TaxTMI Updates e-Newsletter
Jul 02,2020

Judicial review of show cause notice - Scope of interference at show cause stage - Penalty under Section 122 - Determination of tax under Section 74 - Validity of delegated legislation - Excessive delegation - Rule 142(1)(a) of the CGST Rules, 2017 - Rule making power under Section 164

Judicial review of show cause notice - Scope of interference at show cause stage - Penalty under Section 122 - Validity of the show cause notice dated 30.11.2019 issued under Section 122 was challenged and the challenge was refused. - HELD THAT: - The High Court applied settled principles restricting interference at the stage of issuance of a show cause notice. Interference under Article 226 is permissible only where the notice is shown to be ex facie without jurisdiction, does not disclose any offence on admitted facts, suffers from incurable infirmity, is contrary to binding judicial decisions, or is bereft of any material justifying issuance. The court declined to enter into merits of the departmental allegations (bogus billing and absence of physical movement) because the matter was at the show cause stage and factual adjudication was necessary. Accordingly, the petition seeking quashing of the notice was rejected and the writ applicant was relegated to reply and seek adjudication before the statutory authority; the court emphasised that it had not considered the merits and that all legal contentions remain open at adjudication. [Paras 21, 22, 23, 31, 32]

The challenge to the show cause notice is rejected; the notice is not quashed and shall be adjudicated on merits by the authority.

Validity of delegated legislation - Excessive delegation - Rule 142(1)(a) of the CGST Rules, 2017 - Rule making power under Section 164 - Challenge to the vires of Rule 142(1)(a) of the CGST Rules, 2017 as ultra vires and an excessive delegation was dismissed. - HELD THAT: - The court examined the rule making power conferred by Section 164 and applied the presumption in favour of validity of subordinate legislation. A delegated rule may be struck down only if it goes beyond the scope of the delegated power or is repugnant to the Act. Having regard to the subject matter and the general power in Section 164 to make rules to carry out the provisions of the Act, Rule 142(1)(a)-which mandates service of a summary electronically along with notices under specified sections-was held to fall within the rule making power and not to be in conflict with the Act. The court observed established principles that, where two constructions are open, the one upholding validity should be adopted and that particular powers may be illustrative of general powers. Consequently, Rule 142(1)(a) was not declared ultra vires. [Paras 26, 27, 28, 29, 30]

Rule 142(1)(a) of the CGST Rules, 2017 is valid and not ultra vires the CGST Act, 2017.

Final Conclusion: The writ petition is dismissed: the challenge to the show cause notice under Section 122 is refused and Rule 142(1)(a) of the CGST Rules, 2017 is held to be intra vires; the show cause notice shall be adjudicated on merits and the petitioner may raise all available legal pleas before the authority.

Rule 117(1A) of the Central GST Rules, 2017 - technical difficulties on common portal - right to carry forward pre-GST CENVAT/ITC - Article 14 of the Constitution - Article 300A of the Constitution - transitional migration relief by permitting filing of FORM GST TRAN-1 - availment of input tax credit in monthly return GSTR-3B as alternative relief

Rule 117(1A) of the Central GST Rules, 2017 - Article 14 of the Constitution - Article 300A of the Constitution - technical difficulties on common portal - Challenge to vires of Rule 117(1A) and contention that denial of TRAN-I filing to those unable to upload due to technical difficulties violates constitutional rights. - HELD THAT: - The Court recognised the contention that sub-rule (1A) differentiates between taxpayers able to demonstrate portal logs and those who cannot, and that repeated extensions by the revenue for TRAN-I filing in cases of technical glitches support the claim that denial of migration would be arbitrary. The Court noted precedents of this Court and the Delhi High Court analysing sub-rule (1A) as susceptible to arbitrariness and discriminatory application vis-a -vis taxpayers, and observed that the right to carry forward accrued CENVAT/ITC engages Article 14 and Article 300A. Nonetheless, the Court refrained from striking down Rule 117(1A) as invalid; instead it applied the binding effect of earlier decisions to the present petitioner and granted relief on that basis. The Court therefore declined to declare the Rule ultra vires but accepted that denying unutilised credit to dealers unable to furnish evidence of attempt to upload TRAN-I would amount to a violation of Article 14 and Article 300A in appropriate cases. [Paras 6, 8]

Did not declare Rule 117(1A) invalid but held that denial of migration on narrow technical-log grounds can be arbitrary and violative of Articles 14 and 300A in appropriate cases; applied earlier precedents to the petitioner.

Transitional migration relief by permitting filing of FORM GST TRAN-1 - availment of input tax credit in GSTR-3B - verification of genuineness of claims - Relief to the petitioner for filing FORM GST TRAN-1 and alternative remedy if portal not opened. - HELD THAT: - Following this Court's decision in Adfert Technologies and the Delhi High Court's decisions (as cited), the Court directed that the petitioner be permitted to electronically upload FORM GST TRAN-1 on or before 30.06.2020. The Court further provided that if the respondents fail to open the portal to permit such filing, the petitioner shall be at liberty to avail the claimed input tax credit in the monthly return GSTR-3B for July 2020. The respondents retain the right to verify the genuineness of the claims made by the petitioner. [Paras 9]

Petition allowed; respondents directed to permit upload of TRAN-1 by 30.06.2020 and, if portal not opened, petitioner permitted to avail ITC in GSTR-3B (July 2020), subject to verification by respondents.

Final Conclusion: Petition allowed. The petitioner is permitted to upload FORM GST TRAN-1 on or before 30.06.2020; if respondents do not open the portal, the petitioner may avail the claimed input tax credit in GSTR-3B for July 2020, subject to verification. The Court declined to strike down Rule 117(1A) but applied earlier precedents to grant transitional relief to the petitioner in view of Article 14 and Article 300A concerns.

Detention and seizure under GST regime - release of seized goods on furnishing indemnity bond - requirement of security or bank guarantee for provisional release - interim release subject to final adjudication

Release of seized goods on furnishing indemnity bond - requirement of security or bank guarantee for provisional release - interim release subject to final adjudication - Permissibility of provisional release of the detained vehicle and goods on the basis of an indemnity bond despite departmental communications referring to requirement of security/bank guarantee. - HELD THAT: - The Court, while issuing notice and without finally adjudicating the legality of the detention or the correctness of the departmental view about bank guarantee/security, directed interim relief in the exercise of its equitable jurisdiction. Having considered the petitioner's explanation about inability to immediately amend the e way bill due to lockdown and the steps taken thereafter, the Court ordered that the respondents shall release the goods and vehicle if the petitioner furnishes an indemnity bond undertaking that, in the event of any adverse order or direction to pay tax and penalty, the petitioner will within seven days pay the entire amount to the competent authority without raising further pleas. The indemnity bond is to be made in favour of the Superintendent of State Tax (GST) Churaibari Enforcement Wing; if the Superintendent is satisfied that the bond complies with this order, release must be effected within three days of submission. The Court expressly stated that this interim arrangement is subject to the final decision of the Court and did not decide on the merits of the detention or the correctness of the tax/penalty imposed.

Directed provisional release of the detained vehicle and goods upon filing the specified indemnity bond and undertaking, with release to follow within three days if the Superintendent is satisfied; order is interim and subject to final adjudication.

Final Conclusion: Notice issued; interim relief granted permitting release of the detained vehicle and goods upon submission of an indemnity bond and undertaking to pay any tax and penalty within seven days if so directed, with release to be effected within three days by the Superintendent if satisfied; interim order subject to the Court's final decision.

Deduction under Section 10A - previously used plant and machinery - continuance of benefit on transfer - demerger/amalgamation versus slump sale - reliance on non-final tribunal orders - treatment of foreign currency expenditure for computation of turnover - application of binding precedent of the Supreme Court

Deduction under Section 10A - previously used plant and machinery - Deduction under Section 10A is allowable though certain plant and machinery purchased could not be characterised as 'new' in the hands of the purchaser, and the condition regarding not more than 20% previously used by any other person was to be read consistently with the controlling precedents cited. - HELD THAT: - The Court noted that questions on whether plant and machinery purchased by the assessee could be treated as 'new' and whether the restriction on previously used plant and machinery barred the deduction had been considered and answered in favour of the assessee by earlier Division Bench decisions of this Court. Having regard to those precedents and the reasoning contained therein, the Court answered the admitted substantial question in favour of the assessee and against the Revenue. The Court adopted the conclusions of the cited High Court decisions as determinative of the present factual and legal controversy. [Paras 3, 4]

Answered in favour of the assessee; deduction under Section 10A allowed notwithstanding the contention about previously used plant and machinery.

