valuation and year of acquisition are material for treating jewellery as undisclosed income

Penalty under Section 271AAB is discretionary, not mandatory - Provisions of Sections 274 and 275 require show cause notice and opportunity before imposing penalty under Section 271AAB - Whether levy of penalty under Section 271AAB is automatic/mandatory upon disclosure in statement under Section 132(4) or is a discretionary exercise of the Assessing Officer - HELD THAT: - The Tribunal analysed the language of Section 271AAB, noting it begins with the phrase 'the Assessing Officer may direct' and that sub-section (3) makes Sections 274 and 275 applicable 'as far as may be'. The statutory scheme therefore requires the AO to issue a show cause notice, consider the assessee's explanation and apply mind before imposing penalty. The mere fact of an admission in a statement under Section 132(4) does not automatically render the disclosure 'undisclosed income' for penalty purposes; the AO must first arrive at a finding that the disclosed amount falls within the statutory definition of 'undisclosed income' and then determine which clause of Section 271AAB applies and the appropriate quantum. The Tribunal followed its earlier coordinate decisions holding that imposition of penalty under Section 271AAB is to be determined on merits of each case and is not mandatory or merely consequential to surrender. [Paras 6]

Levy of penalty under Section 271AAB is discretionary; AO must apply Sections 274/275 procedures and reach a reasoned conclusion before imposing penalty.

Definition of "undisclosed income" in Section 271AAB requires income represented by inflow/entries or corresponding asset and does not include mere outflow/investment - Mere surrender in statement under Section 132(4) does not ipso facto attract penalty under Section 271AAB - Whether the surrender of amounts representing unaccounted expenditure on real estate projects (recorded in seized loose papers relating to firms/companies) constitutes the assessee's 'undisclosed income' under the Explanation to Section 271AAB - HELD THAT: - On consideration of the seized material and statements, the Tribunal found the entries of unaccounted expenditure were identifiable as pertaining to specific projects of partnership firms and companies in which the assessee was partner/director, and not to the assessee in his individual capacity. Some entries were also reflected in the books of the relevant company. The Tribunal followed its earlier decisions holding that expenditure entries and investments (outflows) recorded in seized documents do not ipso facto represent 'undisclosed income' as defined in Section 271AAB unless a corresponding income inflow or asset in the assessee's individual hands is established. Where the documentary evidence attributes the entries to the firms/companies, a surrender recorded for convenience in the assessee's individual name cannot be treated as the assessee's undisclosed income for levy of penalty. [Paras 6]

Penalty in respect of surrender of Rs. 5,17,32,630 (unaccounted expenditure on projects) is not sustainable and is deleted.

Mere surrender in statement under Section 132(4) does not ipso facto attract penalty under Section 271AAB - Definition of "undisclosed income" in Section 271AAB requires evidentiary foundation showing undisclosed income in the assessee's hands - Whether the surrender of amount on account of 'any other irregularity or discrepancy' (Rs. 50 lacs) can be treated as undisclosed income for levy of penalty under Section 271AAB where no discrepancy was found by the department - HELD THAT: - The Tribunal observed there was no material or finding by the AO or during search/assessment establishing any discrepancy or irregularity corresponding to the surrender. Following coordinate decisions, the Tribunal held that in absence of such material a generalized surrender on account of 'other discrepancies' cannot form the basis for penalty under Section 271AAB, which requires specific satisfaction that the amount qualifies as 'undisclosed income' as defined in the Explanation. [Paras 6]

Penalty in respect of the Rs. 50 lacs surrender is not sustainable and is set aside.

Valuation and year of acquisition are material for treating jewellery as undisclosed income - Mere presence of jewellery at search without provenance or year-of-acquisition proof cannot automatically constitute 'undisclosed income' under Section 271AAB - Whether the surrender attributed to jewellery and silver items found at the assessee's residence/locker qualifies as undisclosed income under Section 271AAB and whether penalty in respect thereof can be sustained without ascertaining valuation and year of acquisition - HELD THAT: - The Tribunal noted the assessee produced some bills but could not substantiate part of the jewellery. The AO adopted current market valuation without establishing year of acquisition or distinguishing inherited or family members' jewellery. The Tribunal emphasised the need to apply recognized instructions (CBDT) and to consider reasonable allowances for family members' personal jewellery (stridhan etc.), and that valuation should reflect cost/price at year of acquisition or other appropriate basis rather than blanket current rates. Because these factual aspects were not verified by the AO and the penalty orders were silent on incorrect valuation and timing of acquisition, the Tribunal concluded that the matter required further verification and consideration. [Paras 6]

Penalty in respect of surrender attributed to jewellery and silver items is set aside and remitted to the AO for fresh verification and decision after giving opportunity to the assessee.

Final Conclusion: The Tribunal held that imposition of penalty under Section 271AAB is discretionary and not automatic; it deleted the penalty insofar as the surrender relating to unaccounted expenditure on projects and the generalized Rs.50 lakh surrender, and remitted the issue concerning jewellery/silver valuation and year of acquisition to the Assessing Officer for fresh verification and decision after providing the assessee an opportunity of hearing. The appeal is partly allowed.

Deduction under section 80IA(4)(i) - infrastructure facility - derived from - operation and maintenance - housing or other activities being an integral part of the highway project

Deduction under section 80IA(4)(i) - infrastructure facility - derived from - housing or other activities being an integral part of the highway project - operation and maintenance - Entitlement to deduction under section 80IA(4)(i) of the Income-tax Act for the projects/developments carried out by the assessee for the assessment years 2005-06, 2006-07, 2008-09 and 2009-10. - HELD THAT: - The Tribunal examined whether the assessee's receipts were profits "derived by an undertaking or an enterprise from any business" referred to in subsection (4) of section 80IA. The record and P&L showed that the assessee's principal receipts in the relevant years were from sale of land and flats and other non-infrastructure receipts, and not income directly derived from developing, operating and maintaining an infrastructure facility as contemplated by sub-section (4). The explanation to clause (i) requires that housing or other activities qualify only when they are an integral part of a highway project; such activities cannot be read in isolation. The assessee did not produce material to show that the New Town project formed an integral part of a highway project nor otherwise demonstrate that profits were directly derived from an eligible infrastructure business. The coordinate Bench's earlier remand required the assessee to furnish details to substantiate the claim; the assessee failed to place such particulars before the Assessing Officer. In light of the above and having regard to the purposive scope of section 80IA (which aims to encourage private investment in infrastructure projects where income is derived from those projects), the findings of the AO and the CIT(A) that the claim was not tenable were affirmed. [Paras 21, 22, 23, 24, 25]

The claim for deduction under section 80IA(4)(i) is rejected and the appeals on this ground are dismissed.

Final Conclusion: All four appeals for AYs 2005-06, 2006-07, 2008-09 and 2009-10 are dismissed; the claim for deduction under section 80IA(4)(i) was held not allowable on the facts and material on record.

