TaxTMI Updates e-Newsletter
Jun 27,2019

Taxability of liquidated damages and forfeited security deposits as consideration - exemption for services provided by government entities - renting of immovable property - input tax credit - used or intended to be used in course or furtherance of business - blocked credits and exempt supplies (Section 17) - e-way bill exemption for defence formations - exemption for transport of defence or military equipment by GTA - reversal of ITC on goods lost, stolen or destroyed - proviso to section 16(2) - reversal where recipient fails to pay within 180 days - applicability of notifications granting nil-rate or reverse-charge consequences to government/PSU entities

Taxability of liquidated damages and forfeited security deposits as consideration - exemption for services provided by government entities - Whether GST is payable by the applicant on liquidated damages deducted and on security deposits forfeited by the applicant - HELD THAT: - The Authority examined Notification No.12/2017 (Sr. No. 62) which exempts services provided by the Central/State Government by way of tolerating non-performance of a contract. The Authority found that the applicant (Ordnance Factory Bhandara) has industrial status and is not ''Government'' as defined in section 2(53) of the CGST Act. Consequently, the applicant cannot claim the government exemption. The Authority further held that forfeited security deposits constitute additional consideration arising from the supply and are includible in taxable value; accordingly GST is payable on such forfeitures. However, deposits merely unclaimed and recognised as income without intention to forfeit were found not to be consideration for supply and not taxable.

GST is payable on liquidated damages and on security deposits forfeited; GST is not payable on security deposits merely left unclaimed and recognised as income after lapse of time.

Taxability of catering services - exemption for services provided by government entities - Whether GST is payable on food and beverages supplied at the industrial canteen run by the applicant - HELD THAT: - The Authority treated supply of food and beverages at the industrial canteen as taxable catering services (tariff group/heading 9963). Because the applicant is not "Government" under section 2(53), it cannot invoke the government-provided-services exemption (Notification No.12/2017 Sr. No.6). Therefore the canteen supplies made for consideration are taxable and GST is payable.

Supply of food and beverages at the applicant's industrial canteen is taxable and GST is payable.

Renting of immovable property - exemption for renting of residential dwelling - Whether GST is payable on (i) community hall let to employees and (ii) rent recovered from residential quarters - HELD THAT: - Renting of immovable property is a supply under Schedule II (Section 7). The community hall licensed to employees for personal use falls within renting and is taxable because the applicant is not a Government entity entitled to the government exemption. In contrast, renting of residential dwelling for use as residence is covered by Entry No.12 of Notification No.12/2017 and attracts nil rate; where the licence/charges relate to residential dwelling the supply is nil-rated.

GST is payable on renting of the community hall; rent recovered for residential dwelling is covered by the nil-rate exemption for renting of residential dwelling.

Exemption for transport of students/staff - exemption for services provided by government entities - Whether GST is payable on school bus facility provided to employees' children - HELD THAT: - Notification No.12/2017 (Sr. No.66) exempts transportation of students, faculty and staff where supplied to an educational institution. The applicant provides bus service to children of employees (not to an educational institution) and is not a Government within section 2(53); accordingly the specific exemption does not apply. The Authority therefore held the supply is taxable unless otherwise exempted.

GST is payable on the school-bus facility provided to employees' children.

Taxability of examination services - exemption for educational institutions - Whether GST is payable on fees charged for conducting examinations for recruitment - HELD THAT: - The Authority noted that the exemption for examination services (Notification No.12/2017 Sr. No.66(aa)) applies to educational institutions. The applicant is neither an educational institution nor a government as per section 2(53); hence the exemption does not apply and the activity of conducting examinations for vacancies is taxable.

GST is payable on fees charged by the applicant for conducting examinations.

Input tax credit - used or intended to be used in course or furtherance of business - blocked credits and exempt supplies (Section 17) - Whether ITC is available on (a) maintenance of gardens inside the factory, (b) maintenance and upkeep of estate area outside factory premises, (c) medicines and hospital upkeep, (d) maintenance of guest houses, and (e) purchase of LPG cylinders for industrial canteen - HELD THAT: - Applying section 16 and the exclusions in section 17, the Authority held: (a) gardening services within the plant do not qualify as used in furtherance of the applicant's manufacturing business and ITC is not available; (b) maintenance/upkeep of estate areas outside the factory are welfare/social activities lacking necessary nexus with manufacture and ITC is not available; (c) hospital/dispensary supplies for employees fall within the definition of clinical establishment and such services are exempt under Notification No.12/2017 (Sr. No.74), so ITC is blocked under section 17(2); (d) guest-house maintenance is a perquisite/personal accommodation facility and lacks nexus with business, therefore ITC is not available (section 17(5)(g)); (e) LPG cylinders used in the industrial canteen (a taxable catering service of the applicant) were held to be inputs for a taxable supply and ITC is available on their purchase.

ITC is not available for garden maintenance inside factory, not available for upkeep of estate outside factory, not available for hospital/medicines and guest-house maintenance; ITC is available for LPG cylinders used in the industrial canteen.

E-way bill exemption for defence formations - Whether the e-way bill exemption for "defence formation under the Ministry of Defence" applies to the applicant and to movements to MOD units - HELD THAT: - Rule 138(14)(k) exempts generation of e-way bills where movement of goods is caused by a defence formation under the Ministry of Defence as consignor or consignee. The Authority observed that the applicant functions under the Ordnance Factory Board within the Department of Defence Production and found the applicant eligible for the benefit when goods are moved by or to defence formations (units, proof establishments, DRDO, etc.) under the Ministry of Defence.

The e-way bill exemption under Rule 138(14)(k) is available to the applicant for movements involving defence formations under the Ministry of Defence.

Exemption for transport of defence or military equipment by GTA - Whether exemption for transport by goods transport agency of defence or military equipments applies to goods transported by the applicant - HELD THAT: - Notification No.12/2017 (Sr. No.21 clause (h)) exempts GTA services transporting defence or military equipments. The Authority accepted that the applicant manufactures and transports propellants and explosives used in ammunition production and held that the exemption is available for such transport of defence/military equipment.

Exemption for GTA transport of defence or military equipment applies to the applicant's relevant transport of such goods.

Reversal of ITC on goods lost, stolen or destroyed - Whether ITC has to be reversed on finished goods destroyed during testing - HELD THAT: - The Authority examined section 17(5)(h) which denies ITC in respect of inputs/goods lost, stolen or destroyed. It held that where inputs have been legitimately used in manufacture and the finished samples are dispatched for testing and consumed/destroyed in testing, those inputs were used in the course of business and cannot be treated as inputs remaining unutilised for which reversal is mandated. The Authority therefore concluded that ITC need not be reversed for finished goods destroyed during testing.

ITC is not required to be reversed on finished goods destroyed during testing.

Proviso to section 16(2) - reversal where recipient fails to pay within 180 days - Whether proportionate ITC must be reversed when payment to supplier is reduced due to deduction of liquidated damages - HELD THAT: - Under the second proviso to section 16(2), failure to pay the supplier the invoice amount including tax within 180 days triggers addition to output tax liability. The Authority reasoned that liquidated damages are compensation for tolerating non-performance and treated as a supply; where the applicant ultimately pays a lesser amount to the supplier resulting in lesser GST remitted by the supplier, the recipient becomes entitled to ITC only to the extent of actual payment and must reverse proportionate ITC accordingly.

Where payment to the supplier is reduced due to liquidated-damages deduction resulting in lesser payment of tax by the supplier, the recipient must reverse ITC proportionate to the reduction.

Applicability of notifications granting nil-rate or reverse-charge consequences to government/PSU entities - Whether Notifications No.2/2018, No.3/2018 and No.36/2017 apply to the applicant and their impact - HELD THAT: - Because the Authority held that the applicant is not "Government" under section 2(53), exemptions or special treatments applicable only to Central/State Government do not apply. Notification No.2/2018 (exemption for arbitrator/advocate services to Central Government) is not available to the applicant. Notification No.3/2018 makes renting of immovable property by government to a registered person subject to reverse charge - the Authority observed that renting of non-residential property by the applicant is taxable and reverse-charge implications should be examined as per that notification. Notification No.36/2017 (reverse charge on sale of used/seized/old/scrap goods by government) is inapplicable as a government concession to the applicant; the applicant must discharge GST on such sales as per the relevant notification and law.

Notification No.2/2018 exemption is not available to the applicant; renting of non-residential immovable property by the applicant is taxable (and reverse-charge consequences arise as per applicable notification); the applicant must discharge GST on sale of used/old/scrap goods in accordance with the notifications and law.

Final Conclusion: The Authority held that Ordnance Factory Bhandara is not "Government" for purposes of the CGST Act and accordingly: GST is payable on liquidated damages and forfeited security deposits (but not on merely unclaimed deposits recognised as income); canteen supplies, community-hall rentals and examination fees are taxable; school-bus facility to employees' children is taxable; ITC is disallowed for garden maintenance inside plant, estate upkeep outside plant, hospital/medicines and guest-house upkeep, but allowed for LPG used in the industrial canteen; e-way bill exemption for defence formations and GTA exemption for transport of defence equipment apply to movements involving defence formations; ITC is not required to be reversed for finished goods destroyed in testing; proportionate ITC must be reversed where payment to supplier is reduced by liquidated damages; and the applicant cannot claim government-specific notification exemptions that apply only to the Central/State Government.

Alternative remedy - statutory appeal - jurisdictional bar arising from availability of alternative remedy - proceedings under Section 129 of the Goods and Services Tax Act, 2007 - refund of penalty - release of seized goods - relief from limitation / condonation of delay for preferring appeal

Alternative remedy - statutory appeal - jurisdictional bar arising from availability of alternative remedy - Maintainability of the writ petition where a statutory appeal under the Act is available against orders passed under Section 129. - HELD THAT: - The Court found that the petitioner had paid the penalty and obtained release of the goods. The petitioner challenged the order under Section 129 before the High Court by writ petition, but the contentions mainly involved factual disputes arising from the enforcement proceedings. In these circumstances the availability of a specific statutory appellate remedy under the Act precluded exercise of writ jurisdiction. The Court therefore relegated the petitioner to the prescribed statutory appeal mechanism as the appropriate forum for redressal of the grievance. [Paras 7]

Writ petition not entertained on merits; petitioner must pursue the alternative statutory appeal.

Statutory appeal - refund of penalty - relief from limitation / condonation of delay for preferring appeal - Directions as to further proceedings before the Appellate Authority, including consideration on merits and waiver of limitation objections. - HELD THAT: - The Court directed that the petitioner may prefer the statutory appeal to the Appellate Authority within two weeks from receipt of certified copy of the order. The Appellate Authority was directed to consider the appeal on merits in accordance with law and not to raise objection on the ground of limitation. This amounts to relegation for fresh consideration by the appellate forum, with a specific procedural time-frame and assurance that limitation will not be objected to, so that the merits of the challenge to the penalty and related reliefs (including refund) can be adjudicated by the appropriate authority. [Paras 8]

Petitioner granted liberty to file appeal within two weeks; Appellate Authority to decide the appeal on merits and not to object to limitation.

Final Conclusion: Writ petition disposed of by relegating the petitioner to the statutory appellate remedy under the Act; petitioner permitted to prefer the appeal within two weeks and the Appellate Authority directed to decide the appeal on merits without raising limitation objections.

Recall of judicial order - restoration of appeal to file - withdrawal of appeal with right to revive - error apparent on the face of the record - monetary limit for admission of tax appeals

Recall of judicial order - restoration of appeal to file - error apparent on the face of the record - monetary limit for admission of tax appeals - Whether the order permitting withdrawal of the tax appeal dated 27.11.2018 should be recalled and the appeal restored where the tax effect exceeds the prescribed monetary limit. - HELD THAT: - The court found that the applicant discovered, on verification of record, that the tax effect in the appeal was Rs. 3,08,44,800/-, which exceeds the monetary threshold of Rs. 50,00,000/- prescribed by the relevant Circular. The earlier order of 27.11.2018 had allowed withdrawal of the appeal but expressly reserved the right to revive the appeal if any discrepancy came to light later, acknowledging possible human error. Since the appeal was withdrawn due to an error on the part of the applicant and the tax effect is above the prescribed limit, the court exercised its power to correct the apparent error on the face of the record by recalling the withdrawal order and restoring the appeal to file. The court accordingly allowed the application and restored Tax Appeal No.308 of 2014. [Paras 4, 5, 6]

Order dated 27.11.2018 is recalled and Tax Appeal No.308 of 2014 is restored to file; rule made absolute with no order as to costs.

Final Conclusion: Application allowed; the withdrawal order dated 27.11.2018 is recalled and the tax appeal restored to file in view of an apparent error regarding the tax effect exceeding the prescribed monetary limit.

Treatment of unverified sundry creditors as unexplained cash credits under Section 68 of the Income tax Act - rejection of books of account under Section 145(3) and consequent approach to assessment - estimation of reasonable/net profit where books are rejected - proof requirements under Section 68: identity, genuineness and capacity to explain cash credits

Treatment of unverified sundry creditors as unexplained cash credits under Section 68 of the Income tax Act - proof requirements under Section 68: identity, genuineness and capacity to explain cash credits - rejection of books of account under Section 145(3) and consequent approach to assessment - Deletion of addition made on account of unverified sundry creditors held to be unexceptionable and sustained. - HELD THAT: - The Assessing Officer treated outstanding sundry creditors as unexplained cash credits and added them under Section 68 after finding no confirmations, incomplete addresses and lack of PAN or other particulars; the CIT(A) had upheld the addition but contemporaneously estimated net profit @2% of turnover for other disallowance issues. The Tribunal, however, declined to sustain the addition of sundry creditors, noting that once the AO had rejected the books and the CIT(A) had adopted an estimated net profit, further addition based on the same rejected books was not appropriate. The High Court examined the record, treated the questions as mixed questions of fact and law, and found no error in the Tribunal's application of principle that estimation of profit in lieu of accepted books precluded making further additions by reliance on those rejected records. The Court therefore declined to interfere with the Tribunal's deletion of the addition relating to sundry creditors. [Paras 8, 9, 12, 14, 17]

Tribunal's deletion of the addition on account of unverified sundry creditors is upheld; no error warranting interference by this Court.