Deduction under Section 10A - continuance of benefit on transfer - demerger/amalgamation versus slump sale - Continuance of benefit under Section 10A on transfer of undertaking was to be construed in accordance with the principles applied by earlier Division Bench decisions, and the restriction in relation to transfers (distinguishing demerger/amalgamation from slump sale) did not defeat the assessee's claim in the facts of this case as resolved by those precedents. - HELD THAT: - The Court observed that the substantial question concerning the applicability of Section 10A benefits to a transferee on a transfer not comprising a demerger or amalgamation had been addressed by prior Division Bench rulings in favour of the assessee. Relying on those decisions and the reasoning contained therein, the Court answered the question for the present appeal in favour of the assessee and against the Revenue, thereby endorsing the view that the factual situation before the Tribunal permitted continuation of the deduction. [Paras 3, 4]

Answered in favour of the assessee; Section 10A deduction permitted in the circumstances before the Court.

Reliance on non-final tribunal orders - The Tribunal's reliance on earlier tribunal orders in other cases to grant relief to the assessee did not render its order perverse where the High Court had subsequently decided identical questions in favour of the assessee. - HELD THAT: - The Court recorded that the Department's objection that the Tribunal had relied on orders which were not final (pending departmental appeals) had been overtaken by later Division Bench decisions of this Court which answered the same substantial questions in favour of the assessee. In that light, the Court found no perversity in the Tribunal's outcome and affirmed the conclusion reached in favour of the assessee. [Paras 3, 4]

Answered in favour of the assessee; reliance on earlier tribunal orders did not make the tribunal's order perverse in the circumstances.

Treatment of foreign currency expenditure for computation of turnover - Exclusion of foreign currency expenditure from the total turnover for computation of Section 10A deduction, insofar as it was consistent with the law as laid down by the Supreme Court, was accepted and the substantial question was answered for the assessee. - HELD THAT: - The Court noted that the questions relating to exclusion of foreign currency expenditure from turnover for purposes of computing Section 10A deduction had been considered and resolved by the Supreme Court in favour of the assessee. In view of that binding precedent, the Court answered the substantial question against the Revenue and in favour of the assessee, adopting the legal position established by the higher court. [Paras 4]

Answered in favour of the assessee; exclusion of foreign currency expenditure for the purpose of computing the deduction sustained in accordance with higher court precedent.

Application of binding precedent of the Supreme Court - deduction under Section 10A - Computation of deduction under Section 10A in the manner followed by the Tribunal was upheld because it conformed with the pronouncements of the Supreme Court, and reliance on those precedents warranted answering the substantial questions against the Revenue. - HELD THAT: - The Court expressly referenced the judgment of the Supreme Court in Commissioner of Income Tax, Central III v. HCL Technologies Ltd., noting that the Supreme Court's ruling had settled the law on computation issues raised in substantial questions Nos.4 and 5. Given that binding authority, the Court answered the contested questions in favour of the assessee and against the Revenue, applying the Supreme Court's legal position to the facts before it. [Paras 4]

Answered in favour of the assessee; computation method upheld as consistent with the Supreme Court precedent.

Final Conclusion: The appeal is dismissed; all substantial questions of law as framed were answered in favour of the assessee and against the Revenue, following earlier Division Bench decisions of this Court and the binding pronouncement of the Supreme Court, and no merit is found in the Revenue's appeal.

Taxability of cash compensatory assistance and duty drawback - accrual versus receipt basis - exclusion under Explanation (baa) to Section 80HHC - applicability of 90% reduction to receipts of the nature of brokerage, commission, interest, rent or charges - deductibility under Section 43B - customs duty included in closing stock - disallowance under Section 40(A)(3) for cash payments exceeding Rs.10,000 and exceptions under Rule 6DD(j) - computation of employee travel expenses - average basis versus trip-wise computation under Rule 6D - requirement of a prior order under Section 201(1) for levy of interest under Section 201(1A)

Computation of employee travel expenses - average basis versus trip-wise computation under Rule 6D - disallowance under Section 40(A)(3) for cash payments exceeding Rs.10,000 and exceptions under Rule 6DD(j) - Findings that travel expenses should be computed trip-wise under Rule 6D and that cash payments exceeding Rs.10,000 were disallowable under Section 40(A)(3) are questions of fact and not substantial questions of law. - HELD THAT: - The Court examined the tribunal's findings on the manner of computing travel expenses and on the disallowance under Section 40(A)(3) and concluded that both determinations rest on a proper appreciation of the evidence. Such conclusions are factual in character and cannot be characterised as perverse or arbitrary. Accordingly, the substantial questions framed in respect of these matters do not raise questions of law requiring the Court's adjudication. [Paras 7]

Findings treated as factual; no substantial question of law arises and these issues are not entertained.

Taxability of cash compensatory assistance and duty drawback - accrual versus receipt basis - Cash compensatory assistance and duty drawback were held to be taxable on accrual only when a right to receive them is sanctioned by the competent authorities; the tribunal permitted deduction on accrual basis. - HELD THAT: - On scrutiny of the tribunal's order, the Court notes that the tribunal allowed the claim on accrual basis, holding that income accrues only when the assessee acquires a legal right to receive the amount - which, in the case of the cash compensatory assistance and duty drawback, occurs upon sanction by the customs authorities and not merely on making a claim. As the amounts for the relevant year were not sanctioned, the tribunal correctly treated them as not having accrued in that year. [Paras 8]

Allowed on accrual basis; substantial question answered against the revenue and in favour of the assessee.

Exclusion under Explanation (baa) to Section 80HHC - applicability of 90% reduction to receipts of the nature of brokerage, commission, interest, rent or charges - Receipts such as income from technical services and other specified receipts cannot be excluded by 90% under Explanation (baa) to Section 80HHC unless they are receipts of a nature comparable to brokerage, commission, interest, rent or charges and have the requisite nexus with export turnover. - HELD THAT: - Relying on this Court's earlier decisions and the Supreme Court authority considered therein, the expression 'any receipt of a similar nature' is to be read in the context of the preceding list (brokerage, commission, interest, rent or charges). Receipts must be of a similar character and lack nexus with export turnover to be excluded; a receipt for technical services does not, by necessary implication, fall within that exclusion merely because it exists alongside export business. The tribunal's conclusion that such receipts (including income from technical services and net interest income, as applicable) are not to be reduced by 90% for computation under Section 80HHC was accepted. [Paras 9]

90% exclusion under Explanation (baa) not attracted to the disputed receipts; decided against the revenue and in favour of the assessee.

Deductibility under Section 43B - customs duty included in closing stock - Customs duty paid and included in closing stock was allowable under Section 43B where the claim had been taken before the Commissioner (Appeals) and the Tribunal. - HELD THAT: - The Court found that the plea for deduction under Section 43B was raised before the Commissioner of Income Tax (Appeals) and thereafter before the Tribunal, so it was not an issue raised for the first time at the Tribunal level. The Court also noted the instructive principle that, between accounting years, any apparent gain to one year and loss to another may be illusory where tax rates are uniform, and that no loss to revenue results in the circumstances described. On these bases the tribunal's allowance was upheld. [Paras 10]

Claim under Section 43B allowed; substantial question answered against the revenue and in favour of the assessee.

Net interest and related receipts - reduction by 90% for purposes of Section 80HHC - The question whether net interest income (as distinct from gross interest) should be reduced by 90% when computing profits for Section 80HHC was decided against the revenue by reference to controlling Supreme Court authority. - HELD THAT: - The Court referred to binding decisions (including ACG Associated Capsules and Eli Lilly) and concluded that the legal position is settled against the revenue on the point raised; the tribunal's view on the treatment of interest income in computing deductions under Section 80HHC stands affirmed insofar as it follows that precedent. [Paras 7]

Answered against the revenue; tribunal's conclusion upheld.

