TaxTMI Updates e-Newsletter
Jul 02,2022

Commensurate reduction in prices - methodology of comparison of pre rate average price with post rate transaction price - treatment of base price discrepancies (averaging and comparables) - mode of passing benefit - post supply discounts and increase in grammage - zeroing versus netting off of benefits - time limit/directory nature of procedural timelines under Rule 129/133 - deposit of profiteered amount in Consumer Welfare Fund - further investigation/remand for post cut off period

Time limit/directory nature of procedural timelines under Rule 129/133 - Whether the proceedings and the Authority's directions were time barred for failure to complete investigation or pass order within six months. - HELD THAT: - The Authority held that the statutory time limits under Rule 129(6) and Rule 133(1) are directory, not mandatory, because the statute and rules do not prescribe nullifying consequences for non compliance. The Authority noted the Respondent had been given opportunities to make submissions and that an interim direction for further investigation under Rule 133(4) was within the Authority's powers; para 10 of the Authority's Guidelines treating a Rule 133(4) report as a fresh report for the purposes of Rule 133(1) was a permissible clarification under Rule 126. The Respondent's plea that the proceedings were time barred was rejected.

Proceedings are not time barred; the Respondent's limitation objection is rejected.

Methodology of comparison of pre rate average price with post rate transaction price - Whether the DGAP's methodology (average pre rate base price compared with transaction wise post rate prices) for quantifying profiteering is unsound and arbitrary. - HELD THAT: - After examining alternative approaches urged by the Respondent (actual v. actual, average v. average, entity/HSN level comparisons) the Authority endorsed DGAP's six step approach of using pre rate average base price (by product and channel) compared with transaction wise post rate taxable values. The Authority found DGAP's methodology suited the factual matrix (multiple SKUs, variable transactional prices, different channels) and that the average to actual method better ensured coverage of transactions and that recipients who actually paid higher prices would be identified. The Authority therefore rejected the Respondent's challenge to the adopted methodology.

DGAP's adopted methodology is reasonable and is affirmed; Respondent's alternate methodologies are rejected.

Treatment of base price discrepancies (averaging and comparables) - Whether DGAP should rectify base price computation where pre rate averaging erroneously took the first matching line item or where comparables/sequencing produced distortions. - HELD THAT: - DGAP accepted and the Authority recorded that certain computational/lookup errors and sequence issues existed. The Authority agreed with DGAP that the correct corrective approach is to adopt a weighted average base price for products having the same description across MRPs (the 'weighted average of all MRPs' approach) to address non averaging and comparable mapping issues; consequential rectifications were made in DGAP's revised computation. DGAP's rectifications (as reflected in its 28.08.2020 report) were found to be appropriate.

DGAP's rectifications to pre rate base price computations are accepted and applied.

Mode of passing benefit - post supply discounts and increase in grammage - Whether passing the benefit of a tax rate reduction by (a) post supply discounts/claims and (b) increasing grammage/volume constitutes lawful 'commensurate reduction in prices' under Section 171(1). - HELD THAT: - The Authority examined submissions and evidence on post supply discounts (credit notes, distributor/modern trade claims) and on increased grammage (minutes, artwork, packaging). It held that Section 171(1) requires passing the benefit by way of a commensurate reduction in prices in monetary terms; promotional or service payments described in documentation, or trade/advertising reimbursements, could not be treated as passing of the tax reduction unless clearly shown to be monetary reductions of the taxable transaction value. On increase in grammage the Authority found no reliable, consistent evidence linking grammage changes to a commensurate price reduction per SKU; minutes and supporting material did not establish required correlations and showed inconsistencies in the percentage increases. Consequently, the Authority rejected the contention that increased grammage per se satisfies Section 171(1).

Post supply discounts and incentives must be demonstrated as reductions in taxable transaction value to be accepted; increase in grammage is not an acceptable substitute for commensurate price reduction on the facts and evidence in this case.

Zeroing versus netting off of benefits - Whether DGAP erred by not 'netting off' (allowing negative variances to offset positive ones) and instead applying zeroing in computing profiteering. - HELD THAT: - The Authority held that Section 171(1) requires benefit to be passed on 'on any supply' to each recipient; netting across different SKUs or recipients would defeat individual recipients' entitlement and could leave some recipients worse off. Accordingly, the Authority upheld the approach of computing denial on each supply/recipient without netting positive and negative variances across different supplies.

Netting off is not permissible; DGAP's transaction/recipient wise approach (zeroing for non denials) is maintained.

Treatment of GST collected in profiteering calculation - Whether GST collected on the alleged excess price must be excluded from the profiteered amount because it was deposited with the government. - HELD THAT: - The Authority found that where excess taxable value was charged to recipients as a result of failure to pass on the tax reduction, the GST collected on that excess forms part of the benefit denied to the consumer and falls within the statutory object of Section 171. Even if GST was deposited to government accounts, the supplier's obligation under Section 171 requires refund/return of the amount equivalent to the benefit; therefore GST collected on the excess cannot be excluded from the quantum determined for restitution / deposit into the Consumer Welfare Fund.

GST collected on the excess taxable value is included in the profiteered amount for removal/relief purposes.

Period of investigation and scope of further inquiry - Whether the period (15.11.2017 to 31.12.2018) for which profiteering was investigated was arbitrary and whether further investigation should be ordered beyond that period. - HELD THAT: - The Authority explained that the investigation period corresponds to the date of rate reduction and the cut off required to examine returns up to the previous month when the complaint/reference was received; the period chosen is not arbitrary. The Authority directed, under Rule 133(5), that DGAP carry out further investigation to ascertain whether the Respondent passed on the benefit in respect of impacted products sold after 31.12.2018, and to report further if denial is found.

Investigation period 15.11.2017 to 31.12.2018 is appropriate; DGAP is directed to investigate post 31.12.2018 transactions and submit a further report.

Constitutional and procedural challenges to Section 171 and NAA rules - Whether Section 171, the Rules (126,127,133) or the Authority's composition/processes are unconstitutional, violative of Article 14 or 19(1)(g), or suffer from excessive delegation; and whether absence of a judicial member invalidates the Authority. - HELD THAT: - The Authority rejected constitutional challenges. It observed Section 171/Rules were enacted through the statutory process with GST Council and legislatures; the Authority's functions are specialised and quasi judicial, and absence of a judicial member does not render constitution or decisions invalid. Challenges alleging excessive delegation and breach of natural justice were dismissed because DGAP's reports, notices, and multiple opportunities to be heard were provided and procedures under the Act/Rules were followed.

Constitutional and procedural challenges are rejected; the Authority's constitution, rules and procedures are valid and complied with in these proceedings.

Quantification of profiteering and deposit directions - Final quantified amount of profiteering and the relief to be ordered. - HELD THAT: - After considering DGAP's investigation, the Respondent's submissions and DGAP's subsequent rectifications, the Authority determined the profiteered amount for the period 15.11.2017 to 31.12.2018. The Authority directed commensurate reduction in prices and ordered deposit of fifty percent of the determined amount into the Central Consumer Welfare Fund and the remainder into the respective State Funds in specified state wise proportions; interest at 18% from date of collection until deposit was directed. The Authority declined to issue a penalty under Section 171(3A) because that provision came into force after the relevant period.

Profiteering determined at Rs. 1,86,39,57,508 for 15.11.2017-31.12.2018; directions issued for price reduction and deposit of amounts with interest into Central and State CWFs; penalty under Section 171(3A) not imposed for the historical period.

Final Conclusion: The Authority found that the Respondent failed to pass on the benefit of the GST rate reduction for the period 15.11.2017 to 31.12.2018 and, after upholding DGAP's methodology and specified rectifications, quantified profiteering at Rs. 1,86,39,57,508/-. The Respondent was directed to effect commensurate price reductions and to deposit the prescribed shares of the determined amount (with 18% interest) into the Central and State Consumer Welfare Funds within three months; DGAP was directed to investigate supplies made after 31.12.2018 and submit a further report.

Transitional credit - Form GST TRAN-1 - electronic credit ledger - monthly return GSTR-3B - administrative remediation by reopening portal or alternative credit mechanism

Transitional credit - Form GST TRAN-1 - electronic credit ledger - Direction to permit filing of TRAN-1 in the correct GST branch or to attempt reopening of the portal so that transitional CENVAT credit can be carried forward into the appropriate electronic credit ledger. - HELD THAT: - The Court recorded that the petitioner had filed TRAN-1 using the Andhra Pradesh branch login instead of the Maharashtra branch where the petitioner held centralized service tax registration, resulting in the transitional CENVAT balance at the end of June 2017 not being credited to the appropriate electronic ledger. The Court directed that, if feasible, the portal should be opened to enable the petitioner to file TRAN-1, revised TRAN-1 or re-revised TRAN-1 in the Maharashtra account so that the credit can be transferred to the correct electronic credit ledger. The Court recognised the factual admission that TRAN-1 had been filed and confined itself to administrative directions without adjudicating the substantive entitlement to the credit. [Paras 2, 3, 5]

Assistant Commissioner to attempt reopening the portal or otherwise facilitate filing of TRAN-1 in the correct branch so as to carry forward the transitional CENVAT credit; no observation was made on the merits of the credit claimed.

Monthly return GSTR-3B - administrative remediation by reopening portal or alternative credit mechanism - Alternative relief permitting utilisation of unutilised transitional credit through monthly GSTR-3B returns where reopening the portal is not possible or feasible. - HELD THAT: - The Court provided an alternative administrative remedy: if reopening the portal to permit correct filing of TRAN-1 is not feasible, the concerned Assistant Commissioner must inform the petitioner within two weeks, and the petitioner should then be permitted to utilise the unutilised transitional credit through its monthly GSTR-3B returns. The Court referenced similar approaches adopted by other High Courts as supportive authority for providing administrative relief without deciding the merits of the credit claim. [Paras 3]

If portal reopening is not feasible, Assistant Commissioner to communicate this and the petitioner may utilse the unutilised transitional credit via monthly GSTR-3B returns.

Transitional credit - Acceptance of factual statement that the petitioner had not otherwise availed the credit. - HELD THAT: - The Court expressly accepted the petitioner's statement that no credit had been availed otherwise, treating this factual concession as a basis for granting the directed administrative relief while refraining from any adjudication on entitlement. [Paras 6]

Petitioner's statement that it had not availed any credit otherwise is accepted.