Estimation of reasonable/net profit where books are rejected - rejection of books of account under Section 145(3) and consequent approach to assessment - Validity of directing addition by estimating net profit @ 2% of turnover in respect of unverifiable purchases was affirmed. - HELD THAT: - The CIT(A) directed the Assessing Officer to adopt net profit @2% of turnover for URD purchases instead of disallowing 15% of purchases as non-genuine; the Tribunal affirmed that approach by reference to consistency of departmental view and earlier orders in the assessee's own case. The High Court found no illegality in this approach, treating the matter as mixed question of fact and law and declining to disturb the Tribunal's conclusion that estimating net profit at 2% was appropriate in the circumstances. [Paras 15, 16, 17]

Direction to determine taxable income by adopting net profit @2% of turnover in place of the disallowance for unverifiable purchases is sustained.

Final Conclusion: The Revenue's tax appeal is dismissed. The Tribunal's order deleting the addition in respect of unverified sundry creditors and affirming the CIT(A)'s direction to estimate net profit @2% for unverifiable purchases is held to be without error and is not disturbed.

Substantial question of law - admission of appeal for consideration - additional grounds referred to Assessing Officer for fresh examination - depreciation on matured investments - real income theory - no substantial question of law

Substantial question of law - admission of appeal for consideration - The Court admitted the appeal for consideration of the three stated substantial questions of law (items (i) to (iii)). - HELD THAT: - The Court recorded admission of the appeal expressly for consideration of the three substantial questions framed at the outset, namely the entitlement to depreciation on leased assets, allowance of payment towards scientific research assistance, and the correctness of reduction of exemption under the specified provision having regard to section 14A. This admission was recorded so that those questions may be considered on the merits in the course of the proceedings. [Paras 1]

The appeal is admitted for consideration of the three specified substantial questions of law.

Additional grounds referred to Assessing Officer for fresh examination - additional grounds - no substantial question of law - The additional questions raised by the assessee (items (a) to (d)) arising from the Tribunal's order were not considered as substantial questions of law by this Court. - HELD THAT: - The Tribunal had entertained the additional grounds and referred specific issues back to the Assessing Officer for proper examination and fresh consideration. The assessee contended that those matters were covered by later Supreme Court decisions and therefore required no remand. The High Court noted that the Tribunal's decision merely sent those issues to the Assessing Officer for examination, that the Assessing Officer has given effect to those directions, and that in the facts of the case the Tribunal's action does not give rise to any substantial question of law warranting interference by this Court. Consequently the Court declined to consider those additional questions. [Paras 3, 4]

Questions (a) to (d) are not considered as arising substantial questions of law and are not entertained by this Court.

Depreciation on matured investments - real income theory - no substantial question of law - The additional question (e) regarding depreciation on matured investments was not entertained by this Court. - HELD THAT: - The Court observed that an identical issue in respect of the assessee had earlier been considered and rejected by this Court in a prior appeal, where the Tribunal and appellate authorities were held to be correct in disallowing depreciation on securities due for redemption. The earlier decision applied the principle that the real income theory cannot be invoked to negate accrual of an amount receivable and that a fall in value of a security which is not an ascertained liability does not permit an adhoc deduction. Relying on those binding decisions, the Court found no substantial question of law in question (e) and therefore declined to entertain it. [Paras 5, 6]

Question (e) is not entertained by this Court.

Final Conclusion: The High Court admitted the appeal for consideration of the three principal substantial questions of law (items (i)-(iii)), declined to consider the assessee's additional grounds (items (a)-(d)) as raising substantial questions of law, and did not entertain question (e) concerning depreciation on matured investments; the Registry was directed to communicate a copy of this order to the Tribunal.

Condonation of delay - Authority for Advance Ruling - filing of return after pronouncement of advance ruling - interpretation of Section 245R read with Sections 139 and 143 - Sin Oceanic principle - claim for refund

Condonation of delay - Authority for Advance Ruling - filing of return after pronouncement of advance ruling - Sin Oceanic principle - claim for refund - Whether delay in filing return for Assessment Year 2014-15 could be condoned where the return claiming refund was filed after the Authority for Advance Ruling pronounced its decision and the petitioner contended that it was obliged to await that ruling - HELD THAT: - The writ petitioner, a Singapore tax resident, had filed applications before the Authority for Advance Ruling (ARA) in respect of projects relevant to Assessment Year 2014-15. The due date for filing the return was 30.11.2014, but the ARA pronounced its ruling only on 16.08.2016. The petitioner filed the return claiming a refund on 06.03.2017 and sought condonation of delay under the provisions dealing with delayed returns. The ARA's reasoning in Wavefield and the Supreme Court's decision in Sin Oceanic were relied on to demonstrate that, in the circumstances, the petitioner was compelled to await the ARA ruling before finalising the return. The respondent had accepted the factual grounds for delay but had rejected condonation on the basis of Section 245R read with Sections 139 and 143. Having regard to the chronology, the court found merit in the contention that the timing of the ARA ruling was material and that the return could not reasonably have been filed before the ARA decision. Exercising supervisory jurisdiction, the court set aside the impugned order rejecting condonation and directed conditional relief: on payment of costs to a charitable institution within the stipulated period the delay would be condoned and the respondent directed to take up the return filed on 06.03.2017 and proceed with its adjudication expeditiously within a four-week period from the compliance date; failure to comply would revive the impugned order.

Impugned order dated 07.03.2019 set aside; delay in filing the return for Assessment Year 2014-15 condoned subject to payment of costs within the time stipulated and directions to the respondent to adjudicate the return expeditiously; non-compliance to revive the impugned order.

Final Conclusion: The writ petition is allowed in part: the respondent's order rejecting condonation of delay is set aside and the delay is condoned conditionally (payment of costs to the specified charity), after which the respondent shall take up and decide the return filed on 06.03.2017 for Assessment Year 2014-15 expeditiously; failure to comply will revive the impugned order.

Deductibility of employee's contribution to welfare funds under Section 36(1)(va) - Requirement of payment before statutory due date for claiming deduction - Inapplicability of return-filing due date under Section 139(1) to Section 36(1)(va) deduction - Licence fee deduction under Section 37 - Taxability of consideration on sale of old and unyielding trees - Capital gains treatment of sale proceeds of grevellea trees - Computation under Section 115JB and treatment of provision for gratuity

Deductibility of employee's contribution to welfare funds under Section 36(1)(va) - Requirement of payment before statutory due date for claiming deduction - Inapplicability of return-filing due date under Section 139(1) to Section 36(1)(va) deduction - Whether belated remittance of employees' contribution to EPF, LWF and ESI is allowable as a deduction under Section 36(1)(va). - HELD THAT: - The Court applied the Division Bench precedent in Popular Vehicles and Services Pvt. Ltd., holding that Section 36(1)(va) permits deduction only where the employee's contribution, treated as income under Section 2(24) when received by the employer, is remitted to the relevant welfare fund on or before the due date prescribed under the corresponding enactment. Late remittance after the statutory due date means the contribution remains assessable as income and cannot thereafter be claimed as a deduction under Section 36(1)(va). The Tribunal's contrary approach treating the due date for filing returns under Section 139(1) as the relevant cut-off was held to be incorrect. As the assessee did not establish payment before the statutory due dates, the Tribunal's direction for fresh consideration by the Assessing Officer was set aside and the Assessing Officer's order restored. [Paras 6, 7, 8]

Belated payments of employees' contribution are not deductible under Section 36(1)(va) unless remitted before the due date prescribed in the relevant welfare enactments; the Tribunal's reliance on Section 139(1) due date and its remand are set aside and the Assessing Officer's order restored.

Licence fee deduction under Section 37 - Whether licence fee paid to RPG Enterprises Limited is allowable as a deduction under Section 37. - HELD THAT: - The revenue did not press this ground before the Court. In the absence of active contest by the revenue, the Tribunal's order on this issue was left undisturbed. [Paras 9]

Issue not pressed by revenue; the Tribunal's order on licence fee deduction under Section 37 remains undisturbed.

Taxability of consideration on sale of old and unyielding trees - Whether consideration obtained on sale of old and unyielding rubber trees is exigible to tax in the light of Rules 7 and 7A of the Income Tax Rules. - HELD THAT: - The Standing Counsel conceded that this question is covered by an earlier Division Bench decision in favour of the assessee. Consequently, the Court answered the substantial question against the revenue, following the precedent which held the sale consideration not exigible to tax in the manner contended by the revenue. [Paras 10]

Sale consideration of old and unyielding rubber trees is not exigible to tax as contended by the revenue; question answered against the revenue.

Capital gains treatment of sale proceeds of grevellea trees - Whether the sale proceeds of grevellea trees can be treated as capital gains and brought to tax. - HELD THAT: - The Court accepted the concession that the Division Bench's earlier decision in Commissioner of Income Tax v. Harrisons Malayalam Limited governs this question. Following that precedent, the Court answered the substantial question against the revenue and in favour of the assessee. [Paras 10]

Sale proceeds of grevellea trees are to be treated as capital gains as per the governing Division Bench decision; question answered against the revenue.

Computation under Section 115JB and treatment of provision for gratuity - Whether the provision for gratuity can be added in computing the income under Section 115JB. - HELD THAT: - The Standing Counsel fairly conceded that this question is covered by the Division Bench ruling in favour of the assessee. The Court accordingly answered the substantial question against the revenue, applying the earlier decision which precludes the addition of the provision for gratuity in computation under Section 115JB in the circumstances adjudicated. [Paras 10]

Provision for gratuity is not to be added in computing income under Section 115JB as contended by the revenue; question answered against the revenue.

Final Conclusion: Appeals partly allowed. The Tribunal's finding and remand in respect of delayed remittance of employees' contribution under Section 36(1)(va) is set aside and the Assessing Officer's order restored; the Tribunal's orders on the other four issues are confirmed (licence fee issue left undisturbed as not pressed; questions on sale of old/unfruitful rubber trees, sale of grevellea trees and provision for gratuity answered against the revenue). No costs.

Reopening of assessment - reassessment on change of opinion - escapement of income - entitlement to depreciation upon commissioning/put to use - concurrent findings of fact

Reopening of assessment - reassessment on change of opinion - escapement of income - concurrent findings of fact - Validity of the reopening of assessment issued beyond four years and whether it was based on a change of opinion or on material establishing escapement of income. - HELD THAT: - The Tribunal and the Commissioner (Appeals) found that during the original scrutiny assessment the Assessing Officer had examined and accepted the assessee's documentary evidence regarding commissioning and generation by the wind turbines, and had allowed depreciation. The reopening notice under section 148 was issued beyond the four year period and, on the material before the authorities, there was no finding of failure by the assessee to disclose material facts. The reassessment was therefore held to be founded on a mere change of opinion rather than on fresh material showing escapement of income. The High Court upheld these concurrent factual findings, noting that no relevant material was ignored and no legal infirmity was demonstrated in the Tribunal's conclusion that the reopening was invalid. [Paras 5, 6, 8]

Reopening of assessment was invalid as it amounted to a mere change of opinion and was not justified by material establishing escapement of income.

Entitlement to depreciation upon commissioning/put to use - concurrent findings of fact - Whether the assessee was entitled to claim depreciation on the wind mill for the year under consideration having regard to evidence of commissioning and generation before 31.3.2006. - HELD THAT: - Both the Commissioner (Appeals) and the Tribunal recorded that the assessee produced documentary evidence - including meter readings and correspondence - demonstrating commissioning on 20.03.2006 and generation during the period up to 15.04.2006, which had been considered and accepted in the original assessment. On that factual basis the authorities held that the wind mill was put to use prior to 31.03.2006 and the assessee was therefore entitled to depreciation. The High Court found no legal infirmity in these concurrent findings and noted that, having been concluded in the original assessment, the matter could not be reopened merely on a different view. [Paras 7, 9]

Assessee entitled to claim depreciation on the wind mill for the year as the evidence established commissioning and generation prior to 31.3.2006.

Final Conclusion: Concurrent factual findings of the Commissioner (Appeals) and the Tribunal that the reassessment was a mere change of opinion and that the wind mill was commissioned and producing before 31.3.2006 were upheld; the revenue's appeal fails and the Tribunal order is summarily dismissed.

Penalty under section 271(1)(c) - furnishing inaccurate particulars of income - reasonable explanation / bona fide explanation - test of preponderance of probabilities - inadvertent mistake versus deliberate concealment

Penalty under section 271(1)(c) - furnishing inaccurate particulars of income - reasonable explanation / bona fide explanation - test of preponderance of probabilities - inadvertent mistake versus deliberate concealment - Validity of deletion of penalty imposed under section 271(1)(c) in respect of certain additions/disallowances confirmed on appeal - HELD THAT: - The Tribunal found that the assessee had offered plausible explanations which, judged on the test of preponderance of probabilities, showed inadvertent mistakes rather than deliberate furnishing of inaccurate particulars. Specific findings recorded by the Tribunal accepted (a) the assessee's admission of small inadvertent errors in respect of other income and interest; (b) that the exchange fluctuation entry arose from wrong posting of capital field vouchers and income being booked on capital account by mistake; and (c) that the depreciation claim, though ultimately incorrect in law, had a factual basis when compared with stamp duty valuation and purchase consideration such that it could not be characterised as an absurd or mala fide claim. The High Court agreed that, given the magnitude of the returned income and the nature and quantum of the errors, the explanations were reasonable and deletion of penalty was justified. The court noted that the deterrent policy behind penalty provisions, and authorities emphasising imposition where claims are wholly untenable, do not apply where on facts the explanation is bona fide and acceptable to the fact-finding authority. Having accepted the Tribunal's factual conclusions as reasonable, the High Court found no legal infirmity warranting interference. [Paras 5, 6, 7, 8, 9]

Tribunal's deletion of the penalty under section 271(1)(c) was upheld as the assessee furnished reasonable explanations showing inadvertent mistakes rather than deliberate inaccuracies.

