TaxTMI Updates e-Newsletter
Jun 29,2023

Entertainment of writ petition in absence of second appellate tribunal - stay of tax demand upon deposit of entire tax - admission of appeal under sub-sections (1) and (4) of Section 107 of the GST Act - condonation of delay in preferring appeal

Entertainment of writ petition in absence of second appellate tribunal - High Court may entertain writ petition against first appellate order where the second appellate forum (Second Appellate Tribunal) has not been constituted. - HELD THAT: - The Court accepted jurisdiction to entertain the writ petition because the Second Appellate Tribunal, which would otherwise be the appropriate appellate forum against the first appellate order, has not yet been constituted. The petition challenging the first appellate authority's refusal to admit the appeal was therefore entertained as an alternative remedy in view of the absence of the statutorily provided second appellate forum. The Court noted the factual background that the petitioner had earlier deposited 10% of the demanded tax before the first appellate authority, but the determinative jurisdictional basis for entertaining the writ was the non-constitution of the Second Appellate Tribunal.

Writ petition entertained by the High Court due to non-constitution of the Second Appellate Tribunal.

Stay of tax demand upon deposit of entire tax - condonation of delay in preferring appeal - Interim relief by way of stay of the balance tax demand was granted subject to the petitioner depositing the entire tax demand within a specified time. - HELD THAT: - As an interim measure, and recognising the petitioner's intention to avail the remedy before the Second Appellate Tribunal which is not yet constituted, the Court directed that the petitioner shall deposit the entire tax demand within four weeks. Upon such deposit, the remaining portion of the demand was ordered to be stayed during the pendency of the writ petition. The Court took note of Revenue's contention regarding delay in preferring the appeal and the limits on appellate authority's discretion to condone delay, but the interim direction made by the Court conditioned the stay on the deposit, thereby balancing the parties' positions pending adjudication.

Petitioner ordered to deposit the entire tax demand within four weeks; on such deposit the rest of the demand is stayed pending the writ petition.

Final Conclusion: The High Court entertained the writ petition in view of the non-constitution of the Second Appellate Tribunal and granted interim relief by staying the balance of the tax demand on condition that the petitioner deposits the entire tax demand within four weeks; matter listed for further hearing.

Refund of GST consequential on judgment, decree, order or direction - affidavit confirming non-availment of input tax credit - right of respondent to seek reclaim from GST Authorities - Explanation(2)(d) to Section 54(14) of the Central Goods and Services Tax Act, 2017

Refund of GST consequential on judgment, decree, order or direction - Explanation(2)(d) to Section 54(14) of the Central Goods and Services Tax Act, 2017 - Court may pass an order directing refund of GST to the petitioner where such refund arises consequential to the Court's order. - HELD THAT: - The Court considered the provision governing refund where tax becomes refundable as a consequence of a judgment, decree, order or direction and observed that Explanation(2)(d) to Section 54(14) does not bar the Court from directing refund to the petitioner. The Court accepted the IRCTC's submission that, if this Court directs refund of GST to the petitioner, corresponding steps may be taken by the IRCTC to reclaim such amount from the GST Authorities. In view of these provisions and submissions, the Court found it permissible to pass a refund direction to the petitioner subject to the safeguards ordered below.

Order for refund to the petitioner can be made; such refund may be coupled with consequent measures by the IRCTC to reclaim from GST Authorities.

Affidavit confirming non-availment of input tax credit - right of respondent to seek reclaim from GST Authorities - Petitioner must file an affidavit stating non-availment of input tax credit, with supporting working and documents, before final refund orders are passed; IRCTC is entitled to seek complementary refund direction from GST Authorities. - HELD THAT: - The Court accepted the IRCTC's request for a protective rider that the petitioner furnish an affidavit affirming that it has not availed input tax credit of GST and provide a complete working supported by relevant documents. Learned counsel for the petitioner agreed to file such affidavit. The Court directed the petitioner to file the affidavit by the listed date, with an advance copy to IRCTC, and recorded that upon receipt of the affidavit appropriate final orders would be passed in the writ petition. The Court thereby coupled the grant of refund with a procedural safeguard to enable IRCTC to pursue reclaim from the GST Authorities if necessary.

Petitioner directed to file the affidavit of non-availment of input tax credit with supporting documents by the next listing date; upon filing and service, the Court will pass final orders, and IRCTC may pursue reclaim from GST Authorities.

Final Conclusion: The writ petitioner is directed to file, by July 4, 2023, an affidavit stating non-availment of input tax credit with complete working and supporting documents, with an advance copy to IRCTC; the Court held there is no bar to directing refund of GST to the petitioner consequential to the Court's order and recognised IRCTC's entitlement to seek complementary refund/reclaim from the GST Authorities; final orders will follow upon filing of the affidavit.

Natural justice - show-cause notice under Section 74 - continuation of proceedings - fraudulent availment of Input Tax Credit - annexures and particulars to enable effective response - opportunity of personal hearing - onus on assessee to cooperate in assessment proceedings

Show-cause notice under Section 74 - continuation of proceedings - annexures and particulars to enable effective response - Validity of the show-cause notice that did not itself recite specific transaction particulars and whether that omission vitiated the Section 74 proceedings. - HELD THAT: - The show-cause notice issued under Section 74 was a continuation of the earlier DRC 01A notice which expressly identified the allegedly non-existent supplier and set out invoice particulars and quantification of tax and interest. The annexures to DRC 01A disclosed the identity of M/s. Baby Suba and Company and the details of transactions, thereby furnishing the petitioner with the specific proposal. The court held that, in these circumstances, the show-cause notice cannot be regarded as defective merely because it did not itself duplicate the particulars already furnished in the earlier notice; the connection between the notices established the requisite nexus and enabled an effective response under the statutory scheme. [Paras 6, 7, 10, 12]

The absence of transaction particulars in the text of the Section 74 show-cause notice did not vitiate the proceedings because the earlier DRC 01A and its annexures provided the necessary particulars.

Natural justice - annexures and particulars to enable effective response - fraudulent availment of Input Tax Credit - Whether the petitioner was denied a fair opportunity to make a defence on the allegation of fraudulent availment of ITC. - HELD THAT: - The petitioner had acknowledged receipt of DRC 01A and, by replies dated 24.01.2023, 08.03.2023 and 19.03.2023, demonstrated awareness that the proceedings related to purchases from M/s. Baby Suba & Co. The petitioner asserted possession of supporting documents and indicated those would be produced at personal hearing. The assessing officer's written instructions confirm that the notices were accompanied by invoice details. Thus the petitioner was aware of the case to be met and had the means to respond; the procedure adopted met the requirements for enabling an effective reply. [Paras 3, 11, 12, 13]

There was no breach of natural justice in issuing the Section 74 proceedings because the petitioner had sufficient notice of the allegations and the particulars necessary to mount a defence.

Opportunity of personal hearing - onus on assessee to cooperate in assessment proceedings - Whether failure to appear at the fixed personal hearing and failure to produce the promised supporting documents justified confirmation of the assessment order. - HELD THAT: - The personal hearing was fixed for 05.04.2023; the petitioner did not appear and did not furnish the documents promised in its replies. A reminder incorrectly noted non-receipt but the petitioner had brought earlier replies to the officer's attention; notwithstanding that, the assessing authority awaited the supporting materials which were never filed. The court observed that an assessee must cooperate and avail of the opportunity for personal hearing; failure to do so disentitles the assessee from complaining of the assessment being confirmed on the available material. [Paras 15, 16, 17, 18]

In view of non-appearance at personal hearing and non-production of the promised documents, confirmation of the assessment order was lawful.

Final Conclusion: Writ petition dismissed; impugned assessment order under Section 74 confirmed as there was no procedural infirmity, the petitioner had adequate notice and failed to cooperate by not producing promised documents or attending the personal hearing; petitioner may pursue alternate statutory remedies.

Provisional attachment to protect revenue - power of Commissioner to provisionally attach property including bank account - provisional attachment ceasing to have effect after one year - return of bank guarantee where attachment has ceased

Provisional attachment ceasing to have effect after one year - provisional attachment to protect revenue - Provisional attachment made under Section 83 of the CGST Act ceases to have effect after the expiry of one year from the date of the order. - HELD THAT: - The Court examined Section 83 which grants the Commissioner power to provisionally attach property, including bank accounts, to protect government revenue, and which expressly provides that every such provisional attachment shall cease to have effect after one year from the date of the order. Applying the clear statutory mandate, the Court held that a provisional attachment continuing beyond one year from its date ceases to operate by virtue of sub section (2) of Section 83. The statutory language was treated as self operative and determinative of the legal effect of an attachment that has run for more than one year. [Paras 3, 4, 5, 6]

The provisional attachment dated 7 March 2022 ceased to have effect after 7 March 2023 and cannot continue thereafter.

Return of bank guarantee where attachment has ceased - Bank guarantee furnished in relation to a provisional attachment that has ceased must be returned to the petitioner. - HELD THAT: - The Petitioners had furnished a bank guarantee pursuant to an earlier court order. Given the Court's conclusion that the provisional attachment has ceased to operate by efflux of time, the justification for holding the bank guarantee no longer subsists. The Court therefore directed that the bank guarantee furnished by the Petitioners be returned. [Paras 7]

The bank guarantee furnished by the Petitioners shall be returned.

Final Conclusion: Writ petition allowed to the extent that the provisional attachment dated 7 March 2022 is declared to have ceased after one year (7 March 2023) and the bank guarantee furnished by the Petitioners is ordered to be returned; all other contentions and any future adjudication are left open.

Limitation for filing appeal - condonation of delay - remand for adjudication on merits - ex-parte order - statutory remedy before the Appellate Tribunal

Limitation for filing appeal - condonation of delay - remand for adjudication on merits - Validity of the order dismissing the appeal as barred by limitation and the consequent relief of remand for fresh adjudication on merits. - HELD THAT: - The High Court found that although the appeal was filed beyond the prescribed period, the reason for delay-illness of the petitioner-prima facie appeared to be bona fide. In view of the peculiar facts and the prima facie satisfaction about the genuineness of delay, the Court set aside the impugned appellate order which dismissed the appeal on limitation grounds and remanded the matter to the Appellate Authority for adjudication on merits. The State did not oppose remand for merits and the Court granted liberty to the petitioner to move the Appellate Authority by an appropriate application; the Appellate Authority was directed to consider the appeal on merits without raising limitation as an objection, after giving notice and opportunity of hearing. The Court emphasised that it did not enter into the merits of the claim and conditioned the entertainability of the appeal on it being filed within two weeks from the date of the order. [Paras 12, 14, 17]

Impugned order dated 26.12.2022 dismissing the appeal as time-barred set aside; appeal remanded to the Appellate Authority for fresh adjudication on merits without raising limitation, subject to filing within two weeks and after notice and hearing; merits not adjudicated by the High Court.

Final Conclusion: The writ petition is allowed in part: the appellate order dismissing the appeal on limitation grounds is set aside and the matter is remanded to the Appellate Authority to decide the appeal on merits after notice and hearing, provided the appeal is filed within two weeks; the High Court has not decided the merits.