Final Conclusion: Writ petition disposed directing administrative steps: attempt to reopen the portal to enable filing of TRAN-1 in the correct branch so as to carry forward transitional CENVAT credit; if reopening is not feasible, the Assistant Commissioner to so inform the petitioner within two weeks and the petitioner to be permitted to utilise the unutilised credit through monthly GSTR-3B returns; no decision was made on the substantive merits of the credit claim.

Detention and seizure of goods - computation of penalty under Section 129 - appeal under Section 107 of the Act, 2017 as an exhaustive alternative remedy - prohibition on disposal/sale of seized goods under Section 129(6) pending appeal - requirement of a reasoned and speaking order by the Appellate Authority

Detention and seizure of goods - computation of penalty under Section 129 - appeal under Section 107 of the Act, 2017 as an exhaustive alternative remedy - Availability and adequacy of the statutory remedy of appeal under Section 107 of the U.P.G.S.T. Act, 2017 in respect of orders under Section 129 - HELD THAT: - The Court observed that the grievances arising from the detention order under Section 129(1) and the consequential order under Section 129(3), including the challenge to seizure of goods and computation of penalty under Section 129, fall within the scope of the appeal provided by Section 107 of the Act, 2017. The appellate remedy under Section 107 was held to be exhaustive and capable of addressing all the petitioner's contentions; accordingly there was no compelling ground to entertain the writ petition on merits. The Court therefore directed that the petitioner may pursue the remedy of appeal under Section 107, and that the appellate forum is the appropriate forum to consider the submissions made by the petitioner.

Writ petition not entertained on merits because the statutory appeal under Section 107 is the appropriate and exhaustive remedy to challenge detention, seizure and penalty under Section 129.

Prohibition on disposal/sale of seized goods under Section 129(6) pending appeal - requirement of a reasoned and speaking order by the Appellate Authority - Interim protection against sale/disposal of non-perishable seized goods and directions for expeditious adjudication of the appeal - HELD THAT: - Although the writ petition was not entertained on merits, the Court recorded the State's undertaking that if the petitioner files an appeal in compliance with Section 107 within three days, the seized goods and vehicle will not be sold. The Court directed the Appellate Authority to decide any such appeal strictly in accordance with law by passing a reasoned and speaking order, preferably within three weeks from the date of filing. The order expressly noted that the seized goods are not perishable, and on that basis restrained the Adjudicatory Authority from disposing of the seized goods or vehicle pending disposal of the appeal.

If an appeal under Section 107 is filed within three days, the seized goods and vehicle shall not be disposed of; the Appellate Authority shall decide the appeal by a reasoned and speaking order, preferably within three weeks.

Final Conclusion: Writ petition dismissed in view of the existence of the statutory appeal under Section 107; conditional interim protection granted that prevents sale/disposal of the non-perishable seized goods and vehicle if the appeal is filed within three days, and the Appellate Authority directed to decide the appeal by a reasoned order preferably within three weeks.

Passing on benefit of reduction in rate of tax and input tax credit by way of commensurate reduction in prices - transaction value (taxable value) as base for computation of profiteering - inclusion of the tax component in determination of the profiteered amount - penalty liability under Section 171(3A) for profiteering w.e.f. 01.01.2020

Passing on benefit of reduction in rate of tax and input tax credit by way of commensurate reduction in prices - transaction value (taxable value) as base for computation of profiteering - inclusion of the tax component in determination of the profiteered amount - The Respondent contravened Section 171(1) of the CGST Act by not passing on the benefit of reduction in tax rate and availability of additional ITC; the profiteered amount was determined. - HELD THAT: - On examination of the DGAP report, written submissions and documents, the Authority accepted the DGAP's methodology of comparing the average pre-GST base price (excluding pre-GST taxes) with the actual invoice-wise base prices in the post-GST period to ascertain excess sales realisation. The Authority rejected the Respondent's contention that 'rate price' (pre-discount list price) should be used for comparison, holding that the transaction value (taxable value) is the base upon which taxes are levied and therefore is the proper comparator for applying Section 171(1). The Authority further held that the excess GST collected on account of increased base prices forms part of the profiteered amount because customers bore both the increased base price and the GST thereon. Applying this methodology to the supplied data, the DGAP's computed net profiteered amount of Rs. 1,18,33,987/- (Rs. 1,15,96,899/- for manufactured goods and Rs. 2,37,088/- for traded goods) for the period 01.07.2017 to 30.06.2020 was accepted by the Authority. [Paras 14, 15, 18, 19]

Profiteering under Section 171(1) established; profiteered amount determined at Rs. 1,18,33,987/- for the period 01.07.2017 to 30.06.2020.

Penalty liability under Section 171(3A) for profiteering w.e.f. 01.01.2020 - Penalty liability under Section 171(3A) arises in respect of profiteering for the period on or after 01.01.2020. - HELD THAT: - The Authority noted that the penalty provision in Section 171(3A) (as inserted w.e.f. 01.01.2020) is in force prior to completion of the present investigation. Consequently, where profiteering is established for periods on or after 01.01.2020, the Respondent is liable for penalty equivalent to ten per cent of the amount so profiteered, subject to the statutory proviso that no penalty shall be leviable if the profiteered amount is deposited within thirty days of the Authority's order. The Authority recorded this legal consequence though the operative order directs refund and interest as primary relief. [Paras 16]

Respondent is liable to penalty under Section 171(3A) in respect of profiteering occurring on or after 01.01.2020, subject to the statutory proviso.

Passing on benefit of reduction in rate of tax and input tax credit by way of commensurate reduction in prices - inclusion of the tax component in determination of the profiteered amount - Reliefs and directions: refund of the profiteered amount with interest and compliance measures. - HELD THAT: - Having determined the profiteered amount, the Authority directed that the Respondent shall pass on/refund Rs. 1,18,33,987/- to identifiable recipients along with interest at 18% from the date of receipt of the profiteered amount until date of passing on/refund, within three months of the order. The Authority also directed jurisdictional CGST/SGST Commissioners to ensure compliance, to publish an advertisement informing recipients and the public, and to file compliance reports within four months. The order is made within limitation in view of the exclusion directed by the Hon'ble Supreme Court and related notifications extending time-limits. [Paras 19, 20, 21, 22]

Respondent directed to refund/pass on Rs. 1,18,33,987/- with interest @18% within three months; jurisdictional officers to ensure compliance, publicise the order and report compliance.

Final Conclusion: The Authority accepted the DGAP report, held that M/s MYK Laticrete India Pvt. Ltd. contravened Section 171(1) for the period 01.07.2017 to 30.06.2020, determined profiteering at Rs. 1,18,33,987/-, directed refund with 18% interest within three months, recorded liability for penalty under Section 171(3A) for amounts profiteered on or after 01.01.2020, and entrusted enforcement and compliance monitoring to the jurisdictional GST Commissioners.

Deduction under section 36(1)(viii) - computation of eligible business income for long term housing finance - apportionment by ratio of interest on long term housing loans to total interest income - apportionment by ratio of interest on long term housing loans to total receipts - binding effect of coordinate bench precedents and consistency of method

Deduction under section 36(1)(viii) - computation of eligible business income for long term housing finance - apportionment by ratio of interest on long term housing loans to total interest income - binding effect of coordinate bench precedents and consistency of method - Whether the assessee's method of computing income eligible for deduction under section 36(1)(viii) by applying the ratio of interest on long term housing loans to total interest income is permissible, and whether the disallowance made by the Assessing Officer should be deleted. - HELD THAT: - The Tribunal examined two alternative methodologies: the assessee's method of apportioning business income by the ratio of interest on long term housing loans to total interest income, and the Assessing Officer's method of applying the ratio to total receipts. The Tribunal noted that identical controversy had been repeatedly adjudicated in the assessee's favour by the first appellate authority and by coordinate Benches of the Tribunal for earlier assessment years (including A.Y. 2014 15 and A.Y. 2015 16), where the assessee's consistent methodology was accepted. The Revenue did not produce any material to show that those coordinate bench decisions have been set aside or that there is any change in fact or law warranting a departure. In the absence of distinguishing features or contrary precedent from a higher forum, the Tribunal followed the earlier consistent decisions and upheld the CIT(A)'s deletion of the disallowance. [Paras 8, 9]

Assessee's method of apportionment upheld and the disallowance deleted; Revenue's appeal dismissed.

Final Conclusion: Following earlier consistent decisions of the first appellate authority and coordinate Benches of the Tribunal, and in the absence of any distinguishing facts or higher court reversal, the Tribunal upholds the CIT(A)'s deletion of the disallowance and dismisses the Revenue's appeal for A.Y. 2016 17.

Amortization of business acquisition expenses - capital versus revenue nature of expenditure - acquisition of clientele and technical human resources - allowability under section 37 of the Income-tax Act - consistency with earlier orders in the assessee's own case

Amortization of business acquisition expenses - capital versus revenue nature of expenditure - acquisition of clientele and technical human resources - allowability under section 37 of the Income-tax Act - consistency with earlier orders in the assessee's own case - Allowability as revenue expenditure of amounts amortized in respect of consideration paid for acquisition of clientele, contracts and technical human resources by the assessee's US branch. - HELD THAT: - The Tribunal examined the factual finding that the US branch acquired ongoing business contracts with clients and technical resources (employees) of certain US companies and that no capital assets or the entire profit making apparatus of those businesses were taken over. The amount paid for such acquisition was treated by the assessee as deferred revenue expenditure and amortised over five years. The Revenue did not controvert the factual position that no capital asset was acquired. Applying the principle that expenditure incurred for expansion of business or for taking over contracts and technical resources, where no capital asset or business amalgamation is involved, is revenue in nature, the Tribunal held the amortised amounts allowable as revenue expenditure under section 37. The Tribunal also relied on earlier appellate findings in the assessee's own case for preceding assessment years and found no reason to deviate from those conclusions. [Paras 6, 7]

The addition disallowing the claimed amortization of business acquisition expenses is deleted and the Revenue's appeals are dismissed for the years under adjudication.