Deduction under section 10A - proviso preserving unexpired period entitlement - effect of amendment by substitution - Individual Quick Freezing (IQF) and manufacture/production distinction - remand for computation to the Assessing Officer

Deduction under section 10A - proviso preserving unexpired period entitlement - Individual Quick Freezing (IQF) and manufacture/production distinction - Whether the assessee is entitled to deduction under section 10A for the unexpired period including exports involving IQF where the assessee had claimed and the Assessing Officer had allowed section 10A prior to its amendment - HELD THAT: - The High Court directed that where an undertaking had been granted deduction under the pre amendment provision, the proviso to the substituted subsection preserves entitlement for the unexpired period of ten consecutive assessment years. The Tribunal had held in principle that the assessee was eligible for section 10A for AY 2002-2003 but stated that deduction could not be granted if it related to IQF. That statement is contrary to the High Court's directive. The High Court's reasoning, as applied to the assessee's own earlier decisions, establishes that continuation of the deduction for the unexpired period is available to assessees who had enjoyed the benefit prior to substitution, and such continuation is not to be negated merely because the activity involves IQF. Consequently the Tribunal's observation denying section 10A for IQF during the unexpired period was an error apparent from the record and is corrected to conform with the High Court's view that the proviso preserves the unexpired period entitlement even for IQF where the pre amendment allowance existed.

Tribunal's observation that section 10A cannot be granted for IQF during the unexpired period is an error; assessee is entitled to deduction under section 10A for the unexpired period (including IQF) provided the claim was made and allowed prior to amendment.

Remand for computation to the Assessing Officer - deduction under section 10A - Direction as to further proceedings for quantification of section 10A deduction - HELD THAT: - Having held that the assessee is entitled to the benefit for the unexpired period in accordance with the proviso, the Tribunal (following the High Court) directed that the Assessing Officer compute the deduction for the unexpired period of ten consecutive assessment years as per the unamended provision. The order therefore requires the Assessing Officer to carry out the quantification and computation in accordance with the clarified legal position and to ensure there is no impermissible overlap with other deductions.

Matter remanded to the Assessing Officer to compute the section 10A deduction for the unexpired period of ten consecutive assessment years in accordance with the unamended provision and the High Court's directions.

Final Conclusion: The Miscellaneous Petition is allowed for statistical purposes: the Tribunal's contrary observation on IQF is set aside and the Assessing Officer is directed to compute deduction under section 10A for the unexpired period of ten consecutive assessment years (including claims relating to IQF) where the claim was made and allowed prior to the amendment.

Reopening of assessment and reassessment - addition under section 68 in respect of share capital - proof of identity, creditworthiness and genuineness of share capital - failure to consider evidence by appellate authority - remand for de novo adjudication - liberty to lead fresh evidence and raise additional grounds - stay petitions rendered infructuous

Failure to consider evidence by appellate authority - proof of identity, creditworthiness and genuineness of share capital - addition under section 68 in respect of share capital - reopening of assessment and reassessment - remand for de novo adjudication - Whether the matter should be remanded to the Commissioner (Appeals) for fresh adjudication because the appellate order did not consider material evidence on identity, creditworthiness and genuineness of foreign investment and proceeded to rely on precedent. - HELD THAT: - The Tribunal found that the ld. CIT(A) proceeded to dispose of the appeal without considering documentary evidence and submissions placed before the Assessing Officer and also documents furnished before the ld. CIT(A) on request, which were relevant to identity, creditworthiness and genuineness of the Mauritius shareholder and the share capital. The Tribunal recorded the existence on record of documents including PAN and address details, Form FCGPRs and related incorporation, tax residence and audited financial statements of the foreign shareholder, return of allotment filed with the Registrar of Companies, and bank statements of both the Mauritius shareholder and the assessee. Because these materials were not examined by the ld. CIT(A) and no findings were given on their merits, the Tribunal considered that in the interest of justice the appeal must be remitted for de novo adjudication. The assessee was permitted to file additional grounds and fresh evidence and to be given a reasonable opportunity of hearing. The Tribunal applied the same conclusion to both assessment years. [Paras 5]

Remitted to the file of the ld. CIT(A) for de novo adjudication on merits, with liberty to the assessee to raise additional grounds and file fresh evidence; same direction to apply for A.Y.2009-10.

Stay petitions rendered infructuous - Whether the pending stay applications should be retained after the appeals were remitted. - HELD THAT: - Having remitted the substantive appeals to the ld. CIT(A) for fresh adjudication, the Tribunal observed that the stay applications arising from those appeals had become infructuous. No substantive determination on the merits of stay was required once the appeals were directed to be reconsidered afresh by the Commissioner (Appeals). [Paras 6]

Stay petitions are dismissed as infructuous.

Final Conclusion: The appeals are remitted to the ld. CIT(A) for de novo adjudication on the merits with liberty to the assessee to file additional grounds and fresh evidence; the same direction applies to both assessment years A.Y.2008-09 and A.Y.2009-10. The related stay petitions are dismissed as infructuous; the appeals are allowed for statistical purposes.

Preimport condition - Advance Authorisation Scheme - ultra vires - reasonableness - quashing of proceedings

Preimport condition - Advance Authorisation Scheme - ultra vires - quashing of proceedings - Validity of the "preimport" condition imposed by Notification No.33/2015-2020 dated 13.10.2017 and the condition (xii) inserted by Notification No.79/2017 dated 13.10.2017, insofar as they apply to imports under Advance Authorization Licences. - HELD THAT: - The challenge to the Notifications imposing a preimport condition on imports under the Advance Authorisation Scheme was resolved by reference to the Division Bench decision in Messrs Maxim Tubes Company Pvt. Ltd. v. Union of India, in which the preimport condition and the inserted clause (xii) were held to be ultra vires the scheme of Advance Authorisation as encapsulated in the Foreign Trade Policy, 2015-2020 and the Handbook of Procedures because they did not meet the test of reasonableness. Given that the impugned Notifications were struck down in that decision, there remained no live controversy for this Court to adjudicate; the consequence being that proceedings initiated for alleged violation of the preimport condition cannot be sustained.

The impugned preimport condition and the inserted clause (xii) were treated as ultra vires the Advance Authorisation Scheme; consequently, proceedings based on those conditions do not survive.

Final Conclusion: The writ petition was disposed of as infructuous in view of the Division Bench decision striking down the preimport condition as ultra vires the Advance Authorisation Scheme; consequential proceedings arising from the impugned condition cannot be sustained.