Refund of input tax credit on export - provisional and final sanction of refund - mandamus for disbursement of sanctioned refund - failure of disbursing authority to comply with sanction order

Refund of input tax credit on export - provisional and final sanction of refund - mandamus for disbursement of sanctioned refund - Claim for disbursement of the sanctioned 90% portion of CGST and IGST refunds for specified export months which remained unpaid despite provisional and final sanction orders. - HELD THAT: - The Court found that the first respondent had issued provisional refund orders under the Rules and subsequently passed final sanction orders in respect of the petitioner's refund claims for the months specified. The second respondent, charged with effecting payment, had not made the payments and failed to provide any reason for non-compliance before the Court. The amounts sanctioned by the first respondent were held to be rightly due to the petitioner. In these circumstances, equitable and authoritative relief in the form of a writ of mandamus directing disbursement was warranted to enforce the administrative sanction already accorded.

Writ petition allowed; the second respondent directed to disburse the sanctioned refund amounts to the petitioner within four weeks from receipt of the order, if not already paid.

Final Conclusion: The High Court directed payment of the sanctioned CGST and IGST refunds for the specified months within four weeks, allowing the writ petition and recording that the amounts were due to the petitioner.

Transfer of unutilized input tax credit in E-credit ledger - advance ruling under Section 97(2) of the CGST Act, 2017 - admissibility of input tax credit - distinct persons (multiple registrations under same PAN) - merger and transfer of business

Transfer of unutilized input tax credit in E-credit ledger - merger and transfer of business - advance ruling under Section 97(2) of the CGST Act, 2017 - Whether transfer of unutilized balance of ITC in the E-credit ledger on merger of two distinct registrations (distinct persons under Section 25(4)) of the same PAN is admissible for an advance ruling. - HELD THAT: - The Authority examined the scope of matters on which advance rulings may be sought under Section 97(2) and the binding effect of a ruling under Section 103. Clauses (a)-(g) of Section 97(2) confine advance rulings to specified questions relating to classification, applicability of notifications, time and value of supply, admissibility of input tax credit of tax paid or deemed to have been paid, liability to pay tax, and questions of registration and supply. The applicant's question concerns transfer of an existing unutilized ITC balance between registrations upon merger - a question about transferability of ledger balances rather than the admissibility of input tax credit itself as contemplated by Section 97(2)(d). Since the subject-matter (transfer of ledger balance on merger) does not fall within any of the categories enumerated in Section 97(2), the Authority concluded that the question is beyond the scope of the advance ruling mechanism and therefore not maintainable.

The application for advance ruling on transfer of unutilized ITC on merger of distinct GST registrations is not maintainable and is rejected as beyond the scope of Section 97(2).

Transfer of unutilized input tax credit in E-credit ledger - distinct persons (multiple registrations under same PAN) - advance ruling under Section 97(2) of the CGST Act, 2017 - Whether transfer of unutilized balance of ITC in the E-credit ledger between distinct registrations of the same PAN without following merger procedure is admissible for an advance ruling. - HELD THAT: - The Authority applied the same statutory scope test under Section 97(2). The applicant sought ruling on inter-registration transfer of E-credit balances absent any formal merger process. That question likewise concerns transferability of ledger balances between distinct registered persons and does not raise any of the matters specified in clauses (a)-(g) of Section 97(2) (for example, admissibility of ITC of tax paid). Consequently, the matter lies outside the ambit of advance rulings as defined in the Act. The jurisdictional officer's view and relevant circulars were noted, but the determinative basis was statutory scope under Section 97(2).

The application for advance ruling on transfer of unutilized ITC between distinct GST registrations without merger is not maintainable and is rejected as beyond the scope of Section 97(2).

Final Conclusion: The Authority rejected the applicant's ARA-01 seeking an advance ruling on transfer of unutilized input tax credit balances (whether on merger or by transfer between distinct registrations without merger) as not maintainable, holding such questions to be outside the scope of matters enumerated in Section 97(2) of the CGST Act, 2017.

Pre-packaged and labelled - definition under the Legal Metrology Act, 2009 - applicability of Notification No. 1/2017-Central Tax (Rate) - leviability of tax on supply of goods including exports - concessional rate for supplies to merchant exporters

Pre-packaged and labelled - definition under the Legal Metrology Act, 2009 - applicability of Notification No. 1/2017-Central Tax (Rate) - GST leviability on export of pre-packaged and labelled rice in packages up to 25 kg to a foreign buyer. - HELD THAT: - The Authority examined the amended entry to Notification No. 1/2017-Central Tax (Rate) and the FAQ dated 18.7.2022 which advises that specified food items supplied in packages that fall within the definition of 'pre-packaged commodity' under the Legal Metrology Act, 2009-i.e., packages containing quantity up to 25 kg-are treated as 'pre-packaged and labelled' for GST purposes. Exports are generally zero-rated under the IGST Act, but where the amended notification makes such pre-packaged and labelled rice taxable, the applicable rate specified in the schedules governs. Applying these provisions, the Authority concluded that pre-packaged and labelled rice up to 25 kg exported to a foreign buyer is taxable under the amended entry and attracts the GST rate prescribed therein.

Yes; GST is leviable on export of pre-packaged and labelled rice up to 25 kg - applicable rate 5% (IGST) in terms of the amended Notification No. 1/2017-Central Tax (Rate) effective from 18.7.2022.

Pre-packaged and labelled - applicability of Notification No. 1/2017-Central Tax (Rate) - leviability of tax on supply of goods including exports - GST leviability on supply of pre-packaged and labelled rice in packages up to 25 kg to an Indian exporter on a 'bill to ship to' basis (bill to exporter and ship to customs port) where the exporter ultimately exports the rice. - HELD THAT: - The Authority applied the amended schedule entry and the Legal Metrology-based definition of 'pre-packaged and labelled' to the 'bill to ship to' scenario. Where the supply falls within the notified description of taxable pre-packaged and labelled rice up to 25 kg, GST is leviable notwithstanding that the ultimate destination is export. The applicable rate for such supplies is that specified in the amended notification (i.e., 5% as 2.5% CGST + 2.5% SGST or 5% IGST depending on intra/inter-state nature of the supply).

Yes; GST is leviable on supply to an exporter on 'bill to ship to' basis of pre-packaged and labelled rice up to 25 kg - applicable rate 5% (2.5% CGST + 2.5% SGST or 5% IGST as applicable), subject to adherence to the notification's stipulations.

Pre-packaged and labelled - applicability of Notification No. 1/2017-Central Tax (Rate) - concessional rate for supplies to merchant exporters - GST leviability on supply of pre-packaged and labelled rice in packages up to 25 kg to the factory of an exporter (where exporter ultimately exports the rice) and availability of concessional export rates for supplies to merchant exporters. - HELD THAT: - The Authority held that supply of pre-packaged and labelled rice up to 25 kg to the factory of an exporter is taxable under the amended notification and attracts the notified rate (5% as CGST+SGST or IGST as applicable). Separately, reference was made to the statutory notifications that prescribe a concessional nominal rate (IGST @ 0.1% or CGST+SGST @ 0.05%+0.05%) for inter-state/domestic supplies to registered recipients/merchant exporters for exports, subject to fulfillment of specified procedural conditions (tax invoice, GSTIN details in shipping bill, registration with recognised export body, movement directly to port or registered warehouse, provision of shipping bill/bill of export and proof of export within prescribed time, etc.).

Yes; GST is leviable on such supplies at 5% (2.5% CGST + 2.5% SGST or 5% IGST as applicable). Where conditions for supplies to merchant exporters are met, the concessional rates (IGST @ 0.1% or CGST+SGST @ 0.05%+0.05%) may apply subject to compliance with the conditions in the relevant notifications.

Final Conclusion: The Authority ruled that pre-packaged and labelled rice in packages up to 25 kg falls within the Legal Metrology-based definition of 'pre-packaged and labelled' and is taxable under the amended Notification No. 1/2017-Central Tax (Rate) effective 18.7.2022. Consequently, GST is leviable on (i) export to a foreign buyer (apply 5% IGST), (ii) supply to an exporter on 'bill to ship to' basis (apply 5% - 2.5% CGST + 2.5% SGST or 5% IGST as applicable), and (iii) supply to the factory of an exporter (apply 5% similarly). Separately, where the supplier and recipient meet the conditions for merchant-exporter supplies, the concessional nominal rates (IGST @ 0.1% or CGST+SGST @ 0.05%+0.05%) apply subject to the stipulated conditions in those notifications.

Classification of goods - interpretation of Chapter and Section Notes - fitment of goods under competing Chapters (Chapter 11 vs Chapter 19) - applicability of rate notifications as per tariff heading - binding character of advance ruling on applicant and jurisdictional officer

Classification of goods - fitment of goods under competing Chapters (Chapter 11 vs Chapter 19) - interpretation of Chapter and Section Notes - applicability of rate notifications as per tariff heading - Classification of the product "Fortified Rice Kernels (FRK)" and the applicable rate of GST on its supply. - HELD THAT: - The Authority examined the product and the manufacturing process (milling to rice flour, blending with vitamins/minerals, and extrusion to form pellets) and applied the rules and chapter/section notes of the Customs Tariff in determining proper HSN fitment. Chapter Note 2 to Chapter 11 confines that chapter to products obtained purely from milling and prescribes starch/ash/sieve criteria; Chapter 11 also excludes "corn flakes or other products of heading 1904". Chapter 19 deals with preparations of cereals and defines heading 1904 as prepared foods obtained by swelling/roasting or otherwise prepared beyond processing contemplated by Chapters 10 or 11. The Authority found that FRK are preparations obtained by processing beyond mere milling (conversion to flour, addition of premix and extrusion into pellets) and thus fall within the scope of Chapter 19, heading 1904, rather than Chapter 11. The Authority also considered the Fitment Committee and GST Council action (including recommendation and subsequent notification amendments relating to FRK) as corroborative of Chapter 19 classification and the applicable rate. Once the tariff classification was determined as subheading 19049000, the applicable GST rate follows the entries in the rate notification; goods classifiable under heading 1904 (including FRK) attract 18% GST (9% CGST + 9% SGST) or 18% IGST as applicable. [Paras 9, 10]

Fortified Rice Kernels (FRK) are classifiable under chapter subheading 19049000 and attract GST at 18% (9% CGST + 9% SGST) or 18% IGST as applicable.

Final Conclusion: The advance ruling holds that the product Fortified Rice Kernels (FRK) is classifiable under chapter subheading 19049000 and is taxable at 18% GST (9% CGST + 9% SGST) or 18% IGST; the ruling is binding on the applicant and the concerned/jurisdictional officer.