Final Conclusion: The Tribunal upheld the CIT(A)'s allowance of the amortised business acquisition expenditure as revenue expenditure under section 37 and dismissed the Revenue's appeals for assessment years 2006-07 and 2007-08, following the factual finding that only clientele, contracts and technical human resources (and not capital assets or entire businesses) were acquired.

Entitlement to deduction under Section 80IB(10) - Inclusion of permissible commercial area within a housing project - Prospective application of amendment restricting commercial area (clause (d) of Section 80IB(10)) - Application of precedent in CIT v. Sarkar Builders

Entitlement to deduction under Section 80IB(10) - Inclusion of permissible commercial area within a housing project - Prospective application of amendment restricting commercial area (clause (d) of Section 80IB(10)) - Application of precedent in CIT v. Sarkar Builders - Assessee entitled to deduction under Section 80IB(10) for the housing project despite presence of a small commercial area where the project was approved before 31.03.2005. - HELD THAT: - The Tribunal found that the assessee's project (Marvel Apoorva) had a total sanctioned built-up area of 15,843.85 sq.m., of which commercial built-up area amounted to 98.46 sq.m., a negligible proportion. The Tribunal applied the principle in the decision of the Honourable Supreme Court in CIT v. Sarkar Builders, holding that the housing project under Section 80IB(10) may include commercial establishments and that the amendment inserting clause (d) (which restricts permissible commercial area) is prospective and applies only to projects approved on or after 01.04.2005. Consequently, where a project was approved prior to 31.03.2005 (as in the present case), the restriction in clause (d) does not disqualify the project from claiming deduction even if some commercial area is included. On the facts, the assessee had plan approval before 01.04.2004 and complied with other statutory conditions for Section 80IB(10); therefore the denial of deduction by the AO and CIT(A) was set aside and the assessee's appeal allowed.

Assessee's appeal allowed; deduction under Section 80IB(10) granted for AY 2003-04 despite the small commercial area, applying the Sarkar Builders ratio and treating the amendment as prospective.

Final Conclusion: The Tribunal allowed the assessee's appeal and granted deduction under Section 80IB(10) for the housing project approved before 31.03.2005 notwithstanding the incidental commercial area; the departmental appeal became academic and was dismissed.

Disallowance under Section 14A in relation to exempt income - Application of Rule 8D for determining disallowance - Requirement of Assessing Officer's satisfaction under Section 14A(2) before invoking Rule 8D - Condonation of delay by exclusion of limitation period on account of COVID-19

Disallowance under Section 14A in relation to exempt income - Requirement of Assessing Officer's satisfaction under Section 14A(2) before invoking Rule 8D - Application of Rule 8D for determining disallowance - Deletion of disallowance computed under Section 14A read with Rule 8D for AY 2013-14 to AY 2015-16 on the ground that the Assessing Officer did not record requisite satisfaction before applying Rule 8D. - HELD THAT: - The Tribunal examined Section 14A(2) which conditions invocation of the prescribed method on the AO being 'not satisfied' with the correctness of the assessee's claim. The assessee had submitted that no expenditure was incurred to earn exempt income and that sufficient interest free funds were available to cover the investments. The AO applied Rule 8D without recording any satisfaction regarding incorrectness of the assessee's claim and without addressing the assessee's financial submissions. Applying the principle in Maxopp Investment Ltd. that the AO must record satisfaction (and examine nature of funds/loans) before undertaking apportionment under Rule 8D, the Tribunal held that the AO's action was not in consonance with Section 14A and accordingly deleted the disallowances for the three assessment years. [Paras 8, 10]

Disallowances under Section 14A read with Rule 8D for AY 2013-14, AY 2014-15 and AY 2015-16 are deleted.

Condonation of delay by exclusion of limitation period on account of COVID-19 - Admission of three time barred appeals by condoning delay of 24 days as the limitation period falling between 15.03.2020 and 28.02.2022 is excluded pursuant to the relevant Supreme Court direction. - HELD THAT: - Registry had recorded the appeals as time barred by 24 days and the assessee filed condonation applications attributing delay to COVID 19 restrictions. Relying on the Supreme Court's exclusion of the period 15.03.2020 to 28.02.2022 for calculating limitation, the Tribunal found that the assessee's limitation period fell within that excluded window and accordingly condoned the delay and admitted the appeals for adjudication. [Paras 2]

Delay of 24 days condoned and appeals admitted.

Abandonment or non pressing of grounds before tribunal - Grounds not pressed by the assessee are dismissed as not pressed. - HELD THAT: - The Tribunal recorded that common grounds (grounds 1, 2, 3 for AY 2013 14 to 2015 16 and ground 5 for AY 2015 16) were not pressed by the assessee and therefore treated those grounds as dismissed. Other general grounds were noted as requiring no adjudication. [Paras 11]

Grounds not pressed are dismissed; other general grounds need no adjudication.

Final Conclusion: The appeals for AY 2013-14, AY 2014-15 and AY 2015-16 are partly allowed: delay of filing is condoned and the disallowances under Section 14A read with Rule 8D are deleted for all three years; grounds not pressed are dismissed.

Genuineness of business expenditure - burden of proof for commission claims - unexplained cash credits under section 68 of the Income-tax Act - accommodation entries and admission by third parties as evidence - disallowance of interest on loans - corroboration by banking channel and TDS

Genuineness of business expenditure - burden of proof for commission claims - corroboration by banking channel and TDS - Deletion of disallowance of commission expenditure of Rs.44,25,705/- - HELD THAT: - The Tribunal found that the assessee consistently claimed commission expenditure and placed on record detailed particulars of commission payees including addresses, PANs, confirmations, service agreements, payment through banking channels and evidence of TDS; income-tax returns of most payees were also produced and the particulars remained uncontroverted by Revenue. Considering the turnover and the long-standing pattern of such payments, the documentary evidence furnished was held sufficient to prove genuineness of the commission expenditure incurred for business purposes, and the disallowance was not warranted. [Paras 8]

Disallowance of commission expenditure deleted; ground allowed.

Unexplained cash credits under section 68 of the Income-tax Act - accommodation entries and admission by third parties as evidence - Additions under section 68 in respect of loans amounting to Rs.18,50,000/-: partly confirmed and partly deleted - HELD THAT: - The Tribunal analysed each creditor separately. For the loan from Sourav Shipping India Pvt. Ltd. the director admitted during assessment proceedings that accommodation entries were provided, and his statement was relied upon to treat the credit as unexplained; the addition in respect of that loan was therefore confirmed. For M/s. Dharmaraj Trading Co. and Gunius Wax & Chemicals Pvt. Ltd., the amounts represented opening balances carried forward from earlier years, complete details including address and PAN were on record, and no adverse material was found; the only defect was non-response to notices under section 133(6) which was not followed by further inquiry. In those circumstances the Tribunal concluded there was no justification for declaring those credits unexplained and deleted the additions in respect of those two parties. [Paras 9, 10, 11]

Addition under section 68 confirmed for the loan from Sourav Shipping India Pvt. Ltd.; additions in respect of M/s. Dharmaraj Trading Co. and Gunius Wax & Chemicals Pvt. Ltd. deleted; net addition confirmed reduced accordingly.

Disallowance of interest on loans - accommodation entries and admission by third parties as evidence - Disallowance of interest of Rs.6,56,140/-: partly confirmed and partly deleted - HELD THAT: - The Tribunal held that interest paid to entities whose directors had admitted furnishing accommodation entries could be disallowed. Consequently, interest payments evidenced as relating to Sourav Shipping India Pvt. Ltd. and Sourav Film City Pvt. Ltd., where directors had admitted accommodation entries, were sustained as disallowable. Other interest payments, predominantly relating to opening balances of loans carried forward from earlier years, were found to be supported and not disallowable. On that basis the Tribunal confirmed a part of the interest disallowance corresponding to the amounts linked to accommodation-entry providers and deleted the remainder. [Paras 12]

Part of the interest disallowance sustained (in respect of companies whose directors admitted accommodation entries); remaining interest disallowance deleted; ground partly allowed.

Final Conclusion: The assessee's appeal is partly allowed: the disallowance of commission expenditure is deleted; of the additions under section 68 totalling Rs.18,50,000/-, only the addition relating to Sourav Shipping India Pvt. Ltd. is confirmed while additions in respect of the other two creditors are deleted; the interest disallowance is partly sustained for amounts paid to entities whose directors admitted accommodation entries and the balance of the disallowance is deleted.

Disallowance under section 14A - Rule 8D - No disallowance where no exempt income earned - Position prior to insertion of explanation to section 14A - Reliance on judicial precedent (Cheminvest Ltd.)

Disallowance under section 14A - Rule 8D - No disallowance where no exempt income earned - Reliance on judicial precedent (Cheminvest Ltd.) - Whether any disallowance under section 14A read with Rule 8D could be made when the assessee had earned no exempt income in the relevant year, and whether the alternative computation restricting disallowance to Rs. 9,87,978/- could be sustained. - HELD THAT: - The Tribunal recorded that it was an admitted fact that the assessee had not earned any tax exempt income in the year under consideration and that the year was prior to the insertion of the explanation to section 14A. Applying the then-prevailing judicial position, in particular the Delhi High Court decision in Cheminvest Ltd., and consistent decisions of coordinate benches, the Tribunal held that section 14A could not be invoked to make a disallowance where no exempt income was earned in the relevant year. Consequently the primary plea of the assessee that no disallowance was warranted was upheld. Although the Assessing Officer had computed an alternative disallowance of Rs. 9,87,978 based on the assessee's own alternative computation, the Tribunal observed that because the primary plea of non-disallowance succeeded, there was no occasion to entertain or sustain the alternative computation; accordingly that alternative disallowance was also deleted. The Tribunal therefore rejected the Assessing Officer's contention and allowed the assessee's principal contention by applying the settled ratio that disallowance under section 14A/read with Rule 8D is not sustainable where no exempt income is earned in the relevant year. [Paras 7, 8]

No disallowance under section 14A read with Rule 8D can be made for the year where the assessee earned no exempt income; the alternative disallowance of Rs. 9,87,978/- is also deleted.

Final Conclusion: Appeal of the Assessing Officer dismissed; appeal of the assessee allowed - disallowance under section 14A/read with Rule 8D deleted for AY 2016-17 in view of absence of exempt income and applicable precedents.