Requirement of a prior order under Section 201(1) for levy of interest under Section 201(1A) - Levy of compensatory interest under Section 201(1A) for delay in remittance of TDS cannot be sustained without the mandatory prerequisite of an order under Section 201(1). - HELD THAT: - The Court recorded that the Supreme Court has addressed this point and decided it against the revenue. Applying that precedent, the tribunal's setting aside of the levy of interest under Section 201(1A) was upheld. [Paras 7]

Requirement of Section 201(1) satisfied as prerequisite; substantial question answered against the revenue.

Final Conclusion: The appeal is dismissed. The tribunal's conclusions on the surviving substantial questions of law (taxability of cash compensatory assistance and duty drawback on accrual, non-applicability of the 90% exclusion under Explanation (baa) to the disputed receipts, allowance under Section 43B, and the prerequisite for levy under Section 201(1A)) are affirmed; several other substantial questions were held to be questions of fact and not entertained.

Set-aside and remand for fresh hearing - ex parte dismissal - opportunity of being heard - pronouncement of orders under Rule 34(5) of the Income Tax Appellate Tribunal Rules, 1963 - computation of time-limits and exclusion of lockdown period - extraordinary circumstances and force majeure (COVID-19 pandemic)

Set-aside and remand for fresh hearing - ex parte dismissal - opportunity of being heard - Whether the ex parte dismissal by the First Appellate Authority should be set aside and the matter remitted for fresh adjudication with an opportunity to the assessee to be heard. - HELD THAT: - The Tribunal accepted the assessee's explanation that non-appearance before the CIT(A) was due to change of residence and non-receipt of notice, and found the explanation to be genuine. To prevent miscarriage of justice the Tribunal exercised its discretion to set aside the ex parte order and remand the appeal to the Learned CIT(A) for fresh disposal after affording a reasonable opportunity of hearing and considering evidence already on record as well as any additional evidence the assessee may file. The Tribunal emphasised that the assessee must cooperate and avoid unnecessary adjournments. [Paras 2]

Ex parte dismissal set aside and matter remitted to the CIT(A) for fresh adjudication after affording opportunity of hearing; appeal allowed for statistical purposes.

Pronouncement of orders under Rule 34(5) of the Income Tax Appellate Tribunal Rules, 1963 - computation of time-limits and exclusion of lockdown period - extraordinary circumstances and force majeure (COVID-19 pandemic) - Whether pronouncement of the Tribunal's order beyond the usual 90-day period after conclusion of hearing is permissible in view of the COVID-19 lockdown and Rule 34(5). - HELD THAT: - Relying on a coordinate-bench decision and considering the unprecedented disruption caused by the COVID-19 pandemic and the nationwide lockdown, the Tribunal held that the period of lockdown must be excluded when computing the 90-day time-limit in Rule 34(5). The Bench noted authoritative directions and extensions by higher courts and governmental notifications treating the pandemic as causing force majeure and disruption to judicial functioning. Given these extraordinary circumstances, the exception inherent in Rule 34(5)(c) applies and the delay in pronouncement is justified; nevertheless benches retain discretion to refix matters for clarifications where necessary. [Paras 5]

Period of lockdown excluded for computation of the 90-day limit under Rule 34(5); delay in pronouncement on the present facts held permissible.

Final Conclusion: The Tribunal set aside the ex parte dismissal and remitted the appeal to the CIT(A) for fresh disposal after affording the assessee a reasonable opportunity to be heard (appeal allowed for statistical purposes), and held that the COVID-19 lockdown period is to be excluded in computing the 90-day pronouncement period under Rule 34(5) of the Appellate Tribunal Rules, 1963, thereby validating the delayed pronouncement.

Resale Price Method (RPM) - Transactional Net Margin Method (TNMM) - arm's length price - transfer pricing - comparability and selection of comparables - precedential consistency in assessment years

Resale Price Method (RPM) - Transactional Net Margin Method (TNMM) - arm's length price - transfer pricing - precedential consistency in assessment years - Appropriateness of RPM vis-a -vis TNMM for benchmarking international transaction of import and resale of finished goods by the assessee - HELD THAT: - The Tribunal examined whether RPM or TNMM was the most appropriate method to determine the arm's length price of purchases of finished surveying instruments from Associated Enterprises, which were resold to unrelated parties. It was an uncontested fact that the assessee acted as a distributor reselling goods without value addition. The TPO rejected RPM citing lack of adjustments and functional/accounting differences and applied TNMM; the DRP upheld TNMM but modified the set of comparables. The Tribunal analysed authorities holding that traditional methods (including RPM) are to be preferred where they can be reasonably applied and that RPM is the appropriate method for pure distributors who do not add significant value. The Tribunal also noted that Revenue had accepted RPM for the assessee in preceding and succeeding assessment years and that no material change in facts for the year under consideration was pointed out to justify a different approach. In light of the factual position (resale without value addition), the jurisprudential preference for traditional methods over transactional profit methods where applicable, and consistency across assessment years, the Tribunal concluded that rejection of RPM was not justified and directed computation of ALP applying RPM. [Paras 14, 15, 16, 18, 19]

TPO/DRP's rejection of RPM and application of TNMM set aside; AO directed to compute ALP for the purchase/resale transaction by applying RPM.

Final Conclusion: Appeal allowed; assessment for AY 2014-15 is to be recomputed by the AO applying the Resale Price Method for the international transaction of import and resale of finished goods.

Computation of capital gains under section 50C of the Income-tax Act - Reference to the Deputy/Valuation Officer under section 50C(2) - Treatment of receipts under cash system of accounting vis-a -vis TDS reflected in Form 26AS - Obligation of Assessing Officer to make enquiries before making additions

Computation of capital gains under section 50C of the Income-tax Act - Reference to the Deputy/Valuation Officer under section 50C(2) - Capital gains computation by adopting stamp duty valuation under section 50C where the assessee objected to stamp valuation - HELD THAT: - The assessee sold a property and declared a share of sale consideration which was lower than the stamp authority value; the assessee had, however, objected to adoption of the stamp duty value before the Assessing Officer by stating factual reasons (lack of approach road, remoteness). The Tribunal found that such a response amounted to an objection under section 50C(2), which obliged the Assessing Officer to refer the matter to the DVO for determination. As the Assessing Officer did not comply with the mandatory procedure in section 50C(2), the Tribunal held that the question of correct valuation requires fresh examination by the Assessing Officer after following the statutory referral procedure and affording the assessee an opportunity of being heard. [Paras 4]

Order of the CIT(A) on this issue set aside and the matter restored to the Assessing Officer for fresh examination in terms of section 50C(2) of the Act.

Treatment of receipts under cash system of accounting vis-a -vis TDS reflected in Form 26AS - Obligation of Assessing Officer to make enquiries before making additions - Addition made on account of difference between gross receipts shown in Form 26AS and receipts declared by the assessee following cash system of accounting - HELD THAT: - The assessee, following cash system of accounting, declared amounts actually received and contended that amounts appearing in Form 26AS resulted from clients following mercantile system who may have deducted TDS but had not paid those amounts to the assessee. The Tribunal noted that the Assessing Officer rejected the explanation without making enquiries from the deductors or other relevant inquiries. In view of the absence of necessary enquiries, the Tribunal concluded that the addition cannot be sustained without further investigation and that the Assessing Officer should examine the matter afresh and make appropriate enquiries before drawing any conclusion. [Paras 6]

Order of the CIT(A) on this issue set aside and the matter restored to the Assessing Officer for fresh examination after making necessary enquiries.

Final Conclusion: Both issues are remanded to the Assessing Officer for fresh consideration in accordance with law after affording the assessee an opportunity of being heard; appeal treated as allowed for statistical purposes.