Input Tax Credit - course or furtherance of business - Corporate Social Responsibility (CSR) - Companies (CSR Policy) Rules, 2014 - interpretation of Section 16(1) of the CGST Act - blocked credits under Section 17(5) of the CGST Act

Input Tax Credit - course or furtherance of business - Corporate Social Responsibility (CSR) - interpretation of Section 16(1) of the CGST Act - Companies (CSR Policy) Rules, 2014 - Admissibility of input tax credit on GST paid for supplies used to discharge statutory CSR obligations. - HELD THAT: - The Authority examined whether supplies procured to comply with mandatory CSR obligations fall within "used or intended to be used in the course or furtherance of business" so as to entitle the applicant to Input Tax Credit under Section 16(1) of the CGST Act. The Companies Act and its CSR Rules create a distinct regulatory regime requiring specified companies to undertake CSR activities and, by Rule 4(1) and related provisions of the Companies (CSR Policy) Rules, 2014 (and its amendments), CSR activities are excluded from activities undertaken in the normal course of business. The Authority held that this statutory and rule-based separation demonstrates that CSR expenditures are not part of the applicant's normal business operations and therefore do not satisfy the statutory test in Section 16(1) for ITC. The Authority rejected reliance on pre GST decisions and other precedents that addressed credit under erstwhile Cenvat or income tax regimes as not being determinative under the GST scheme; it also noted that an earlier AAR decision on the point is binding only on the applicant to whom it was pronounced and not generally binding. Consequently, having found no provision permitting ITC on mandatory CSR expenses and in view of the CSR Rules' exclusion of CSR from normal business, the Authority concluded that ITC on such CSR expenses is not admissible. [Paras 13, 14, 15, 16]

ITC on GST paid for supplies/expenses incurred to discharge statutory CSR obligations is not admissible because CSR activities are excluded from the normal course of business and thus do not meet the requirement of being "used or intended to be used in the course or furtherance of business" under Section 16(1) of the CGST Act.

Final Conclusion: The Advance Ruling holds that GST paid on supplies/services procured to fulfil mandatory CSR obligations is not eligible for Input Tax Credit, in view of the Companies (CSR Policy) Rules, 2014 which exclude CSR from normal business activities and the requirements of Section 16(1) of the CGST Act.

Exemption u/s 11 - Charitable activity or not - Profit motive - Exemption was disallowed on the ground that registration u/s 12AA granted to the assessee stood cancelled - what's the charitable nature of activities carried out by assessee in terms of Section 2(15)? - ITAT and HC restored the registration and allowed the benefit of exemption - as decided by HC [2022 (8) TMI 1400 - ALLAHABAD HIGH COURT], mere selling some product at a profit will not ipso facto hit assessee by applying proviso to Section 2(15) and deny exemption available u/s 11 and proviso to Section 2(15) is not applicable to the facts and circumstances of the case, and the assessee was entitled to exemption provided under Section 11

HELD THAT:- No ground to interfere with the impugned judgment.

The special leave petitions, accordingly, stand dismissed.

Depreciation allowed as per its original return of income u/explanation-5 to clause (ii) of Section 32(1) inserted vide Finance Act - HELD THAT:- Relying upon the decision of this Court in the case of Commissioner of Income Tax vs. Mahendra Mills[2000 (3) TMI 3 - SUPREME COURT] the High Court has dismissed the Appeals preferred by the Revenue.

Revenue has heavily relied upon Explanation 5 to Section 32(1) of the Income Tax Act, 1961. We are of the opinion that, in the facts and circumstances of the case, Explanation 5 to Section 32(1) shall not come to the rescue of the Revenue.

Payment on retirement of partner as full and final settlement - treatment of excess consideration on retirement - taxability as capital gains under Section 45 - goodwill as component in determining retiring partner's share - remand for fresh consideration by the High Court

Addition u/s 45(1) under the head long term capital gains - Consideration received on retirement from partnership firm - Receipts as full and final settlement of its right, title and interest as a partner as having 50% share in the firm - It is the case of the appellant revenue that this is a case where the AO was right for the reason that the sum of Rs. 15 crores received by the respondent was paid in excess of the amount due to it by way of the share it was entitled under the partnership deed - High Court [2018 (4) TMI 1212 - BOMBAY HIGH COURT] deleted the additions

HELD THAT:- As per appellant is not a case where the amount which it has received is attributable in other words to the share which the retiring partner would be entitled in law. The amount is far in excess. Had the amount being the same as the share, the Revenue would not have raised objection. This is in addition to the fact that the amount paid to the respondent was, in fact, brought in by the three new incoming partners. This made the amount exigible to Income Tax under the head income under the capital gains u/s 45 of the Income Tax Act, 1961.

As Learned senior counsel, on the other hand, would point out that actually though the amount may appear to be in excess of the share standing to the credit of the capital account of the respondent-assessee, the amount in excess is attributable to the goodwill which, according to him, is subject matter of decisions of this Court and since goodwill under the law as it stood was to be taken into consideration in determining the share of the retiring partner, no part of the amount received by the respondent-assessee was exigible to tax.

From the impugned order, we do not find any discussion on any submission on the lines which has been addressed before this Court. We are of the view that the matter should, therefore, be reconsidered by the High Court with reference to the facts as are not in dispute and law which governs the field. The appeal is allowed. The impugned order will stand set aside. The case will stand remitted. The appeals will be reheard.

Exemption u/s 11 - scope and amplitude of the definition “charitable purpose” - correct interpretation of the proviso to Section 2(15) for “charitable purpose” - HELD THAT:- The issue is covered by the judgment reported as “Ahmedabad Urban Delvelopment Authority [2022 (10) TMI 948 - SUPREME COURT]

The special leave petition is dismissed in the light of the said judgment and the clarification.

Income taxable in India - Addition of recharacterization of receipts from sale of software licenses to Indian customers/distributors as royalty - High Court [2022 (7) TMI 1426 - DELHI HIGH COURT] has held that, in view of the decision of Apex Court, the income is not taxable in India - HELD THAT:- Special leave petitions is covered against them vide judgment in the case of “Engineering Analysis Centre of Excellence Private Limited vs. The Commissioner Of Income Tax & Anr [2021 (3) TMI 138 - SUPREME COURT]

Learned Additional Solicitor General states that a Review Petition has been filed against this judgment, which is currently pending and the right of the Revenue to revive the present special leave petitions may be reserved, in case the Review Petition is allowed.

Recording the aforesaid, the special leave petitions are dismissed, as the same is covered by the said decision of this Court. In case the review petition on the issue raised in the present special leave petitions is allowed, it will be open to the petitioner(s) to get the present special leave petitions revived.

Reopening of assessment u/s 147 OR assessment u/s 153C - Addition u/s 69B of the Act as unexplained investment - HC [2022 (7) TMI 800 - KARNATAKA HIGH COURT] decided in favour of assessee as reopening and the addition under Section 69B were held unsustainable - HELD THAT:- This Court is of the opinion that the order impugned does not call for interference. The Special Leave Petition is, accordingly, dismissed. All Pending applications are disposed of.

Prosecution for commission of offence u/s 276B r/w 278B - Sanction u/s 279(1) - TDS deducted but not deposited in time - offence allegedly committed u/s 276(B) and 278(B) - As per HC [2022 (3) TMI 1038 - JHARKHAND HIGH COURT] amount has already been deposited with interest and there is no reason why the criminal proceeding shall proceed and the criminal proceeding was launched after receiving the said amount with interest, had it been a case that the case was immediately instituted and thereafter the TDS amount has been deposited with interest, the matter would have been different - HELD THAT:- SLP dismissed.

Revision u/s 263 - cancellation of registration for the year when the cancellation order was not available to the AO while passing the order u/s 147/143(3) - HC [2022 (1) TMI 1379 - CALCUTTA HIGH COURT] confirmed Tribunal order as allowing the assessee’s case and held that Section 12AA(3) is applicable only from the assessment year 2011-12 deciding substantial questions of law raised in this appeal are covered against the revenue - HELD THAT:- Heard learned counsel for the petitioner.

We are not inclined to interfere with the impugned order and judgment of the High Court. However, the question of law is kept open. Special leave petition is dismissed.

Validity of notice u/s 148 requiring prior satisfaction u/s 151 for reopening beyond four years - sanction by appropriate authority for reopening assessments beyond four years - Faceless Assessment Scheme - mandatory issuance of draft assessment order under Section 144B(1)(xvi) - jurisdictional defect arising from non-compliance with mandatory procedural requirements - HELD THAT: - The impugned order [2022 (8) TMI 1401 - BOMBAY HIGH COURT] does not call for interference.

The Special Leave Petition is accordingly dismissed. However, the question of law is kept open.

Nature of subsidy receipt - value of the MILIEV grant given by the Dutch government as a subsidy for purchase of wind turbine generator - transfer of right by the assessee to another company, no offset credit and electricity charges paid to Wescare as deduction - HC [2022 (6) TMI 1125 - MADRAS HIGH COURT] confirmed ITAT orders for deleting the additions - HELD THAT:- No case for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution of India.

The special leave petitions are, accordingly, dismissed.

Validity of reopening of assessment - monetary requirement for reopening assessment - unexplained cash credit u/s 68 - as decided by HC [2022 (10) TMI 297 - DELHI HIGH COURT] condition precedent of an asset in the form of Rs.50 lakhs is not be attracted to the present case, as the notice u/s 148A(b) had been issued on 17th March, 2022 i.e. within three years of the assessment year sought to be assessed, namely, 2018-19 and Section 148A(d) order as well as Section 148 notice issued on 31st March, 2022 was within prescribed time

HELD THAT:- Learned counsel seeks liberty to withdraw the special leave petition and agitate all issues before the authorities. Liberty sought for is granted.

The petition is accordingly dismissed as withdrawn.

Pending application(s), if any, stand disposed of.

Reassessment proceedings - Reasonable belief that income chargeable to tax has escaped assessment - Material to form belief - Principles of natural justice - Personal hearing - Speaking order

Reassessment proceedings - Reasonable belief that income chargeable to tax has escaped assessment - Material to form belief - Personal hearing - Principles of natural justice - Speaking order - Validity of the order passed under Section 148A(d) and the consequential notice under Section 148 initiating reassessment proceedings - HELD THAT: - The court found that the reassessment proceedings against the petitioner were triggered primarily on the basis of a statement recorded under Section 131. The statement alone did not demonstrate that the assessing officer possessed underlying material sufficient to form a reasonable belief that income chargeable to tax had escaped assessment. Further, the assessing officer did not grant the petitioner's authorised representative a personal hearing. Having regard to the CBDT circulars referred to by the parties and the application of principles of natural justice to the proceedings under Section 148A and Section 148, the court concluded that the order under Section 148A(d) and the consequential notice could not be sustained in the existing form. The court therefore set aside the order and notice, remanding the matter to the assessing officer with directions to accord personal hearing, to furnish any material relied upon to the petitioner, to allow the petitioner a reasonable opportunity to respond if fresh material is supplied, and to pass a speaking order which shall be furnished to the petitioner. [Paras 18, 19, 20]

Order dated 22.03.2022 under Section 148A(d) and consequential notice dated 22.03.2022 under Section 148 set aside; matter remitted to AO to afford personal hearing, furnish material relied upon, allow response and pass a speaking order.

Final Conclusion: Writ petition disposed of by setting aside the impugned order and notice and remitting the matter to the assessing officer with directions to afford personal hearing, disclose material relied upon, permit response and thereafter pass and furnish a speaking order.