Final Conclusion: The appeal is dismissed; the Tribunal's order deleting the penalty under section 271(1)(c) for Assessment Year 2009-10 is upheld as legally and factually sustainable.

Tax deduction at source - royalty - fees for technical services - reimbursement of expenses - purchase of copyrighted article not constituting royalty - DTAA overrides domestic law where more beneficial

Purchase of copyrighted article not constituting royalty - DTAA overrides domestic law where more beneficial - tax deduction at source - Whether payments for purchase of software licences/statutory copyrighted articles were liable to withholding as royalty and whether the assessee was in default for non-deduction. - HELD THAT: - Relying on the Tribunal's earlier reasoning in the assessee's own case, the Court held that purchase of software, being payment for a copyrighted article where no copyright was transferred, does not fall within the domestic or treaty definition of royalty. The amended domestic definition cannot be extended to the DTAA where the treaty definition has not been changed, and where the DTAA is more beneficial it governs. Applying that ratio, the assessee was not required to deduct tax at source on the software purchase and therefore cannot be held in default under the provisions invoked by Revenue. [Paras 8]

Demand under section 201(1) and interest under section 201(1A) in respect of payments for purchase of software are cancelled.

Tax deduction at source - royalty - fees for technical services - reimbursement of expenses - Whether payments characterised as IT support charges (internet, e mail, backup, VPN, online meeting charges, etc.) required withholding as royalty or fees for technical services and whether non-deduction constituted default. - HELD THAT: - The Tribunal had held that such IT support and related service charges do not amount to royalty nor do they involve making technical services available; they are not within the treaty or domestic tests for withholding. Applying that precedent, the payments for IT support and similar service/line/VPN charges in the present case do not attract TDS and the assessee was not in default. [Paras 9]

No requirement to deduct tax at source on IT support and related service charges; demand and interest on this ground are cancelled.

Lease line charges - tax deduction at source - reimbursement of expenses - Whether lease line charges payable to the non resident constituted royalty or equipment royalty necessitating TDS, or were at best reimbursements not chargeable to withholding. - HELD THAT: - Following the Tribunal and relevant High Court authority, the use of lease lines for transmitting data was treated as use of a broadband facility and not a lease or use of equipment giving rise to royalty. The Tribunal further recognised an alternate plea that such charges were at best reimbursements. Applying that reasoning, the assessee was not obliged to deduct tax at source on lease line charges and was not in default. [Paras 11]

Assessee not in default for non-deduction of TDS on lease line charges; impugned order on this count is reversed.

Fees for technical services - tax deduction at source - Whether payments for web based training amounted to fees for technical services attracting withholding. - HELD THAT: - The Tribunal concluded that in absence of any transfer of technology or making technical knowledge/skills available in the requisite sense, web based training payments do not constitute fees for technical services. Applying the same reasoning, the Court held there was no obligation to deduct tax at source on web based training fees and hence no default. [Paras 12]

No TDS obligation on web based training fees; demand and interest on this ground are cancelled.

Tax deduction at source - reimbursement of expenses - Whether reimbursement of salaries of expatriate employees deputed by the non resident required withholding as payment for services, given that TDS under salary provisions was deducted. - HELD THAT: - The Tribunal held and this Court applied the same parity of reasoning that where the assessee had deducted tax at source under the salary provisions in respect of expatriate employees deputed to India, the amounts reimbursed could not be treated as separate taxable technical service payments attracting additional withholding under the non resident provisions. Accordingly, the assessee could not be held in default under section 201(1) and interest under section 201(1A) on this count. [Paras 13]

No default in respect of reimbursement of expatriate salaries; demand and interest on this ground are cancelled.

Final Conclusion: All grounds of appeal concerning alleged failure to deduct tax at source on software purchases, IT support/lease line charges, web based training fees and reimbursement of expatriate salaries are allowed; the demands under section 201(1) and interest under section 201(1A) are set aside and the appeal is allowed.

Interest on borrowed funds for acquisition of shares - Capitalisation of interest as part of cost of acquisition for computation of capital gains - Mixed funds and allocation of interest - Burden of proof to substantiate apportionment of interest - Remand for fresh adjudication with opportunity to be heard

Interest on borrowed funds for acquisition of shares - Capitalisation of interest as part of cost of acquisition for computation of capital gains - Mixed funds and allocation of interest - Burden of proof to substantiate apportionment of interest - Claim for deduction/capitalisation of interest of Rs. 10,76,258/- in computing short term capital gain was not finally adjudicated but remitted to the Assessing Officer for fresh consideration. - HELD THAT: - The Assessing Officer disallowed the interest claimed on the ground that funds in the broker account were mixed, the assessee had not shown that the borrowings related exclusively to the shares on which short term capital gain arose, and the assessee had not computed interest attributable to acquisition periods for each security. The CIT(A) sustained the disallowance. The assessee produced account statements, month-wise interest details and a share-wise allocation of interest and relied on earlier decisions in its favour. Having considered the material and rival contentions, the Tribunal found that the matter requires re-examination on the record and that the Assessing Officer should revisit the file, give the assessee an opportunity of being heard, and decide the allowability or capitalisation of the interest claim in accordance with fact and law. The Tribunal therefore did not decide the merit of the claim but directed fresh adjudication by the Assessing Officer in light of the submissions and evidence placed on record. [Paras 10, 13]

Disallowed interest claim remitted to the Assessing Officer for fresh consideration after affording opportunity to the assessee; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal remitted the issue of allowability/capitalisation of the interest claimed against short term capital gains for A.Y. 2015-16 to the Assessing Officer for fresh adjudication after considering the assessee's submissions and directed that the assessee be afforded an opportunity of being heard; the appeal is allowed for statistical purposes.

Annual Letting Value - deemed to be let out under section 23(1) - municipal ratable value - estimate-based determination of ALV not permissible - vacancy allowance under section 23(1)(c) - verification/remand for computation

Annual Letting Value - municipal ratable value - estimate-based determination of ALV not permissible - Determination of ALV of Flat No.10 F Harbour Heights (assessee claimed self occupation) and the method to be followed by the Assessing Officer. - HELD THAT: - The Tribunal held that where the property is not let out the Assessing Officer cannot substitute market rental estimates by adopting the rent of another flat; ALV must be verified against the ratable value fixed by the Municipal Corporation. If the assessee's declared ALV corresponds to the municipal ratable value it must be accepted; otherwise the Assessing Officer is directed to determine ALV on the basis of municipal ratable value after verification and affording a reasonable opportunity of hearing. [Paras 4]

ALV of Flat No.10 F to be verified and determined on the basis of municipal ratable value; Assessing Officer directed to proceed accordingly.

Annual Letting Value - deemed to be let out under section 23(1) - municipal ratable value - verification/remand for computation - Determination of ALV of Flat No.11 B Harbour Heights where AO adopted rent of another flat and assessee relied on differential security deposit as justificatory factor. - HELD THAT: - The Tribunal observed that the assessee's contention regarding a higher security deposit for the subject flat is a relevant factor and requires verification in the light of precedents relied upon. If the ALV declared by the assessee exceeds the municipal ratable value it shall be accepted; otherwise ALV must be determined in accordance with the municipal ratable value. The matter is remitted to the Assessing Officer for verification and determination accordingly. [Paras 5]

Assessment of ALV for Flat No.11 B remanded to Assessing Officer to verify security deposit and municipal ratable value and determine ALV accordingly.

Annual Letting Value - municipal ratable value - estimate-based determination of ALV not permissible - Determination of ALV of Flat at Jolly Market and Row House Lonavala where AO had made estimate based ALV determinations without supporting material. - HELD THAT: - The Tribunal found that estimate based determinations by the Assessing Officer, unsupported by material, are not acceptable. The Assessing Officer is directed to verify whether the ALV shown by the assessee corresponds to the municipal ratable value; if yes it is to be accepted, otherwise ALV must be fixed in accordance with the municipal ratable value. [Paras 6]

ALV for the Jolly Market flat and the Lonavala row house remitted to Assessing Officer for verification against municipal ratable value and redetermination accordingly.

Annual Letting Value - deemed to be let out under section 23(1) - municipal ratable value - Determination of ALV of flat at Perin Nariman Street, Fort which the assessee said was used as staff quarters and declared nil. - HELD THAT: - The Tribunal held that mere use by staff does not alter the ownership status and the property is liable to be assessed under section 23(1)(a). The Assessing Officer's estimate based fixation of ALV is unsustainable; ALV must be determined on the basis of the municipal ratable value after verification, and the assessee must be afforded a reasonable opportunity of hearing. [Paras 7]

ALV for the Fort property to be determined by Assessing Officer on basis of municipal ratable value after verification and hearing.

Consequential nature of interest and penalty issues - Challenge to levy of interest under section 234 and initiation of penalty proceedings under section 271(1)(c). - HELD THAT: - The Tribunal observed that issues of interest and penalty are consequential upon the outcome of ALV determinations and therefore do not require adjudication at this stage. [Paras 9]

Ground challenging interest and penalty dismissed as premature; consequential issues to be considered after final determination of ALV.

Final Conclusion: Assessee's appeal is partly allowed: determinations of ALV made by the Assessing Officer are set aside to the extent indicated and remitted to the Assessing Officer to verify and determine ALV of the specified properties in accordance with municipal ratable value (accepting assessee's declared ALV if it equals or exceeds the municipal ratable value), affording the assessee a reasonable opportunity of hearing; consequential interest and penalty issues dismissed at this stage.

Penalty under section 271(1)(c) - concealment of income or furnishing inaccurate particulars - bonafide belief in claim of deduction - separation of assessment and penalty proceedings - claim of deduction under section 80IB(10) - untenability of claim not ipso facto ground for penalty

Penalty under section 271(1)(c) - concealment of income or furnishing inaccurate particulars - bonafide belief in claim of deduction - claim of deduction under section 80IB(10) - untenability of claim not ipso facto ground for penalty - Levy of penalty under section 271(1)(c) on the assessee for claiming deduction under section 80IB(10) was unjustified and was to be deleted. - HELD THAT: - The Tribunal held that to levy penalty under section 271(1)(c) the Assessing Officer must be satisfied that the assessee concealed income or furnished inaccurate particulars; mere disallowance of a claimed deduction does not automatically establish concealment or falsity. The assessee's claim of deduction under section 80IB(10) failed because the project approval date was after the stipulated date, but the material in the return and the auditor's report disclosed the approval date and there was no suppression or misrepresentation of that fact. The claim was made in the first year in which sales occurred and profits arose, the assessee had filed the return and paid tax under MAT and, upon assessment, promptly paid the additional tax with interest. On these facts the Tribunal treated the claim as a bona fide error, not as concealment, and relied on the settled principle that an untenable claim alone is insufficient to attract penalty (as indicated in the judgments referred to in the order: Anantharam Veerasinghaiah & Co. , CIT vs. Reliance Petroproducts Ltd , Price Waterhouse Coopers , and the Bombay High Court decision in Petels Engineers Limited ). Consequently, the imposition of penalty was not sustainable and was deleted. [Paras 7, 8, 9, 12]

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

Final Conclusion: The Tribunal allowed the appeal of the assessee for Assessment Year 2013-14 by deleting the penalty imposed under section 271(1)(c) in respect of the disallowed claim under section 80IB(10) on the ground that the claim was a bona fide error without concealment or furnishing of inaccurate particulars.

Disallowance under section 14A - Rule 8D computation - recording of satisfaction under section 14A(2) - exempt dividend income under section 10(34) - limitation of disallowance to exempt income

Disallowance under section 14A - recording of satisfaction under section 14A(2) - Rule 8D computation - Validity of the disallowance made under section 14A read with Rule 8D in respect of exempt dividend income when the Assessing Officer did not record satisfaction that expenses were incurred in relation to exempt income. - HELD THAT: - The Assessing Officer, while framing assessment for A.Y. 2013-14, applied Rule 8D(2)(iii) to compute a disallowance without recording the requisite satisfaction that any expenditure debited to the profit and loss account was incurred in relation to earning exempt income. The Tribunal noted that the AO's observations were general and speculative, merely stating that some expenses must have been incurred to earn exempt income, without identifying expenses relatable to exempt income or expressing the statutory satisfaction mandated by section 14A(2). Reliance was placed on precedent where courts have held that absence of a recorded satisfaction disentitles the AO from invoking Rule 8D(2)(iii). Applying that principle to the facts, the Tribunal concluded that the statutory precondition for disallowance was not satisfied and therefore the disallowance could not be sustained. The Tribunal accordingly set aside the orders of the AO and CIT(A) and allowed the appeal. [Paras 6, 7]

Disallowance under section 14A read with Rule 8D set aside for lack of recorded satisfaction; appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y. 2013-14, setting aside the disallowance under section 14A/Rule 8D because the Assessing Officer failed to record the mandatory satisfaction that expenditures were incurred in relation to exempt income.