Rectification proceedings under section 154 - Classification of assets for depreciation - Principles of natural justice - Applicability of Rule 8D(2)(iii) for section 14A disallowance - Remand for fresh examination and opportunity to be heard

Rectification proceedings under section 154 - Classification of assets for depreciation - Principles of natural justice - Remand for fresh examination and opportunity to be heard - Rectification order disallowing depreciation (treating certain items as not qualifying for 60% rate) was set aside and remitted to the Assessing Officer for fresh examination after affording the assessee opportunity to furnish breakup details. - HELD THAT: - The Tribunal found that the Assessing Officer passed the rectification order without providing adequate opportunity to the assessee to explain and to furnish the breakup of items shown under the heads "Plant and Machinery - General" and "Plant and Machinery - Office". Given the assessee's contention that many items (network switches, routers, peripherals etc.) could be classified as computers attracting higher depreciation and its offer to supply detailed breakups if heard, the issue could not be finally adjudicated in rectification proceedings. Consequently, the Tribunal set aside the appellate order on this point and restored the matter to the file of the Assessing Officer for fresh consideration after giving the assessee a proper opportunity of being heard. [Paras 10]

Order of Ld. CIT(A) on depreciation issue set aside; matter remitted to AO for fresh examination and hearing.

Applicability of Rule 8D(2)(iii) for section 14A disallowance - Rectification proceedings under section 154 - Remand for fresh examination and opportunity to be heard - Enhancement of disallowance under section 14A by application of Rule 8D(2)(iii) in the rectification order was set aside and remitted to the Assessing Officer for fresh examination after affording the assessee an opportunity to explain. - HELD THAT: - The Tribunal accepted the contention that the Assessing Officer applied Rule 8D(2)(iii) to increase the section 14A disallowance without affording adequate opportunity to the assessee to explain its position (noting the assessee's submission that investments were only in mutual funds and that no expenditure was required). In view of the lack of opportunity and the factual aspects which the assessee sought to place before the AO, the Tribunal directed restoration of the issue to the AO for fresh consideration and hearing, setting aside the appellate order on this point. [Paras 11, 12]

Order of Ld. CIT(A) on the section 14A/Rule 8D issue set aside; matter remitted to AO for fresh examination and opportunity to be heard.

Final Conclusion: Both contested additions in the rectification order were not finally adjudicated; the matters are remitted to the Assessing Officer for fresh examination after affording the assessee appropriate opportunity of hearing. The appeal and cross objection are treated as allowed for statistical purposes and the assessee's cross objection has become infructuous.

Penalty under section 271(1)(c) of the Income-tax Act - Deletion of quantum additions by appellate authority negating penalty - Interplay between assessment additions and penalty proceedings - Precedential weight of appellate deletion in penalty proceedings

Penalty under section 271(1)(c) of the Income-tax Act - Deletion of quantum additions by appellate authority negating penalty - Precedential weight of appellate deletion in penalty proceedings - Whether penalties imposed under section 271(1)(c) can be sustained where the quantum additions on which they were based have been deleted by the appellate tribunal. - HELD THAT: - The appellate tribunal upheld the order of the Commissioner (Appeals) deleting the penalties because the substantive additions made by the Assessing Officer-namely revaluation of closing stock, gross profits made outside the books and excess stock found on search-were subsequently deleted by the ITAT in the quantum appeals. The CIT(A) relied on decisions of High Courts which hold that when quantum additions are set aside by the appellate authority the penalty predicated on those additions does not survive. The Revenue's contention that the issues had not attained finality because appeals against the ITAT orders were pending before the High Court was noted, but no contrary judicial authority was produced to rebut the principle relied upon by the CIT(A). In these circumstances the Tribunal found no infirmity in the CIT(A)'s conclusion that penalties under section 271(1)(c) could not be sustained once the underlying additions were deleted by the ITAT, and declined to entertain other grounds since penalty was held not sustainable on that primary account. [Paras 4, 7, 8]

Penalty orders under section 271(1)(c) for assessment years 2005-06 to 2011-12 are not sustainable and were correctly deleted by the CIT(A).

Final Conclusion: All appeals filed by the Revenue are dismissed; the deletion of penalties under section 271(1)(c) for assessment years 2005-06 to 2011-12 is upheld by the Tribunal.

Non-deduction of tax at source and disallowance under section 40(a)(ia) - Applicability of section 172 vis-a -vis sections 194C and 195 - CBDT Circular No. 723 (1995) on taxation of shipping payments - Ad hoc disallowance of expenses without pointing out specific discrepancies

Non-deduction of tax at source and disallowance under section 40(a)(ia) - Applicability of section 172 vis-a -vis sections 194C and 195 - CBDT Circular No. 723 (1995) on taxation of shipping payments - Deletion of disallowance of Rs. 6,42,437 made under section 40(a)(ia) in respect of ocean freight paid to non-resident shipping companies. - HELD THAT: - The Tribunal held that payments towards ocean freight to non-resident ship-owners/charterers fall within the special regime of section 172 and that the provisions of sections 194C/195 do not apply insofar as section 172 provides a self-contained code for levy and recovery. Reliance was placed on CBDT Circular No. 723 (dated 19-9-1995) which explains that where section 172 applies (including payments made to agents who step into shoes of non-resident principals), sections 194C and 195 are not applicable and, consequently, disallowance under section 40(a)(ia) for non-deduction of TDS was not warranted. On that basis the Tribunal deleted the addition. [Paras 5]

Addition of Rs. 6,42,437 disallowed by AO/CIT(A) deleted.

Difference in ledger balances carried forward - Reconciliation of long-standing accounting discrepancies - Deletion of addition of Rs. 50,250 being the difference in the opening balance of account of M/s. Eskay Sales Corporation. - HELD THAT: - The Tribunal accepted the assessee's contention that the discrepancy related to earlier years, was being carried forward, and required reconciliation/adjustment rather than being treated as income of the year under consideration. In view of these facts the addition sustained by the CIT(A) was deleted. [Paras 6]

Addition of Rs. 50,250 deleted.

Ad hoc disallowance of expenses without pointing out specific discrepancies - Requirement to point out verifiable discrepancies before making disallowance - Deletion of ad hoc 10% disallowance from travelling and miscellaneous expenses. - HELD THAT: - The Tribunal found that the Assessing Officer made an ad hoc 10% disallowance merely on the ground that certain debit vouchers were 'self-made' and not open to full verification, without pointing out any specific discrepancies or rejecting the tax-audited books. The Tribunal followed authority holding that where satisfactory evidence is adduced and no specific discrepancy is shown, an Assessing Officer cannot arbitrarily make ad hoc disallowances. Accordingly, the disallowance was deleted. [Paras 9]

Ad hoc disallowance of 10% of travelling and miscellaneous expenses deleted.

Final Conclusion: The assessee's appeal is allowed: the disallowance under section 40(a)(ia) in respect of ocean freight is deleted relying on CBDT Circular No. 723 and the special operation of section 172; the addition for unexplained ledger difference is deleted as being carried forward from earlier years; and the ad hoc 10% disallowance of travelling and miscellaneous expenses is deleted for want of specific discrepancies in the tax-audited books.

Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - validity of show cause notice under section 274 read with section 271(1)(c) - principles of natural justice in quasi criminal penalty proceedings - requirement of specificity in penalty notice - pronouncement of orders beyond 90 days - exclusion of lockdown period/extraordinary circumstances

Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - validity of show cause notice under section 274 read with section 271(1)(c) - requirement of specificity in penalty notice - principles of natural justice in quasi criminal penalty proceedings - Penalty imposed under section 271(1)(c) was set aside because the show cause notice did not specify the limb of section 271(1)(c) on which penalty was proposed (concealment of income or furnishing inaccurate particulars). - HELD THAT: - The Tribunal examined the show cause notice issued under section 274 read with section 271(1)(c) and found that it simultaneously recited both limbs (concealment and furnishing inaccurate particulars) without specifying which limb was the basis for initiating penalty proceedings. Such non specificity demonstrates non application of mind by the Assessing Officer and deprives the assessee of the ability to prepare an effective defence. Relying on settled authorities, including the principle that penalty proceedings are quasi criminal and must comply with natural justice, the Tribunal held that a notice which does not single out the charge under section 271(1)(c) is void ab initio and any penalty imposed thereon is illegal and liable to be deleted. The Tribunal therefore directed deletion of the penalty confirmed by the CIT(A). [Paras 5, 7]

Penalty deleted as the show cause notice failed to specify the limb of section 271(1)(c) and was therefore void.