Reasonableness of directors' remuneration - application of section 40A(2)(b) to related party remuneration - excessiveness assessed against free market value - consistency in revenue's appellate policy - revenue cannot accept an appellate order in one case and challenge an identical order in another without just cause

Consistency in revenue's appellate policy - revenue cannot accept an appellate order in one case and challenge an identical order in another without just cause - Whether the Assessing Officer could validly challenge before the Tribunal the CIT(A)'s deletion of addition relating to directors' remuneration in AY 2014-15 when an identical plea had been allowed by the CIT(A) in the preceding year and that earlier CIT(A) order was not appealed by the revenue. - HELD THAT: - The Tribunal noted that the identical question of excessiveness of directors' remuneration had been considered and allowed by the CIT(A) for the preceding year and that the revenue did not challenge that earlier appellate order. Reliance was placed on the principle, as laid down by the Supreme Court, that the revenue cannot accept an appellate authority's order in one case and, without just cause, challenge the same legal position in another case; differential treatment on the same set of facts is impermissible. In the absence of any explanation by the Assessing Officer showing good and sufficient reasons to adopt a different stand in the subsequent year, the challenge to the CIT(A)'s order for AY 2014-15 was held to be not maintainable. The Tribunal therefore declined to entertain the appeal on that ground and dismissed the revenue's grievance in limine. [Paras 6, 7]

The appeal is dismissed as not maintainable because the revenue, having accepted identical relief in an earlier year and not appealed that order, cannot permissibly challenge the same issue in the subsequent year without just cause.

Final Conclusion: Appeal dismissed: revenue's challenge to deletion of addition relating to directors' remuneration for AY 2014-15 is not maintainable in view of the earlier unchallenged acceptance of identical relief by the CIT(A) in the preceding year; therefore the Assessing Officer's appeal is rejected.

Addition under section 68 for unexplained share capital - onus on assessee to prove identity, creditworthiness and genuineness of investor - addition under section 69C as unexplained commission/undisclosed income - reliance on search and seizure material and post-search enquiries - adjudication on merits in absence of assessee's representation

Addition under section 68 for unexplained share capital - onus on assessee to prove identity, creditworthiness and genuineness of investor - reliance on search and seizure material and post-search enquiries - Addition of Rs.25,00,000 treated as unexplained share capital under section 68 upheld. - HELD THAT: - The Assessing Officer recorded that the assessee received Rs.25 lakhs from M/s. Attractive Finlease Pvt. Ltd. which was treated as unexplained credit and added to income. The Tribunal found that the assessee failed to discharge the initial onus under section 68 by not proving identity of the investor, its creditworthiness or the genuineness of the transaction. The record showed no documentary paper trail was produced before the authorities or the Tribunal to controvert adverse findings arising from search and post search enquiries. Reliance placed by the Revenue on discovery during search and subsequent enquiries supported the addition, and the lower authorities' findings were not shown to be erroneous or unsupported. Given the absence of material from the assessee to rebut the AO's conclusions, the Tribunal found no reason to interfere with confirmation of the addition. [Paras 6]

Addition of Rs.25,00,000 under section 68 confirmed and appeal dismissed on this point.

Addition under section 69C as unexplained commission/undisclosed income - adjudication on merits in absence of assessee's representation - Addition of Rs.50,000 under section 69C upheld and appeal dismissed. - HELD THAT: - The Tribunal noted that the assessee did not produce evidence to rebut the Assessing Officer's finding of an unexplained payment treated as commission under section 69C. The assessee remained absent throughout hearings and failed to furnish documents or point out any infirmity in the findings of the lower authorities. In these circumstances, and having heard the Revenue, the Tribunal confirmed the addition under section 69C along with the other additions made in the assessment order. [Paras 6, 7]

Addition of Rs.50,000 under section 69C confirmed and appeal dismissed.

Final Conclusion: The Tribunal, after hearing the Revenue and noting absence of any documentary rebuttal by the assessee, confirmed the additions made by the Assessing Officer under sections 68 and 69C and dismissed the appeal for A.Y. 2010-11.

Penalty under section 271AAA - undisclosed income - search and seizure under section 132 - conditions in section 271AAA(2) - definition of undisclosed income in the Explanation to section 271AAA - discretionary imposition of penalty

Penalty under section 271AAA - undisclosed income - conditions in section 271AAA(2) - definition of undisclosed income in the Explanation to section 271AAA - Whether penalty under section 271AAA is sustainable in respect of the conditional disclosure of Rs. 40 lakhs - HELD THAT: - The Tribunal examined whether the Rs. 40 lakhs, which was conditionally offered in the disclosure petition to cover any discrepancy, constituted 'undisclosed income' within the Explanation to section 271AAA so as to attract penalty. The court noted that section 271AAA empowers the AO to levy penalty but that levy is discretionary and subsection (2) excludes penalty where the assessee (i) admits undisclosed income in the course of search and specifies its derivation, (ii) substantiates the manner of derivation, and (iii) pays tax with interest. The assessee had admitted Rs. 3.78 crore during search, produced schedules substantiating Rs. 3.38 crore as undisclosed income attributable to falsely claimed losses, and conditionally offered Rs. 40 lakhs only as a cautionary cover for any other discrepancy. The Tribunal found that the Rs. 40 lakhs was not discovered in the search in any of the forms specified in the Explanation (money, bullion, jewellery, valuable article, entry in books, or transaction) and there was no seized material corroborating any specific undisclosed income of Rs. 40 lakhs for AY 2012-13. As the addition of Rs. 40 lakhs in assessment was not supported by material found during the search and could not be attributed to any item falling within the statutory definition of 'undisclosed income', it could not sustain penalty under section 271AAA. The Tribunal applied the coordinate-bench decision in the sister-concern case with identical facts and followed its reasoning to set aside the appellate authority's confirmation of penalty in respect of Rs. 40 lakhs. [Paras 6, 8, 9, 10]

Penalty under section 271AAA in respect of the Rs. 40 lakhs is deleted as that amount does not qualify as 'undisclosed income' within the Explanation to section 271AAA and was not supported by material found during the search.

Final Conclusion: Appeal allowed; the order of the CIT(A) confirming penalty of Rs. 4 lakhs (10% of Rs. 40 lakhs) is set aside and the Assessing Officer is directed to delete the penalty in respect of the Rs. 40 lakhs for AY 2012-13.

Assessee in default under section 201(1) - liability under section 201(1A) - compensatory interest for delayed TDS - tax deductible under Chapter XVII-B - vicarious liability for TDS - refund under section 244A

Assessee in default under section 201(1) - liability under section 201(1A) - compensatory interest for delayed TDS - Whether being deemed to be in-default under section 201(1) is a condition precedent for liability under section 201(1A). - HELD THAT: - The Tribunal answered this question in the negative. It held that sections 201(1) and 201(1A) are to be considered independently: section 201(1A) imposes compensatory interest for delay in depositing tax deductible under the Act and specifies the quantum, rate and period of interest. While an assessee is deemed to be in default under section 201(1) for non-deduction/non-payment of the tax deductible, the statutory charge of interest under section 201(1A) may subsist independently for the period of delay measured from the date the tax was deductible to the date of actual payment. The Tribunal relied on and applied the principles in the cited Apex Court decisions to construe 'tax as required by or under the Act' as referring to the tax deductible under Chapter XVII-B, thus requiring interest to be worked with reference to that deductible amount. [Paras 8]

Liability under section 201(1A) does not automatically fall with the existence or non-existence of a deemed default under section 201(1); the two provisions operate independently and interest under section 201(1A) is payable with reference to the tax deductible under the Act for the specified period of delay.

Tax deductible under Chapter XVII-B - vicarious liability for TDS - refund under section 244A - Whether a subsequent assessment of the payee at nil or loss absolves the deductor of liability to interest under section 201(1A) or of being deemed in-default under section 201(1). - HELD THAT: - The Tribunal held that the payee's later assessment at nil/loss is not determinative of the deductor's obligation to deduct tax at the time sums were credited or paid. The statutory obligation of the deductor is with reference to the tax 'deductible' under Chapter XVII-B (including certificates under section 197 or proceedings under section 195(2)), and cannot be made contingent on the payee's subsequent assessment. A payment by the payee prior to or at the time of assessment may discharge the deductor's liability under section 201(1), but the mere fact that the payee is ultimately assessed at loss does not automatically extinguish the deductor's liability to interest for the intervening period of delay. Excess tax collected relative to a tax deduction certificate is refundable (with interest under section 244A) and the Tribunal directed that interest paid in excess be refunded, but this is a distinct process from determining the compensatory interest under section 201(1A). [Paras 11, 14]

A subsequent assessment of the payee at nil/loss does not by itself absolve the deductor of interest liability under section 201(1A); the deductor's obligation is determined with reference to the tax deductible under the Act and by actual payment (by payer or payee) which alone can satisfy a demand under section 201(1).

Refund under section 244A - tax deductible under Chapter XVII-B - Computation and grant of refund (if any) of interest held/paid under section 201(1A) and related directions to the Assessing Officer. - HELD THAT: - Though the Tribunal resolved the legal questions as above, the quantum of interest refundable (if any) required factual verification as directed in its earlier orders. The Tribunal found that (i) interest computed in excess of that referable to the tax deductible as per tax deduction certificates is refundable, (ii) the Assessing Officer must verify what was required to be deducted, when it was required to be deducted, and when it was actually deposited (by payer or payee), and (iii) the AO must modify the orders under sections 201(1) and 201(1A) accordingly, compute refund of excess interest with interest under section 244A and communicate the computations in a speaking order. The Tribunal therefore remanded these factual and computation aspects to the AO for fresh consideration and determination in accordance with law and earlier directions. [Paras 15, 16]

Matter remanded to the Assessing Officer to verify facts, recompute interest under section 201(1A) with reference to the tax deductible and to grant refund of interest in excess (with interest under section 244A); AO to complete the process as directed.

Final Conclusion: The Tribunal held that liability to interest under section 201(1A) is not strictly conditional upon being deemed an assessee-in-default under section 201(1); the two provisions operate independently though linked by the tax 'deductible' under Chapter XVII B. A payee's subsequent assessment at nil/loss does not automatically extinguish the deductor's interest liability for the intervening period. The appeals were allowed in part by remitting factual and computation issues (verification of amount deductible, period and date of deposit, and computation of refund and interest under section 244A) to the Assessing Officer for determination in accordance with law, with directions to complete the process within the timeframe specified by the Tribunal.