Revisional jurisdiction under section 263 of the Income tax Act, 1961 - Eligibility for deduction under section 80IC of the Income tax Act - Exchange rate fluctuation as part of cost of production - Interest on fixed deposit held as margin for Letter of Credit having business nexus - Insurance claim for stock damaged in transit as business income

Revisional jurisdiction under section 263 of the Income tax Act, 1961 - Eligibility for deduction under section 80IC of the Income tax Act - Exchange rate fluctuation as part of cost of production - Interest on fixed deposit held as margin for Letter of Credit having business nexus - Insurance claim for stock damaged in transit as business income - Whether the PCIT was justified in cancelling the assessment under section 263 by denying deduction under section 80IC in respect of exchange rate fluctuation, interest income and insurance claim, and the consequent directions to the Assessing Officer. - HELD THAT: - The Tribunal recorded that the PCIT invoked revisional jurisdiction and cancelled the assessment on the ground that the AO had erroneously allowed 100% deduction under section 80IC in respect of exchange rate fluctuation, interest on FDR and insurance claim. The assessee had filed explanations that the exchange rate difference arose from import payments and formed part of purchase cost, interest related to FDRs placed as margin for Letters of Credit and the insurance receipt related to stock damaged in transit - each asserted to have nexus with manufacturing activity and eligibility for section 80IC deduction. The Tribunal found an absence of information on the record regarding the giving effect proceedings under the revision order (the DR could not demonstrate what transpired, and the assessee was absent). In view of the lacuna in the giving effect stage and in the interest of justice, the Tribunal did not uphold outright cancellation; instead it modified the revision order by setting aside the assessment order and directed the Assessing Officer to examine afresh the eligibility of the section 80IC claim in respect of the three receipts, uninfluenced by any earlier conclusions. The Tribunal therefore remitted the matter for fresh consideration by the AO rather than finally adjudicating the correctness of allowance or disallowance of the three items. [Paras 6, 7, 8]

The revision order of the PCIT is modified by setting aside the assessment; the AO is directed to re examine the eligibility of the claim under section 80IC in respect of exchange rate fluctuation, interest income and insurance claim afresh and uninfluenced by earlier decisions; appeal partly allowed for statistical purposes.

Final Conclusion: The Tribunal modified the PCIT's order under section 263 by setting aside (not cancelling) the assessment dated 20.01.2015 and remitted the matter to the Assessing Officer to re examine, on merits, the eligibility of the deduction under section 80IC in respect of exchange rate fluctuation, interest on FDR and insurance claim; the appeal is partly allowed for statistical purposes.

Disallowance of interest expenses - presumption that investments are from interest free funds where such funds are sufficient - unexplained stock addition consequent to survey under Section 133A - evidentiary value of statements recorded under Section 133A - onus of verification and duty of Assessing Officer to pursue summons / enquiries under Section 131 - fees for technical services (FTS) and taxation of overseas commission - application of Section 9(1)(vii) and TDS under Section 195

Disallowance of interest expenses - presumption that investments are from interest free funds where such funds are sufficient - Validity of disallowance of interest on advances where assessee had sufficient interest free funds - HELD THAT: - The Tribunal upheld the deletion by the CIT(A) of the interest disallowance. Applying the principle in CIT Vs. Reliance Utilities the Court held that where an assessee has interest free funds sufficient to meet advances, a presumption arises that the advances were made out of interest free funds and not interest bearing borrowings. The balance sheet showed interest free funds at the beginning and end of the year in excess of the advances; the Tribunal also followed its earlier coordinate decision in the assessee's own case for AY 2009 10. On those findings the disallowance of interest was rejected and the Revenue's ground was dismissed. [Paras 10, 11, 12]

Deletion of interest disallowance of Rs. 63,70,992/- upheld; Revenue's ground dismissed.

Unexplained stock addition consequent to survey under Section 133A - evidentiary value of statements recorded under Section 133A - onus of verification and duty of Assessing Officer to pursue summons / enquiries under Section 131 - Whether addition for unexplained stock based on survey and partner's statement was sustainable and extent of addition where some supporting parties did not comply with summons - HELD THAT: - The Tribunal upheld the majority of the relief granted by the CIT(A). It accepted that the statement recorded under Section 133A during survey is not conclusive and, where the assessee produces documentary evidence reconciling stock (audited books, invoices, shipping bills and supplier confirmations), an addition cannot be sustained merely on a survey statement (relying on the reasoning in S. Khader Khan Son and related authorities and CBDT guidance). The CIT(A)'s two remand reports were examined: the first remand report accepted the genuineness of the bills; the second remand report alleged manipulation but did not produce concrete evidence to displace the assessee's documentary proof. Applying the principle that once the assessee discharges its onus by furnishing details of parties and documents, the AO must pursue verification (see Orissa Corporation Pvt. Ltd. as relied in the order), the Tribunal held that only amounts for which summons under section 131 could not be served and which therefore remained unverified could be sustained as addition. The CIT(A)'s restriction of the original addition to Rs. 28,78,632/- was affirmed in part but, on further review, the Tribunal concluded that even merely non service of summons after long delay (seven years) was not sufficient to treat documentary evidence furnished earlier as invalid; on that basis the Tribunal directed deletion of the remaining sustained addition of Rs. 28,78,632/-. [Paras 41, 43, 45, 46]

Addition of Rs. 4,29,63,309/- largely deleted; the CIT(A)'s limited addition of Rs. 28,78,632/- also deleted and Assessing Officer directed to delete that addition.

Fees for technical services (FTS) and taxation of overseas commission - application of Section 9(1)(vii) and TDS under Section 195 - Whether commission paid to foreign agents for procuring overseas orders constituted "fees for technical services" taxable in India and subject to TDS under Section 195 / disallowance under Section 40(a)(i) - HELD THAT: - The Tribunal held that the payments were commission for procuring orders and incidental sales promotion activities, not managerial, technical or consultancy services caught by Explanation 2 to Section 9(1)(vii). The agency agreements produced by the assessee showed ordinary selling/agent obligations (identifying buyers, sample approvals, liaison, follow up) and did not evidence any technical or managerial service. The AO's own remand report observed that the agreements indicated simple agency arrangements and accepted the assessee's claim on merits. The Tribunal followed co ordinate precedents of the Delhi Tribunal (e.g., Digi Drives and Pure Software ) holding that procurement of export orders by non resident agents (absent a PE) does not amount to FTS and is not taxable in India. Accordingly the disallowance under Section 40(a)(i)/the invocation of Section 195 was reversed. [Paras 56, 58, 60]

Disallowance of Rs. 30,76,482/- for non deduction of TDS on overseas commission reversed; Assessing Officer directed to delete the disallowance.

Final Conclusion: For AY 2011 12 (FY 2010 11) the Tribunal: (i) upheld deletion of the interest disallowance on the finding that interest free funds sufficed to meet advances; (ii) sustained the CIT(A)'s deletions of the large unexplained stock addition but ultimately directed deletion of the residual amount which had been sustained solely because summons were not served; and (iii) held that overseas commission paid to non resident agents for procuring export orders did not constitute FTS and ordered deletion of the disallowance for non deduction of TDS. The revenue appeal is dismissed and the assessee's appeal is allowed.

Ex-parte order - opportunity of hearing - natural justice - decision on merits - remand for fresh adjudication - treatment of unexplained capital as income - assessment reopened under section 147/148

Ex-parte order - opportunity of hearing - natural justice - decision on merits - remand for fresh adjudication - Ld. CIT(A) erred in dismissing the appeal ex parte without considering material on record and without affording adequate opportunity of hearing; matter remitted for fresh disposal on merits. - HELD THAT: - The Tribunal found that the ld. CIT(A) had dismissed the assessee's appeal by an ex parte order based on non prosecution without perusing the assessment record or considering the e filed replies and adjournment applications. The Tribunal noted that an appeal ought to be decided on merits and that the principles of natural justice require giving the assessee a reasonable opportunity to be heard. In the interest of justice the Tribunal directed that the file be remitted to the ld. CIT(A) for fresh adjudication in accordance with law after affording due and adequate opportunity of hearing to the assessee; all legal pleas of the assessee remain available and the assessee shall cooperate in the fresh proceedings. [Paras 5, 6]

Appeal remitted to ld. CIT(A) for fresh decision on merits after affording opportunity of hearing; for statistical purposes treated as allowed.

Treatment of unexplained capital as income - decision on merits - remand for fresh adjudication - Addition of capital introduced of Rs. 13,20,000/- was not finally adjudicated and is to be considered afresh by ld. CIT(A). - HELD THAT: - The original assessment had sustained an addition on account of unexplained capital introduced in the assessee's capital account with the firm M/s VRRH. The Tribunal did not decide the correctness of that addition on merits; instead, because the appellate order was ex parte and the material on record had not been considered, the Tribunal remitted the issue to the ld. CIT(A) to examine the sources, documents and submissions and to decide the addition afresh in accordance with law. [Paras 2, 6]

Addition set aside for fresh consideration by ld. CIT(A) and not adjudicated by the Tribunal.

Assessment reopened under section 147/148 - remand for fresh adjudication - Legality of reopening the assessment under section 147/148 was not decided on merits and stands remitted to the ld. CIT(A). - HELD THAT: - Although the assessee contested the reopening of assessment as void ab initio, the Tribunal did not decide this contention on merits because the appellate proceedings before the ld. CIT(A) were concluded ex parte without considering the material. The Tribunal remitted the entire matter, including the question regarding reopening, to the ld. CIT(A) for fresh consideration in accordance with law. [Paras 6]

Question of legality of reopening remitted to ld. CIT(A) for fresh adjudication; no substantive decision by the Tribunal.

Final Conclusion: The Tribunal set aside the ex parte appellate order, remitted the appeal to the ld. CIT(A) for fresh adjudication on merits after affording the assessee adequate opportunity of hearing, and treated the appeal as allowed for statistical purposes.

Confiscation of export goods - recovery of duties foregone on transferable DEPB scrips - mis declaration of country of origin - value addition requirement under DEPB scheme - concurrent jurisdiction of DGFT and Customs and bar on double penalties - penalty under Section 114 and Section 114AA of the Customs Act, 1962

Confiscation of export goods - mis declaration of country of origin - value addition requirement under DEPB scheme - Confiscation of 2169 MT of Ferro Silicon exported by the appellant - HELD THAT: - The tribunal upheld confiscation because evidence established that the Ferro Silicon exported was of Bhutanese origin notwithstanding procurement through domestic traders. Statements of suppliers indicated that supplies were originally imported from Bhutan, and the director admitted that the cleaning, cutting, re sizing and packing undertaken did not meet the DEPB requirement of at least 25% value addition to change origin. The appellant had also accepted liability and deposited sums prior to the show cause notice. On these findings, the tribunal held the declaration of origin as 'India' to be a misdeclaration and found confiscation legally tenable. [Paras 7, 8, 14]

2169 MT of FeSi exported by the appellant are liable for confiscation.

Recovery of duties foregone on transferable DEPB scrips - transferable DEPB scrips - Recoverability from the appellant of an amount equivalent to import duties foregone on imports made by transferees using the appellant's DEPB scrips, with interest - HELD THAT: - The tribunal upheld the adjudicating authority's appropriation and held that the amount equivalent to duties foregone on imports effected by transferees on the strength of transferable DEPB scrips issued to the appellant can be recovered from the appellant along with interest. The factual findings that the appellant sold transferable scrips to multiple importers who used them for imports, combined with the department's appropriation of amounts deposited by the appellant, supported the conclusion that recovery from the appellant was permissible. [Paras 3, 7, 14]

An amount equivalent to import duties foregone due to imports made by importers on the strength of the DEPB scrips purchased from the appellant can be recovered from the appellant along with interest.