Pronouncement of orders beyond 90 days - exclusion of lockdown period/extraordinary circumstances - rule 34(5) of the Income Tax Appellate Tribunal Rules - "ordinarily" 90 day period - Pronouncement of the order beyond 90 days from conclusion of hearing was justified by excluding the period of lockdown as an extraordinary circumstance; the Tribunal followed a co ordinate bench decision permitting exclusion of lockdown period when computing the 90 day limit. - HELD THAT: - The Tribunal recorded that the order was pronounced after more than 90 days from conclusion of hearing and addressed the procedural concern by following a co ordinate bench precedent which construed rule 34(5) as permitting exclusion of the lockdown period when computing the 90 day norm. The Tribunal noted the exceptional disruption caused by the COVID 19 lockdown, relevant orders of higher courts and the pragmatic purpose of the rule, and held that the lockdown period is to be excluded for the purpose of pronouncement limits. Relying on that reasoning, the Tribunal proceeded to pronounce the order beyond 90 days and treated the delay as justified by extraordinary circumstances. [Paras 8, 10]

Delay in pronouncement beyond 90 days was excused by excluding the lockdown period; order pronounced accordingly.

Final Conclusion: The appeal is allowed: the penalty under section 271(1)(c) confirmed by the CIT(A) is deleted because the show cause notice under section 274 read with section 271(1)(c) failed to specify the limb on which penalty was based; the Tribunal pronounced the order beyond 90 days after excluding the lockdown period as an extraordinary circumstance.

Natural Justice - Adjournment for reasonable cause - Vakalatnama requirement - Authorized representative - Ex parte disposal - Recall and restoration of order

Natural Justice - Adjournment for reasonable cause - Authorized representative - Ex parte disposal - Recall and restoration of order - Impugned ex parte disposal violated the principles of natural justice and the appropriate remedy was to recall the Tribunal's order and restore the appeals for fresh hearing. - HELD THAT: - The Tribunal had refused an adjournment on the ground that no Vakalatnama was filed in the name of the advocate who sought the adjournment and proceeded to dispose of the appeals after hearing the Departmental Representative. The assessee filed a verified Misc. Application showing that the advocate was duly authorized by the company and that adjournment was sought for a reasonable cause (ill-health and inability to be briefed). The non-filing of the Vakalatnama was a technical omission which caused confusion but did not dispel the assessee's entitlement to be effectively heard. On these facts the Bench found a breach of the audi alteram partem principle and that the appeals were not effectively heard, warranting recall of the impugned order and restoration of the appeals for fresh listing and hearing. [Paras 4]

Impugned order recalled; the appeals are restored and the Registry directed to list them for fresh hearing.

Final Conclusion: Miscellaneous applications are allowed; the Tribunal's order is recalled for breach of natural justice and the appeals for AYs 2009-10 to 2011-12 are restored for fresh hearing.

Penalty notice specifying grounds - Section 271(1)(c) penalty - concealing particulars or furnishing inaccurate particulars - Requirement of specific grounds for penalty proceedings - Vagueness and non-application of mind in penalty notice - Distinction between assessment and penalty proceedings - Penalty is discretionary

Penalty notice specifying grounds - Section 271(1)(c) penalty - concealing particulars or furnishing inaccurate particulars - Requirement of specific grounds for penalty proceedings - Vagueness and non-application of mind in penalty notice - Distinction between assessment and penalty proceedings - Penalty is discretionary - Validity of penalty proceedings where the penalty notice used the disjunctive 'or' between the two alternatives under section 271(1)(c) despite assessment-record findings referring to both charges - HELD THAT: - The Tribunal correctly held that clause (c) of section 271(1) deals with two distinct offences - concealing particulars of income and furnishing inaccurate particulars - and that initiation and imposition of penalty must be on the same specific ground(s) so as to give the assessee an opportunity to meet those grounds. Where the assessing officer considers that both offences are attracted, the penalty notice must clearly proceed on both grounds (the adjunctive 'and') rather than proceed on one ground while ultimately imposing penalty for the other; use of the disjunctive 'or' in that circumstance renders the notice vague and exposes a mechanical, non-application-of-mind approach. Findings in the assessment order cannot cure a defective penalty notice because assessment proceedings are distinct from penalty proceedings and imposition of penalty is discretionary; subsequent discovery of facts cannot validate a penalty order that was not sustainable when passed. Applying these principles and the precedent relied upon, the Tribunal's cancellation of the penalty was not in error. [Paras 4]

Miscellaneous application by the revenue dismissed; the Tribunal's cancellation of the penalty upheld as the penalty notice was vague for using 'or' instead of specifying both grounds where both were relied upon.

Final Conclusion: The revenue's Miscellaneous Application is dismissed; the order cancelling penalty under section 271(1)(c) is maintained because the penalty notice was vague and failed to specify the particular ground(s) on which penalty was to be imposed, and assessment findings cannot cure that defect.

Admission of additional evidence under Rule 46A of the Income tax Rules, 1962 - Refusal by Assessing Officer to admit evidence and its effect on appellate admission - Audi alteram partem and requirement of giving Assessing Officer reasonable opportunity to examine additional evidence - Power of appellate authority to remit matter for fresh consideration and decide on merits after admission of evidence

Admission of additional evidence under Rule 46A of the Income tax Rules, 1962 - Refusal by Assessing Officer to admit evidence - Admissibility of ledger accounts and creditor confirmations filed before the CIT(A) as additional evidence under Rule 46A - HELD THAT: - The Tribunal examined Rule 46A(1) and the factual matrix that the assessee could produce confirmed ledger copies only in the last week of December 2017 and that the Assessing Officer allegedly refused to accept them on account of impending limitation for completion of assessment. The CIT(A) had rejected admission on the ground that the assessee had not placed the documents in the AO's DAK and that multiple opportunities had been earlier afforded by the AO. The Tribunal held that a mere failure to place documents in the AO's docket does not justify denial of substantial justice where the AO had refused to admit the material; accordingly, the circumstance in which the AO has refused to admit evidence which ought to have been admitted falls within Rule 46A(1)(a). Applying these principles, the Tribunal set aside the CIT(A)'s conclusion and directed that the additional evidence filed before the CIT(A) be admitted and considered after following the procedural safeguards required by the Rule, including giving the AO a reasonable opportunity to examine the evidence and to be heard. [Paras 8, 9]

Finding of CIT(A) rejecting admission of additional evidence is set aside; CIT(A) is directed to admit the ledger accounts and confirmations as additional evidence and decide the appeal on merits after providing the Assessing Officer a reasonable opportunity.

Power of appellate authority to remit for fresh consideration under section 250(4) - Merits of addition based on unconfirmed sundry creditors - Disposition of the addition based on unexplained sundry creditors after admission of evidence - HELD THAT: - Because the Tribunal has directed admission of the additional evidence, it did not decide the correctness of the addition on merits. The Tribunal observed that the question whether inquiries conducted by the AO established genuineness of creditors became academic in view of its direction to admit and re decide the matter. Consequently, the matter was restored to the CIT(A) to examine the admitted evidence, allow necessary enquiry, and decide the addition on merits afresh. [Paras 9]

Merits of the addition are not adjudicated by the Tribunal; matter is remitted to the CIT(A) for fresh adjudication after admission of evidence and after giving both parties opportunity to be heard.

Final Conclusion: The appeal is allowed for statistical purposes: the CIT(A)'s refusal to admit the additional ledger accounts and confirmations is set aside and the matter is remitted to the CIT(A) to admit the evidence, afford the Assessing Officer reasonable opportunity, and decide the disputed addition on merits afresh for Assessment Year 2015-16.