Jurisdiction of Show Cause Notice - validating effect of Section 28(11) of the Customs Act, 1962 - retrospective validation - binding precedent - conflict between High Court rulings on Section 28(11) - admission on substantial question of law

Jurisdiction of Show Cause Notice - validating effect of Section 28(11) of the Customs Act, 1962 - binding precedent - Whether the Show Cause Notice dated 9th October 2003 issued by the Additional Director General of DRI is without jurisdiction in light of the decision in Commissioner of Customs v. Sayed Ali, having regard to the validating effect attributed to Section 28(11) of the Customs Act, 1962 by this Court in Sunil Gupta v. Union of India. - HELD THAT: - The admitted substantial question challenges the jurisdictional validity of a Show Cause Notice dated 9.10.2003 in view of Sayed Ali (S.C.). Counsel referred to this Court's decision in Sunil Gupta which construed Section 28(11) as a validating provision that applies also to notices issued under the erstwhile Section 28. A contrary view has been taken by the Delhi High Court restricting the application of the newly inserted sub section to notices under the substituted Section 28 effective 1.4.2011, and the point is pending before the Supreme Court. Having regard to the earlier decision of this Court in Sunil Gupta, the bench concluded that, prima facie, the issue stands concluded by that binding precedent and is therefore determinative for purposes of admission. Consequential directions were given to list this appeal along with other similar matters for final disposal on 28th June 2019 so that the consolidated matters may be considered together. [Paras 2, 4, 5]

Appeal admitted on the formulated substantial question; prima facie bound by this Court's decision in Sunil Gupta that Section 28(11) has validating effect and therefore the challenge to jurisdiction is concluded for the purposes of admission; matter listed for directions and final disposal on 28th June 2019.

Final Conclusion: The appeals are admitted on the substantial question identified; the bench records that, prima facie, this Court's decision in Sunil Gupta binds on the validating effect of Section 28(11), and the matters are directed to be listed for final disposal on 28th June 2019 along with other similar matters.

Writ jurisdiction to quash show-cause notice - Exercise of discretion under Article 226 in revenue matters - Limitation and reasonable time - Adjudication of show-cause notice after preliminary limitation determination - Exceptions permitting quashing of show-cause notice (lack of jurisdiction, settled law reopened, mala fides, pre-determination)

Writ jurisdiction to quash show-cause notice - Exercise of discretion under Article 226 in revenue matters - Whether the High Court should quash the impugned show-cause notice at the pre-adjudication (SCN) stage. - HELD THAT: - The Court applied settled principles that writ jurisdiction under Article 226 is discretionary and ordinarily a High Court should not quash a show-cause notice or charge-sheet at the notice stage. Interference is permissible only in rare and exceptional circumstances such as absence of jurisdiction, reopening of a settled position of law, palpable mala fides, or clear pre-determination by the authority. On the facts of this petition, none of those exceptional circumstances is established. The court therefore declined to exercise its discretion to quash the impugned show-cause notice and corrigendum at the SCN stage, preferring that the statutory adjudicatory process be allowed to run its course. [Paras 15, 16, 17, 18]

The writ petition seeking quashing of the impugned show-cause notice is refused and the SCN and corrigendum are not set aside at this stage.

Limitation and reasonable time - Adjudication of show-cause notice after preliminary limitation determination - Procedure to be followed regarding the limitation defence raised against the impugned notice. - HELD THAT: - Although the petitioner contends that the SCN is time-barred and relied on the principle that, where no statutory period is prescribed, powers must be exercised within a reasonable time, the Court observed that what constitutes a reasonable period is fact-sensitive. Rather than resolve the limitation question on writ, the Court directed that the authority must decide the limitation point as the first step in the adjudication. The authority was required to consider and decide the limitation objection while completing the adjudication, and to do so within a stipulated timeframe so that the question is determined in the statutory proceedings rather than by pre-emptive writ relief. [Paras 8, 9, 11, 18, 19]

Limitation is to be determined by the adjudicating authority first in the statutory proceedings; the authority is directed to decide the SCN (including the limitation issue) within the time-frame ordered by the Court.

Adjudication of show-cause notice after preliminary limitation determination - Directions as to conduct and timeline of further proceedings on the impugned show-cause notice. - HELD THAT: - The Court directed procedural steps to ensure expeditious adjudication: the petitioner to file further response with supporting documents within a fortnight; the respondent to adjudicate the SCN (deciding the limitation point first) within one month of receipt of the objections; and to serve a copy of the adjudication order on the petitioner within 10 working days. The Court clarified that the limitation decision need not be a separate order but must be addressed within the same adjudicatory process, and that the proceedings will continue irrespective of whether the limitation decision goes against the petitioner. [Paras 18, 19]

The Court directed filing of response, adjudication within one month (with limitation decided first), and service of the adjudication order within 10 working days; the writ petition is disposed subject to these directions.

Final Conclusion: The petition to quash the show-cause notice and corrigendum is refused; the matter is remitted to the adjudicating authority to decide the limitation objection first and to complete adjudication within the time-frame prescribed by the Court, with the petitioner permitted to file a response and the authority to communicate its order to the petitioner thereafter.

Waiver of production of Bill of Export for supplies to SEZ - acceptance of alternative documentary evidence to establish exports to SEZ - relaxation under para 2.5 of the Foreign Trade Policy 2009-2014 - redeemption of EPCG licence on discharge of export obligation - placement on Denied Entity List consequent to non-redemption of EPCG licence

Waiver of production of Bill of Export for supplies to SEZ - acceptance of alternative documentary evidence to establish exports to SEZ - relaxation under para 2.5 of the Foreign Trade Policy 2009-2014 - Whether absence of Bill of Export alone can lead to denial of benefit of exports made to SEZ where exports are otherwise evidenced and the EPCG Committee may grant relaxation under para 2.5 - HELD THAT: - The Court held that non-availability of the Bill of Export by itself will not result in denial of the benefit of exports made to an SEZ when the supplies are evidenced by other contemporaneous documents. The judgment follows this Court's earlier decision in Larsen & Toubro Limited and subsequent same-bench decisions, which were upheld by dismissal of the Special Leave Petition, establishing finality. The EPCG Committee's minutes which refused to treat supplies to SEZ as exports solely for want of Bill of Export were set aside. The Court noted the Committee's power under para 2.5 of the Foreign Trade Policy 2009-2014 to grant relief or relaxation on grounds of genuine hardship and that the factual difference that the supplies in the present case had nexus with import of capital goods did not affect entitlement to relaxation. The petitioner's revised ANF-5B was on record and the sole objection in the deficiency letter related to the Bill of Export; accordingly, the absence of Bill of Export could not sustain refusal to accept SEZ supplies as export fulfilment for redemption of the EPCG licence.

Impugned minutes of the EPCG Committee dated 29th August, 2018 are set aside to the extent they denied export benefit for supplies to SEZ due solely to absence of Bill of Export; absence of Bill of Export alone will not displace other contemporaneous evidence of export.

Redeemption of EPCG licence on discharge of export obligation - placement on Denied Entity List consequent to non-redemption of EPCG licence - Remedial consequences flowing from acceptance of exports to SEZ on other evidence and grant of relief - HELD THAT: - Having directed that absence of Bill of Export alone cannot defeat recognition of SEZ supplies as exports, the Court granted relief in terms of the prayers - quashing the impugned EPCG Committee decision, directing acceptance of the petitioner's submitted documents for purposes of discharge of export obligation, enabling issuance of Export Obligation Discharge Certificate and redemption of the EPCG licence, removal of the petitioner from the Denied Entity List, and permitting the petitioner to apply for fresh authorisations under the Foreign Trade Policy. The Court proceeded to final disposal at admission as the parties agreed the issue was concluded by existing precedent.