Measurement of distance for the purpose of section 2(14)(iii)(b) of the Income-tax Act - municipal limits as on date of CBDT notification (06.01.1994) - measurement by shortest road distance for periods prior to A.Y. 2014-15 - distinction between setting aside an issue and directing the Assessing Officer - reliance on CBDT Circular No. 17/2015 and precedents of the ITAT

Distinction between setting aside an issue and directing the Assessing Officer - power of CIT(A) under section 251 of the Act - Whether the CIT(A) impermissibly 'set aside' the issue to the Assessing Officer or lawfully gave directions to the AO to act on the CIT(A)'s determination. - HELD THAT: - The Tribunal found that the CIT(A) did not set aside the issue for fresh adjudication by the AO but instead recorded a finding on the legal question (that distance must be measured from the municipal limits as on 06.01.1994) and directed the AO to determine the actual distance in accordance with that finding and act upon it. The distinction drawn is that an issue set aside would leave the matter open for adjudication by the AO, whereas directions require the AO merely to implement the CIT(A)'s adjudicatory conclusion. Accordingly, the Revenue's contention that the CIT(A) lacked power to set aside is misplaced because no setting aside occurred; only directions to implement the CIT(A)'s determination were given. [Paras 8, 9]

The challenge that the CIT(A) improperly set aside the issue is rejected; the CIT(A) lawfully gave directions to the AO to ascertain distance and act on the CIT(A)'s finding.

Measurement of distance for the purpose of section 2(14)(iii)(b) of the Income-tax Act - municipal limits as on date of CBDT notification (06.01.1994) - measurement by shortest road distance for periods prior to A.Y. 2014-15 - reliance on CBDT Circular No. 17/2015 and ITAT precedents - Whether the distance for determining applicability of section 2(14)(iii)(b) should be measured from the municipal limits as on 06.01.1994 and by what method for the relevant period. - HELD THAT: - The Tribunal accepted the CIT(A)'s conclusion, following the ITAT decisions and CBDT Circular No.17/2015, that for periods prior to A.Y.2014-15 the distance is to be measured by the shortest road distance and that the municipal limit to be used is the limit as specified in the CBDT notification dated 06.01.1994. The CIT(A) applied these precedents and directed the AO to ascertain the actual distance from the 06.01.1994 municipal boundary and, if the land is beyond 8 kms from that boundary, to treat it as falling outside the definition of 'capital asset' under section 2(14)(iii) and not charge capital gains. The Revenue did not point to any contrary High Court or Supreme Court decision; the Tribunal found no infirmity in following the ITAT line of authorities and the CBDT circular. [Paras 6, 11]

The distance is to be measured from the municipal limits as on 06.01.1994 and, for the relevant period, by the shortest road distance; the CIT(A)'s direction to the AO to ascertain distance on that basis is upheld.

Final Conclusion: The Revenue's appeal is dismissed; the CIT(A)'s directions to determine the distance from the municipal limits as on 06.01.1994 (and to apply the road-distance measure applicable for the period) are upheld, and the AO is to act on those findings to decide whether capital gains are chargeable.

Penalty under section 271(1)(c) - concealment or furnishing inaccurate particulars of income - requirement of AO's satisfaction for initiating penalty proceedings - change of charge in penalty proceedings - exemption under section 54F - deeming fiction in section 50 confined to mode of computation - bonafide belief and denial of claim not attracting penalty

Requirement of AO's satisfaction for initiating penalty proceedings - change of charge in penalty proceedings - penalty under section 271(1)(c) - Validity of penalty where proceedings were initiated on one charge but conducted and levied on a different charge - HELD THAT: - The Tribunal found that the Assessing Officer recorded satisfaction and initiated penalty proceedings on the basis that the assessee had claimed long term capital gains on sale of a godown while the AO treated the asset as a depreciable business asset attracting short term capital gains. However, the penalty was thereafter conducted and ultimately levied on the distinct ground that the assessee was ineligible for exemption under section 54F because conditions for that exemption were not fulfilled. Penalty proceedings being quasi criminal require that the charge on which they are initiated be clear and the proceedings conducted only on that charge. Conducting and levying penalty on a different charge than that for which satisfaction was recorded renders the penalty proceedings illegal. The Tribunal therefore held the penalty order to be not in accordance with law and set it aside for this legal infirmity. [Paras 5, 8, 9, 10, 13]

Penalty order set aside as illegal because proceedings were initiated on one charge but conducted and levied on a different charge.

Exemption under section 54F - bonafide belief and denial of claim not attracting penalty - deeming fiction in section 50 confined to mode of computation - Whether, on merits, deletion of penalty was justified because the assessee furnished particulars and denial of exemption in law did not amount to concealment or furnishing inaccurate particulars - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the assessee had furnished all particulars relating to the claim for exemption under section 54F and had a bonafide belief that the requisite investment would be completed within the statutory period; the failure to complete construction in time was on facts beyond the assessee's control. The CIT(A) also relied on judicial views treating certain procedural requirements as directory, and concluded that mere disallowance of the claim in law did not prove concealment or furnishing of inaccurate particulars. The Tribunal agreed with these conclusions and found no infirmity in deleting the penalty on the merits. [Paras 14, 15, 16, 17, 18]

Deletion of penalty upheld on merits because the assessee had furnished particulars and the denial of exemption in law did not constitute concealment or inaccurate particulars of income.

Final Conclusion: The appeal filed by the Revenue is dismissed: the penalty under section 271(1)(c) is set aside as illegally levied for being initiated on one charge but prosecuted on another, and, on the merits, the deletion of penalty by the CIT(A) is upheld because the assessee had furnished particulars and mere disallowance of the exemption did not amount to concealment.

Waiver of demurrage/rent under Regulation 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009 - detention certificate and entitlement to waiver of custody charges - liability to pay demurrage where goods are detained or confiscated - right of custodian/container freight station to recover demurrage and lien on goods - option to redeem/confiscated goods for re-export on payment of redemption fine - apportionment of demurrage liability between importer and Customs for different periods

Waiver of demurrage/rent under Regulation 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009 - detention certificate and entitlement to waiver of custody charges - Whether the partial waiver of demurrage/rent granted by the third respondent for the period 27.01.2015 to 19.10.2015 is sustainable. - HELD THAT: - The Court upheld the impugned communication of 23.12.2016 granting waiver for the period 27.01.2015 to 19.10.2015. The decision rests on Regulation 6(1)(l) which prevents a Customs Cargo Service Provider from charging rent/demurrage on seized/detained/confiscated goods, and on the factual chronology showing investigation and detention during that investigation period. The Court noted that earlier orders and communications, including the adjudication and the inability to complete investigation within statutory time, supported waiver for the investigation period. The Court also considered precedents dealing with detention certificates and waiver policies but applied Regulation 6(1)(l) to sustain the partial waiver granted up to 19.10.2015. [Paras 34, 44]

Partial waiver up to 19.10.2015 is sustained.

Liability to pay demurrage where goods are detained or confiscated - apportionment of demurrage liability between importer and Customs for different periods - right of custodian/container freight station to recover demurrage and lien on goods - Who must bear demurrage for the period after 19.10.2015 and for the period after the Commissioner (Appeals) order dated 19.04.2016. - HELD THAT: - The Court found that demurrage for the period between 19.10.2015 and 19.04.2016 (date of Commissioner of Customs (Appeals) order) must be borne by the petitioner because the petitioner showed no inclination to re-export the consignment during that interregnum. For the period after 19.04.2016, the Court held that loss caused to the private custodians (fourth and fifth respondents) by continuing to store the goods despite the adjudicatory orders must be borne by the Customs Department. This allocation is grounded on the facts that the petitioner did not take steps to re-export immediately after payment/options available and that the private custodians should not be forced to bear storage losses caused by official inaction thereafter. [Paras 45]

Demurrage from 19.10.2015 to 19.04.2016 to be paid by the petitioner; demurrage liability for the period thereafter to be borne by the Customs Department.

Option to redeem/confiscated goods for re-export on payment of redemption fine - detention certificate and entitlement to waiver of custody charges - Whether the petitioner may be permitted to re-export the consignment and on what conditions. - HELD THAT: - Although the petitioner had earlier paid redemption fine and penalties and had an option to redeem for re-export, the goods remained in custody. The Court directed the respondents (officials and custodians) to permit re-export provided the goods remain in containers and the petitioner pays the demurrage for 19.10.2015 to 19.04.2016 with applicable interest. The fourth and fifth respondents were directed to compute the amount expeditiously (preferably within thirty days) and intimate the petitioner, who must pay and then be allowed to re-export within fifteen days. The Court also protected the petitioner's right to challenge any alleged excess in the amount by preserving its right to recover from the custodians by appropriate proceedings. [Paras 46, 47, 48, 49]

Re-export permitted subject to payment by the petitioner of demurrage for 19.10.2015 to 19.04.2016 (with interest) calculated by the custodians; payment to be followed by re-export and right to contest excessive charges preserved.

Final Conclusion: Writ petitions partly allowed: the impugned partial waiver dated 23.12.2016 is upheld for 27.01.2015 to 19.10.2015; petitioner to bear demurrage for 19.10.2015 to 19.04.2016 and Customs must bear loss thereafter; respondents and custodians directed to permit re-export on payment terms and calculation as ordered, with the petitioner's rights to dispute excessive charges preserved.