Penalty under section 271(1)(c) for concealment of income or furnishing of inaccurate particulars of income - wrong claim of tax deducted at source (TDS) without corresponding income offered to tax - requirement of tax evasion as precondition for levy of section 271(1)(c) penalty - validity of penalty notice under section 274 read with section 271(1)(c) - necessity to specify the specific charge

Penalty under section 271(1)(c) for concealment of income or furnishing of inaccurate particulars of income - wrong claim of tax deducted at source (TDS) without corresponding income offered to tax - requirement of tax evasion as precondition for levy of section 271(1)(c) penalty - Whether penalty under section 271(1)(c) could be levied where the assessee wrongly claimed TDS credit but no corresponding income was added in assessment and no tax was shown to be evaded. - HELD THAT: - The Tribunal held that section 271(1)(c) applies only where there is concealment of income or furnishing of inaccurate particulars of income resulting in tax evasion. In the present case the assessee had claimed TDS credit which did not belong to it and the assessing officer disallowed the TDS claim; however, no addition was made to the assessee's income in the assessment order in respect of that TDS. The Tribunal reasoned that a wrong claim of TDS, without any finding of concealed income or tax sought to be evaded, does not satisfy the statutory precondition for levy of penalty under section 271(1)(c). The statutory mechanism for calculating penalty likewise presupposes tax sought to be evaded. Applying these principles, the Tribunal concluded that on merits the statutory ingredients for imposing the penalty were not established and therefore penalty could not be sustained.

Penalty under section 271(1)(c) cannot be levied where a wrong TDS claim was disallowed in assessment but no income addition was made and no tax evasion was established; on merits the penalty did not lie.

Validity of penalty notice under section 274 read with section 271(1)(c) - necessity to specify the specific charge - procedural fairness and opportunity to respond to specific charge - Whether the penalty notices and initiation were valid where the notices failed to specify the particular charge and were issued in a mechanical manner. - HELD THAT: - The Tribunal observed that the penalty notices dated 09.03.2016 and 22.08.2016 were issued without stating the specific charge on which penalty was proposed, and the penalty order recorded imposition on multiple charges without demonstrating application of mind. Citing the ratio of the Bombay High Court decisions relied upon by the CIT(A) (as applied by the Tribunal), it was held that where a notice under section 274 read with section 271(1)(c) does not confront the assessee with the specific charge, the assessee is deprived of a fair opportunity to meet that charge and the penalty is invalid. Applying that principle, the Tribunal found the initiation and imposition of penalty to be procedurally deficient and therefore unsustainable.

Penalty notices and the resultant penalty were invalid for failure to specify the particular charge and for mechanical issuance; appeal allowed on procedural ground.

Final Conclusion: The appeal is allowed: the penalty imposed under section 271(1)(c) is set aside both on substantive grounds (no concealment/tax evasion established where the TDS claim was disallowed without any income addition) and on procedural grounds (penalty notices failed to specify the particular charge), and the assessing officer is directed to delete the penalty.

Computation of book profit for Minimum Alternate Tax under section 115JB - rectification under section 154 for "mistake apparent from record" - limits of adjustments to net profit as set out in Explanation 1 to section 115JB - remand for fresh computation in accordance with statutory code

Rectification under section 154 for "mistake apparent from record" - computation of book profit for Minimum Alternate Tax under section 115JB - Validity of CIT(A)'s deletion of the Assessing Officer's rectification order increasing book profit and direction to assess book profit at the earlier figure - HELD THAT: - The Tribunal found that the CIT(A)'s order did not explain or demonstrate that the computation of book profit in the assessment order dated 26.12.2012 was free from error. The Tribunal observed that neither the Assessing Officer nor the CIT(A) had applied the statutory code under section 115JB or explained how particular additions or deductions to the net profit were authorised by Explanation 1 to section 115JB. Because the adjustments to net profit must be confined to the items listed in the statutory Explanation, the CIT(A)'s silent acceptance of the earlier figure without statutory explanation was unsustainable. For these reasons the Tribunal set aside the CIT(A)'s order insofar as it directed assessment of book profit at the earlier figure.

CIT(A)'s deletion is set aside; the matter cannot be sustained without statutory application of section 115JB

Limits of adjustments to net profit as set out in Explanation 1 to section 115JB - remand for fresh computation in accordance with statutory code - Whether the matter should be remitted to the Assessing Officer for recomputation of book profit strictly in accordance with section 115JB - HELD THAT: - The Tribunal emphasised that section 115JB constitutes a self-contained code identifying specific additions and deductions to the net profit shown in the profit and loss account. Because the assessment and appellate orders did not explain the basis of the adjustments in terms of the statutory list, the Tribunal directed that the Assessing Officer should re-examine and compute book profit by applying only those adjustments permitted by Explanation 1 to section 115JB and by ensuring that additions or deductions are supported by the Companies Act accounts and the statutory provision. The remand was for fresh computation under the statutory code rather than for simple quantification alone.

Issue remitted to the Assessing Officer for fresh computation of book profit in accordance with section 115JB

Final Conclusion: Both appeals by the revenue are allowed for statistical purposes; the CIT(A) order is set aside and the matter is remitted to the Assessing Officer to recompute book profit strictly in accordance with the statutory provisions of section 115JB.

Entitlement to interest on refund of excess self-assessment tax - entitlement to interest on unpaid interest (interest on interest) - interest under Section 244A - adjustment of refund towards interest component first - computation of book profits for MAT under Section 115JB

Entitlement to interest on refund of excess self-assessment tax - interest under Section 244A - Assessee entitled to interest on excess self-assessment tax paid for the assessment year 1985-86 - HELD THAT: - The Tribunal, following its earlier decisions in the assessee's own case and the Supreme Court and High Court authorities discussed at length in the order, held that where a refund becomes due to an assessee that refund carries the statutory right to interest. Section 244A grants a substantive right to interest for delay in payment of any amount refundable by the Revenue, and the Department's retention of monies wrongly collected attracts the obligation to refund with interest. The Tribunal directed the Assessing Officer to verify the assessee's computation and grant the refund with interest in accordance with law.

Direction to Assessing Officer to allow interest under Section 244A on the excess self-assessment tax and to verify and grant the refund in accordance with law.

Entitlement to interest on unpaid interest (interest on interest) - adjustment of refund towards interest component first - Assessee entitled to interest on unpaid interest; refund already granted must be adjusted first towards interest component and balance, if any, towards tax - HELD THAT: - Applying precedents and the principle of parity with collection rules (as reflected in the explanation to Section 140A(1)), the Tribunal held that where only part payment of a refund is made, the unpaid interest component remains an 'amount due' and attracts interest under Section 244A. The Tribunal followed coordinate-bench authority and High Court guidance that the correct method is to adjust earlier refunds first against the interest component and thereafter against the principal tax component; this ensures that the Revenue cannot avoid liability for interest on amounts it retained.

Direction to re-compute interest under Section 244A by first adjusting amounts already refunded towards the interest component and then towards the tax component; interest on unpaid interest allowed.

Computation of book profits for MAT under Section 115JB - Revenue's challenge to exclusion of provision for diminution in value of investments and provision for non-performing assets while computing book profits under Section 115JB rejected - HELD THAT: - The assessee admitted that a challenge to the retrospective amendment affecting Section 115JB had been dismissed by the Calcutta High Court in related writ proceedings; accordingly the Assessing Officer's treatment was accepted and the Revenue's grounds in respect of these adjustments were not pressed. The Tribunal recorded the concession and agreed with the Assessing Officer's computation.

Grounds 5 to 7 raised by the Revenue rejected; Assessing Officer's computation upheld as conceded.

Final Conclusion: Following review of authorities and earlier coordinate-bench decisions in the assessee's own case, the Tribunal directed the Assessing Officer to grant the refund with interest under Section 244A (including interest on unpaid interest by appropriate adjustment) and dismissed the Revenue's appeal.

Extension of anti-dumping duty notification - prevention of infructuous proceedings - permission to place written submissions on record

Extension of anti-dumping duty notification - prevention of infructuous proceedings - Direction to respondent authorities to extend the existing anti-dumping duty notification in respect of the product in question until 9th July 2019. - HELD THAT: - The Court found it necessary to preserve the operative status of the anti-dumping duty notification until the Court could pronounce its judgment so that the expiry of the notification on 24th June 2019 would not render the ongoing adjudicatory proceedings infructuous. Having observed that oral arguments had only just concluded and noting the respondents' request to place written submissions on record, the Court exercised its discretion to direct a short interim extension of the notification to maintain the status quo pending final disposal, relying on the principle that expiry of the notification during adjudication could nullify the utility of the hearing. [Paras 1]

Respondent nos.1, 3 & 4 directed to extend the anti-dumping duty notification at least till 9th July 2019.

Permission to place written submissions on record - Granting of time to the parties to place on record the gist of written submissions and adjournment of the matter. - HELD THAT: - The Court allowed the parties, including respondent no.2, to place written submissions on record and initially permitted filing of the gist by 21st June 2019. Subsequently, on joint request of counsel for the petitioner and respondents, the Court granted additional time to file the gist of written submissions by Monday, 24th June 2019 and adjourned the matter to that date. This administrative extension was granted to enable completion of record filings before the Court proceeds to pronounce its order. [Paras 1, 2]

Permission granted to place written submissions on record; matter adjourned to 24.6.2019 for filing of gist of written submissions.

Final Conclusion: The High Court directed an interim extension of the anti-dumping duty notification until 9th July 2019 to prevent the proceedings becoming infructuous and permitted the parties to file the gist of written submissions, adjourning the matter to 24.6.2019.

Natural justice - reliance on documents in show cause notice - right to information v. right of production in adjudicatory proceedings - production of documents in domestic enquiry - cross examination of witnesses in adjudication

Reliance on documents in show cause notice - natural justice - production of documents in domestic enquiry - Whether the appellants were entitled, as of right in the adjudicatory proceedings, to be furnished with the entire chain of correspondence between Customs and Central Excise which the revenue did not rely upon in the show cause notice. - HELD THAT: - The Court held that documents which the department relies upon in issuing a show cause notice constitute the class of material which must be furnished to the opposite party as a matter of principle of natural justice, because the department cannot proceed on documents without enabling the affected person to meet them. Conversely, where the revenue does not rely on particular documents in the show cause notice, the person has no vested right in the adjudicatory proceeding to compel production of such material. The right to obtain information under the Right to Information v. right of production in adjudicatory proceedings are distinct: an RTI applicant need not state reasons and RTI remedies remain open, but an RTI entitlement cannot be equated with a right to require production in a domestic enquiry when the document is not a relied upon basis for adjudication. The Tribunal's rejection of the request to furnish the entire chain of correspondence was thus sustainable where the revenue disclaimed reliance on those documents; the Court found no infirmity in that conclusion and noted that alternate remedies under the RTI regime remained available to the appellants. [Paras 11, 12, 13]

Request to furnish documents not relied upon in the show cause notice was correctly rejected; no breach of natural justice is made out.

Cross examination of witnesses in adjudication - Whether the appellants were denied the opportunity to cross examine departmental witnesses. - HELD THAT: - The record shows that the appellants sought cross examination and that the Customs, Excise and Service Tax Appellate Tribunal acceded to that request. The adjudicatory process therefore permitted the appellants to test witness evidence, and no substantial legal question arises from denial of that relief. The Court confined itself to the limited scope of whether refusal to furnish non relied documents required interference, and having found the rejection sustainable, no separate grievance as to cross examination remained for interference. [Paras 9]

Cross examination request was allowed by the Tribunal; no interference necessary.

Final Conclusion: The appeals are dismissed; the Tribunal rightly permitted cross examination and sustained non furnishing of documents not relied upon in the show cause notice, and the appellants remain free to pursue remedies under the Right to Information Act.

Extension of anti-dumping duty notification - interim relief to prevent proceedings becoming infructuous - permission to place written submissions on record

Extension of anti-dumping duty notification - interim relief to prevent proceedings becoming infructuous - Direction to extend the existing anti-dumping duty notification in respect of the product in question until 9th July 2019. - HELD THAT: - The Court observed that oral arguments in the petition had concluded only on the day of the order and that the notification extending anti-dumping duty was due to expire on 24th June 2019. Relying on the principle that expiry of the notification before pronouncement of judgment could render the proceedings infructuous, and having permitted parties to place written submissions on record, the Court found it appropriate to grant interim protection by directing extension of the notification. The extension was restricted in time to cover the period necessary for the Court to consider the matter and pronounce judgment, namely until 9th July 2019.

Respondent Nos. 1, 3 and 4 directed to extend the anti-dumping duty notification in respect of the product in question at least till 9th July 2019.

Permission to place written submissions on record - Grant of leave to respondents to place written submissions on record by 21st June 2019 and listing of the matter on 21st June 2019. - HELD THAT: - The Court allowed respondent No.2 to place the gist of written submissions on record by 21st June 2019 and, by extension, permitted respondents Nos.1 and 3 to do so as necessary. Recognising that written submissions remained to be filed and that judgment would not be immediate, the Court fixed the time for filing and directed that the matter be put up on 21st June 2019, with direct service permitted.

Permission granted to place written submissions on record by 21st June 2019; matter posted for 21st June 2019 with direct service permitted.

Final Conclusion: Interim directions issued: the anti-dumping duty notification concerning the product is extended until 9th July 2019 to prevent the proceedings becoming infructuous; respondents permitted to file written submissions by 21st June 2019 and matter posted for that date.

Enforcement of appellate order pending revision - Payment of penalty as condition for implementation - Redemption of confiscated goods by payment of redemption fine - Penalty under Section 114 AA of the Customs Act, 1962 (applicability in issue)

Enforcement of appellate order pending revision - Payment of penalty as condition for implementation - Redemption of confiscated goods by payment of redemption fine - Appellate authority's order permitting redemption to be implemented notwithstanding pendency of revisions, subject to payment of the penalty under Section 114 AA by the writ petitioners. - HELD THAT: - The Court directed that, in light of the limited scope of the pending revisions (which challenge only the deletion of the Section 114 AA penalty), each writ petitioner shall pay the penalty under Section 114 AA within one week of receipt of this order. Once that payment is made, respondents 1 and 2 (in particular respondent No.2) are to give effect to the appellate orders by permitting redemption on payment of the redemption fine as reduced by the Appellate Authority, within a fortnight. The court reasoned that payment of the penalty removes the principal revenue limb that would otherwise provide a basis for stalling implementation, and thus there is no impediment to enforcing the appellate decision despite the continuance of the revision proceedings.