Petition allowed; respondent directed to accept the petitioner's documentary evidence, issue export obligation discharge certificate, redeem the EPCG licence, remove the petitioner from the Denied Entity List and permit fresh applications.

Final Conclusion: The writ petition is allowed: the EPCG Committee's decision refusing to treat supplies to SEZ as exports for lack of Bill of Export is set aside; the respondents are directed to accept the petitioner's documentary evidence, redeem the EPCG licence, issue export obligation discharge certificate, remove the petitioner from the Denied Entity List and permit further applications under the Foreign Trade Policy.

Dissolution of Corporate Debtor - Liquidator entitlement to liquidation costs and remuneration - Proportionate contribution by stakeholders/secured creditors - Final Report under the IBBI (Liquidation Process) Regulations - Relief and discharge of Liquidator - Communication to Registrar of Companies

Dissolution of Corporate Debtor - Final Report under the IBBI (Liquidation Process) Regulations - Dissolution of M/s. SKC Retail Limited upon filing of the Final Report and winding up of affairs. - HELD THAT: - The Tribunal considered the Liquidator's Final Report prepared under Regulation 45 and Section 35 of the Code and noted that the Corporate Debtor had ceased carrying on business, statutory and financial records were not made available by promoters/directors, no assets were discoverable, and no realizable funds remained. On the basis of the material in the application, the Final Report and the factual findings regarding absence of assets and inability to carry forward liquidation realizations, the Tribunal exercised its power under Section 54(2) of the Insolvency and Bankruptcy Code, 2016 to order dissolution of the Corporate Debtor from the date of the order. [Paras 10, 12, 14]

The Corporate Debtor, M/s. SKC Retail Limited, is dissolved with effect from the date of the order.

Liquidator entitlement to liquidation costs and remuneration - Proportionate contribution by stakeholders/secured creditors - Liquidator is entitled to liquidation costs including remuneration, to be paid by secured creditors/stakeholders in proportion to their lending ratio. - HELD THAT: - The Liquidator submitted a claim for liquidation costs and remuneration, supported by the Final Report indicating no assets available in the Corporate Debtor to meet such costs. Relying on the Liquidator's filings and the prior directions regarding CoC contributions, the Tribunal held that the Liquidator is entitled to the claimed liquidation costs. The Tribunal directed secured creditors and other stakeholders to pay the liquidation costs to the Liquidator in proportion to their claims/lending ratio, thereby allocating payment responsibility among stakeholders where estate assets are insufficient or absent. [Paras 6, 11, 16]

Liquidation costs including the Liquidator's remuneration are payable to the Liquidator and shall be borne by the secured creditors/stakeholders in proportion to their lending ratio.

Relief and discharge of Liquidator - Communication to Registrar of Companies - Liquidator is relieved of his duties consequent to dissolution and directed to send the order to the Registrar of Companies. - HELD THAT: - On ordering dissolution of the Corporate Debtor, the Tribunal recorded that the Liquidator stands relieved. The Tribunal further directed the Liquidator and Registry to send a copy of the dissolution order to the Registrar of Companies with which the Corporate Debtor is registered within seven days, ensuring administrative compliance with the dissolution order. [Paras 14, 15]

The Liquidator is relieved; a copy of the order shall be sent to the Registrar of Companies within seven days.

Final Conclusion: The Tribunal accepted the Liquidator's Final Report, ordered dissolution of M/s. SKC Retail Limited, relieved the Liquidator, directed transmission of the order to the RoC, and held that liquidation costs including the Liquidator's remuneration are payable by secured creditors/stakeholders in proportion to their lending ratio.

Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - notice and representation of the corporate debtor at admission proceedings - rights of operational creditors at the stage of admission - obligation to complete the resolution process within the stipulated period - duties of the resolution professional and the committee of creditors to cooperate in the resolution process

Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - notice and representation of the corporate debtor at admission proceedings - Validity of the Adjudicating Authority's order admitting the Section 7 application filed by the financial creditor - HELD THAT: - The Adjudicating Authority's admission of the Section 7 petition was sustained because notice had been issued to the corporate debtor and senior counsel along with another advocate appeared and were heard on multiple occasions before the Adjudicating Authority. The Tribunal found the appellants' contention that the corporate debtor had not been given notice to be unfounded in view of the record of representation and hearings conducted prior to passing the impugned order.

The admission order dated 1st November, 2018 was not interfered with.

Rights of operational creditors at the stage of admission - Whether operational creditors are entitled to be heard at the time of admission of a Section 7 application - HELD THAT: - The Tribunal held that claims of operational creditors are to be considered by the resolution professional once admitted; operational creditors do not have a right to be heard at the stage of admission of the Section 7 application unless their claims have been admitted and are required to be considered in the insolvency process.

Operational creditors have no right to be heard at the admission stage; their claims are to be considered subsequently by the resolution professional.

Obligation to complete the resolution process within the stipulated period - duties of the resolution professional and the committee of creditors to cooperate in the resolution process - Direction regarding conduct and timeline of the resolution process following admission - HELD THAT: - The Tribunal directed that the Adjudicating Authority is expected to ensure completion of the resolution process in accordance with law within the stipulated period. The resolution professional and the committee of creditors were enjoined to cooperate to facilitate the success of the resolution process, reflecting the court's supervisory expectation that timelines and cooperative conduct be observed post-admission.

The Adjudicating Authority must complete the resolution process within the stipulated period and the resolution professional and committee of creditors shall cooperate to ensure its success.

Final Conclusion: Appeals dismissed; impugned order admitting the Section 7 application is upheld, operational creditors' claims to be considered post-admission by the resolution professional, and directions issued to complete the resolution process within the stipulated period with cooperation from the resolution professional and the committee of creditors.

Suppression of facts with intent to evade - proviso to Section 73(1) - invocation of extended period of limitation - penalty for deliberate suppression under Section 78 - interest for delayed payment under Section 75 - personal liability of director under Section 78A and failure to furnish information under Section 77C - appropriation of amounts already deposited / adjustment of CENVAT credit

Proviso to Section 73(1) - invocation of extended period of limitation - suppression of facts with intent to evade - Confirmation of demand of service tax on receipts from booking/sale of flats for the period July 2010 to March 2014 - HELD THAT: - The Tribunal affirmed the Original Authority's finding that the assessee collected service tax but did not deposit the same on the due dates. The record (Annexure A) shows substantial tax liabilities remained unpaid or were discharged belatedly and partly through CENVAT credit, with payments made well after the prescribed due dates. Registration in June 2011 did not negate the Department's finding of omission during the earlier period and the pattern of non-payment and delayed payments supported the conclusion of suppression with intent to evade. Reliance placed on decisions by the appellant was examined and rejected as distinguishable on facts (e.g., earlier payments with interest or different factual matrices). In view of the proven suppression and delay, invocation of the proviso to Section 73(1) for extended period assessment was sustained and the demand was confirmed.