Penalty under Section 114 and Section 114AA of the Customs Act, 1962 - concurrent jurisdiction of DGFT and Customs and bar on double penalties - Sustainability of penalties under Sections 114 and 114AA imposed by Customs where DGFT has already adjudicated and imposed a penalty for the same violation - HELD THAT: - The tribunal found that DGFT had issued a notice, adjudicated and imposed a fiscal penalty, and that the appellant had thereby effectively accepted the misdeclaration. Relying on prior decisions with similar facts, the tribunal held that Customs could not sustain penalties under Sections 114 and 114AA in respect of the same offence after DGFT had initiated action and imposed penalty. Accordingly, the penalties levied by the adjudicating authority under Sections 114 and 114AA on the appellant and its director were set aside. [Paras 9, 13, 14, 15]

Penalties under Section 114 and Section 114AA cannot be imposed by Customs on the appellant and its director for the same offence after DGFT has initiated action and imposed penalty; the penalties imposed are set aside.

Final Conclusion: The tribunal upholds confiscation of the exported Ferro Silicon and the recovery of duties foregone with interest, but sets aside the penalties imposed under Sections 114 and 114AA by Customs on the appellant and its director in view of prior DGFT adjudication; the remaining confirmations in the impugned order are maintained and the appeals are disposed accordingly.

Confiscation of smuggled goods - foreign origin of imported goods - burden to prove licit purchase - admissibility and formal sufficiency of recorded statements - penalty assessment and appellate reduction

Confiscation of smuggled goods - foreign origin of imported goods - burden to prove licit purchase - Validity of absolute confiscation of the gold biscuits and wallets. - HELD THAT: - The Tribunal accepted the combination of (a) seizures at airport screening, (b) recorded statements in which the appellants admitted travel to Myanmar and purchase of the biscuits for cash, and (c) the Assam Hallmarking Centre test report establishing 24 carat/high fineness, as establishing that the biscuits were of foreign origin. In the absence of any invoices or other evidence from the appellants to prove lawful domestic purchase, the Department was justified in treating the gold as imported and confiscating the biscuits and wallets. The procedural objection that the recorded statements did not expressly refer to Section 108 of the Customs Act, 1962 was held insufficient to overturn confiscation when the appellants failed to prove licit purchase or to retract the statements. [Paras 5]

Confiscation of the gold biscuits and wallets upheld.

Admissibility and formal sufficiency of recorded statements - Effect of omission to state Section 108 in the recorded statements on the validity of proceedings. - HELD THAT: - Although the recorded statements did not specify that they were recorded under Section 108, the Tribunal observed that the statements were recorded in the presence of Customs Inspector and Superintendent and were not retracted by the appellants. The appellants did not contest the statements before the lower authorities on the ground of coercion nor later retract them. The omission to recite Section 108 was therefore not held to vitiate the proceedings given the absence of contrary evidence and the appellants' failure to produce invoices proving domestic purchase. [Paras 5]

Omission of reference to Section 108 does not vitiate the proceedings in the circumstances; statements are not set aside.

Penalty assessment and appellate reduction - Appropriateness of penalties imposed on the appellants and adjustment on appeal. - HELD THAT: - The Tribunal accepted the factual finding that Shri Antony Philip was the owner of the biscuits and that Shri Jochan Michael acted as a carrier. Exercising appellate discretion, the Tribunal reduced the penalties: the penalty on Shri Antony Philip was reduced considering the value of the gold, and the penalty on Shri Jochan Michael was reduced in view of his role as carrier. The reductions were ordered while upholding the underlying confiscation. [Paras 5]

Penalties modified on appeal: reduced for Shri Antony Philip and for Shri Jochan Michael.

Final Conclusion: The Tribunal upheld the absolute confiscation of the seized gold biscuits and wallets, rejected the contention that omission to mention Section 108 vitiated the proceedings, and, while affirming confiscation, exercised appellate discretion to reduce the penalties imposed on the two appellants.

Business Support Service - Reverse Charge Mechanism - CENVAT credit reversal - reimbursable expenses not includible in taxable value prior to amendment of Section 67 - exclusion of sports coaching from taxable services / commercial training or coaching centre - joint venture receipts not consideration for taxable service

Joint venture receipts not consideration for taxable service - Business Support Service - Receipt of appellants' share in Central Rights Income is not consideration for services to BCCI-IPL and is not taxable as Business Support Service. - HELD THAT: - The Tribunal applied its Coordinate Bench precedent in KPH Dream Cricket Pvt. Ltd., and Mormugao Port Trust reasoning that amounts received by co-venturers under a joint venture/franchise agreement do not reflect a contractor-contractee relationship or fixed quid pro quo for any particular service. There is neither intention to render a service by one partner to another nor the essential principal-client relationship required for a taxable service; accordingly the Central Rights income cannot be treated as consideration for BSS and the demand confirmed in the impugned order is unsustainable. [Paras 5]

Demand in respect of Central Rights Income set aside.

Reverse Charge Mechanism - Business Support Service - Amounts attributable to players' fees (10% or 90%) and agents' fees are not taxable under RCM as Business Support Service. - HELD THAT: - Relying on the Tribunal decision in Sourav Ganguly, the Tribunal held that players are engaged principally to play cricket and fees are for playing (non taxable); promotional activities are ancillary and, absent a statutory mechanism to segregate and value a non taxable component within a composite contract, the levy cannot be sustained. Consequently the confirmation of demand for the portion attributed to promotional activities and the demands on agents' fees cannot be upheld. [Paras 5]

Demands in respect of fees paid to foreign players and their agents under RCM set aside; Revenue's appeal on 90% portion dismissed.

Reimbursable expenses not includible in taxable value prior to amendment of Section 67 - Reverse Charge Mechanism - Reimbursement to foreign service providers for consultancy (reimbursable expenses) is not includible in taxable value for the disputed periods and cannot be taxed under RCM. - HELD THAT: - Applying the Supreme Court's decision in Union of India v. Intercontinental Consultants and Technocrats, the Tribunal noted that prior to the 14.05.2015 amendment to Section 67 reimbursable expenses were not part of valuation. The disputed periods fall before that amendment, so there was no legal basis to include reimbursements in gross amount charged or to levy service tax on such reimbursements; therefore the confirmed demand is unsustainable. [Paras 5]

Demand in respect of reimbursable consultancy charges set aside.

Business Support Service - territoriality / services provided outside India - Costs incurred for marketing and PR activities conducted outside India are not taxable as Business Support Service. - HELD THAT: - Following the Tribunal's earlier decision in KPH Dream Cricket Pvt. Ltd., the Tribunal observed that the main object is promoting cricket through IPL and organising tournaments cannot be characterised as a taxable BSS. Where activities and services were provided outside India (IPL played in South Africa for the disputed period), the levy of service tax under BSS is not sustainable. Hence the demand confirmed for such marketing/PR services paid to foreign vendors is not maintainable. [Paras 5]

Demand on marketing and PR costs incurred outside India set aside.

CENVAT credit reversal - explanation 3 to Rule 6(1) and prior law - No reversal of common CENVAT credit was required for amounts received that were not services (stadium gate receipts, prize money) for the disputed period. - HELD THAT: - The Tribunal relied on precedents (L Balaji and KPH Dream Cricket) holding that ticket sales, prize money and similar receipts are not services and therefore not 'exempted services' requiring reversal under Rule 6 prior to the 01.04.2016 amendment which expanded the definition. As the disputed periods precede the amendment, there was no legal requirement to reverse CENVAT credit and the demand for reversal is unsustainable. [Paras 5]

Demand for reversal of common CENVAT credit set aside.

Reverse Charge Mechanism - Business Support Service - Revenue's contention that 90% of players' fees is taxable under RCM as BSS was rejected. - HELD THAT: - The Tribunal followed the reasoning in KPH Dream Cricket that players' primary activity is playing cricket and promotional work is ancillary; absent statutory machinery to segregate and value the non taxable playing component, the levy on players' fees cannot be sustained. Therefore the Commissioner was correct in dropping the demand and there is no merit in Revenue's appeal on this point. [Paras 5]

Revenue's appeal on the 90% portion of players' fees dismissed; demand rightly dropped.

Exclusion of sports coaching from taxable services / commercial training or coaching centre - Business Support Service - Payments to foreign coaches and support staff are not taxable under RCM as BSS; coaching/support services are not chargeable. - HELD THAT: - The Principal Commissioner had found coaching and support services to be distinct, attributable to coaching and therefore not BSS; the Tribunal noted that sports coaching falls outside taxable ambit by virtue of the definition of 'commercial training or coaching centre' and that coaching by individuals for the team is not subject to service tax. On this basis the Tribunal found no reason to interfere and held the demand unsustainable. [Paras 5]

Demand on payments to foreign coaches and support staff set aside; Revenue's appeal on this point dismissed.

Final Conclusion: The Tribunal allowed the appeals of M/s Knight Riders Sports Pvt. Ltd. to the extent the Principal Commissioner had confirmed adjudged demands, setting aside demands relating to Central Rights Income, players' and agents' fees, reimbursable consultancy charges, marketing/PR costs outside India and reversal of common CENVAT credit for the disputed periods (2008-2009, 2011-2012); the Revenue's appeal was dismissed and cross objection disposed of.

Classification of taxable service - online information and database access or retrieval - system networking services - service tax liability

Online information and database access or retrieval - system networking services - classification of taxable service - service tax liability - Whether the services rendered by the Respondent fall within the category of 'online information and database access or retrieval' and are liable to service tax. - HELD THAT: - The Tribunal examined the statutory definitions and held that to constitute 'online information and database access or retrieval' the service must (a) relate to providing data or information (retrievable or otherwise), (b) be provided in electronic form, and (c) be supplied through a computer network. The Respondent's activity was found to be limited to providing system networking services - linking computing devices by installing hardware and software and making telecommunication/network infrastructure available for transfer of data. The Respondent neither generated nor supplied data or information to customers, nor was there any allegation that they supplied or retrieved information through the network. Consequently the essential ingredient of providing data or information was absent, and the services could not be classified as online information and database access or retrieval taxable under the Act. On that basis the Adjudicating Authority's order dropping the demand was sustained and the departmental appeal was rejected. [Paras 7, 8, 9, 10, 11]

The Respondent's services do not fall within 'online information and database access or retrieval' and the order dropping the service tax demand is upheld; the department's appeal is rejected.

Final Conclusion: The appeal by the department is dismissed; the impugned order dropping the demand for service tax is sustained on the ground that the Respondent provided system networking services and did not provide data or information as required to attract tax under 'online information and database access or retrieval.'