Payment of the Section 114 AA penalty within one week will be a condition for respondents to implement the Appellate Authority's order and permit redemption within a fortnight thereafter.

Penalty under Section 114 AA of the Customs Act, 1962 (applicability in issue) - Whether Section 114 AA is properly attracted in the cases is left open for the Revisional Authority; the court did not decide the substantive question of applicability. - HELD THAT: - The Court expressly declined to adjudicate the correctness of invoking Section 114 AA, leaving that question open. It permitted the Customs Department the option to either withdraw the revisions or to continue them to their conclusion. The court recorded that if the revisions are prosecuted to conclusion and ultimately dismissed, the writ petitioners would be entitled to a refund of the penalty paid. Thus the substantive controversy over applicability of Section 114 AA remains for the Revisional Authority or the Department's prosecutorial decision.

The question of whether Section 114 AA applies is left open for determination in the revision proceedings; if revisions are dismissed the petitioners are entitled to refund.

Final Conclusion: The writ petitions are disposed by directing the petitioners to pay the penalty under Section 114 AA within one week; on such payment respondents shall implement the Appellate Authority's orders permitting redemption within a fortnight; the substantive question of applicability of Section 114 AA is left open and, if the revisions are ultimately dismissed, the petitioners shall be entitled to refund.

Misdeclaration and undervaluation of imported goods - due diligence of a Customs Broker - duties under Regulation 11(d), (e) and (m) of CBLR, 2013 - penalty under Regulation 22 of CBLR, 2013

Misdeclaration and undervaluation of imported goods - due diligence of a Customs Broker - duties under Regulation 11(d), (e) and (m) of CBLR, 2013 - penalty under Regulation 22 of CBLR, 2013 - Whether the Customs Broker (appellant) committed contraventions of the duties cast upon it by Regulation 11(d), (e) and (m) of CBLR, 2013 and whether imposition of penalty under Regulation 22 was justified. - HELD THAT: - The Tribunal examined the record of misclassification, misdeclaration and undervaluation of wireless POS/MPOS consignments and the findings of the adjudicating authority. The authority found that the impugned devices included an integral software license whose value should have been included in transaction value, and that the consignments were misdeclared and undervalued. As to the role of the Customs House Agent (CHA), the adjudicating authority accepted that the CHA held a bonafide belief regarding the changed invoice and had completed KYC formalities, which led to rejection of revocation of the CHA's licence. However, the CHA's own statement acknowledged negligence in ensuring correctness of declarations. Regulation 11(d), (e) and (m) impose a mandatory duty on a Customs Broker to advise clients to comply with the Act, to exercise due diligence in ascertaining correctness of information imparted for clearance, and to discharge duties with speed and efficiency. The Tribunal held that, notwithstanding absence of mens rea, the admitted dereliction of those mandatory duties amounted to contravention and, given the resultant loss to the Exchequer by virtue of evasion of customs duty, the imposition of penalty under Regulation 22 was appropriate. The Tribunal therefore found no infirmity in the order imposing penalty and upheld the adjudicating authority's decision. [Paras 6, 7]

Penalty imposed under Regulation 22 of CBLR, 2013 for violation of duties under Regulation 11(d), (e) and (m) is upheld; appeal dismissed.

Final Conclusion: The Tribunal upheld the adjudicating authority's finding that the Customs Broker breached mandatory duties of due diligence under Regulation 11(d), (e) and (m) of CBLR, 2013 and sustained the penalty imposed under Regulation 22; the appeal is dismissed.

Finality of assessment - extended period of limitation - rejection of declared transaction value under Rule 12 - admissibility and corroboration of statements under Section 108 - right to cross-examination

Finality of assessment - extended period of limitation - Whether assessments finalized between May 2010 and January 2011 could be reopened in May 2015 by invoking the extended period of limitation for recovery of anti dumping duty. - HELD THAT: - The Tribunal held that assessments of the relevant 70 Bills of Entry, finalized in the period May 2010 to January 2011 and not appealed within the statutory period, had attained finality. All information required for assessment had been furnished during the assessment period and there was no sustainable material to establish suppression of facts that would justify invocation of the extended period. Consequently the show cause action of 29 May 2015 seeking reassessment and recovery of anti dumping duty was barred by limitation and impermissible as reopening of final assessments. [Paras 7]

Assessments finalized May 2010 to January 2011 could not be reopened in May 2015; proceedings were barred by limitation and the demand was unsustainable.

Rejection of declared transaction value under Rule 12 - admissibility and corroboration of statements under Section 108 - right to cross-examination - Whether the transaction value declared in the Bills of Entry could be rejected under Rule 12 of the Customs Valuation Rules solely on the basis of voluntary statements without independent corroboration and after denying cross examination. - HELD THAT: - The Tribunal noted that the Original Authority relied principally on voluntary statements recorded under Section 108 and on investigational material but did not possess independent corroborative evidence to displace the declared transaction value. The Original Authority also refused the appellants' request to cross examine the persons whose statements were relied upon. In these circumstances, and given the settled principle that the transaction value accepted at assessment cannot be lightly rejected, the Tribunal found that rejection under Rule 12 without contemporaneous or independent corroboration and without permitting cross examination was unsustainable on merits.

Rejection of declared transaction value and consequent imposition of anti dumping duty and penalties, based solely on uncorroborated statements and without allowing cross examination, is unsustainable; impugned order set aside on merits.

Final Conclusion: The impugned adjudication order dated 28 February 2017 is set aside: (i) the attempts to reopen assessments finalized between May 2010 and January 2011 were barred by limitation; and (ii) the rejection of declared transaction value and confirmation of anti dumping duty and penalties, based on uncorroborated statements and denial of cross examination, was unsupportable on merits.

Portable automatic data processing machines - classification under heading 847130 - presence of central processing unit, keyboard and display as classificatory test - weight criterion for subheading 847130 (not more than 10 kg) - HSN explanatory notes on portability - presentation in the form of systems (sub heading 8471 49) - classification under heading 847150 (processing units) - sub heading note 2 to Chapter 84 (definition of systems)

Portable automatic data processing machines - weight criterion for subheading 847130 (not more than 10 kg) - presence of central processing unit, keyboard and display as classificatory test - HSN explanatory notes on portability - classification under heading 847150 (processing units) - presentation in the form of systems (sub heading 8471 49) - sub heading note 2 to Chapter 84 (definition of systems) - Imported all in one computers are classifiable under heading 847130 as portable automatic data processing machines weighing not more than 10 kg and consisting of at least a central processing unit, a keyboard (virtual/touch) and a display; alternative classifications under headings 847150, 847141 or 847149 are not attracted. - HELD THAT: - The Tribunal accepted the factual findings that the imported goods are all in one computers with integrated CPU and VDU, include a touch screen/virtual keyboard, and weigh less than 10 kg. On the statutory and interpretative materials it held that: (i) to fall under heading 847130 an article must be portable, weigh not more than 10 kg and comprise a CPU, a keyboard and a display; (ii) the term "portable" as used in the HSN explanatory notes is not limited to laptop/notebook form factors and covers devices that can be easily relocated; (iii) absence of an in built battery does not preclude portability; and (iv) the imported items satisfy all the conditions of heading 847130. The Tribunal further examined the contention of classification as a "system" under sub heading 8471 49 and observed that sub heading note 2 requires segregable units comprising at least a CPU, an input unit and an output unit; because the CPU and VDU are integrated in the same housing the article does not qualify as a system for 8471 49. Similarly, the claimed classification under 847150 (processing units) and the alternate 8471 41/8471 49 headings were found not to be attracted on facts and on the application of the relevant notes and explanatory text. For these reasons the Tribunal found no error in the adjudicating and appellate authorities' classification of the imports under heading 847130. [Paras 5, 6]

Appeal dismissed; impugned classification under heading 847130 upheld.

Final Conclusion: The Tribunal upheld the orders of the lower authorities classifying the imported all in one computers under CTH 847130 (portable automatic data processing machines meeting the CPU keyboard display and weight criteria) and dismissed the appeal.

Summary order. Hearing recorded; no final adjudication on jurisdictional point in CP 1 of 2016; CA 103 of 2019 adjourned pending disposal of CA 92 of 2019; all listed matters, including CP 1 of 2016 and connected appeals, to appear on 21st June, 2019.

Admission under Section 7 of I&B Code - Corporate Insolvency Resolution Process - default in repayment of debt - substituted service - moratorium under Section 14 of I&B Code - appointment of Interim Resolution Professional

Admission under Section 7 of I&B Code - default in repayment of debt - The Section 7 petition is maintainable and the financial debt and default have been established such that the petition deserves to be admitted. - HELD THAT: - The petitioner produced the Loan-cum-hypothecation Agreement and the corporate debtor's board resolution authorising the loan, together with the account statement showing accrued interest and arrears. Notices including a loan recall and a demand under the Companies Act were sent and remained unanswered. The Bench found that the application under sub-section (2) of Section 7 was complete and that an existing financial debt in excess of the statutory threshold and its default were proved on the record. In the absence of any defence by the corporate debtor despite substituted service, the Bench treated the lack of response as admission of liability and proceeded to admit the petition. [Paras 11, 12, 13, 14, 16]

Petition under Section 7 admitted; existence of debt and default established.

Substituted service - Service by publication as substituted service was sufficient and lack of appearance by the corporate debtor justified proceeding with the petition. - HELD THAT: - The record shows multiple attempts at personal service returned 'unclaimed' and the petitioner published notice as directed by the Bench. The Tribunal held that service by substituted means complied with directions previously given and that the corporate debtor's failure to appear or defend despite adequate notice warranted adjudication in the petitioner's favour. [Paras 9]

Substituted service held sufficient; proceedings properly continued in absence of corporate debtor.

Moratorium under Section 14 of I&B Code - On admission, moratorium under Section 14 of the I&B Code is declared with the consequential prohibitions and protections specified in the order. - HELD THAT: - Upon admission of the corporate insolvency petition, the Bench declared the moratorium operative from the date of the order until completion of CIRP or earlier approval of a resolution plan or liquidation, enjoining institution or continuation of suits, transfer or encumbrance of assets, enforcement of security, and recovery of property, while ensuring continuation of supply of essential goods and services subject to statutory exceptions. [Paras 16]

Moratorium under Section 14 declared with the consequential prohibitions and directions.

Appointment of Interim Resolution Professional - The proposed insolvency professional is appointed as Interim Resolution Professional to perform functions under the I&B Code. - HELD THAT: - The petitioner proposed Mr Sekar Ananthanarayan, a registered insolvency resolution professional, submitted his declaration and a statement that no disciplinary proceedings were pending. The Bench appointed him as Interim Resolution Professional and directed that his fees comply with applicable IBBI regulations and directions. The Registry was directed to communicate the order and to cause the public announcement as required. [Paras 15, 16]

Mr Sekar Ananthanarayan appointed as Interim Resolution Professional; directions given regarding fees, public announcement and communication of the order.

Final Conclusion: The petition under Section 7 is admitted; CIRP is initiated against the corporate debtor, moratorium under Section 14 is declared, and an Interim Resolution Professional is appointed with directions for public announcement and communication of the order.

Pre-existing dispute - maintainability of a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - rejection of insolvency petition where dispute is not spurious, hypothetical or illusory - requirement of supporting documentary evidence for operational debt

Pre-existing dispute - maintainability of a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - requirement of supporting documentary evidence for operational debt - Whether the Section 9 petition is maintainable where the corporate debtor disputed the claim and sought specific supporting documents evidencing transportation of goods. - HELD THAT: - The Tribunal examined the pleadings, invoices and the correspondence between the parties and found that the corporate debtor had, prior to the initiation of the petition, specifically denied the claimed debt and requested supporting documents including lorry receipts with acknowledgement, border check-post stamping and consignee acknowledgement. The operational creditor failed to produce those documents contemporaneously or before the Adjudicating Authority; only invoices and consignee copies (without the requested acknowledgements and stamps) were placed on record. The Tribunal held that such a dispute was not a mere colourable or vague denial but a bona fide, pre-existing dispute as to liability and proof of transportation. Relying on the settled principle that an application under Section 9 must be rejected if a real dispute exists (and such dispute is not spurious, hypothetical or illusory), the Tribunal concluded that the petition was not maintainable and therefore refused admission.

Petition under Section 9 of the IBC dismissed for non-admission on account of a pre-existing, bona fide dispute and absence of required supporting documentary evidence.

Final Conclusion: The Tribunal dismissed the Section 9 petition and declined to admit the insolvency application because the corporate debtor had a pre-existing bona fide dispute and the operational creditor failed to furnish the documentary proof requested to substantiate the claimed operational debt.

Provisional attachment under the Prevention of Money Laundering Act - reason to believe - proceeds of crime - compliance with Section 5 and Section 8 of PMLA - scope of inquiry at interlocutory stage (prima facie/initial material) - preservation of property pending trial - restoration/conditional release by deposit or security

Provisional attachment under the Prevention of Money Laundering Act - reason to believe - compliance with Section 5 and Section 8 of PMLA - proceeds of crime - Validity of provisional attachment of 231.09 acres of land in favour of M/s Penna Cement Industries Limited and whether the Adjudicating Authority properly applied the statutory pre-requisites for confirmation. - HELD THAT: - The Tribunal found that the Adjudicating Authority failed to legally consider the reply and material placed by the appellant as required under Section 8(2), and that the provisional attachment order and its confirmation did not adequately record the requisite "reason to believe" contemplated by Section 5/8 of the Act. The material shows that statutory revenue processes, valuations, notices and executive approvals preceded alienation and that the question whether a scheduled offence was committed remains to be tested at trial; CBI allegations/charge-sheet cannot be treated as conclusive. While some technical discrepancies may exist, overall process and state approvals negate a finding that no due process was followed. Balancing the need to preserve alleged proceeds of crime with procedural safeguards, the Tribunal held that the attachment may be continued to preserve the property but possession should not be taken by the respondent in the interim. [Paras 40, 41, 42, 43, 66]

Attachment of the land shall continue, but the respondent shall not take possession of the said property.