Demand of service tax on receipts from booking/sale of flats for July 2010 to March 2014 confirmed.

Taxability of advances - proviso to Section 73(1) - invocation of extended period of limitation - Confirmation of demand of service tax on amounts treated as advances/receipts for the period July 2010 to March 2014 - HELD THAT: - The Tribunal upheld the Original Authority's conclusion that sums shown in balance sheets as advances were taxable and that the assessee had failed to discharge tax on those amounts in time. The adjudicating authority's reliance on available records (including balance sheet entries) to characterize those receipts as taxable advances was accepted. The appellant's contention that such amounts were loans was not accepted on the material before the Authority. Consequently, the demand under the proviso to Section 73(1) was sustained.

Demand of service tax on advances/receipts for July 2010 to March 2014 confirmed.

Interest for delayed payment under Section 75 - Confirmation of interest for delayed payment of service tax - HELD THAT: - The Tribunal observed that interest on delayed payment was not discharged before issuance of the show cause notice. The payment pattern showed interest was not paid on due dates and therefore the appellant could not escape liability for interest. Distinguishing the decisions cited by the appellant, the Tribunal held that where interest remained unpaid at the time of SCN, the authority was justified in confirming interest under Section 75.

Interest for delayed payment confirmed.

Penalty for deliberate suppression under Section 78 - Imposition of penalty on the company for deliberate suppression with intent to evade service tax - HELD THAT: - The Tribunal found the Original Authority's conclusion of deliberate suppression to be supported by the record of non-payment and delayed payment of service tax and the failure to file returns timely. The pattern of conduct, including not depositing collected tax on due dates and not paying interest timely, was held to establish intention to evade. The Tribunal therefore did not interfere with the penalty imposed under Section 78.

Penalty under Section 78 imposed on the company upheld.

Personal liability of director under Section 78A - failure to furnish information / production of documents under Section 77C - Imposition of personal penalties on the director under Section 78A and under Section 77C - HELD THAT: - The Tribunal accepted the Original Authority's finding that the director was in charge of and responsible for conduct of the company's business and was knowingly concerned in the acts of omission and commission. The Authority also recorded failures to furnish information and to appear when called, supporting penal provisions. The Tribunal found no merit in the appellant's challenge that the director's role was not shown and therefore sustained the personal penalties imposed under the cited provisions.

Personal penalties on the director under Section 78A and Section 77C upheld.

Appropriation of amounts already deposited / adjustment of CENVAT credit - Appropriation of amounts already deposited and adjustment of CENVAT credit against the confirmed demand - HELD THAT: - The Original Authority appropriated the amounts the assessee had deposited, including debits to CENVAT account, against the confirmed demand. The Tribunal noted that payments made were partial and belated and that appropriation by the Authority was within its powers in view of the confirmed demand and the payment history.

Appropriation of amounts already deposited (including CENVAT debits) against the confirmed demand sustained.

Final Conclusion: Both appeals are dismissed. The Tribunal upholds the Order in Original in all material respects, confirming the demands of service tax (including on advances), interest for delayed payment, appropriation of amounts deposited, and the penalties imposed on the company and the director for the period July 2010 to March 2014.

Unjust enrichment - deposit under protest - refund of amounts deposited during investigation - incidence of tax passed on to recipient - payment to the credit of the Central Government under Section 73A - recovery and interest under Section 73A and Section 73B

Unjust enrichment - deposit under protest - refund of amounts deposited during investigation - Whether refund of the amounts deposited by the assessee during the raid is barred by the doctrine of unjust enrichment. - HELD THAT: - The Tribunal held, and this Tribunal concurs, that amounts deposited during the pendency of adjudication or investigation are in the nature of a deposit made under protest and do not constitute payment of service tax or duty. On the consistent line of authorities cited (including decisions of High Courts and the Tribunal), the principle of unjust enrichment does not apply to refund claims for amounts so deposited. The adjudicating authority and Commissioner(Appeals) erred in directing the sanctioned refund to be credited to the Consumer Welfare Fund on the ground of unjust enrichment. Applying the established legal principle that a pre-deposit during investigation is treated as a deposit under protest, the Appellant is entitled to the refund of the sanctioned amount. [Paras 21, 22]

Refund of Rs. 1,11,36,840/- is allowable because amounts deposited during investigation are deposits under protest and not subject to the bar of unjust enrichment.

Incidence of tax passed on to recipient - payment to the credit of the Central Government under Section 73A - recovery and interest under Section 73A and Section 73B - Whether the Department may examine afresh the allegation that the Appellant collected service tax from customers and recover such amounts, and the procedure to be followed. - HELD THAT: - The Tribunal observed that a separate factual and legal inquiry is necessary to determine whether the Appellant in fact collected 'service tax' from customers (as distinct from 'service charges'). Section 73A (with consequential application of Section 73B) furnishes the statutory mechanism requiring a person who has collected amounts representing service tax to pay them to the credit of the Central Government after issuance of a show cause notice and determination. The Tribunal therefore set aside the Commissioner(Appeals) order only to the extent of directing refund, but left open the Department's right to proceed strictly under Sections 73A and 73B. Any recovery under those provisions must follow the statutory notice, opportunity to the Appellant to prove that amounts were only service charges and not service tax, and determination in accordance with law; earlier findings shall not prejudice the fresh proceedings. [Paras 24, 25, 26, 27, 28]

Department permitted to proceed, if advised, under Sections 73A and 73B by issuing appropriate notice and giving the Appellant an opportunity to prove that no service tax was collected; fresh determination to be made in accordance with law.

Final Conclusion: The Commissioner(Appeals) order dated 29 April 2013 is set aside to the extent it directed deposit of the sanctioned refund into the Consumer Welfare Fund; the Appellant is entitled to refund of Rs. 1,11,36,840/-, to be paid within two months. The Department, however, remains free to initiate recovery proceedings under Sections 73A and 73B (with requisite notice and opportunity) if it concludes that service tax was in fact collected from customers.

Non obstante clause - CENVAT credit - availment versus utilisation - lapsing of CENVAT credit - interpretation and application of Rule 6(3) of the Cenvat Credit Rules, 2004 - substantive right of taxpayer under value added taxation - extended period of limitation - invocation and time-bar

Non obstante clause - CENVAT credit - availment versus utilisation - lapsing of CENVAT credit - interpretation and application of Rule 6(3) of the Cenvat Credit Rules, 2004 - substantive right of taxpayer under value added taxation - Whether a provider of both taxable and exempt services who availed full CENVAT credit prior to 01/06/2007 could utilise 20% for payment of service tax and carry forward the balance without the balance lapsing on amendment of Rule 6 with effect from 01/06/2007 or 01/04/2008 - HELD THAT: - The Tribunal examined Rule 6 as it stood on 01/06/2007 and as amended w.e.f. 01/04/2008. Sub rule (3) of Rule 6 begins with a non obstante clause overriding sub rules (1) and (2) where a provider of output service opts not to maintain separate accounts. The non obstante clause was held to give the options in sub rule (3) an overriding operation and, in that context, the restriction in sub rule (3)(c) is a restriction on utilisation of credit (limiting utilisation to 20% of service tax payable) and not on the availment of credit itself. The Rules contained no provision that an unutilised balance accrued prior to amendment would lapse on the date services became taxable or on the subsequent amendment. The Tribunal therefore held that the accrued CENVAT credit could be carried forward and utilised when the utilisation cap was removed; in absence of a clear statutory prohibition, the substantive right to take and utilise credit cannot be denied. The reasoning accords with earlier Tribunal decisions and renders the question of the existence of a Board circular inconsequential to the legal conclusion that balance credit did not lapse. [Paras 5]

Appellant entitled to carry forward and subsequently utilise the balance CENVAT credit; the balance did not lapse on amendment and the restriction under Rule 6(3)(c) was one of utilisation, not availment.