Self-assessment and return entries - Refund of excess tax - Rule 6(3) adjustment of tax - Return scrutiny and correction - Best judgment assessment - Unjust enrichment - Refund under Section 11B

Self-assessment and return entries - Rule 6(3) adjustment of tax - Return scrutiny and correction - Whether an apparent clerical/data-entry statement in ST-3 returns, without independent verification, can conclusively bar a refund claim where supporting data shows eligibility. - HELD THAT: - The Tribunal held that a return filed under the statutory self-assessment scheme is ordinarily to be accepted but does not operate as an absolute bar to correcting an evident error when a refund claim is otherwise supported by verifiable records. The original authority was wrong to treat the ST-3 entry as determinative and refuse to examine the appellant's independent data and CA statements showing entitlement. Statutory powers and departmental return-scrutiny procedures permit verification and correction; moreover, the concept of best judgment assessment and the CBIC return-scrutiny framework require the department to examine the correctness of declared tax rather than retain amounts merely because of an inadvertent entry. Consequently, rejection of the refund solely on the basis of the ST-3 entry was unsustainable and the impugned order was set aside subject to departmental verification of mathematical accuracy before sanction. [Paras 7, 9, 10]

Refund claim could not be rejected merely because the ST-3 return showed an adjustment; the entry did not conclusively bind the department and the matter required verification - impugned order set aside and appeal allowed with consequential relief.

Refund under Section 11B - Unjust enrichment - Whether a refund claim under Section 11B is maintainable where tax was paid or collected under a mistake of law and whether unjust enrichment has been established. - HELD THAT: - The Tribunal noted that claims for refund where tax is paid under a mistake of law fall to be considered under Section 11B, subject to the claimant proving that the burden of duty was not passed on to third parties (i.e., no unjust enrichment). The Tribunal did not finally adjudicate entitlement on merits under Section 11B but recognised that the appellant raised this legal plea and that the lower authorities had not examined it. Given that the appellant's refund claim as presented excluded amounts not claimed and that there was no demonstrated double benefit, the question of refund under Section 11B and the absence of unjust enrichment remains to be examined afresh by the department in the light of verifiable records and applicable law. [Paras 8, 9]

The Section 11B contention was not finally decided; the matter requires fresh consideration by the department on the question of tax paid under a mistake of law and whether the burden was passed on (unjust enrichment).

Final Conclusion: The impugned order rejecting the refund was set aside and the appeal allowed; the department is directed to verify the mathematical accuracy and other verifiable aspects of the refund claim and to reconsider the claim (including any Section 11B contentions and the question of unjust enrichment) in accordance with law before sanctioning or rejecting the refund.

Consulting Engineering Service as defined under Section 65(31) of the Finance Act, 1994 - Composite/turnkey contract - bifurcation of supply and service components - Supply of goods with incidental supervisory services - Valuation of service where price for goods includes design/drawings and trading margin - Taxability of supervision, erection and commissioning as a service - Prohibition on artificial segregation of contract value to create taxable service component - Consequences for interest and penalty where primary demand is unsustainable

Consulting Engineering Service as defined under Section 65(31) of the Finance Act, 1994 - Composite/turnkey contract - bifurcation of supply and service components - Supply of goods with incidental supervisory services - Whether the appellant rendered 'Consulting Engineering Service' to JUD and, if so, what portion of the contract value constituted the taxable service component - HELD THAT: - The Tribunal found that the contract was predominantly for supply of equipment for a new dry process cement production line, the appellant acting as seller and supplier of both its own manufactured goods and bought-out items, with supervision of erection and commissioning being incidental. Although the agreement referred to drawings, technical documents, supervision and performance guarantees, these were held to be routine or ancillary to the supply of goods and normally subsumed in the sale price of the equipment. The Tribunal rejected the Department's approach of treating the entire value realised on bought-out items as the taxable value of 'Consulting Engineering Service' and of artificially bifurcating the consolidated contract price to create a separate service component. The appellant had, in any event, computed and paid service tax on supervision/erection and commissioning based on man-hours. Applying the principle that a composite contract cannot be split to tax as service that which is really sale of goods, the Tribunal held that the value of bought-out items sold with a trading margin could not be treated as consideration for consulting engineering services and therefore could not be made subject to the demand for service tax on that basis. [Paras 12, 15, 16, 17, 20]

The appellant did not render 'Consulting Engineering Service' to the extent alleged; the contract was primarily for supply of goods and incidental supervisory services, and the Department's demand treating the value of bought-out items as taxable service value is unsustainable.

Valuation of service where price for goods includes design/drawings and trading margin - Taxability of supervision, erection and commissioning as a service - Consequences for interest and penalty where primary demand is unsustainable - Whether any service tax, interest or penalty could be sustained once the primary demand was held unsustainable - HELD THAT: - The Tribunal recognised that supervision, erection and commissioning performed by the appellant were taxable services but noted that the appellant had itself computed and discharged service tax on those services (based on man-hours) and paid a specified amount. Since the Department's primary demand sought to tax the gross value of bought-out items as consulting-engineering consideration - a demand which the Tribunal set aside as legally untenable - any consequent demand for interest and penalty based on that unsustainable primary demand could not survive. The Tribunal therefore held that once the main demand was set aside, interest and penalty incident thereto also did not arise. [Paras 20, 22]

The incidental supervisory services were taxable and already subjected to service tax by the appellant; the demand based on treating sale value as consulting-engineering consideration is set aside and, accordingly, interest and penalty predicated on that demand do not arise.

Final Conclusion: The appeal is allowed: the impugned demand treating the value of bought-out goods as consideration for 'Consulting Engineering Service' is set aside; the appellant's contract is held to be primarily for supply of goods with incidental supervisory services (for which service tax was paid on the worked-out man-hour basis), and consequential interest and penalty based on the unsustainable demand are rejected.

Taxability of construction of residential complex service - retrospectivity of an Explanation added to a statutory definition - obligation to remit tax collected from purchasers under Section 73A of the Finance Act, 1994 - interest for delayed deposit under Section 73B of the Finance Act, 1994 - invocation of extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994 - levy of penalty for evasion of service tax

Taxability of construction of residential complex service - retrospectivity of an Explanation added to a statutory definition - Whether service tax was leviable on construction of residential complex prior to 01.07.2010 and whether the Explanation to the definition operates retrospectively. - HELD THAT: - The Tribunal recorded that prior to 01.07.2010 service tax was not leviable on construction of residential complex service; after introduction of the Explanation with effect from 01.07.2010 gross receipts of builders became taxable and the Explanation was not held to have retrospective effect. Consequently, there was no pre-existing liability to service tax for the period before 01.07.2010. The adjudicatory finding that taxability arose only from 01.07.2010 is based on the Explanation having prospective effect. [Paras 6, 21]

Service tax was not leviable on construction of residential complex prior to 01.07.2010; the Explanation is not retrospective and taxability arises from 01.07.2010.

Obligation to remit tax collected from purchasers under Section 73A of the Finance Act, 1994 - interest for delayed deposit under Section 73B of the Finance Act, 1994 - Whether the appellant, having collected service tax from purchasers prior to and upto 01.07.2010, was obliged to remit the collected amounts to the Department and whether interest is payable for any delay between collection and deposit. - HELD THAT: - The Tribunal accepted that although no substantive tax liability existed prior to 01.07.2010, amounts collected by the appellant from purchasers nonetheless engaged the obligation under Section 73A to remit taxes collected to the Department. As to interest, the Tribunal held that it is necessary to determine whether there was a delay in deposit of the collected amounts so as to attract interest under the relevant statutory provision; this factual and quantification exercise was not undertaken by the Principal Commissioner and therefore must be examined afresh by the adjudicating authority. The Tribunal remanded the matter for determination of whether and when deposits were made and whether interest is payable. [Paras 7, 9, 10, 11]

Amounts collected must be examined for obligation to remit under Section 73A; whether interest is payable for delayed deposit is remitted to the Principal Commissioner for fresh determination.

Timing of collection and point of liability for service tax after 01.07.2010 - interest for delayed deposit under Section 73B of the Finance Act, 1994 - invocation of extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994 - For the period from 01.07.2010 onwards, whether service tax liability arose on each instalment paid by purchasers (and hence when tax should have been collected and deposited), and whether interest or extended limitation could be invoked by the Department. - HELD THAT: - The Tribunal observed that from 01.07.2010 service tax was leviable and that the correct incidence was to collect tax at the time each instalment was paid rather than only on receipt of the last instalment. The Principal Commissioner had not examined the matter from this instalment-by-instalment perspective, including dates of actual deposit and the applicability of interest; accordingly the Tribunal remitted the issue to the Principal Commissioner to determine when liability arose in each case, when deposits were made, and whether interest and extended limitation are properly attracted. The Tribunal further noted that penalty could not be levied in view of the Division Bench decision relied upon, and thus penalty was not to be sustained on the same facts. [Paras 3, 12, 13, 14]

Remitted to the Principal Commissioner to determine, for the post-01.07.2010 period, the point at which service tax liability arose (instalment-wise), the dates of deposit, and whether interest or extended limitation are applicable; penalty not leviable in the circumstances noted.

Final Conclusion: The Tribunal held that construction-service taxability arose only from 01.07.2010 (the Explanation not retrospective), directed that amounts collected be examined for remittance obligation and possible interest liability, and remitted both the pre-01.07.2010 (limited to interest on collected amounts) and post-01.07.2010 issues to the Principal Commissioner for fresh, instalment-wise factual and legal determination, with a direction to decide the matter expeditiously; penalty was held unsustainable on the noted precedent.

Service tax liability for taxable services provided by non-resident to recipient in India w.e.f. 18.04.2006 - reverse charge liability of service recipient for banking and other financial services provided by a non-resident - effect of prior payment of service tax under Section 73(3) of the Finance Act, 1994 on validity of show-cause proceedings - administrative clarification in CBEC Circular F.No.276/8/2009-CX8A dated 26-09-2011

Service tax liability for taxable services provided by non-resident to recipient in India w.e.f. 18.04.2006 - administrative clarification in CBEC Circular F.No.276/8/2009-CX8A dated 26-09-2011 - Liability to service tax for fees remitted to a foreign bank for payments made prior to 18.04.2006. - HELD THAT: - The Tribunal relied on the Board's circular which, having accepted the position of the Supreme Court judgments, states that service tax liability on any taxable service provided by a non-resident to a recipient in India arises with effect from 18.04.2006, the date of enactment of Section 66A. Applying that clarification, the demands relating to the payments dated 29.12.2005 (Sl. Nos.1 and 2 in the show-cause schedule) fall prior to 18.04.2006 and therefore do not attract service tax. The Tribunal accordingly held that those demands are not sustainable. [Paras 7, 8]

Demands in respect of payments made prior to 18.04.2006 are not leviable and are set aside.

Reverse charge liability of service recipient for banking and other financial services provided by a non-resident - effect of prior payment of service tax under Section 73(3) of the Finance Act, 1994 on validity of show-cause proceedings - Sustainability of demand for amounts for which the appellant had already paid service tax with interest, and consequence for the show-cause notice. - HELD THAT: - The Tribunal observed that the appellant had already discharged service tax along with interest in respect of the payments dated 13.03.2007 and 20.03.2007 (Sl. Nos.3, 4 and 5) and that the demand insofar as it related to those heads was therefore not sustainable. In that factual context, the Tribunal applied the principle in Section 73(3) (that proceedings cease where a person has paid tax on his own ascertainment before issuance of notice) and concluded that issuance of a show-cause notice was not required. Consequently, the adjudicatory proceedings based on that notice could not be sustained. [Paras 9, 10]

Demands in respect of amounts already paid with interest are not sustainable and the show-cause notice was unnecessary.