Ad-hoc disallowance of business expenses - presumption and surmise cannot substitute evidential contradiction - travel expenses incurred in ordinary course of international trading business - disallowance under section 14A read with Rule 8D - no disallowance under section 14A where no exempt income is earned

Ad-hoc disallowance of business expenses - travel expenses incurred in ordinary course of international trading business - presumption and surmise cannot substitute evidential contradiction - Disallowance of part of travelling expenses debited by the assessee - HELD THAT: - The Tribunal examined the details of foreign and domestic travel submitted by the assessee (names, designations, country visited, period of visit, TA/DA, air fare and miscellaneous expenses) and accepted that foreign travel formed part of the assessee's ordinary trading operations given its international business and status as a public sector undertaking under the Ministry of Commerce. The Court held that once the assessee provided specific particulars for each employee's travel, the Assessing Officer could not sustain an ad-hoc disallowance without pointing to any specific discrepancy. The CIT(A)'s reliance on conjecture that presence was unnecessary or that officials overstayed was held to be based on presumption and surmise and therefore unsustainable; accordingly the ad-hoc disallowance was deleted. [Paras 8]

The addition towards travelling expenses is deleted and the assessee's appeal on this point is allowed.

Disallowance under section 14A read with Rule 8D - no disallowance under section 14A where no exempt income is earned - Validity of disallowance under section 14A r.w. Rule 8D in absence of any exempt income - HELD THAT: - The Tribunal noted that both parties agreed there was no exempt income in the relevant year. Relying on the settled proposition in the jurisdiction that where no exempt income has been earned, disallowance under section 14A cannot be sustained, the Tribunal held that the Assessing Officer's mechanical invocation of Rule 8D in the absence of exempt income was incorrect. The CIT(A)'s earlier order in favour of the assessee was affirmed on this legal basis. [Paras 11]

The disallowance made under section 14A read with Rule 8D is deleted and the Revenue's appeal is dismissed.

Final Conclusion: The assessee's appeal is allowed in respect of travelling expenses; the Revenue's appeal challenging deletion of section 14A disallowance is dismissed; overall, the additions under challenge are deleted.

Administrative decision-making - duty to consider designated authority's recommendations - opportunity of hearing - judicial direction to decide within fixed time - impleadment of intervenors

Duty to consider designated authority's recommendations - administrative decision-making - judicial direction to decide within fixed time - opportunity of hearing - Union of India to consider the recommendations of the designated authority and take an appropriate decision in accordance with law within eight weeks - HELD THAT: - The Court observed that the designated authority (DGTR) had completed an investigation, recorded conclusions that the product was exported at dumped prices and that the domestic industry suffered material injury, and had recommended imposition of definitive anti-dumping duty. The writ applicants sought a direction that the Central Government issue a notification imposing anti-dumping duty and, in the alternative, that they be afforded an opportunity of hearing before any final decision. The Court declined to issue a directive imposing duty itself but required the Union of India to "look into the recommendations made by the designated authority and take an appropriate decision in accordance with law" within eight weeks from receipt of the writ. The direction preserves the administrative process and mandates timely compliance with legal standards, including any requirements to afford interested parties an opportunity of hearing as mandated by law before taking a final decision. [Paras 13]

The Union of India shall consider the designated authority's recommendations and decide in accordance with law within eight weeks.

Impleadment of intervenors - Applicants in the connected Civil Application were not impleaded as party respondents in the main writ petition at this stage - HELD THAT: - The Court noted the application by the Federation of Gujarat Weavers Welfare Association and others seeking impleadment to ensure the Ministry of Textiles' recommendations were considered by the Union. The Court held that no useful purpose would be served by impleading those applicants at the present stage because the main matter was to be disposed of by directing the Union to consider the designated authority's recommendations and take a decision within the stipulated time-frame. Accordingly, the Civil Application for impleadment was not allowed to be treated as part of the main matter. [Paras 11, 12, 15]

The connected Civil Application for impleadment is declined at this stage and stands disposed of.

Final Conclusion: Writ petition disposed with a direction to the Union of India to consider the DGTR's recommendations and take an appropriate decision in accordance with law within eight weeks; the connected application for impleadment is declined and disposed of.

Insider trading - tipping - unpublished price sensitive information - connected person - persons deemed to be connected - circumstantial evidence - preponderance of probability - Model Code of Conduct for Prevention of Insider Trading

Insider trading - tipping - unpublished price sensitive information - connected person - persons deemed to be connected - circumstantial evidence - Whether the appellant was guilty of insider trading by imparting unpublished price sensitive information to related persons (Tippees) and whether such guilt can be inferred from circumstantial evidence and the proximity of relationship. - HELD THAT: - The Tribunal found that the appellant did not dispute being a connected person or an insider with access to unpublished price sensitive information during the UPSI period, nor did he dispute close relationship with the Tippees (paras. 13, 18). The adjudicatory conclusion was reached by applying established principles that, in the absence of direct evidence, an inference of wrongdoing may be drawn from the totality of immediate and proximate facts and circumstances on a preponderance of probability. The Tribunal identified foundational facts: the appellant's role and access to UPSI; close relationship with the Tippees; attempts to conceal that relationship and dilute his role during investigation; the Tippees' concentrated and time-correlated trading in the target scrip during the UPSI period; abnormal investment behaviour (including borrowing to fund purchases); purchase of large parcels followed by immediate sale after the open offer announcement; and settlement of the Tippees' own proceedings (para. 21). Applying the inferential test endorsed in cited precedents, the Tribunal held that these cumulative circumstances reasonably and irresistibly supported the conclusion that the appellant passed on the price sensitive information to the Tippees, and therefore violated Regulation 3(ii) read with the relevant provisions of the Model Code of Conduct (paras. 19-23). The Tribunal further explained that proximity of relationship alone would not suffice in all cases, but in the present factual matrix the relationship combined with the other foundational facts justified the inferential finding (paras. 14, 22-23). [Paras 18, 19, 21, 22, 23]

The finding of the Adjudicating Officer that the appellant was guilty of insider trading by tipping the Tippees is upheld; the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the appeal, upholding the AO's finding that on a preponderance of probability and from circumstantial evidence the appellant imparted unpublished price sensitive information to related persons and was guilty of insider trading; no penalty had been imposed by the AO and the appeal is dismissed with no order as to costs.

Scope of judicial review under Section 30(2) of the I&B Code - grounds of appeal under Section 61(3) of the I&B Code - commercial wisdom of the Committee of Creditors - power of the Adjudicating Authority to direct the Committee of Creditors to reconsider an approved resolution plan - effect of filing a resolution plan before the Adjudicating Authority on the CIRP period

Power of the Adjudicating Authority to direct the Committee of Creditors to reconsider an approved resolution plan - commercial wisdom of the Committee of Creditors - scope of judicial review under Section 30(2) of the I&B Code - Whether the Adjudicating Authority can suo motu direct the Committee of Creditors to consider a resolution plan submitted after the CoC has approved another plan. - HELD THAT: - The Tribunal applied the principles laid down by the Hon'ble Supreme Court in Essar Steel and K. Sashidhar, holding that the Adjudicating Authority's scrutiny of an approved resolution plan is confined to the matters specified in Section 30(2) and cannot impinge upon the commercial decision of the CoC. The Adjudicating Authority therefore has no jurisdiction to direct the CoC/RP to re-open or reconsider an already approved resolution plan merely because a later plan offers higher value; such a direction would amount to substituting the court's view for the CoC's commercial wisdom, which the Code does not permit. [Paras 7, 17]

Adjudicating Authority rightly declined to direct the CoC to reconsider the approved resolution plan; it was within jurisdiction to reject the application of the second resolution applicant.

Grounds of appeal under Section 61(3) of the I&B Code - maintainability of appeal against approval of a resolution plan - Whether the appeal by the second resolution applicant (A-1) and by the erstwhile promoter (A-2) is maintainable when no grounds under Section 61(3) are pleaded. - HELD THAT: - The Tribunal observed that appeals against an order approving a resolution plan are maintainable only on the statutory grounds enumerated in Section 61(3). The second resolution applicant and the erstwhile promoter failed to specify or establish any of those grounds in the memo of appeal or during arguments. Relying on the limited scope of review articulated by the Supreme Court, the Tribunal held that absent invocation of Section 61(3) grounds the appeals cannot be entertained. [Paras 20, 21, 22]

Appeals by A-1 and A-2 are not maintainable for lack of grounds under Section 61(3); accordingly they fail.