Extended period of limitation - invocation and time-bar - disclosure in ST-3 returns and prior show cause notices - Whether the department could invoke the extended period of limitation for recovery in respect of the CENVAT credit at issue - HELD THAT: - The Tribunal noted that ST 3 returns (and prior show cause notices issued in 2008 and 2009 concerning excess utilisation) had placed the department on notice regarding the appellant's credit position and utilisation. The appellants had disclosed details in returns and earlier proceedings raised the related issue; accordingly, it was not open to revenue to resurrect the matter on a different premise invoking extended limitation. In these circumstances the show cause notice and the Order in Original did not survive on the ground of time bar. [Paras 5]

Extended period of limitation could not be invoked; revenue's demand is time barred on the facts.

Final Conclusion: Impugned order set aside; appeal allowed and appellants entitled to consequential relief, the accumulated CENVAT credit standing carried forward and utilisable in accordance with the Rules, and the department's recovery being unsustainable on the merits and time bar grounds.

Refund of Cenvat credit - nexus between input and output services - prior allowance of credit and non-challenge by Revenue - entitlement of 100% EOU to refund of unutilized credit - SEZ unit refund claim and applicability of competing notifications - centralized registration and ISD pooling effect on refund admissibility

Refund of Cenvat credit - nexus between input and output services - prior allowance of credit and non-challenge by Revenue - entitlement of 100% EOU to refund of unutilized credit - Whether refund of accumulated unutilized Cenvat credit can be denied on the ground of lack of nexus between input and output services where the credit had earlier been availed following due procedure and without any objection by the Revenue. - HELD THAT: - The Tribunal applied its earlier precedent that credit once permitted to be taken cannot be subjected to a different yardstick at the refund stage; where the assessee validly availed Cenvat credit in accordance with procedure and the Revenue did not challenge the admissibility of that credit at the time of availment, the Revenue cannot raise the nexus objection only when refund of accumulated unutilized credit is claimed. Reliance was placed on the Tribunal's decision in Commissioner of Service Tax v. Convergys India Pvt. Ltd., which was upheld by the High Court, establishing that eligibility for rebate/refund cannot be questioned without first contesting the original grant of credit. On this ground alone the appeals of the assessee were allowed with consequential relief. [Paras 3, 4]

Refund of accumulated unutilized Cenvat credit cannot be denied on nexus grounds where the credit was previously availed without objection; assessee's appeals allowed on this ground.

SEZ unit refund claim and applicability of competing notifications - centralized registration and ISD pooling effect on refund admissibility - Whether refund claimed by an SEZ unit could be denied on the basis that the claim should have been made under a later notification (with a non availment condition) instead of the earlier Notification No.05/2006, when the SEZ unit's credit was availed centrally under a centralized registration and treated as ISD credit. - HELD THAT: - The Tribunal examined the Revenue's contention that the SEZ unit was not entitled to refund under Notification No.05/2006 and should have claimed under Notification No.09/2009 which required non availment of credit. The appellate authority had accepted the assessee's case that registration was centralized in Noida and the input credit was availed at Noida as an ISD; in that factual and legal posture, a denial of refund to the SEZ by treating it as ineligible under Notification No.09/2009 was not justified. The Tribunal followed its earlier decision (Tata Consultancy Service Ltd. v. Commissioner of Central Excise, Mumbai) holding that services used in relation to authorized operations in SEZ are eligible for refund under the statutory refund provisions applicable to service tax and cannot be denied solely because Notification No.09/2009 would have imposed a non availment condition. Consequently Revenue's appeals on this ground were rejected. [Paras 5, 6, 7]

Revenue's objection to SEZ unit refund (that Notification No.09/2009 should apply) rejected; refund admissible where credit was availed centrally and treated as ISD and SEZ services are eligible for refund under the statutory refund regime.

Final Conclusion: All appeals of the assessee allowed and Revenue's appeals rejected: accumulated unutilized Cenvat credit availed without objection must be refunded notwithstanding a late nexus objection, and the SEZ unit's refund claim cannot be denied where credit was centralized and treated as ISD and SEZ services are eligible for refund.

Cenvat Credit reversal - availability of Cenvat Credit on input services received before provision of output services - application of Rule 6(3) of Cenvat Credit Rules, 2004 - confirmation of demand, interest and penalty - reliance on precedent

Cenvat Credit reversal - application of Rule 6(3) of Cenvat Credit Rules, 2004 - confirmation of demand, interest and penalty - reliance on precedent - Validity of confirmation of demand (with interest and penalty) in respect of Cenvat credit which was reversed by the appellant before utilization and whether additional demand under Rule 6(3) could be sustained. - HELD THAT: - The Tribunal accepted the appellant's contention that the relevant issue is covered by the Karnataka High Court decision in Commissioner of Central Excise & Service Tax, Bangalore v. Bill Forge Pvt. Ltd. and set aside the confirmation of demand, interest and penalty in respect of the Cenvat credit amounts which the appellant had reversed before utilizing. The Tribunal further held that an additional demand confirmed under Sub rule (3) of Rule 6 of the Cenvat Credit Rules, 2004 could not be sustained where the Cenvat credit in question had been reversed prior to utilization; consequently the confirmation of that additional amount (and the attendant interest and penalty) was set aside.

Confirmation of demand, interest and penalty in respect of the reversed Cenvat credit and the additional demand under Rule 6(3) was set aside.

Availability of Cenvat Credit on input services received before provision of output services - confirmation of demand, interest and penalty - Sustainability of confirmation of demand for Cenvat credit availed on security and legal services received before commencement of provision of output services. - HELD THAT: - The Tribunal found no provision in the Cenvat Credit Rules, 2004 making it mandatory that provision of output services must be simultaneous with receipt of input services in order to avail Cenvat credit. On that basis the confirmation of demand in respect of the credit availed on security and legal services before the beginning of output services was held not sustainable and was set aside.

Confirmation of demand (with consequential interest and penalty) for the Cenvat credit availed on security and legal services prior to commencement of output services was set aside.

Final Conclusion: The appeal is allowed; the impugned order is set aside insofar as it confirmed demands (and attendant interest and penalty) in respect of the reversed Cenvat credits and the credit availed on input services before commencement of output services, with consequential relief as per law.