Effect of prior payment of service tax under Section 73(3) of the Finance Act, 1994 on validity of show-cause proceedings - Validity of the show-cause notice and continuation of proceedings where tax has been paid by the recipient before issuance of the notice. - HELD THAT: - Having held that certain demands were either not leviable (pre-18.04.2006) or already discharged by the appellant, the Tribunal concluded that the show-cause notice itself was bad in law. The Tribunal set aside the impugned adjudication proceedings as not sustainable in the circumstances. [Paras 10, 11]

The show-cause notice is bad in law and the impugned proceedings are set aside.

Final Conclusion: The appeal is allowed: demands in respect of payments prior to 18.04.2006 are set aside; demands already discharged by the appellant are held unsustainable; the show-cause notice and consequent adjudication are declared bad in law and the impugned proceedings are quashed with consequential relief, if any, to the appellant.

Cenvat credit - utilisation of input in manufacture - evidentiary burden and presumption - reliance on registers (RG-23, gate register, stores register) - theoretical literature not determinative of admissibility of credit - penalty under Rule 15(1) of the Cenvat Credit Rules, 2004

Cenvat credit - utilisation of input in manufacture - reliance on registers (RG-23, gate register, stores register) - theoretical literature not determinative of admissibility of credit - evidentiary burden and presumption - Eligibility of Cenvat credit on sponge iron availed by the appellant for manufacture of pig iron - HELD THAT: - The Tribunal held that denial of credit was based on conjecture rather than evidence. The adjudicating authority relied on a single-day charge report, absence of sponge iron in central excise registration as a major input, omission in an internal costing sheet and an external technical publication to conclude non-utilisation. The appellant produced RG-23, gate and stores registers showing receipt, transport details and accounting of sponge iron and the duty-paid nature of the input was not in dispute. The Tribunal found that (a) non-issuance on the day of inspection does not prove non-use overall, particularly where sponge iron was used on trial basis to reduce coke consumption, (b) an internal costing sheet prepared for job-charge computation is not determinative of whether an input was used, and (c) theoretical material relied on by investigators could not supplant contemporaneous factory records. As receipt, utilisation and duty-paid character were not controverted, the appellant was held eligible for Cenvat credit on sponge iron and the demand was set aside. [Paras 11, 12, 13, 14]

Credit upheld; impugned demand set aside

Penalty under Rule 15(1) of the Cenvat Credit Rules, 2004 - personal liability of director - evidentiary burden and presumption - Imposability of penalty on the director under Rule 15(1) of the Cenvat Credit Rules, 2004 - HELD THAT: - Since the Tribunal found that the Cenvat credit on sponge iron was legitimately availably and that the department's allegations were not supported by evidence of wrongful availment, it concluded there was no violation attributable to the director. The absence of any proven contravention disentitled the Revenue from imposing penalty under the cited rule. [Paras 14]

Penalty on the director under Rule 15(1) set aside

Final Conclusion: Appeals allowed; demands and penalty set aside as the appellant proved receipt, utilisation and duty-paid character of sponge iron and the departmental allegations were not established by evidence.

Principles of natural justice - Right to cross-examination in quasi-judicial/adjudication proceedings - Admissibility of statements recorded during investigation under Section 9D - Requirement to examine maker of statement before admitting it - Remand for fresh adjudication after violation of natural justice

Principles of natural justice - Right to cross-examination in quasi-judicial/adjudication proceedings - Requirement to examine maker of statement before admitting it - Whether the adjudicating authority's failure to allow cross-examination of witnesses whose statements were relied upon vitiated the adjudication and required the impugned orders to be set aside and remanded. - HELD THAT: - The Tribunal found that the adjudication proceeded without permitting cross-examination of persons whose statements recorded during investigation were relied upon. Applying settled authorities, the Tribunal held that in adversarial/quasi judicial proceedings the noticee has a right to cross examine natural persons whose statements are relied upon, and that statements recorded during investigation become admissible only when the maker is examined before the adjudicating authority and the authority forms a considered opinion to admit such statement. The Tribunal distinguished decisions relied on by the adjudicating authority as factually different and reiterated that non production of witnesses for cross examination is a breach of natural justice. In consequence, the impugned orders were quashed to the extent they rested on such untested statements and the matters were remanded for fresh adjudication after affording the opportunity of cross examination and appropriate consideration of evidence. [Paras 4, 5]

Impugned orders set aside and appeals allowed by way of remand to the adjudicating authority with direction to permit cross examination of relied witnesses and pass fresh orders in accordance with law.

Final Conclusion: The Tribunal quashed the original adjudication to the extent it relied on statements recorded during investigation without allowing cross examination, and remanded the matters to the adjudicating authority for fresh adjudication after providing the opportunity of cross examination and applying the relevant legal tests.

Cenvat credit of input services received at captive mines - integrated unit / captive mines doctrine - definition of input service and its territorial scope - Input Service Distributor (ISD) and validity of ISD credit - extended period of limitation invoked for suppression and penalty - distinction between credit on inputs/capital goods and input services

Cenvat credit of input services received at captive mines - integrated unit / captive mines doctrine - definition of input service and its territorial scope - distinction between credit on inputs/capital goods and input services - Cenvat credit of service tax availed by the factory in respect of input services received at the appellant's captive coal and iron ore mines is admissible to the factory. - HELD THAT: - The Tribunal held that the factory and the captive mines allotted to the Company for captive use must be treated as one integrated unit for purposes of availment of cenvat credit of input services. The revenue's attempt to distinguish the Supreme Court's Vikram Cement ratio (decided in the context of inputs/capital goods) on the ground that Rule 3 imposes a locational receipt/use restriction for inputs but not for services was not accepted. The Tribunal observed that the definition of input service under the Cenvat Credit Rules is wider than the definition of input and there is no statutory locational restriction for input services analogous to Rule 3 for inputs; consequently, services rendered at captive mines used directly or indirectly in manufacture of excisable goods at the factory attract credit. The Tribunal relied on and applied the ratio of the earlier Tribunal decision in Hindalco Industries (where credit on services at captive mines and on ISD invoices was allowed) and other authorities recognising availment of credit for services located away from the factory when those services relate to manufacture of final excisable goods. The Tribunal also noted absence of any material from the revenue showing that the mines were owned by separate entities and recorded that the mining leases were in the Company's name for captive use; there was no claim that credit taken exceeded tax paid. On these findings the denial of credit by the Commissioner was held unsustainable. [Paras 10, 11]

Allow credit of service tax to the factory in respect of services received at the captive mines; impugned denial set aside.

Input Service Distributor (ISD) and validity of ISD credit - ISD registration and disclosure requirements - extended period of limitation invoked for suppression and penalty - ISD registration held to be validly obtained and there was no suppression to justify invocation of extended period or imposition of penalty; ISD-based credits were admissible. - HELD THAT: - The Tribunal found that the Bokna Mines office had obtained ISD registration after disclosing relevant facts to the department by letter dated 25.04.2008 and that ER-I returns were being filed with invoice-wise details of credit taken. The Commissioner's finding that registration was obtained by suppression was negatived on the record. Applying the principle that ISD-distributed credit is admissible where the distributing unit forms part of the same establishment and noting the factual parity with Hindalco (where ISD invoices from captive mines were held admissible, including for periods before formal ISD registration), the Tribunal concluded there was no suppression warranting extended limitation or penalty. Consequently, the penalties imposed on the factory and on the Bokna Mines were set aside. [Paras 10, 11]

ISD registration and ISD-distributed cenvat credit upheld; extended period and penalties set aside.

Final Conclusion: Appeals allowed. The Tribunal set aside the impugned orders denying cenvat credit of service tax in respect of services at the captive coal and iron ore mines, upheld admissibility of ISD-based credits, and quashed the invocation of extended limitation and the penalties; consequential relief granted.

Cenvat credit - bona fide purchaser - reasonableness under Rule 9(3) of the Cenvat Credit Rules, 2004 - scope of show cause notice - adjudicatory limits on travelling beyond allegations - onus of proof on the party making allegation - extended period of limitation

Cenvat credit - bona fide purchaser - reasonableness under Rule 9(3) of the Cenvat Credit Rules, 2004 - reliance on supplier's registration and tax invoices - Whether denial of Cenvat credit to the recipient (Appellant) is justified where the supplier was registered and duty paid invoices were produced and the recipient had received and installed the capital goods. - HELD THAT: - The Tribunal held that the record established receipt and installation of the capital goods by the Appellant and that the supplier, M/s. Saha Industries, was registered and had issued tax invoices showing payment of duty. The departmental case primarily attacked the supplier's capacity and conduct; it did not establish that the Appellant had received the goods from any alternate source. The Tribunal applied the principle that the recipient, acting as a bona fide purchaser who had paid through banking channels and entered the goods in statutory records, is entitled to rely on prima facie valid invoices and registration of the supplier. The burden to prove non receipt or diversion lay on the department and it failed to discharge that burden. The Tribunal also rejected reliance on inquiry material (transporters' statements) not placed in the relied upon documents. Consequently, denial of Cenvat credit on the basis that the transactions were fake or that goods were not received could not be sustained. [Paras 9]

The denial of Cenvat credit was unsustainable; the impugned demand on merits set aside and appeal allowed.

Scope of show cause notice - adjudicatory limits on travelling beyond allegations - Whether the Adjudicating Authority could go beyond the allegations in the Show Cause Notice to hold that the supplier was not an assessee/manufacturer entitled to issue excise invoices. - HELD THAT: - The Tribunal found that the Show Cause Notice itself acknowledged that M/s. Saha Industries held Central Excise registration and that the Commissioner's finding that the supplier was not an assessee/manufacturer exceeded the scope of the Notice. Reliance was placed on Supreme Court authority that an adjudicating authority cannot travel beyond the scope of the SCN. The Tribunal noted that the supplier had followed excise procedures (issue of tax invoices, ER 1 returns) and no evidence was produced showing the supplier's statutory records to be false. Therefore the impugned finding that the supplier had no power to issue excise invoices could not be sustained. [Paras 9]

Finding that the supplier was not an assessee/manufacturer was beyond the scope of the SCN and unsustainable.

Onus of proof on the party making allegation - extended period of limitation - Whether demand under the extended period of limitation could be sustained where the recipient had, in good faith, availed Cenvat credit on duty paid invoices from a registered supplier. - HELD THAT: - Applying precedent that a holder for valuable consideration who is not shown to be a party to fraud cannot be proceeded against under extended limitation merely because the supplier is later found to be non existent, the Tribunal held that the department must prove that the recipient participated in or had knowledge of fraud. Here the Appellant received and installed the capital goods, payments were made through banking channels, and the supplier had discharged duty as per invoices; the department failed to show complicity or alternative receipt. The Tribunal therefore held that invocation of the extended period of limitation was not permissible against the Appellant. [Paras 9]

Demand confirmed under the extended period of limitation cannot be sustained; the extended period demand set aside.