Natural justice - procedure under Section 153 of the Customs Act - notice returned unserved - failure of appellate authority to record a finding on a pleaded ground - remand for de novo adjudication

Natural justice - procedure under Section 153 of the Customs Act - notice returned unserved - failure of appellate authority to record a finding on a pleaded ground - remand for de novo adjudication - The Order-in-Original and the Order-in-Appeal are unsustainable for failure to follow statutory procedure and principles of natural justice, and the matter must be remanded for fresh adjudication. - HELD THAT: - The Adjudicating Authority recorded that the notice issued to the appellant had been returned unserved and, thereafter, proceeded to pass the adjudication order without affording further personal hearing or following the procedure prescribed under Section 153 read with Section 122A of the Customs Act. The First Appellate Authority, though noting the specific contention regarding non-compliance with the statutory procedure, did not discuss or record any finding on that ground. The prescribed procedure for adjudication under the Act must be strictly followed and a notice returned unserved cannot be treated as effective service in the absence of compliance with the statutory steps and fair opportunity to the party. Ignoring a specific pleaded procedural defect by the appellate authority is contrary to law. Consequently the impugned Order-in-Original suffers from infirmity for want of due process and the Order-in-Appeal upholding it cannot be sustained. The matter is therefore restored to the Adjudicating Authority for a de novo adjudication, with directions that sufficient and reasonable opportunities as prescribed under the statute shall be afforded and that the Adjudicating Authority shall consider the pleas, documents and authorities that may be filed during the fresh proceedings. No decision is expressed on the merits to avoid prejudicing the forum conducting the de novo adjudication. [Paras 5, 6, 7]

Order-in-Original set aside; Order-in-Appeal set aside; matter remanded to the Adjudicating Authority for de novo adjudication in accordance with law with adequate opportunity to the appellant.

Final Conclusion: Appeal allowed by way of remand: both the adjudication order and the appellate order are set aside for failure to follow the statutory procedure and principles of natural justice; fresh adjudication to be conducted in accordance with law with reasonable opportunities to the appellant.

Summons must reflect application of mind and prima facie satisfaction - abuse of process of court - mens rea requirement for offences under the Companies Act - false statement and omission requiring knowledge to be false or material - no prima facie case where allegations are absurd and inherently improbable

Summons must reflect application of mind and prima facie satisfaction - Pepsi Foods principle on summoning - Validity of the order issuing summons by the learned 2nd Special Court in absence of recorded satisfaction or reasoning - HELD THAT: - The Court examined the order dated 14.12.2018 and the materials placed before the trial court and found that the order does not disclose how the court satisfied itself about a prima facie case against the accused nor does it record the grounds for proceeding. Relying on the settled principle that summoning is a serious step and the magistrate/court must apply its mind to the nature of allegations and supporting evidence, the High Court held that the impugned order was cryptic, routine and lacked the requisite application of mind. Consequently the process issued in reliance upon that order could not be permitted to stand. [Paras 10]

The order issuing summons was vitiated for want of application of mind and was set aside.

Mens rea requirement for offences under the Companies Act - false statement and omission requiring knowledge to be false or material - no prima facie case where allegations are absurd and inherently improbable - abuse of process of court - Whether the allegations in the complaint, being primarily an inadvertent typographical error in the board minutes, disclosed offences under Sections 447, 448 and 149 of the Companies Act - HELD THAT: - Having considered the board minutes, the filed Form DIR-12, the appointment letter and the replies to the show cause notice, the Court concluded that the subsequent documents consistently record the appointment as an "Additional Director" and that the solitary sentence referring to "Independent Director" was an inadvertent clerical error. The Court observed that Sections 447 and 448 require knowledge or intent-a false statement must be made "knowing it to be false" or an omission must be made "knowing it to be material"-and that fraud under Section 447 requires intent. Applying these legal tests, the Court found no material to show that the alleged misstatement was made with knowledge or intent to deceive, and that the allegations were absurd and inherently improbable such that there was no real prospect of conviction. Continuing the prosecution would therefore amount to an abuse of process. [Paras 6, 11, 12]

The materials did not disclose the requisite mens rea or a prima facie offence under Sections 447, 448 or the provisions relating to independent directors in Section 149; continuation of the complaint would be an abuse of process.

Final Conclusion: The revisional petition is allowed; all proceedings in Complaint Case No. 14 of 2018 before the learned 2nd Special Court, Kolkata are quashed. There shall be no order as to costs.

Initiation of corporate insolvency resolution process by financial creditor - Limitation for filing Section 7 petition - Existence of default - Completeness of application in Form No.1 - Appointment of Interim Resolution Professional - Moratorium under Section 14 - Constitution of Committee of Creditors - Interim funding of insolvency resolution process

Limitation for filing Section 7 petition - Initiation of corporate insolvency resolution process by financial creditor - The Section 7 petition was filed within limitation. - HELD THAT: - The Tribunal considered the dates of default and the compliance affidavit filed to remove defects. The petitioner clarified that the date of occurrence of default was 02.03.2013 with acknowledgements on 07.03.2015 and 01.09.2017, and the filing was held to be within limitation. The Tribunal recorded these findings while deciding the admissibility of the Section 7 application and treating the application as complete for the purposes of admission (see paragraph 10). [Paras 10]

Petition is within limitation and admitted for consideration.

Existence of default - Completeness of application in Form No.1 - There was a financial default and the Section 7 application was complete. - HELD THAT: - The Tribunal examined the ledger, bank statements, statement of dues and the arbitral award attached as annexures, and noted that the corporate debtor in its reply admitted the indebtedness and its incapacity to pay. The application in the prescribed Form No.1 was found to be complete. On these materials the Tribunal was satisfied that a default had occurred and the petition met the requirements for admission under Section 7(5)(a) (see paragraph 12). [Paras 12]

Default established and the Section 7 application is complete.

Appointment of Interim Resolution Professional - Completeness of application in Form No.1 - Replacement and appointment of the proposed Interim Resolution Professional was allowed and Mr. Gaurav Srivastava was appointed as Interim Resolution Professional. - HELD THAT: - The petitioner sought substitution of the initially proposed IRP due to prior commitments, supported by a NOC. The Tribunal allowed the replacement and, after checking credentials and noting absence of adverse records or disciplinary proceedings, appointed Mr. Gaurav Srivastava as Interim Resolution Professional. The Tribunal directed him to perform statutory functions under the Code (see paragraphs 4 and 13). [Paras 4, 13]

Mr. Gaurav Srivastava is appointed as Interim Resolution Professional and directed to perform duties under the Code.

Moratorium under Section 14 - Initiation of corporate insolvency resolution process by financial creditor - On admission of the Section 7 petition, moratorium under Section 14 of the Code was declared. - HELD THAT: - Having admitted the petition under Section 7(5) on the basis that the petitioner proved the debt and default above the threshold, the Tribunal declared the moratorium and set out the statutory prohibitions that follow during the moratorium period. The moratorium operates from the date of the order until completion of CIRP or approval of a resolution plan or liquidation (see paragraph 14). [Paras 14]

Moratorium under Section 14 is declared with the statutory prohibitions.

Constitution of Committee of Creditors - Initiation of corporate insolvency resolution process by financial creditor - Directions were given for collation of claims, constitution of the Committee of Creditors and convening of its first meeting within specified timeframes. - HELD THAT: - The Interim Resolution Professional was directed to collate all claims, determine the corporate debtor's financial position, constitute the Committee of Creditors and file a report certifying its constitution within thirty days of appointment, and to convene the first meeting of the Committee within seven days of that report. The IRP was also directed to send fortnightly progress reports to the Tribunal (see paragraph 15). [Paras 15]

IRP to collate claims, constitute the Committee of Creditors within thirty days and convene the first meeting as directed.

Interim funding of insolvency resolution process - The financial creditor was directed to deposit interim funds with the Interim Resolution Professional to meet CIRP expenses. - HELD THAT: - Pursuant to Regulation 6 of the IBBI Regulations, the Tribunal directed the financial creditor to deposit a specified sum with the Interim Resolution Professional to meet expenses of performing assigned functions. The order provided for subsequent adjustment of the amount by the Committee of Creditors as accounted for by the IRP (see paragraph 16). [Paras 16]

Financial creditor to deposit interim funds with the IRP; amount subject to adjustment by the Committee of Creditors.

Final Conclusion: The Section 7 petition filed by the financial creditor was admitted: the Tribunal found the petition within limitation, established default and completeness of the application, allowed substitution and appointed the Interim Resolution Professional, declared the moratorium under Section 14, directed constitution of the Committee of Creditors and mandated interim funding to the IRP; consequential procedural directions were issued for conduct of the CIRP.

Service of demand notice - dispute raised by corporate debtor - limitation for filing under Section 9 of the IBC - conditions for admission under Section 9 of the IBC - moratorium under Section 14 of the IBC - appointment of Interim Resolution Professional - territorial jurisdiction

Service of demand notice - Demand notice in Form 3 dated 31.07.2019 was properly served on the corporate debtor. - HELD THAT: - The Tribunal found that although the demand notice dispatched by registered post was not delivered, the statutory demand was served by email and by publication as recorded in the proceedings. The Tribunal treated such service as effective for purposes of Section 9 and proceeded accordingly, noting the steps taken to bring the notice to the corporate debtor's attention. [Paras 5, 9]

Service of the demand notice was held to be proper and effective.

Dispute raised by corporate debtor - The operational debt remained undisputed by the corporate debtor. - HELD THAT: - The corporate debtor did not appear or file any reply despite service and was set ex parte. The petitioner filed an affidavit under Section 9(3)(b) stating that no dispute had been raised by the corporate debtor. On this basis the Tribunal concluded that there was no genuine pre-existing dispute to bar admission of the Section 9 petition. [Paras 7, 10, 13]

There was no dispute by the corporate debtor; the debt was treated as undisputed.

Limitation for filing under Section 9 of the IBC - The petition under Section 9 was filed within the prescribed limitation period. - HELD THAT: - The Tribunal noted the date of default as 21.01.2019 and the filing date of the petition as 23.01.2020. Having compared these dates, the Tribunal held that the petition was within limitation and therefore maintainable on that ground. [Paras 4, 11]

The application was held to be filed within limitation.

Conditions for admission under Section 9 of the IBC - threshold of operational debt - The petition satisfied the statutory conditions for admission under Section 9(5)(i) of the IBC and was complete in Form 5. - HELD THAT: - On examination of the Form 5 and accompanying documents (invoices, ledger, settlement correspondence, cheque return memo), the Tribunal found that the petitioner had proved the existence of an operational debt and default exceeding the statutory monetary threshold applicable at the relevant time. The material on record remained unrebutted and established the corporate debtor's liability and default. Consequently, the Tribunal was satisfied that the requirements of Section 9(5)(i) were met. [Paras 4, 12, 13, 14]

The petition was admitted under Section 9 and found complete.