Clandestine removal - contemporaneous records - job work / reprocessing - inference of fact from documentary absence - scope of appeal under Section 35G of the Central Excise Act, 1944

Clandestine removal - contemporaneous records - job work / reprocessing - Whether the Tribunal was correct in holding that removal of the goods to the job worker was clandestine despite there being no prescribed procedure or requirement of challan under the rules allegedly applicable at the time. - HELD THAT: - The Court upheld the concurrent finding of the three authorities that the removals amounted to clandestine removal. The inference was not based solely on absence of a challan or prescribed procedural formality; rather it rested principally on the absence of contemporaneous records corroborating that the goods were sent for reprocessing on job work basis. The record showed Kopran maintained organised documentation for materials, production and dispatch but there were no entries in contemporaneous registers (loading Register, Gate outward Register, Returnable Register) relating to the goods in question. The purported cover letter relied upon did not establish that reprocessing actually occurred or that payment terms were agreed or paid. Statements recorded also did not consistently support the appellants' job-work theory. On this material, the Tribunal's factual conclusion that the removals were clandestine was a plausible view and not perverse, and therefore the Court declined to interfere with the factual findings. [Paras 12, 13]

Concurrent factual findings that the goods were clandestinely removed, grounded on absence of contemporaneous documentation and unsatisfactory supporting evidence, are sustainable and will not be disturbed.

Scope of appeal under Section 35G of the Central Excise Act, 1944 - inference of fact from documentary absence - Whether the appeals under Section 35G disclose any substantial question of law warranting interference with the Tribunal's conclusions on facts. - HELD THAT: - The Court observed that the appellate scope under Section 35G is limited and interference with concurrent findings of fact requires demonstration of perversity. The authorities concurrently recorded a plausible view based on the material on record; no perversity was shown. Minor discrepancies in records, where considered alongside the total absence of contemporaneous entries and unsatisfactory corroborative evidence, did not translate into a substantial question of law. The appellants' reliance on absence of a prescribed procedural document was insufficient, by itself, to displace the factual conclusions reached by the three authorities. [Paras 15]

No substantial question of law is raised; the appeals fail for want of any demonstrable perversity in the concurrent findings of fact and are therefore dismissed.

Final Conclusion: The High Court dismissed the appeals, holding that the concurrent factual findings of clandestine removal were supported by the absence of contemporaneous documentary records and unsatisfactory corroborative evidence, and that no substantial question of law arose under Section 35G to warrant interference.

Admissibility of statements in absence of cross-examination - Right to cross-examination of prosecution witnesses - Admissibility of diary when the author is not identified - Reliance on books of account and ledger entries as evidence - Obligation of revenue to investigate transportation and actual receipt of inputs - Disallowance of Cenvat credit for non-receipt of inputs

Admissibility of statements in absence of cross-examination - Right to cross-examination of prosecution witnesses - Admissibility of diary when the author is not identified - Statements recorded by revenue and the diary recovered at residence of partner of the supplier are not admissible evidence for confirming demand where cross-examination was not permitted and the diary's author was not identified. - HELD THAT: - The Tribunal applied the principle in the Allahabad High Court decision relied upon by the parties that, if cross-examination of prosecution witnesses is not permitted, the revenue cannot rely on such statements to confirm demand; accordingly, none of the statements on which the Original Adjudicating Authority relied were admissible. The Tribunal also held that a diary is inadmissible evidence where its author has not been identified and his statement not recorded. The Original Adjudicating Authority's reliance on those untested statements and the unidentified diary therefore could not sustain the demand. [Paras 6]

Statements relied upon by revenue and the diary found at the supplier's partner's residence are inadmissible; they cannot be the basis for confirming the demand.

Reliance on books of account and ledger entries as evidence - Obligation of revenue to investigate transportation and actual receipt of inputs - Disallowance of Cenvat credit for non-receipt of inputs - The impugned demand for alleged inadmissible Cenvat credit was unsustainable because the ledgers, when read together, did not disclose the discrepancies alleged by revenue and revenue failed to investigate material matters such as transporters, destinations and alternative sources of inputs. - HELD THAT: - The Tribunal found that the appellant maintained two ledgers in the regular course of business and that the total goods entered in both ledgers together tallied with receipts recorded in statutory RG-23 records; revenue did not establish any discrepancy between the combined ledger totals and RG-23 entries. Revenue also failed to investigate the alleged non-delivery of a large quantity of inputs - it did not identify transporters, recipients or the destination of the alleged shortfall, nor inquire how the appellant had sourced inputs for manufacture and clearance of finished goods if the supplier's invoices were fictitious. In these circumstances, the Tribunal concluded that the Original Adjudicating Authority could not sustain a demand for disallowance of Cenvat credit on the basis of the material placed before it. [Paras 6, 7]

The demand for disallowance of Cenvat credit and the consequential penalties are unsustainable for lack of admissible evidence and inadequate investigation by revenue.

Final Conclusion: The Tribunal set aside the entire impugned order, allowed all appeals and granted consequential relief to the appellants, holding that the statements and diary relied upon were inadmissible and that revenue's case was not made out due to lack of proper investigation.

CENVAT credit - input service - reverse charge mechanism under Section 66A of the Finance Act, 1994 - Applicability of Rule 9(1)(b) exclusion to supplementary invoices issued by service providers - wilful mis-statement or suppression of facts as bar to credit

CENVAT credit - input service - reverse charge mechanism under Section 66A of the Finance Act, 1994 - Applicability of Rule 9(1)(b) exclusion to supplementary invoices issued by service providers - wilful mis-statement or suppression of facts as bar to credit - Entitlement of the appellant to avail CENVAT credit of service tax paid under reverse charge on overseas sales commission and whether Rule 9(1)(b) precluded such credit on account of alleged wilful mis-statement or suppression. - HELD THAT: - The appellant paid service tax under Section 66A (reverse charge) on commission payable to overseas service providers for the period May 2008 to March 2009 and availed CENVAT credit treating the tax as attributable to an input service. Revenue conceded that the service qualified as an input service but contended that credit was barred by the exception in Rule 9(1)(b) because the tax was paid only after being pointed out, implying wilful mis-statement or suppression of facts. The Tribunal examined the scope of Rule 9(1)(b) and followed the analysis in the Madras High Court decision in CCE Salem v. JSW Steel Ltd., holding that Clause (b) of Rule 9(1) deals with supplementary invoices issued by manufacturers or importers of inputs or capital goods and does not extend to invoices or documents issued by service providers. Consequently the exception in Rule 9(1)(b) which denies credit where additional duty becomes recoverable on account of fraud, collusion or wilful mis-statement/suppression does not apply to the facts where the tax related to an input service paid under the reverse charge mechanism. Further, this Tribunal had previously examined the circumstances and concluded there was no suppression or wilful mis-statement by the appellant in discharging the tax after being pointed out. In light of the legal construction of Rule 9(1)(b) and the factual finding of absence of suppression, denial of CENVAT credit was not justified.