Provisional attachment under the Prevention of Money Laundering Act - proceeds of crime - scope of inquiry at interlocutory stage (prima facie/initial material) - restoration/conditional release by deposit or security - Validity of provisional attachment of identified floors/portions of the hotel building of M/s Pioneer Holiday Resorts Limited and appropriate interim relief where the attachment is contested. - HELD THAT: - On the material before it, including that the building permissions, payments and revised permits were in the record and that investments alleged as quid pro quo were disputed as bona fide business transactions, the Tribunal concluded that the impugned attachment of the hotel floors could not be sustained in the form ordered. The Tribunal accepted the appellants' suggestion to secure the value of the attached property by furnishing a fixed deposit receipt in favour of the respondent, subject to conditions that the appellants shall not dispose of the specified floors and shall not claim equity for renovations. This remedy was regarded as an appropriate balance between preserving alleged proceeds and protecting commercial interests and employees pending final adjudication by the Special Court. [Paras 23, 33, 55, 56, 67]

Attachment of the specified hotel floors is released on the appellants furnishing a fixed deposit security to the respondent within the stipulated time and subject to the stated conditions.

Final Conclusion: The Tribunal modified the Adjudicating Authority's confirmation of provisional attachment: the attachment of the Penna land is maintained but possession shall not be taken by the respondent; the attachment of the specified hotel floors of Pioneer Holiday Resorts Ltd. is released on furnishing a conditional fixed deposit security and compliance with attendant conditions, while substantive allegations remain to be adjudicated by the Special Court.

Provisional attachment under PMLA - proceeds of crime - bona fide third party claimant - security interest of a secured creditor - attachment subject to satisfaction of prior charge - due diligence in acquisition of security - section 8 PMLA confirmation process - moratorium under the Insolvency and Bankruptcy Code

Provisional attachment under PMLA - bona fide third party claimant - security interest of a secured creditor - due diligence in acquisition of security - attachment subject to satisfaction of prior charge - Validity of confirmation of the Provisional Attachment Order (PAO) as against Bank of India, a secured creditor holding pari passu mortgages over the Subject Properties. - HELD THAT: - The Tribunal set aside the Adjudicating Authority's confirmation of the PAO in respect of the appellant bank. It found that the mortgages and security interest in favour of the bank were created prior to the alleged criminal activity and that the bank had conducted due diligence before taking the securities. Relying on the principle that the charge or encumbrance of a bona fide third party secured creditor cannot be declared void unless material shows it was created to defeat PMLA proceedings, the Tribunal held that an attachment under PMLA operates subject to satisfaction of the prior charge and is restricted to the value in excess of the secured creditor's claim. The Adjudicating Authority had not applied its mind, given no reasoning to treat prior created encumbrances as proceeds of crime, and therefore the confirmation order could not stand insofar as it affected the appellant bank. [Paras 24, 25, 28, 36, 46]

Impugned confirmation of the PAO set aside qua the appellant bank; the bank's prior security interest upheld and attachment held operable only subject to satisfaction of that charge.

Section 8 PMLA confirmation process - provisional attachment under PMLA - proceeds of crime - Whether the Adjudicating Authority applied the statutory test under PMLA when issuing and confirming the provisional attachment. - HELD THAT: - The Tribunal concluded the Adjudicating Authority failed to state reasons or apply the statutory test required by Section 5/8 of the PMLA. The authority did not identify material prima facie to show the bank was in possession of proceeds of crime nor did it consider the appellant's replies and evidence of bona fide acquisition. Citing settled authorities on the need to assess bona fides and probative material before confirmation, the Tribunal found the order suffered from fundamental legal infirmity for want of application of mind. [Paras 36, 37, 41]

The confirmation was quashed for failure to apply the required PMLA statutory tests and for want of reasoning.

Moratorium under the Insolvency and Bankruptcy Code - priority of insolvency moratorium over attachment - Effect of the NCLT moratorium on continuation of PMLA attachment proceedings and consequences of ED actions taken after commencement of the moratorium. - HELD THAT: - The Tribunal held that proceedings under Section 8 of the PMLA are civil in nature and ought to have been stayed upon commencement of the NCLT moratorium. The Enforcement Directorate registered the ECIR and issued the provisional attachment after the moratorium was in place; the Tribunal regarded this as contrary to the legislative scheme and settled law, creating an impermissible hurdle in the insolvency process. Consequently, the PAO and its confirmation could not validly operate against the appellant bank which had initiated insolvency remedies prior to attachment. The Tribunal directed that the period from commencement of the moratorium until this judgment be excluded for limitation calculation in the corporate insolvency process. [Paras 11, 43, 44, 45, 46]

PMLA proceedings continued after the NCLT moratorium were improper; PAO and its confirmation set aside as to the appellant and the moratorium period excluded for limitation purposes in the CIRP.

Final Conclusion: The appeals are allowed. The Adjudicating Authority's confirmation of the provisional attachment and the PAO of 24.04.2018 are quashed insofar as they affect the appellant bank: the bank's prior security interest is recognised and attachment may operate only subject to satisfaction of that charge; continuation of PMLA proceedings after the NCLT moratorium was improper and the moratorium period is to be excluded for CIRP limitation computation.

Exercise of writ jurisdiction - alternate remedy - relegation to alternate statutory remedy - rule of discretion - natural justice principles - fiscal law - alternate remedy applies with greater rigour - condonation of delay

Alternate remedy - exercise of writ jurisdiction - rule of discretion - fiscal law - alternate remedy applies with greater rigour - Whether the writ petitions should be entertained in view of the availability of an alternate statutory remedy by way of appeal. - HELD THAT: - The Court found that an effective alternate remedy by way of appeal to the Commissioner (Appeals-II) is available to the writ petitioner and that the grounds raised in the writ petitions principally involve factual disputes which cannot be resolved on affidavits. Reliance on the Supreme Court's exposition in Satyawati Tandon and K.C. Mathew was held to be applicable, the latter reiterating that the alternate remedy rule applies with particular rigour in matters involving recovery of taxes or other public dues. There was no allegation of want of jurisdiction, violation of principles of natural justice, or that the statutory appeal would be ineffectual. In these circumstances the exercise of writ jurisdiction was declined and the petitioner was relegated to the appellate remedy; questions of fact and merit were left open for determination by the appellate authority. The Court also observed that applications for condonation of delay, if any, should be dealt with by the Appellate Authority on merits. [Paras 18, 19, 20, 21, 22]

Writ petitions dismissed for non-entertainment on merits and the petitioner relegated to file the statutory appeal before the Commissioner (Appeals-II), with all grounds left open and liberty to seek condonation of delay before the appellate authority.

Relegation to alternate statutory remedy - refund claim - conditional notification - penalty for filing ineligible refund claim - natural justice principles - Disposition of the refund claims and penalty imposed in the impugned orders - whether to adjudicate merits in writ jurisdiction or leave for the appellate process. - HELD THAT: - The impugned orders had rejected refund claims and imposed penalties principally on the ground that Notification No.39/2012 was conditional and conditions had not been complied with. The Court noted that these contentions involve factual questions (compliance with conditions, filing of declarations and returns) which cannot be resolved on affidavits in writ proceedings. There was no finding of violation of natural justice or lack of jurisdiction in the impugned orders. Consequently, the Court did not decide the merits of the refund rejection or the penalty, but directed that these matters be agitated before the appellate authority, leaving all questions open for determination on appeal and permitting consideration of condonation applications by the Appellate Authority. [Paras 11, 12, 13, 20, 22]

Merits of the refund claims and penalty not adjudicated; matters to be raised and decided in the statutory appeal before the Commissioner (Appeals-II), with liberty to apply for condonation of delay.

Final Conclusion: Both writ petitions are dismissed and disposed of by relegating the petitioner to pursue the statutory appeal before the Commissioner (Appeals-II) in respect of the periods April to June 2015 and July to September 2015; all substantive questions are left open for decision by the appellate authority and condonation applications, if any, shall be decided on merits.

Composite contract - Works Contract Service - Erection, Commissioning and Installation Services - abatement - Service Tax liability of sub-contractor - extended period of limitation - bona fide belief / interpretational defence

Composite contract - Erection, Commissioning and Installation Services - Works Contract Service - abatement - Sustainability of Service Tax demand where contracts were composite and authorities confirmed tax under Erection, Commissioning and Installation Services or re-characterised as Works Contract Service. - HELD THAT: - The appellants undertook composite contracts involving supply, installation and commissioning and had separated material and labour to discharge tax only on labour. For the period prior to 01.06.2007, reliance on M/s. Larsen & Toubro leads to the conclusion that Service Tax on such composite contracts cannot be sustained. For the post-01.06.2007 period, though the Commissioner (Appeals) re-characterised the demand as Works Contract Service and allowed abatement (33%) on materials, the Tribunal finds the Commissioner (Appeals) impermissibly travelled beyond the Show Cause Notice which alleged tax under Erection, Commissioning and Installation Services. The Tribunal also relied on a prior Tribunal decision holding that demands under Erection, Commissioning and Installation Services do not survive for composite contracts after 01.06.2007. On these grounds the confirmation of demand under Erection, Commissioning and Installation Services/Works Contract Services is held to be erroneous and is set aside. [Paras 6]

Demand of Service Tax under Erection, Commissioning and Installation Services/Works Contract Services in respect of the composite contracts is unsustainable and is set aside.

Service Tax liability of sub-contractor - extended period of limitation - bona fide belief / interpretational defence - Whether demand of Service Tax on amounts received for Co-consultancy Services is sustainable and whether invocation of extended limitation period is proper. - HELD THAT: - The appellants, as co-consultants, did not discharge Service Tax during the relevant period because they bona fide believed the principal consultant's discharge of tax sufficed; contemporaneous judicial decisions favoured that position. Although the Board later clarified by Circular dated 23.08.2007 that sub-contractors must also pay Service Tax, the matter was an interpretational question mired in litigation during the disputed period up to 2007-08. Given that there was no finding of deliberate suppression to evade tax and that the issue was arguable, the Tribunal holds the demand to be barred by limitation and unsustainable. [Paras 7]

Demand of Service Tax on Co-consultancy Services is barred by limitation and is set aside.

Final Conclusion: Both the demands (for Erection, Commissioning and Installation Services/Works Contract Services on composite contracts and for Co-consultancy Services) were held unsustainable; the impugned order is set aside and the appeal is allowed with consequential reliefs as per law.

Condonation of delay - refund of service tax under Notification No.41/2012 ST (29.06.2012) - substantial question of law - withdrawal of appeal with liberty to agitate question

Condonation of delay - Delay in re filing the three service tax appeals was condoned. - HELD THAT: - Applications for condonation of delays of 326 days, 285 days and 285 days respectively in re filing the appeals were considered and, for the reasons stated in the applications, the High Court allowed the same and condoned the delay. The court thereby permitted the re filing of the appeals which had been time barred for the stated periods.

Applications for condonation of delay are allowed and the delay in re filing the appeals is condoned.

Withdrawal of appeal with liberty to agitate question - substantial question of law - refund of service tax under Notification No.41/2012 ST (29.06.2012) - The three appeals were dismissed as withdrawn while keeping open the substantial question of law concerning entitlement to refund under the notification. - HELD THAT: - The appellant indicated that the refund amounts were below the threshold and sought permission to withdraw the appeals while reserving the right to pursue the substantive legal question. The High Court permitted withdrawal of the appeals and expressly kept open the substantial question of law raised (concerning whether services used to obtain funds ahead of the prescribed date fall within the notification for export related services). The court therefore did not decide that substantive question on the merits.

Appeals dismissed as withdrawn with liberty to raise the substantial question of law; the substantive question remains undecided.

Final Conclusion: The High Court allowed condonation of delay in re filing the three service tax appeals and permitted the appellant to withdraw the appeals; the substantive legal question regarding entitlement to refund under the notification was left open for future consideration.

Availability of Cenvat credit for input services used to provide the same output service - Interpretation of exclusion with exception: 'except for the provision of one or more of the specified services' - Commercial or Industrial Construction Services - Input Service - Cenvat credit - Extended period of limitation

Availability of Cenvat credit for input services used to provide the same output service - Commercial or Industrial Construction Services - Input Service - Cenvat credit - Interpretation of exclusion with exception: 'except for the provision of one or more of the specified services' - Service tax paid by sub-contractors on Commercial or Industrial Construction Services is allowable as Cenvat credit to the appellant where those services are used by the appellant in providing the same output service. - HELD THAT: - The amended definition of Input Service contains an inclusion and an exclusion with a built-in exception. The exclusion denies credit where specified services are used for construction or laying of foundations, but expressly saves an exception "except for the provision of one or more of the specified services." The Tribunal construed the statutory language so that the exclusion does not operate where the excluded services are themselves used for providing any of the specified services; applying the exception yields that construction services used by the appellant in providing construction output (power plant works) qualify as admissible Cenvat credit. The Tribunal held that the literal exclusion cannot be read so as to nullify the express saving clause and that the exception converts the double-negative into an affirmative entitlement where the services are used to provide the specified services themselves. Applying that principle, the service tax paid by subcontractors for Commercial or Industrial Construction Services was held to be creditable to the appellant. [Paras 5]

Allowed the appeal on merits and held the credit admissible.