Moratorium under Section 14 of the IBC - appointment of Interim Resolution Professional - On admission, moratorium was declared and an Interim Resolution Professional was appointed. - HELD THAT: - Having admitted the petition, the Tribunal directed the moratorium to take effect in terms of Section 14(1), clarified the scope and duration of the moratorium including exceptions for supply of essential goods or services, and appointed an Interim Resolution Professional from the IBBI list. Directions were also given regarding the IRP's duties, public announcement, constitution of Committee of Creditors, filing of consent (Form-2), fortnightly progress reports, and interim funding to be deposited by the petitioner. [Paras 14, 15, 16, 17, 18]

Moratorium declared and Ms. Shilpa Singhal was appointed as Interim Resolution Professional with specified directions.

Territorial jurisdiction - Territorial jurisdiction of the Adjudicating Authority over the corporate debtor was established. - HELD THAT: - The Tribunal recorded the corporate debtor's registered office details and master data confirming its location within the territorial limits of this Adjudicating Authority, thereby establishing jurisdiction to adjudicate the petition under the Code. [Paras 2]

This Tribunal was held to have territorial jurisdiction over the petition.

Final Conclusion: The Section 9 petition was admitted: service of the demand notice was held effective, the debt was undisputed and the petition was within limitation; statutory requirements for admission were satisfied. Consequentially, moratorium was declared and an Interim Resolution Professional was appointed with directions to manage the CIRP.

Admissibility of Cenvat credit on C&F Agent services - interpretation of input service under Rule 2(l) of Cenvat Credit Rules, 2004 - services received up to the place of removal - C&F Agent services treated as sale by the principal (appellant)

Admissibility of Cenvat credit on C&F Agent services - services received up to the place of removal - interpretation of input service under Rule 2(l) of Cenvat Credit Rules, 2004 - Cenvat credit is admissible on C&F Agent services claimed by the appellant. - HELD THAT: - The Tribunal found that C&F Agent services are rendered in relation to the sale of goods and are provided up to the place of removal. Since the sale effected through the C&F agent is treated as a sale by the appellant, those services fall within the scope of "input service" as envisaged in Rule 2(l) of the Cenvat Credit Rules, 2004. The appellant's reliance on the Tribunal's earlier decision in its own case was noted and the same principle was applied to allow the credit. On this basis the impugned finding denying credit was set aside.

Impugned order set aside and the appeal allowed; Cenvat credit on C&F Agent services held admissible.

Final Conclusion: The appeal is allowed: C&F Agent services are input services received up to the place of removal and Cenvat credit thereon is admissible under Rule 2(l) of the Cenvat Credit Rules, 2004.

Exemption under Notification No.108/95-CE - scope of exemption limited to duty leviable under section 3 of the Central Excises and Salt Act, 1944 and additional duty leviable under sub section (1) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 - additional duty imposed under Section 133 of the Finance Act, 1999 - refund of duty not covered by the notification is not permissible - legal principle that a duty not expressly exempted cannot be treated as exemptible

Exemption under Notification No.108/95-CE - additional duty imposed under Section 133 of the Finance Act, 1999 - refund of duty not covered by the notification is not permissible - legal principle that a duty not expressly exempted cannot be treated as exemptible - Whether the appellant was entitled to refund of the additional duty claimed on diesel where the supply was under Notification No.108/95-CE. - HELD THAT: - The Tribunal examined the text of Notification No.108/95-CE and observed that the exemption is expressly confined to (i) the duty of excise leviable under section 3 of the Central Excises and Salt Act, 1944 and (ii) the additional duty leviable under sub section (1) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957. The additional duty for which refund was claimed in this case had been imposed under Section 133 of the Finance Act, 1999 (as amended), and therefore falls outside the classes of duties identified in the notification. The Tribunal held that a duty not mentioned in the notification cannot be given exemption by construction and relied on the authoritative principle that a duty which is not exempted cannot be treated as exemptible; the reasoning was reinforced by the Supreme Court decisions cited before the Tribunal (UNICORN INDUSTRIES Vs. UNION OF INDIA and COMMISSIONER OF CUS.(IMPORT), MUMBAI Vs. DILIP KUMAR & COMPANY ) which support the proposition that exemption cannot be extended to duties not covered by the notification. Applying this principle, the Tribunal found no infirmity in the orders denying exemption and refund of the additional duty and of associated cenvat credit. [Paras 4, 5]

Claim for refund of the additional duty imposed under Section 133 of the Finance Act, 1999 is not maintainable under Notification No.108/95-CE and is rejected.

Final Conclusion: The appeal is dismissed; the denial of exemption and consequential refund of the additional duty (and related cenvat credit) is upheld as the duty claimed is not within the scope of Notification No.108/95-CE.

Cenvat credit admissibility on duty paid by consignor - transfer of inputs between units and valuation under Rule 3(5) of Cenvat Credit Rules - LIFO valuation method and challenge to credit at recipient end - binding precedent of MDS Switchgear on recipient credit

Cenvat credit admissibility on duty paid by consignor - transfer of inputs between units - Rule 3(5) of Cenvat Credit Rules - Whether the recipient unit can be denied Cenvat credit on inputs transferred by the Chennai unit when duty on those inputs was paid by the Chennai unit and its assessment was not disputed by the department. - HELD THAT: - The Tribunal found that there is no dispute that the recipient appellant availed credit of duty actually paid by the Chennai unit and that the payment/assessment of duty by the Chennai unit was not objected to by the department. In such circumstances the department cannot challenge valuation or re-open the entitlement to Cenvat Credit at the recipient end. The Tribunal applied the binding principle laid down in MDS Switchgear that duty paid on inputs is available as Cenvat Credit to the recipient, and held that the department's application of LIFO to re-quantify and deny credit was not permissible where the consignor's duty payment stood unchallenged. Relying on the cited precedents, the Tribunal concluded the issue was no longer res integra and the appellant had correctly availed the credit. [Paras 4, 5]

The denial of Cenvat credit was set aside and the appeals allowed.

Final Conclusion: Where the consignor unit has paid duty on inputs and that payment/assessment is not disputed by the department, the recipient unit is entitled to the Cenvat credit of that duty; the adjudicating order denying such credit is set aside and the appeals are allowed.

By-product - Cenvat credit admissible in respect of inputs contained in by-product - demand under Rule 6 not sustainable in respect of by-products

By-product - Cenvat credit admissible in respect of inputs contained in by-product - demand under Rule 6 not sustainable in respect of by-products - Whether Silica Sand and Ball Clay, recovered incidentally during opencast mining of lignite, are by-products and whether demand under Rule 6 can be sustained in respect of their clearance. - HELD THAT: - The Tribunal examined the nature of the mining contract and mining method and found that the contract is for lignite mining while removal of overburden (which includes silica sand and ball clay) is an unavoidable incidental operation required to extract the main product, lignite. The proportionate yield chart placed on record showed that lignite constitutes the overwhelming bulk of output while silica sand and ball clay are produced in very small proportions, indicating their character as by-products. Relying on para 3.7 of Chapter 5 of the CBEC manual, which recognises admissibility of Cenvat credit in respect of inputs contained in waste, refuse or by-products and does not deny credit where inputs are used in relation to the manufacture of final products, the Tribunal held that once a material is established to be a by-product, a demand under Rule 6 cannot be sustained. Applying the ratio of the appellant's earlier decision on identical facts, the Tribunal set aside the impugned order and allowed the appeal. [Paras 4, 5]

Silica Sand and Ball Clay are by-products generated incidentally during lignite mining; consequently, demand under Rule 6 in respect of their clearance does not survive and the impugned order is set aside.

Final Conclusion: The appeal is allowed: the Tribunal applied its earlier ratio that silica sand and ball clay recovered incidentally during lignite mining are by-products and that a demand under Rule 6 in respect of their clearance cannot be sustained.

Application of Rule 6 of Cenvat Credit Rules to clearance of by product (bagasse) - clearance of bagasse generated during manufacture of sugar - precedential effect of higher court decisions on statutory interpretation - res integra

Application of Rule 6 of Cenvat Credit Rules to clearance of by product (bagasse) - clearance of bagasse generated during manufacture of sugar - precedential effect of higher court decisions on statutory interpretation - Whether the appellant is liable to pay an amount under Rule 6 of the Cenvat Credit Rules on clearance of bagasse generated in the course of manufacture of sugar. - HELD THAT: - The Tribunal considered the revenue's reliance on the impugned order but held that the question is no longer res integra in view of higher judicial pronouncements. The Tribunal referred to the Hon'ble Supreme Court decision in UOI and Ors vs. M/s DSCL Sugar Ltd and to the Allahabad High Court decision in M/s Balrampur Chini Mills Ltd , noting that the latter struck down the circular of 25.04.2016 and settled that Rule 6 of the Cenvat Credit Rules, 2004 does not apply to clearance of bagasse generated during sugar manufacture. Applying that settled legal position, the Tribunal found the demand unsustainable and set aside the impugned order. [Paras 4, 5]

The demand under Rule 6 in respect of clearance of bagasse is not sustainable; the impugned order is set aside and the appeal is allowed.

Final Conclusion: Having applied the settled precedents, the Tribunal held that Rule 6 of the Cenvat Credit Rules does not apply to clearance of bagasse generated in sugar manufacture; the demand was quashed and the appeal allowed.

Appointment of arbitrator - appeal to Appellate Tribunal under Section 58 of the Tamil Nadu Value Added Tax Act, 2006 - jurisdiction of appellate authority to decide assessment appeals - compliance with earlier judicial directions and limits on fresh judicial intervention - scope of pre-revision proceedings under the Tamil Nadu Value Added Tax Act, 2006

Appointment of arbitrator - appeal to Appellate Tribunal under Section 58 of the Tamil Nadu Value Added Tax Act, 2006 - jurisdiction of appellate authority to decide assessment appeals - Petition for direction to appoint a Joint Commissioner or other officer as an arbitrator to decide legality of assessment orders was not maintainable. - HELD THAT: - The High Court declined to direct appointment of a Joint Commissioner/arbitrator to examine the legality of assessment orders in respect of the specified assessment years because the statutory appellate mechanism under the Tamil Nadu Value Added Tax Act, 2006 (notably the appeal to the Appellate Tribunal as described in Section 58) provides the established forum for challenge and determination of assessment orders. The matter had traversed to the Supreme Court and the petitioner had filed statutory appeals which were pending before the appellate authority; further, the Act does not contemplate appointment of a departmental officer as an arbitrator to supplant the appellate process. In these circumstances the Court held that judicial intervention in the form sought (appointment of an arbitrator/Joint Commissioner) could not be countenanced and refused the mandamus prayer. [Paras 18, 19, 20, 21]

Prayer for appointment of a Joint Commissioner/arbitrator to consider legality of the assessment orders is rejected.