CENVAT credit of Rs. 1,04,53,676/- paid under reverse charge for overseas sales commission is admissible; the impugned order denying credit is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the service tax paid under reverse charge on overseas sales commission qualified as creditable input service, that Rule 9(1)(b) did not bar availment in these facts, and that there was no wilful suppression; the impugned order denying credit was set aside with consequential relief as per law.

Reversal of CENVAT credit attributable to inputs used in relation to exempted final products - Rule 6 of the Cenvat Credit Rules - payment/adjustment mechanism for inputs and input services relating to exempted goods - retrospective amendment to Rule 6 by Section 73 of the Finance Act, 2010 (Rule 6(7)) - penalty under Rule 15(1) of the Cenvat Credit Rules - binding effect of earlier Tribunal decision upheld by High Court and dismissal of SLP

Reversal of CENVAT credit attributable to inputs used in relation to exempted final products - Rule 6 of the Cenvat Credit Rules - payment/adjustment mechanism for inputs and input services relating to exempted goods - retrospective amendment to Rule 6 by Section 73 of the Finance Act, 2010 (Rule 6(7)) - Validity of dropping demand for reversal of CENVAT credit where assessee had reversed credit and relied on Tribunal/High Court decisions and subsequent retrospective amendment. - HELD THAT: - The Tribunal upheld the Commissioner's order dropping the show cause notice because the assessee had already reversed credit (at 25% on the quantity attributed to exempted goods) and the issue was covered by the appellant's own earlier Tribunal decision which had been upheld by the High Court of Gujarat and whose SLP was dismissed by the Supreme Court. Further, the retrospective insertion of sub rule (7) in Rule 6 by Section 73 of the Finance Act, 2010 - made effective from 10th September, 2004 to 31st March, 2008 - provides a statutory mechanism allowing a manufacturer to pay an amount equivalent to credit attributable to inputs/input services used for exempted goods (with prescribed interest) and thus reinforces relief in such cases. The Tribunal relied on these precedents and the statutory amendment to conclude that no merit remained in the Revenue's demand.

Demand for reversal of CENVAT credit was rightly dropped and Revenue's appeal on this point dismissed.

Penalty under Rule 15(1) of the Cenvat Credit Rules - binding effect of earlier Tribunal decision upheld by High Court and dismissal of SLP - Sustainability of penalty proceedings under Rule 15(1) where show cause notice and demand were dropped. - HELD THAT: - Penalty proceedings were disposed of along with the demand because the primary show cause notice was dropped. The Tribunal relied on the assessee's successful reliance on its own earlier decision (upheld by the High Court of Gujarat and not sustained on SLP) and on the retrospective legislative amendment which settled the controversy in favour of the assessee. In those circumstances, penalty could not be sustained.

Penalty proceedings under Rule 15(1) were rightly dropped and Revenue's appeal on the penalty is dismissed.

Final Conclusion: Revenue's appeal against the Commissioner's order dropping the show cause notice and penalty was dismissed: the assessee's reversal of credit, the binding precedents (Tribunal decision affirmed by the High Court with SLP dismissed), and the retrospective amendment to Rule 6 by Section 73 of the Finance Act, 2010 collectively warranted disposal of the demand and penalty in favour of the assessee.

Summary order. Notice issued returnable on 15th July, 2019; interim restraint against coercive recovery of dues arising from the impugned order; liberty to amend granted with amendment to be carried out forthwith.

Liability of legal representative on death of dealer - continuance and discontinuance of business after death - liability under section 57(1)(b) of the Gujarat Value Added Tax Act - operation of section 57(2) regarding partition of HUF property - attachment or charge on third party property for recovery of dealer's dues

Liability under section 57(1)(b) of the Gujarat Value Added Tax Act - attachment or charge on third party property for recovery of dealer's dues - Whether the respondents were justified in creating a charge over the petitioner's property to recover tax dues of M/s. Umiya Oil Industries - HELD THAT: - The court examined subsections (1) and (2) of section 57 of the GVAT Act. Clause (a) of subsection (1) applies where the deceased dealer's business is continued after death; clause (b) applies where the business is discontinued and makes the legal representative liable to the extent of the estate of the deceased. Subsection (2) deals with partitioned HUF property. In the present case the business was discontinued after the proprietor's death, so clause (a) is inapplicable and clause (b) applies only to recovery out of the deceased's estate. The respondents did not seek recovery from the dealer or his estate but from the petitioner's own property, and no material was produced to show any proprietary interest of the deceased in that property. Subsection (2) is irrelevant since it concerns partition among HUF members. Consequently there is no statutory power under section 57 to create a charge on the petitioner's independently owned property for the dealer's dues, and continuance of appellate proceedings by the dealer does not convert the petitioner's property into liable estate under clause (a). [Paras 11, 12, 13, 14]

The charge on the petitioner's property for recovery of M/s. Umiya Oil Industries' tax dues is without authority of law and unsustainable.

Final Conclusion: Petition allowed. The respondents are directed to delete/withdraw the charge entered over the petitioner's property (Survey No.71, Gambhirpura, Taluka Idar, District Sabarkantha) created for recovery of the tax dues of M/s. Umiya Oil Industries; rule made absolute with no order as to costs.

Refund of tax deposited under protest - character of predeposit versus payment of tax - crystallisation of tax liability by self-assessment or assessment - retention of public funds without authority of law under Article 265 - expiry of time limits for reassessment/revision under the GVAT Act

Refund of tax deposited under protest - crystallisation of tax liability by self-assessment or assessment - expiry of time limits for reassessment/revision under the GVAT Act - retention of public funds without authority of law under Article 265 - Whether the amount deposited by the petitioners under protest for the year 2006-2007 is liable to be refunded with interest where no assessment, reassessment or revision order fixing tax liability was passed and the statutory time-limits for reassessment/revision have expired. - HELD THAT: - The court found that the petitioners deposited the amount under protest and no return constituting self-assessment was filed for 2006-2007, nor has any assessment, reassessment under section 35 or revision under section 75 of the GVAT Act been passed in respect of that year. Tax liability can be said to be crystallised only by self-assessment or by an assessment order; in absence of either, the deposit remains a trust-like deposit held by the government. The time-limits for reassessment/revision in relation to the 2006-2007 assessment have expired and therefore there is no legal authority to retain the amount. Retention of the deposit without statutory authority would amount to collection of money without authority of law, contrary to Article 265 of the Constitution. Applying these principles and having regard to the petitioners' application for refund made within limitation, the court concluded that the deposit must be refunded and that interest should be awarded from the date specified in the petitioners' refund application period. [Paras 13, 20, 21]

The respondents are directed to refund the amount deposited under protest for 2006-2007 with simple interest at 6% per annum from 11.11.2015; the refund shall be completed by 31.7.2019.

Final Conclusion: Writ petition allowed: the amount deposited under protest for 2006-2007 is to be refunded with simple interest at 6% per annum from 11.11.2015; respondents to complete refund by 31.7.2019.