Effect of filing resolution plan before the Adjudicating Authority on the CIRP period - Whether the filing of a resolution plan before the Adjudicating Authority stops or suspends the running of the CIRP time-limit. - HELD THAT: - The Tribunal examined the Code and found no provision that filing a resolution plan with the Adjudicating Authority suspends or stops the statutory CIRP timeline. The contention that submission of a plan to the Authority ipso facto halts the CIRP period was rejected for lack of statutory basis. [Paras 23, 24, 25]

Filing the resolution plan before the Adjudicating Authority does not stop the CIRP period; the contention to the contrary is without merit.

Final Conclusion: In view of the limited scope of judicial review under Section 30(2) and the restricted grounds of appeal under Section 61(3) as expounded by the Supreme Court, the Tribunal found no infirmity in the Adjudicating Authority's order; the impugned order approving the resolution plan and rejecting the applications is upheld and the appeals are dismissed, with no order as to costs.

Voluntary liquidation of corporate persons - Applicability of sections 35 to 53 and Chapter VII to voluntary liquidation proceedings - Admission and rejection of claims by the Liquidator - Appeal against Liquidator's decision under section 42 - Jurisdiction and maintainability of appeals before the Adjudicating Authority and the Appellate Tribunal - Insolvency and Bankruptcy Code overriding other laws

Voluntary liquidation of corporate persons - Applicability of sections 35 to 53 and Chapter VII to voluntary liquidation proceedings - Section 59 of the I&B Code applies to voluntary liquidation proceedings initiated by a company and mandates that, with necessary modifications, the provisions of sections 35 to 53 of Chapter III and Chapter VII apply to such proceedings. - HELD THAT: - The Court held that Section 59, which was notified and enforced with effect from 1 April 2017, expressly brings voluntary liquidation of corporate persons within Chapter V of Part II and stipulates that voluntary liquidation proceedings shall meet conditions and procedural requirements specified by the Board. Sub section (6) of Section 59 makes the provisions of sections 35 to 53 of Chapter III and Chapter VII applicable to voluntary liquidation proceedings with necessary modifications. Consequently, voluntary liquidation processes initiated after the notification of Section 59 are governed by those provisions and the procedural framework they create. The Court rejected the contention that the voluntary liquidation of the company in question was outside the scope of Section 59, noting that the process initiated was not the subject of any challenge and that the Liquidator acted after Section 59 had been notified and enforced (paras. 5-7, 9). [Paras 5, 6, 7, 9]

Section 59 applies to the voluntary liquidation proceedings in question and brings sections 35 to 53 and Chapter VII into play for such proceedings.

Admission and rejection of claims by the Liquidator - Appeal against Liquidator's decision under section 42 - Decision of the Liquidator to admit or reject claims is governed by the I&B Code and a rejection can be appealed under Section 42 to the Adjudicating Authority. - HELD THAT: - The Court observed that the application of sections 35 to 53 to voluntary liquidation places admission or rejection of claims within the domain of the Liquidator and provides a statutory right to appeal against the Liquidator's decision. The Adjudicating Authority therefore has jurisdiction to entertain appeals under Section 42 challenging the Liquidator's rejection of a claim. On the facts, the Adjudicating Authority correctly found the respondent's explanation for non submission plausible and concluded that the Liquidator had improperly rejected the claim, directing admission as per the filed Form B (paras. 7, 10). [Paras 7, 10]

The Liquidator's rejection of the respondent's claim was liable to be set aside and is appealable to the Adjudicating Authority under Section 42.

Jurisdiction and maintainability of appeals before the Adjudicating Authority and the Appellate Tribunal - Insolvency and Bankruptcy Code overriding other laws - Appeals under Section 42 and consequent appeals to the Appellate Tribunal are maintainable under Part II of the I&B Code and the Code's provisions override other laws where applicable. - HELD THAT: - The Court noted that Section 61 allows any person aggrieved by an order under Part II to appeal to the Appellate Tribunal. Since Sections 40 and 42 (governing admission/rejection of claims and appeals from Liquidator's decisions) and Section 59 (governing voluntary liquidation) are contained in Part II, appeals under Section 42 to the Adjudicating Authority and further appeals to the Appellate Tribunal fall within the statutory appellate scheme and are maintainable. The Court further relied on Section 2 (application of the I&B Code to companies) and Section 238 (the Code's overriding effect) to reject arguments premised on other laws or transitional orders that would oust the Code's operation in the present voluntary liquidation (paras. 9-11). [Paras 9, 11]

The appeal under Section 42 to the Adjudicating Authority and the subsequent appeal to the Appellate Tribunal are maintainable and the Code's provisions prevail over inconsistent provisions of other laws.

Final Conclusion: The Adjudicating Authority properly exercised jurisdiction in setting aside the Liquidator's rejection of the respondent's claim; the appeals under Section 42 and Section 61 are maintainable under the I&B Code. The present appeal is dismissed as devoid of merit. No costs.

Eligibility under SVLDRS Scheme - determination of tax liability - preliminary finding versus final quantification - refusal to accept application under a settlement scheme - issuance of recovery notices during pendency of investigation

Eligibility under SVLDRS Scheme - determination of tax liability - preliminary finding versus final quantification - Whether the letter dated 24.09.2019 constituted a final determination of service tax liability so as to preclude acceptance of the petitioner's application under the SVLDRS Scheme. - HELD THAT: - The Court examined the letter relied upon by the petitioner, which recorded that during investigation it was found that the petitioner had defaulted in payment of service tax for the period 2015-16 to June, 2017. The Court held that the statement in the letter amounted to a preliminary figure emerging from the investigation and did not amount to final quantification or determination of liability. Because the SVLDRS Scheme required the due amount to be determined, the mere communication in the course of investigation could not be treated as final determination. Consequently, the respondents were justified in treating the petitioner's application as not acceptable where no final quantification had been made. [Paras 3, 5, 6]

The letter dated 24.09.2019 did not amount to final determination of liability; it was at best a preliminary finding, and the respondents rightly refused to accept the petitioner's SVLDRS application.

Issuance of recovery notices during pendency of investigation - refusal to accept application under a settlement scheme - Whether the respondents erred in issuing recovery notices and refusing the SVLDRS application while investigation was pending and final liability was undetermined. - HELD THAT: - The Court noted the factual position that investigation by the Anti Evasion wing was ongoing, that the petitioner had made partial payment and requested instalments, and that no final determination of the due amount had been made. In these circumstances, the respondents' action in refusing to accept the application under the Scheme and pursuing recovery notices could not be faulted because the statutory requirement of a determined due amount for acceptance under the Scheme was unmet. [Paras 1, 2, 6]

No fault in the respondents' refusal to accept the petitioner's application or in issuing recovery notices while the liability remained undetermined during investigation.

Final Conclusion: The petition is dismissed: the communication relied upon by the petitioner was a preliminary investigative figure and did not constitute final quantification of service tax liability; accordingly the respondents were justified in refusing to accept the petitioner's SVLDRS application and pursuing recovery.

Exemption for construction forming part of road under Section 65(105)(zzzza) - works contract service - adjunct and ancillary structures as part of principal exempted infrastructure - turnkey/BOT concessionaire agreements and scope of work - extended period of limitation invoked on ground of suppression versus change of opinion

Exemption for construction forming part of road under Section 65(105)(zzzza) - adjunct and ancillary structures as part of principal exempted infrastructure - Construction of toll plaza, cattle and pedestrian crossings, parking bays, rest rooms and similar ancillary works are part of the road and exempt from service tax under Section 65(105)(zzzza). - HELD THAT: - The Tribunal held that structures such as toll plazas, cattle and pedestrian crossings, parking bays for buses/trucks, rest rooms for staff and the public, and similar allied works are integral to and meant for exclusive use by highway users and staff; therefore they form part of the road. The decision notes consistent Tribunal precedents treating dividers, greenery and crash barriers as components of the road and not exigible to service tax. Reference was made to earlier decisions treating ancillary constructions within the principal exempted infrastructure as non-taxable. Applying that reasoning, the constructions in issue are not separate commercial works attracting classification as works contract service but are encompassed by the exemption for construction forming part of road under Section 65(105)(zzzza). Consequently the appellant is entitled to the claimed exemption and related reliefs.