Extended period of limitation - Public Sector Undertaking - The demand raised by invoking the extended period of limitation is barred and liable to be set aside in the facts of this case. - HELD THAT: - The Tribunal observed that the appellant is a Central Government Public Sector Undertaking and there was no justification to invoke the extended period of limitation against it. In the absence of such justification and in view of the circumstances recorded, the demand raised under the extended limitation was held to be time-barred. Consequently, the impugned order confirming the demand was set aside on limitation grounds in addition to the merits. [Paras 6]

Demand under extended limitation set aside as barred by limitation.

Final Conclusion: The appeal is allowed: (a) the service tax paid by sub contractors on Commercial or Industrial Construction Services used by the appellant in providing the same construction output is admissible as Cenvat credit; and (b) the demand raised by invoking the extended period of limitation is barred and is set aside.

Eligibility of Cenvat credit on outdoor catering services - definition of input service post-amendment - exclusion for services used primarily for personal use or consumption - impact of negative list regime (post 01.07.2012) on pre existing service definitions - binding effect of Larger Bench decision

Eligibility of Cenvat credit on outdoor catering services - definition of input service post-amendment - binding effect of Larger Bench decision - Credit on outdoor catering services is not admissible for the disputed period. - HELD THAT: - The Tribunal was asked to decide whether credit on services of preparation and supply of food in factory canteens is eligible after the amendments to Rule 2(l) of the CENVAT Credit Rules effective 01.04.2011 and for the period after introduction of the negative list regime. Although appellants argued that such canteen services are statutory compliance and not services for employees' personal consumption and that the negative list regime from 01.07.2012 and GST classifications demonstrate that ongoing contract food services differ from event based outdoor catering, the bench is bound by the Larger Bench decision in M/s. Wipro Ltd. The Larger Bench construed Clause (C) of the post 1.4.2011 exclusion to exclude "outdoor catering service" from input services and held such services ineligible for credit. The CENVAT Credit Rules have not been amended to remove that exclusion; accordingly the Larger Bench precedent applies and credit is ineligible for the disputed period despite arguments based on statutory canteen obligations or subsequent developments in GST classification. [Paras 7]

Following the Larger Bench, credit on outdoor catering services is not admissible for the period in dispute.

Penalty relief - Penalties imposed in the demand orders are set aside while demand and interest are maintained. - HELD THAT: - Although the substantive demand for ineligible credit is sustained under the binding Larger Bench view, the Tribunal considered the imposition of penalties to be unwarranted in the interpretational context and in light of the reference to the Larger Bench. Consequently, penalties were annulled while leaving the demand and interest intact. [Paras 7, 8]

Penalties are set aside; demand and interest remain undisturbed.

Final Conclusion: Appeals are partly allowed: the Cenvat credit on outdoor catering services is held ineligible for the disputed post 01.07.2012 period (following the Larger Bench), but penalties imposed are set aside; demand and interest are maintained.

Cenvat credit - clean energy cess - fee versus tax distinction - quid pro quo - Rule 3 of Cenvat Credit Rules, 2004 - earmarking of cess for specific purpose - applicability of Central Excise Act provisions to cess

Clean energy cess - fee versus tax distinction - quid pro quo - earmarking of cess for specific purpose - Classification of the clean energy cess levied under Section 83 of the Finance Act, 2010 as a fee or as an excise duty/tax - HELD THAT: - The Tribunal examined Section 83 which denominates the levy as "Clean Energy Cess" and contemplates its collection, appropriation and application for financing specified clean energy purposes, with proceeds credited to the Consolidated Fund but earmarked for particular uses and not distributable to States. Applying settled constitutional and judicial tests on the distinction between tax and fee (including the requirement of an element of quid pro quo and earmarking for specified purposes), the Tribunal found that despite the statutory nomenclature and the provision making Central Excise Act machinery applicable, the primary object and essential purpose of the levy is to fund specific clean energy initiatives. The levy therefore partakes the character of a fee (a cess for a specified purpose with an identifiable nexus between contributors and the services/benefit), rather than a general-purpose excise duty or tax. The Tribunal distinguished the decision relied upon by the appellant on its facts, observing that the present levy is earmarked for a specific purpose and thus bears the characteristics of a fee. [Paras 6, 7]

The clean energy cess under Section 83 of the Finance Act, 2010 is a fee (cess for a specific purpose) and not an excise duty/tax.

Cenvat credit - Rule 3 of Cenvat Credit Rules, 2004 - proviso excluding clean energy cess - applicability of Central Excise Act provisions to cess - Entitlement to cenvat credit on clean energy cess paid on coal under Rule 3, Cenvat Credit Rules, 2004 - HELD THAT: - Rule 3 of the Cenvat Credit Rules, 2004 permits credit only in respect of duty of excise or specified duties. The Tribunal held that since the clean energy cess is in substance a fee earmarked for specific purposes, it does not qualify as an excise duty for the purpose of Rule 3. In addition, Notification No.26/2010-CE inserted a proviso to Rule 3 expressly stating that cenvat credit of duties specified shall not be utilised for payment of clean energy cess leviable under Section 83, confirming legislative intent that the cess is to be discharged in cash. Consequently, even on a statutory construction ground, the levy is excluded from the ambit of cenvat credit. [Paras 8, 9, 10]

The appellant is not entitled to cenvat credit on the clean energy cess; Rule 3, CCR, 2004 does not permit credit for the cess and the proviso to Rule 3 bars utilisation of cenvat credit for payment of the clean energy cess.

Final Conclusion: The Tribunal dismissed the appeal, holding that the clean energy cess is in the nature of a fee earmarked for specific clean energy purposes and not an excise duty/tax, and accordingly the appellant is not entitled to cenvat credit for the cess (the impugned recovery, interest and penalty confirmed).

Evidentiary value of third-party documents - requirement of corroborative evidence for clandestine removal - recovery of duty cannot be sustained solely on third-party records

Evidentiary value of third-party documents - requirement of corroborative evidence for clandestine removal - recovery of duty cannot be sustained solely on third-party records - The impugned recovery and penalties based solely on documents recovered from a third party cannot be sustained in absence of corroborative evidence linking the appellants to clandestine procurement and removal. - HELD THAT: - The Tribunal examined whether documents recovered from M/s. Pankaj Ispat Ltd. could, by themselves, support the finding that the appellants supplied unaccounted raw material and thereby facilitated clandestine removal. It held that established precedent requires clinching or corroborative evidence of clandestine manufacture or removal before adverse findings can be sustained against a third party whose own premises were not searched. The adjudicatory order relied exclusively on documents seized from the third party; there was no stock verification at the appellants' premises, nor evidence of transportation or other material linking the appellants to the alleged supplies. In the absence of such independent corroboration the third-party records could not be attributed to or used to fix liability upon the appellants. Applying these principles, the Tribunal found the confirmed recovery to lack a legal basis.

Order confirming recovery and penalties set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that reliance solely on third-party documents without corroborative evidence was insufficient to sustain the recovery of duty and penalties, and accordingly set aside the adjudicating order.

Duty liability for goods cleared without payment - confiscation and redemption - imposition of penalty and personal penalty - ownership and control of seized goods - sufficiency of investigation and evidence

Duty liability for goods cleared without payment - sufficiency of investigation and evidence - Whether Central Excise duty liability could be fastened on the manufacturer-appellant in respect of the seized goods - HELD THAT: - The Tribunal examined the record and the course of investigation and found absence of evidence establishing that the confiscated goods were cleared by the appellant without payment of duty. In view of the lack of proof that the goods in question were cleared short of duty, the Tribunal held that duty liability could not be fastened on the appellant. The impugned demand of Central Excise duty levied on the seized goods was therefore set aside. [Paras 4]

Demand of Central Excise duty fastened on the appellant in respect of the confiscated goods set aside.

Imposition of penalty and personal penalty - ownership and control of seized goods - sufficiency of investigation and evidence - Whether penalties (including personal penalty) and redemption/confiscation consequences could be sustained against the manufacturer-appellant and the other appellant - HELD THAT: - The Tribunal considered the appellants' contention that they did not claim ownership of the seized goods and that there was no evidence of their control over or clearance of those goods beyond Uttar Pradesh. Having regard to the earlier Final Order referred to and to the record of the present investigation, the Tribunal found that the Revenue had not established the necessary nexus between the appellants and the seized consignments nor shown that the appellants cleared the goods without duty. On that basis the Tribunal concluded that the penalties and personal penalty imposed on the appellants could not be sustained and set aside the impugned order insofar as it imposed penalties and confirmed confiscation/redemption consequences against them. [Paras 4]

Penalties (including personal penalty) and the impugned confiscation/redemption consequences imposed on the appellants set aside.

Final Conclusion: The appeals are allowed: the demand of duty and the penalty orders (including personal penalty) in the impugned order are set aside for lack of evidence that the seized goods were cleared by the appellants without payment of duty.

Revenue neutrality - adjustment of service tax towards excise duty - service tax paid available as credit - classification of activity as manufacture versus service - longer period of limitation not invokable where revenue neutral - acceptance of ST-3 returns by Revenue

Adjustment of service tax towards excise duty - service tax paid available as credit - revenue neutrality - classification of activity as manufacture versus service - Whether the excise duty demand can be sustained where the appellant had treated and discharged the liability as service tax and such service tax was paid and available as credit, leading to a revenue neutral position. - HELD THAT: - The Tribunal found that the appellant had paid service tax on repair activities and filed ST-3 returns which were accepted by the Revenue. Although Revenue contended that excise duty ought to have been paid, the excise liability corresponded to an amount that had effectively been discharged by way of service tax which was available as credit. Relying on principles applied in earlier decisions cited in the order, the Tribunal held there was no justification for upholding the excise demand and that the service tax paid should be adjusted towards the excise duty now confirmed against the appellant. The conclusion rests on the factual finding of payment of service tax, its acceptance by Revenue, and the equivalence of the tax burden producing a revenue neutral outcome. [Paras 6]

Service tax paid by the appellant is to be adjusted towards the excise duty; the excise demand is not justified on merits.

Longer period of limitation not invokable where revenue neutral - acceptance of ST-3 returns by Revenue - Whether the demand raised after invoking the extended period of limitation is sustainable where the appellant had paid service tax, filed returns which were not objected to, and no suppression or misstatement was found. - HELD THAT: - The Tribunal noted that the demand was raised invoking the longer period of limitation but held that extended limitation cannot be invoked when the position leads to revenue neutrality and the Revenue had accepted the appellant's ST-3 returns without objection. There was no case of suppression or misstatement by the appellant to justify invocation of the extended period. Applying the cited precedents, the Tribunal concluded that the demand is barred by limitation and therefore unsustainable. [Paras 7]

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

Final Conclusion: Impugned order set aside; appeal allowed - the service tax paid is to be adjusted against the excise demand and the demand is barred by limitation, giving consequential relief to the appellant.

Exemption subject to export within prescribed period - confirmation of duty demand consequent to non-fulfilment of conditions of Notification No.42/2001-CE(NT) - extension of export period by revenue authorities - finality of unchallenged administrative order - bona fide impossibility / force majeure as defence to penalty - penalty under Central Excise Rules, 2002 Rule 25

Exemption subject to export within prescribed period - extension of export period by revenue authorities - finality of unchallenged administrative order - confirmation of duty demand consequent to non-fulfilment of conditions of Notification No.42/2001-CE(NT) - Confirmation of duty demand for goods procured duty-free under Notification No.42/2001-CE(NT) on account of failure to export within the permitted period and rejection of further extension. - HELD THAT: - The appellant had initially procured and exported goods under the Notification but, after procurement of certain goods, could not export them within six months due to the project being stalled abroad. Extensions were granted earlier, but the Assistant Commissioner rejected the appellant's final request for further extension by letter dated 23/02/2015. The appellant did not challenge that administrative rejection and allowed it to attain finality. In consequence, there was no valid extension on record and the condition of the Notification stood violated. The demand of duty confirmed by the adjudicating authority therefore follows as a direct consequence of the unchallenged rejection of extension; this consequence cannot be agitated before the Tribunal at this stage. The Tribunal accordingly upheld confirmation of the duty demand and the interest (the latter having been deposited). [Paras 7]

Confirmation of the duty demand and interest upheld as a consequence of failure to export within the prescribed/extended period and finality of the unchallenged rejection of further extension.

Bona fide impossibility / force majeure as defence to penalty - penalty under Central Excise Rules, 2002 Rule 25 - Imposition of penalty under Rule 25 of the Central Excise Rules, 2002 against the appellant for non-export of duty-free goods. - HELD THAT: - Although the demand for duty was sustained because no extension order remained on record, the appellant's failure to export arose from circumstances beyond its control - namely, the suspension of project operations and withdrawal of staff on directions of the Indian Embassy due to unrest in the destination country. Accepting that the appellant's conduct was bona fide and the inability to export was not within its control, the Tribunal concluded that imposition of penalty was not justified and set aside the penalty imposed by the authorities. [Paras 8]

Penalty imposed under Rule 25 set aside on account of bona fide reasons preventing export.

Final Conclusion: The Tribunal upholds the confirmed demand of duty and interest as consequent upon the unchallenged rejection of further extension for export, but sets aside the penalty under Rule 25 on the finding that the appellant's inability to export was bona fide and beyond its control; the appeal is disposed accordingly.