Final Conclusion: The Tribunal set aside the impugned Order in Original both on merits and on limitation: Cenvat credit wrongly denied to the Appellant where goods were received, supplier was registered and duty paid invoices existed, the adjudicator had travelled beyond the SCN, and the extended period of limitation could not be invoked; appeal allowed with consequential relief.

Cenvat credit on capital goods - use for Research & Development - validity of TR-6 challan as proof of duty payment - remand for fresh consideration of admissibility of credit

Validity of TR-6 challan as proof of duty payment - Cenvat credit on capital goods - Finality of the finding that TR-6 challan evidencing payment of duty is a valid document for admitting Cenvat credit. - HELD THAT: - The first appellate authority had held that the TR-6 challan dated 14.1.2016 evidencing payment of duties is a valid document for admitting Cenvat credit. Revenue did not challenge that conclusion by way of further appeal, and therefore that finding has attained finality. The Tribunal accordingly did not reopen the issue of the TR-6 challan's validity and proceeded on the basis that document is valid for the purpose of claiming credit. [Paras 3]

The finding that TR-6 challan is a valid document for admitting Cenvat credit is final and not reopened.

Cenvat credit on capital goods - use for Research & Development - remand for fresh consideration of admissibility of credit - Whether the imported engine was used in the factory for Research & Development so as to entitle the appellant to Cenvat credit, remanded for fresh adjudication. - HELD THAT: - The Tribunal noted that one limb of the relevant rule (classification under Chapter 84) is satisfied, but availability of credit also requires proof of use of the engine in the manufacturer's factory for R&D. The Commissioner(Appeals) had found that the appellant failed to establish such use, while the appellant produced technical write up, a declaration and a test data sheet indicating use of the engine in the factory. The Tribunal held that the assessment of those evidences is for the appellate authority to make and therefore remitted the matter to the Commissioner(Appeals) to decide afresh after allowing the appellant to produce all relevant documents and after giving an opportunity of hearing. The Tribunal expressly refrained from adjudicating issues of suppression or penalty and limited its direction to determining admissibility of credit on merits based on evidence. [Paras 3]

Matter remanded to Commissioner(Appeals) to decide afresh whether the engine was used for R&D in the factory and whether Cenvat credit is admissible, after permitting production and appreciation of the evidence and hearing the appellant.

Final Conclusion: Impugned order set aside and the appeal allowed by way of remand to the Commissioner(Appeals) to decide afresh on the admissibility of Cenvat credit in respect of the imported engine after permitting the appellant to place and the authority to appreciate relevant evidence; the TR-6 challan issue remains final.

Waiver of tax arrears and penalty - Binding nature of Commissioner s clarification - Power of authority to accept or reject waiver and to demand interim payment - Interim payment as condition pending adjudication - Remand for fresh decision on merits - Classification of drilling rigs as taxable under Part C entry as components/machinery - Status quo regarding recovery of tax

Waiver of tax arrears and penalty - Binding nature of Commissioner s clarification - Power of authority to accept or reject waiver and to demand interim payment - Whether the authority was precluded from rejecting the appellants' request for waiver and whether the authority has power to grant, refuse or impose interim conditions while the classification dispute remains undecided - HELD THAT: - The Court observed that, having chosen departmental remedy over challenging the Commissioner s clarification, the appellants could not insist that the entire waiver be granted as a matter of right. The authority possesses the statutory power to either grant or refuse waiver of tax arrears and penalty, and may impose interim measures including demanding a higher percentage pending final adjudication. If the authority later accepts the assessee s contention, any excess collected would be refundable. The Court therefore treated the rejection of waiver as a matter suitable for fresh consideration by the authority in the context of the binding clarification and the ongoing classification dispute, rather than as an order to be set aside outright on the present writ proceedings. [Paras 8]

Authority has power to accept or reject waiver and to require interim payment pending final decision; the matter requires fresh consideration by the authority.

Interim payment as condition pending adjudication - Remand for fresh decision on merits - Classification of drilling rigs as taxable under Part C entry as components/machinery - Status quo regarding recovery of tax - Appropriate interim direction and disposition of the writ appeals pending final decision on the tax classification and waiver applications - HELD THAT: - Although the learned Single Judge s order need not have been interfered with on the limited challenge before the Court, the Division Bench directed an interim measure to afford finality and to enable the departmental authorities to decide the dispute on merits. The Court set aside the impugned order rejecting waiver only to the extent necessary to remand the matter to the authority for fresh adjudication in accordance with law. As an interim direction, each appellant was ordered to pay an additional 4% of the tax determined by the authorities (in addition to 4% already remitted), to be paid within four weeks of receipt of the order; the additional amount is subject to final determination and refund if appropriate. The remand contemplates a merits decision by the authority on tax classification and waiver, not mere numerical computation. [Paras 9]

Writ appeals disposed by setting aside the impugned order to the extent necessary, directing interim payment of an additional 4% and remitting the matter to the authority for fresh decision on merits.

Final Conclusion: Writ appeals disposed; appellants directed to pay an additional interim 4% of the tax within four weeks (in addition to 4% already remitted), the impugned order set aside to the extent necessary and the matter remitted to the competent authority for fresh adjudication on merits regarding classification and waiver; no costs.

Presumption under Section 139 of the Negotiable Instruments Act - effect of admitted signature on cheque - leave to defend - conditional leave to defend subject to deposit - adequacy of plaint regarding consideration and particulars

Presumption under Section 139 of the Negotiable Instruments Act - effect of admitted signature on cheque - Whether the presumption under Section 139 is attracted and its effect where the drawer has admitted execution and delivery of the cheque. - HELD THAT: - The Court found that the defendant had admitted executing and handing over the cheque and there was no suggestion of coercion or compulsion. On that basis the presumption under Section 139 arises and primes the plaintiff's case by treating the cheque as relating to a legally enforceable debt or liability. Although the presumption is rebuttable, the admitted execution and voluntary handing over of a (even blank) cheque was held to discharge the initial burden prima facie and to make the Section 139 presumption applicable in the present facts. The judgment therefore treats the admitted signature and delivery as sufficient to invoke the statutory presumption unless adequately rebutted. [Paras 3, 4, 22, 23]

Presumption under Section 139 arises on the admitted execution and delivery of the cheque; the initial burden is prima facie discharged by that admission.

Adequacy of plaint regarding consideration and particulars - leave to defend - Whether the plaint contains adequate particulars of the consideration and dealings so as to entitle the plaintiff to an unconditional summary decree, or whether the defendant is entitled to defend. - HELD THAT: - The Court observed that although dealings between the parties were established on the material, the plaint was deficient in material particulars: it did not explain when and how the consideration passed, why amounts increased over time, or adequately explain the plaintiff's own letter dated 8th April, 2021. Those lacunae meant that the defendant had raised triable issues regarding the origin, quantification and subsistence of the asserted liability which were not foreclosed by the admitted signature. Consequently, the Court concluded that the plaint, as drafted, did not justify an unconditional summary decree and that the defendant should be permitted to defend subject to appropriate conditions. [Paras 22, 24]

The plaint is deficient in particulars of consideration and therefore the defendant is not entitled to unconditional leave to defend but has grounds for defending the suit.

Conditional leave to defend subject to deposit - leave to defend - What relief or procedural order should be made in view of the competing findings on the Section 139 presumption and the inadequacy of the plaint? - HELD THAT: - Balancing the application of the Section 139 presumption (arising from the admitted execution and delivery) with the plaint's failure to set out necessary particulars of the alleged consideration, the Court granted conditional leave to the defendant to defend. The condition imposed was a security deposit to protect the plaintiff's prima facie position while permitting adjudication on triable issues at trial. The Court therefore ordered deposit within a specified period, transfer of the suit to the Commercial Causes list and permitted filing of the written statement on compliance; non-compliance would permit the plaintiff to seek ex parte decree after obtaining the prescribed certificate. [Paras 23, 24, 25]

Conditional leave to defend granted upon deposit within the stipulated time; failure to deposit entitles the plaintiff to apply for ex parte decree.

Final Conclusion: The Court held that the admitted execution and delivery of the cheque attracts the statutory presumption under Section 139, but because the plaint lacks necessary particulars as to consideration and variation in claimed amounts the defendant was not entitled to unconditional leave to defend; conditional leave was granted subject to a directed deposit and consequential procedural directions.

Presumption under Section 139 of the Negotiable Instruments Act, 1881 - rebuttal of presumption on proof of legally enforceable debt - burden of proof in proceedings under Section 138 of the Negotiable Instruments Act - dishonour of cheque and statutory notice requirement - use of financial statements (sundry debtors) as evidence of debt

Presumption under Section 139 of the Negotiable Instruments Act, 1881 - rebuttal of presumption on proof of legally enforceable debt - The presumption under Section 139 of the N.I. Act was not rebutted by the Accused and therefore had to be drawn in favour of the Complainant. - HELD THAT: - The Trial Court ignored the mandatory statutory presumption which arises where the signature on the cheque is not disputed and the procedural requirements under Section 138 are met. The Accused did not dispute the signature, date or other particulars of the cheque and failed to adduce any evidence in defence despite opportunities to examine witnesses or to disclose a specific defence. The Trial Court erroneously required the Complainant to prove that the cheque discharged a legally enforceable debt, thereby reversing the statutory onus. In absence of any material brought on record by the Accused to rebut the presumption, the presumption under Section 139 ought to have been drawn in favour of the Complainant and the acquittal was therefore unsustainable. [Paras 12, 13, 15, 18, 19]

Presumption under Section 139 not rebutted; Trial Court's negative finding set aside and Accused found guilty under Section 138.

Burden of proof in proceedings under Section 138 of the Negotiable Instruments Act - use of financial statements (sundry debtors) as evidence of debt - dishonour of cheque and statutory notice requirement - The learned Magistrate erred in shifting the burden onto the Complainant and in disbelieving the documentary evidence (delivery challans, income tax returns and balance sheet) without adequate basis. - HELD THAT: - The Trial Court placed upon the Complainant the onus of proving that the cheque was issued for a legally enforceable debt, contrary to the statutory presumption. The Court improperly compared signatures on delivery challans with the Accused's signature despite no denial that the Accused personally received materials at the site; such comparison was unwarranted in ordinary business practice where delivery challans are signed by the receiving person at site. Further, the Complainant produced Income Tax Returns, Balance Sheet and Profit & Loss account certified by a Chartered Accountant showing 'Sundry Debtors' exceeding the cheque amount, which indicated entitlement to recover the claimed amount. With no effective evidence produced by the Accused to rebut these documents, the Trial Court's disbelief of the documentary evidence was perverse and required interference. [Paras 14, 16, 17, 18, 19]

Trial Court wrongly shifted burden to Complainant and erred in disbelieving documentary evidence; acquittal interfered with and conviction restored.

Final Conclusion: The appeal is allowed; the impugned acquittal is quashed and set aside, the Accused is convicted under Section 138 of the Negotiable Instruments Act, sentenced to imprisonment and directed to pay compensation, as recorded in the order.