Allowed - the constructions in question form part of the road and are exempt under Section 65(105)(zzzza).

Extended period of limitation invoked on ground of suppression versus change of opinion - The show-cause notice invoking the extended period of limitation is invalid as it was issued on the basis of a mere change of opinion by the Revenue and not on suppression of facts warranting extended limitation. - HELD THAT: - The Tribunal observed that the appellant was a registered assesse who filed returns and maintained books of account. The extended-period invocation in the show-cause notice arose from an audit and amounted to a change of opinion by the department. Absent material establishing suppression of facts or fraud, the extended period could not be validly invoked. On this basis the Tribunal held the notice to be bad for invoking the extended period and set aside the demand insofar as it relied on extended limitation.

Allowed - extended period invocation is invalid as based on change of opinion; the show-cause notice is bad on that ground.

Final Conclusion: The appeal is allowed: the constructions ancillary to the highway project are held to be part of the road and exempt under Section 65(105)(zzzza), and the show-cause notice based on invocation of the extended period of limitation is set aside as founded on a mere change of opinion; consequential relief to the appellant follows.

Exemption of construction of ancillary structures as part of road - reversal under Rule 6(3) of Cenvat Credit Rules - allowability of input service credit under Rule 2(l) of CCR - penalty under Section 78 and Section 77(2) of the Finance Act - classification as works contract service versus construction service

Exemption of construction of ancillary structures as part of road - Construction of toll plaza, administrative building, rest rooms and similar ancillary works are part of the road and exempt from service tax - HELD THAT: - The Tribunal found that the ancillary structures in question had no separate existence and were constructed solely for the purpose of the road project, under a DBFOT contract and corresponding sub-contract. The works were integral to the scope of the single turnkey/ EPC contract and intended for maintenance, safety and toll collection on the highway, hence they cannot be treated as separate taxable commercial buildings. Reliance on the contract scope and the nature and purpose of the structures led to the conclusion that the construction falls within the exemption for construction of road and related civil works. The demand raised on this ground was set aside. [Paras 7]

Demand for service tax on construction of toll plaza, administrative buildings, rest rooms and similar ancillary works set aside as exempt.

Reversal under Rule 6(3) of Cenvat Credit Rules - Amount attributable under Rule 6(3) already reversed prior to show cause notice was accepted and appropriated - HELD THAT: - The Tribunal noted that the appellant had reversed the proportionate Cenvat credit amount as per Rule 6(3A)/Option 2 prior to the issue of the show cause notice and had paid interest. Since the reversal was made before adjudication, the amount was not in dispute and was appropriated in the adjudication order. Consequently the disallowance/demand on this ground did not survive. [Paras 8]

Disallowance under Rule 6(3) not sustained as the appellant had already reversed and the amount was appropriated.

Double availing of Cenvat credit - Allegation of double availed credit was remedied by reversal prior to show cause notice and not pressed - HELD THAT: - The record showed that the appellant had reversed the amount alleged to have been taken twice before issuance of the show cause notice, and the reversed amount was appropriated in adjudication. The appellant did not dispute the reversal. Accordingly, the issue of double availed credit did not sustain as a demand. [Paras 9]

Demand on account of alleged double credit disallowed/appropriated and not sustained.

Allowability of input service credit under Rule 2(l) of CCR - Cenvat credit on various input services including banking and financial services, credit rating and similar services held allowable - HELD THAT: - The Tribunal examined the nature of the impugned input services and found they were used in providing the appellant's output services. Applying the definition of input service under Rule 2(l) of the CCR, and noting there was no specific exclusion applicable to the services in dispute, the Tribunal held such services (including banking and financial charges, credit rating, and similar services) were eligible for credit. The Tribunal rejected the Commissioner's conclusion that these services were not used for output services, observing that fund-raising and related financial services were essential to carry out the appellant's business and that benefits flowing from related companies did not negate eligibility. The Tribunal also noted partial reversals already made and allowed the remaining disputed credit. [Paras 10]

Disallowance of Cenvat credit on the specified input services set aside; credit held allowable.

Penalty under Section 78 and Section 77(2) of the Finance Act - Penalties under Section 78 and Section 77(2) (and penalty under Rule 15(3) of CCR) set aside for lack of suppression, fraud or intent to evade - HELD THAT: - The Tribunal found no material to establish suppression, fraud or intention to evade tax. The appellant maintained proper books, regularly filed ST-3 returns, admitted and reversed substantial amounts during audit, and paid interest where applicable. The demands arose from change of opinion during audit rather than concealment. In these circumstances the Tribunal held that extended period of limitation was not invocable and penalties under the cited provisions were not attracted. [Paras 11, 12]

Penalties under Section 78, Section 77(2) and Rule 15(3) of CCR set aside.

Classification as works contract service versus construction service - Transactions involving works contract with supply of materials are classifiable as works contract service and not as construction service - HELD THAT: - On examination of the contractual and factual matrix it was found that the appellant executed works contracts along with supply of materials. Under the facts, the Tribunal held that such transactions fall within the definition of works contract service rather than being pure construction service. Consequent penalty imposed under Rule 15(3) of CCR was set aside in view of this classification and the factual findings. [Paras 13]

Services classified as works contract service; related penalty under Rule 15(3) set aside.

Final Conclusion: Both appeals are allowed in part: service tax demands relating to ancillary structures on the road are set aside as exempt; reversals and appropriations already made are accepted; disallowance of various input service credits is reversed and credits allowed; extended period of limitation and penalties are set aside; classification held as works contract service. Consequential benefits directed.

Priority of secured creditor over subsequent tax attachment - first charge by virtue of Section 26E of the SARFAESI Act - attachment under Section 48 of the Gujarat VAT Act - protection of purchasers of property sold under the SARFAESI Act - deletion of mutation entry showing attachment in record of rights

Priority of secured creditor over subsequent tax attachment - first charge by virtue of Section 26E of the SARFAESI Act - attachment under Section 48 of the Gujarat VAT Act - deletion of mutation entry showing attachment in record of rights - protection of purchasers of property sold under the SARFAESI Act - Whether an entry showing attachment under the Gujarat VAT Act, made after the bank's exercise of SARFAESI remedies and sale, is liable to be deleted and whether the bank's first charge prevails over such attachment. - HELD THAT: - The Court found that the subject property was a secured asset of the bank and that the bank had created the first charge and exercised rights under the SARFAESI Act, culminating in auction and sale in 2015. The subsequent mutation (entry No.16521) effected in 2017 to show attachment under Section 48 of the Gujarat VAT Act could not displace the prior charge of the bank. The Court relied on earlier decisions of this Court holding that the bank's priority over secured assets prevails over attachment by the State under the VAT Act and that purchasers of properties sold under the SARFAESI Act are protected from such subsequent proceedings. Applying that principle, the Court held the attachment entry showing state claim could not operate to override the bank's prior charge or affect purchasers who acquired title pursuant to the SARFAESI sale. The Court nevertheless noted that recovery of any tax dues from the erstwhile owner remains open to the department by appropriate legal steps available in law and that any excess proceeds, if applicable, may be adjusted towards State dues as recognised in precedent.

The writ succeeds; respondents Nos.3 and 4 are directed to delete entry No.16521 from the record of rights (Village Form No.6) on production of the certified copy of this order, and the department remains free to pursue recovery from the erstwhile owner by appropriate legal remedies.

Final Conclusion: Writ allowed: the mutation entry recording attachment under the Gujarat VAT Act, made after the bank's SARFAESI sale and first charge, is ordered deleted; purchasers under the SARFAESI sale are protected while the State may pursue recovery from the erstwhile owner by other legal means.