Classification of goods - classification of Multi Functional Devices as Information Technology Products - advance ruling binding effect - no distinction between new and used goods for classification - remand for reassessment in accordance with law

Classification of goods - classification of Multi Functional Devices as Information Technology Products - advance ruling binding effect - no distinction between new and used goods for classification - Impugned assessment was inconsistent with the Advance Ruling which classified MFDs under the notified list of Information Technology products without distinguishing between new and used items. - HELD THAT: - The Court recorded that the classification of MFDs is settled and the Advance Ruling Authority's order dated 02.09.2014 governs the field. The notified list of Information Technology products does not differentiate between old/used and new MFDs. Consequently, the respondent's assessment, insofar as it created or applied a distinction between old/used and new MFDs and thereby deviated from the Advance Ruling, misread and misconstrued that ruling. The impugned order is therefore unsustainable to the extent it departs from the Advance Ruling and the notified classification applicable to MFDs. [Paras 8, 9]

Impugned order set aside insofar as it misread the Advance Ruling; classification of MFDs follows the Advance Ruling and the notified list without distinction between new and used devices.

Remand for reassessment in accordance with law - advance ruling binding effect - Direction to the respondent to redo the assessment in conformity with the Advance Ruling and the notified classification. - HELD THAT: - Having set aside the portion of the impugned order that misapplied the Advance Ruling, the Court directed the respondent to recommence and complete reassessment taking the Advance Ruling dated 02.09.2014 into account and recognising that no distinction exists between new and used MFDs for classification purposes. The reassessment must be carried out in a manner known to law and completed within the timeframe specified by the Court. [Paras 10, 11]

Respondent directed to redo the assessment in light of the Advance Ruling, treating MFDs uniformly (new or used), the reassessment to be commenced and completed within three months.

Final Conclusion: Writ petition allowed in part: the impugned assessment is set aside to the extent it misread the Advance Ruling; respondent directed to reassess in accordance with the Advance Ruling (no distinction between new and used MFDs) and complete the exercise within three months. No costs.

Natural Justice - deemed assessment under Section 22(2) of TNVAT Act - setting aside assessment for breach of hearing and notice - remand for fresh assessment with statutory hearing

Natural Justice - deemed assessment under Section 22(2) of TNVAT Act - Impugned revised assessment orders under the TNVAT Act were passed without giving notice or an opportunity of personal hearing to the assessee and are vitiated for breach of natural justice. - HELD THAT: - The Court found that, notwithstanding any contention that the impugned TNVAT assessments may have been consequential on CST Act assessments, an assessment under the TNVAT Act could not be sustained where the assesses had only been under deemed assessment and no notice or opportunity to be heard was afforded. The absence of notice and a personal hearing amount to a violation of the principles of natural justice, rendering the assessment orders infirm. On that basis the Court held that the impugned orders must be set aside solely for breach of natural justice. [Paras 12, 13]

Impugned TNVAT revised assessment orders set aside for violation of natural justice.

Remand for fresh assessment with statutory hearing - setting aside assessment for breach of hearing and notice - Assessments for the two specified years were remitted for fresh adjudication after issuance of notice, filing of response, and affording personal hearing. - HELD THAT: - Having set aside the impugned orders on natural justice grounds, the Court directed that the respondent shall reissue fresh notices to the assessee, the assessee shall respond within the stipulated time without seeking further time, and the Assessing Authority shall afford a personal hearing at which supporting documents may be produced. Thereafter fresh assessment orders are to be passed in accordance with law for the two assessment years identified in the petitions. [Paras 14]

Matters remitted to the respondent to redo assessments for 2013-2014 and 2014-2015 after issuing fresh notices, receiving responses, and granting personal hearing; fresh orders to be passed in accordance with law.

Final Conclusion: Both writ petitions are allowed: the impugned TNVAT revised assessment orders dated 06.02.2019 are set aside for breach of natural justice and the respondent is directed to reissue notices, afford the assessee opportunity to respond and a personal hearing, and thereafter pass fresh assessment orders for AY 2013-2014 and AY 2014-2015 in accordance with law.

Relegation to alternate statutory remedy - exercise of writ jurisdiction as discretionary - rule of alternate remedy in fiscal matters - efficacy of alternate remedy - violation of principles of natural justice - application of independent mind by Assessing Officer after Enforcement Wing audit

Violation of principles of natural justice - No violation of principles of natural justice was shown in the impugned assessment order. - HELD THAT: - The Court examined the impugned order and the undisputed factual trajectory, including the issuance of notice, consideration of the dealer's objections, the opportunity of personal hearing on 21.01.2019 and the Assessing Officer's specific findings reproduced in paragraph 4 of the impugned order. The impugned order records that objections were considered, one proposal of the Enforcement Wing was dropped after verification of bank statements, and that the dealers did not file written representations or documentary evidence at the personal hearing. On this basis the Court concluded that the principles of natural justice were not violated. [Paras 4, 22, 23]

The contention of violation of natural justice is rejected.

Application of independent mind by Assessing Officer after Enforcement Wing audit - The Assessing Officer applied independent mind and did not merely act on the Enforcement Wing's proposal. - HELD THAT: - The Court noted that the Assessing Officer considered the objections filed by the dealer, sustained one objection and dropped one proposal of the Enforcement Wing after examining produced bank statements. Reliance was placed on the principle in Madras Granites and subsequent authority interpreting that an assessment following an Enforcement Wing audit requires an independent application of mind by the Assessing Officer. Given the findings in the impugned order that show independent examination and dropping of a proposal, the Court found no basis to hold that the Assessing Officer simply rubber-stamped the Enforcement Wing proposal. [Paras 6, 19, 21]

The challenge that the assessment was a mere adoption of the Enforcement Wing proposal is rejected.

Relegation to alternate statutory remedy - rule of alternate remedy in fiscal matters - efficacy of alternate remedy - exercise of writ jurisdiction as discretionary - Writ jurisdiction is not to be exercised and the petitioner is relegated to the alternate remedy of appeal to the Appellate Deputy Commissioner (S.T), Chennai (North). - HELD THAT: - The Court observed that an alternate remedy by way of statutory appeal is available and that the petitioner's contentions on merits turn heavily on facts. Applying the settled principle that writ jurisdiction is discretionary and that the rule of alternate remedy must be strictly applied in fiscal matters (as reiterated in Satyawati Tondon and K.C. Mathew), the Court found that none of the exceptions (lack of jurisdiction, breach of natural justice, or inefficacy of alternate remedy) were made out. Therefore, given the availability and efficacy of the statutory appeal and the factual nature of the disputes, the Court declined to entertain the writ petition and relegated the petitioner to pursue the appellate remedy. The Court expressly refrained from deciding merits to avoid pre-empting the Appellate Authority. [Paras 13, 14, 15, 25, 27]

Writ petition dismissed and petitioner relegated to file appeal before the Appellate Deputy Commissioner (S.T), Chennai (North).

Final Conclusion: Writ petition dismissed; petitioner relegated to the alternate statutory remedy of appeal to the Appellate Deputy Commissioner (S.T), Chennai (North). No costs.

Consideration of stay petitions - stay of recovery proceedings - interim abeyance of coercive proceedings - statutory first appeal

Consideration of stay petitions - statutory first appeal - Exts.P3, P3A and P3B (stay petitions) to be considered by the third respondent within a specified time. - HELD THAT: - The writ petition was disposed by directing the third respondent to consider the stay petitions filed by the petitioner (Exts.P3, P3A and P3B) in accordance with law. The Court mandated a time-bound decision to ensure that the statutory first appeals pending before the appellate authority are not rendered nugatory by inaction. No substantive determination on the merits of the assessments or the appeals was made; the relief granted is limited to directing the authority to decide the pending stay applications within one month.

The third respondent is directed to decide Exts.P3, P3A and P3B in accordance with law within one month.

Stay of recovery proceedings - interim abeyance of coercive proceedings - Coercive proceedings, if any, to be kept in abeyance until the stay petitions are decided. - HELD THAT: - As incidental and interim relief, the Court ordered that until the third respondent disposes of the stay petitions, any coercive steps initiated for recovery of the demands arising from the assessment orders relating to the specified tax periods shall be kept in abeyance. This preserves the petitioner's position pending the administrative determination of the stay applications and avoids immediate hardship, without adjudicating the underlying assessment demands.

Coercive recovery proceedings, if any, against the petitioner shall remain in abeyance until decision on Exts.P3, P3A and P3B.

Final Conclusion: Writ petition disposed by directing the authority to decide the stay applications (Exts.P3, P3A, P3B) within one month; meanwhile any coercive recovery proceedings in respect of assessment orders for 2014-15, 2015-16 and 2016-17 are stayed (kept in abeyance) until such decision.

Reopening of assessment - reason to believe - escapement of wealth - opinion of District Valuation Officer (DVO) - revision under section 25(2) - application of mind to information

Reopening of assessment - opinion of District Valuation Officer (DVO) - revision under section 25(2) - application of mind to information - reason to believe - Validity of reopening assessments under section 17(1) of the Wealth-tax Act where reasons were founded on DVO valuation and an order passed in revision under section 25(2). - HELD THAT: - The Tribunal examined the reasons recorded for reopening and the material relied upon by the Assessing Officer. The order of revision passed by the Commissioner under section 25(2) was founded on the DVO's valuation report which post-dated completion of assessment. The recorded reasons referred to the DVO value as on 31.03.2001 while the DVO had prepared valuations up to 31.03.2003 and the last valuation (31.03.2003) showed a higher value; the Assessing Officer, however, adopted the earlier date/value as basis for reopening. The Tribunal held that reopening cannot be sustained where the Assessing Officer has not applied his mind to the information relied upon and has effectively based the reopening on the DVO's opinion or on the revisional order that itself proceeded from that opinion. Applying the ratio of ACIT Vs. Dhariya Construction Company the Tribunal found that an opinion of the DVO per se does not constitute information sufficient to form a belief for reopening and that the Assessing Officer must independently apply his mind to form a reason to believe. On these facts the recorded reasons were held to be inadequate and the belief not formed by the Assessing Officer; consequently the reassessment proceedings were invalid. [Paras 10, 11, 12, 13, 14]

Reopening held invalid for lack of proper application of mind where it was founded on DVO's opinion and the revisional order; grounds challenging jurisdiction allowed and reassessments set aside.

Final Conclusion: The Tribunal allowed the appeals challenging jurisdictional validity of reopening for assessment years 2005-06 to 2010-11, holding the reassessment proceedings void because the Assessing Officer failed to form a valid reason to believe independent of the DVO's opinion; consequential grounds were rendered academic and the appeals were allowed.

Exclusion from net wealth - stock-in-trade - assessment under Wealth-tax Act - appeal maintainability where return accepted by assessing officer - retraction of mistake in return of wealth - remand for verification and fresh consideration

Exclusion from net wealth - stock-in-trade - retraction of mistake in return of wealth - remand for verification and fresh consideration - Whether certain assets disclosed in the assessee's returns should be excluded from his net wealth as stock-in-trade or as not belonging to him, and whether the matter should be adjudicated afresh by the Wealth-tax Officer. - HELD THAT: - The Tribunal noted that the assessee had filed returns of wealth for the assessment years 2008-2009 to 2013-2014 which were accepted by the Wealth-tax Officer without additions and that the CIT(A) dismissed the appeals as not maintainable on the ground that there was no grievance against an assessing officer's order accepting the returns. The Tribunal held that assets mistakenly disclosed in a return which are not includible in net wealth (either because they belong to others or because they are business stock-in-trade) can be the subject of appellate contention when the assessee retracts the mistake. Relying on the assessee's material, including sale treatment in income-tax assessments showing such assets as business income, the Tribunal concluded that the factual disputes require fresh examination. In the interest of justice the Tribunal restored the issues to the Wealth-tax Officer for examination of documents and determination whether the impugned assets are to be excluded from net wealth, directing the assessee to cooperate with the Officer for that exercise. [Paras 8]

The Tribunal restored the issues to the Wealth-tax Officer for fresh examination and determination whether the assets should be excluded from the assessee's net wealth; the appeals are allowed for statistical purposes.

Final Conclusion: The Tribunal allowed the appeals for statistical purposes and remanded the disputes to the Wealth-tax Officer to examine documentary evidence and decide whether the assets disclosed in the returns for assessment years 2008-2009 to 2013-2014 should be excluded from the assessee's net wealth as stock-in-trade or as not belonging to him.

Pre-deposit condition under Section 18(1) of the SARFAESI Act - discretion under the third proviso limited to not less than twenty-five per cent - mandatory nature of statutory pre-condition for entertaining appeal - lack of inherent jurisdiction v. mere error in exercise of jurisdiction

Pre-deposit condition under Section 18(1) of the SARFAESI Act - discretion under the third proviso limited to not less than twenty-five per cent - lack of inherent jurisdiction - error in exercise of jurisdiction v. lack of jurisdiction - Whether the Debts Recovery Appellate Tribunal had jurisdiction to decide the appeal on merits when it had waived the statutory pre-deposit requirement in contravention of the provisos to Section 18(1). - HELD THAT: - The Court examined the second and third provisos to Section 18(1) and held that the Appellate Tribunal's discretion under the third proviso is limited and cannot reduce the pre-deposit below twenty-five per cent of the debt. A total waiver of the pre-deposit was therefore in contravention of the statutory mandate. Applying the distinction between lack of jurisdiction and mere error in exercise of jurisdiction, the Court found that compliance with the proviso is a jurisdictional condition precedent; failure to comply renders the appeal incompetent and the Tribunal lacked inherent jurisdiction to adjudicate the appeal on merits. Consequently, the order passed by the Debts Recovery Appellate Tribunal on 13th January, 2014, which decided the appeal on merits without the required pre-deposit, could not be sustained. [Paras 11, 12, 15, 16, 17]

The Debts Recovery Appellate Tribunal lacked jurisdiction to decide the appeal on merits in the absence of the statutory pre-deposit; the order dated 13th January, 2014 is quashed and set aside, and directions for status quo in respect of the properties are issued.

Final Conclusion: Writ petition allowed; the Debts Recovery Appellate Tribunal's order of 13th January, 2014 is quashed for want of jurisdiction for having waived the statutory pre-deposit below the minimum threshold, and status quo in respect of the properties is directed for six weeks.