Scope of pre-revision proceedings under the Tamil Nadu Value Added Tax Act, 2006 - compliance with earlier judicial directions and limits on fresh judicial intervention - Writ challenge to the impugned pre-revision/assessment notice was dismissed but the petitioner was permitted to file a detailed reply and the State Tax Officer was directed to decide the proceedings on merits within a time-bound period. - HELD THAT: - The Court found no merit in quashing the impugned pre-revision notice because the notice relied on enforcement inspections and alleged irregularities which the petitioner must answer in the statutory proceedings; proceedings under the Act (including those initiated under Section 27(2)) cannot be forestalled on the basis advanced. However, recognising procedural fairness, the Court granted the petitioner liberty to file a detailed reply to the pre-revision notice and ordered that on receipt of such reply the State Tax Officer shall proceed to decide the matter on merits and in accordance with law. The Court directed that the decision be taken expeditiously and preferably within six months from receipt of a copy of the order. [Paras 24, 25, 27, 28]

Writ petition challenging the pre-revision notice dismissed; petitioner permitted to file reply within thirty days and the State Tax Officer directed to decide the proceedings on merits, preferably within six months.

Final Conclusion: Writ petitions dismissed. Direction refused for appointment of a Joint Commissioner/arbitrator to examine assessment legality; challenge to the pre-revision notice rejected but petitioner allowed to file a detailed reply and the State Tax Officer directed to decide the proceedings on merits within a stipulated time (preferably six months).

Calculation of set off under Note-1 and Note-2 of List-C of OST Rate Chart in respect of Entry No.76 - denial of set off for consumables for want of supporting invoices - applicability of precedent in Luis Packaging Pvt. Ltd. to set off claims - factual findings and appellate interference standard - burden of production of documentary evidence to establish entitlement to set off

Calculation of set off under Note-1 and Note-2 of List-C of OST Rate Chart in respect of Entry No.76 - Whether the mechanism of calculating set off under Note-1 and Note-2 of List-C in respect of Entry No.76 was correctly applied by the authorities below. - HELD THAT: - The Court considered the challenge to the manner in which the STO and ACST applied the provisions of Note-1 and Note-2 of List-C and affirmed the concurrent factual and legal application by the authorities below. The Tribunal examined the assessment and the rate chart provisions and found that the statutory notes and the rate for Entry No.76 were applied; the dispute turned on the Assessee's failure to substantiate its claimed set off with supporting documents. The High Court found no legal error in the authorities applying Note-1 and Note-2 and concluded that, on the record, the mechanism of calculation as adopted by the forums below was correct in law. [Paras 5, 6, 10]

Mechanism of calculating set off under Note-1 and Note-2 of List-C as applied by the authorities below was correct and is upheld.

Denial of set off for consumables for want of supporting invoices - burden of production of documentary evidence to establish entitlement to set off - Whether the denial of set off in respect of consumables for lack of purchase invoices was justified. - HELD THAT: - The Tribunal found that no purchase invoices or supporting documents were produced by the Assessee to rebut the assessing authority's conclusion, despite a specific ground of appeal indicating willingness to produce records. The STO and ACST denied the claimed set off for consumables on the ground of absence of satisfactory invoices; the Tribunal endorsed that factual finding. The High Court declined to interfere with this factual conclusion, noting that the denial was based on non-production of documentary evidence which is fatal to the claim for set off. [Paras 5, 7, 8, 10]

Denial of set off for consumables for want of supporting invoices was justified and is upheld.

Applicability of precedent in Luis Packaging Pvt. Ltd. to set off claims - factual findings and appellate interference standard - Whether the decision in Luis Packaging Pvt. Ltd. applied to entitle the Assessee to the set off claimed. - HELD THAT: - The Tribunal considered Luis Packaging and concluded it was not applicable because that case concerned benefits under IPR-1996 whereas the present Assessee did not claim any IPR benefit. The Tribunal observed that the legal principle in Luis Packaging regarding computation without reference to IPR exemptions did not assist the Assessee here. The High Court agreed that the precedent was not relevant to the facts before the authorities and that no fault was shown in treating that decision as inapposite. [Paras 8, 9, 10]

Luis Packaging decision is not applicable to the present case and does not assist the Assessee.

Final Conclusion: The High Court dismissed the revision petition, upholding the denial of the claimed set off for lack of supporting invoices and holding that the computation and application of Note-1 and Note-2 of List-C in respect of Entry No.76 by the authorities below was correct; the precedent relied on by the Assessee was found inapplicable and the concurrent factual findings were not interfered with.

Exigibility of tax at the first point of sale - component parts and accessories of machinery - tools and machinery spare parts exigible as first point taxable goods - deduction under section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act - demand for double taxation of the same transaction

Component parts and accessories of machinery - exigibility of tax at the first point of sale - Whether the 'idler' sold by the assessee to HEC is a component part, accessory or tool of machinery and therefore exigible to tax at the first point of sale. - HELD THAT: - The Tribunal and the lower authorities treated the idler as a machinery spare/component. The Finance Department notification of 9th January 2002 precludes doubt by making "machinery, machinery parts and spare parts and component parts and accessories thereof and tools" exigible to tax at the first point of sale. The assessee did not place material on record to show the function of the idler or that it was not an accessory or part of a particular machine. The Allahabad High Court decision relied on by the assessee turned on the factual finding that the pulleys there were ordinary pulleys not integral to any particular machine; that factual distinction is not established here. The attempted semantic distinction between "equipment" and "machinery" does not assist the assessee in the statutory context because the notification expressly covers component parts, accessories and tools which capture items such as the idler. Applying these considerations, the Court upheld the view that the idler is exigible to tax at the first point of sale and that the assessee, as first seller, was bound to collect tax. [Paras 12, 13, 14, 15, 16]

The idler sold to HEC is a component/ accessory or tool exigible to tax at the first point of sale; the assessee, being the first seller, was required to collect tax.

Deduction under section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act - demand for double taxation of the same transaction - Whether disallowance of the assessee's claim for deduction under section 5(2)(A)(a)(ii) in respect of sales to HEC against Form-XXXIV was lawful. - HELD THAT: - The assessee claimed deduction under section 5(2)(A)(a)(ii) relying on the fact that HEC had paid tax on subsequent sales. The Court observed that the mere production of a declaration did not suffice where the notified entry renders the goods first-point taxable when sold by the first seller. Further, the contention that allowing deduction would prevent double taxation was not established because it was not shown that the goods sold by the assessee to HEC were the identical items subsequently taxed in HEC's sales to NALCO; the record did not demonstrate that the same transaction was being taxed twice. In the absence of clear evidence to substantiate double taxation or that the idler was not a part/accessory, the Court found the disallowance of the deduction to be lawful and proper. [Paras 10, 14, 16]

The disallowance of the deduction under section 5(2)(A)(a)(ii) in respect of sales to HEC against Form-XXXIV was lawful; double taxation was not established on the record.

Final Conclusion: Both questions framed by the Court are answered in favour of the Department: the idler is exigible to tax at the first point of sale as a component/accessory/tool of machinery and the disallowance of the deduction under section 5(2)(A)(a)(ii) in respect of the sales to HEC is upheld; the revision petitions are dismissed.

Refund of tax deposited during search - obligation to decide refund on assessment - quash and set aside administrative orders - remand for de novo consideration - personal hearing with advance notice - provision of list of relied judicial authorities to opposing party

Refund of tax deposited during search - obligation to decide refund on assessment - quash and set aside administrative orders - remand for de novo consideration - Orders dated 31.01.2019 and 18.03.2020 failed to deal with the refund claim despite earlier court direction and were therefore liable to be quashed and remanded for fresh adjudication. - HELD THAT: - The Court recorded that in an earlier order dated 14.09.2018 it had accepted the Revenue's statement that assessments for the relevant years were in progress and had granted liberty to urge refund contentions before the assessing authorities. The impugned orders (31.01.2019 and 18.03.2020) are silent on the refund issue which the earlier order required the Adjudicating Authority to consider. In consequence, those orders are quashed and set aside and the matter is remitted for de novo consideration. The Adjudicating Authority is directed to consider all submissions of the petitioner and pass a reasoned order dealing with every submission within eight weeks from the date of remand. [Paras 6]

Impugned orders for the stated years quashed and set aside; matter remanded for de novo consideration with directions to decide the refund claim by a reasoned order within eight weeks.

Personal hearing with advance notice - provision of list of relied judicial authorities to opposing party - remand for de novo consideration - Procedure to be followed on remand: the petitioner must be given a personal hearing with specified notice, be supplied with a list of authorities the Adjudicating Authority intends to rely upon, and be allowed brief time to file written submissions after the hearing. - HELD THAT: - The Court directed that before passing any order on remand the petitioner shall be given a personal hearing, with notice of the personal hearing served at least seven days in advance. If the Adjudicating Authority intends to rely upon any judgment or authority, a list of such authorities must be provided to the petitioner along with the notice so the petitioner may deal with or distinguish them. After the personal hearing, petitioner may file written submissions within three working days if so desired. These procedural safeguards are mandated to ensure fair opportunity and effective adjudication on remand. [Paras 7, 8]

Adjudicating Authority must give personal hearing with at least seven days' notice, provide list of relied authorities in advance, and permit filing of written submissions within three working days after hearing.

Quash and set aside administrative orders - remand for de novo consideration - Order dated 12.05.2021 in respect of F.Y. 2016-17, which likewise did not consider the refund issue, is quashed and remanded for fresh consideration subject to the same directions. - HELD THAT: - Counsel for the parties agreed that the facts in respect of F.Y. 2016-17 were identical and that the refund question had not been addressed in the order dated 12.05.2021. In fairness, and to avoid multiplicity of litigation, the Court quashed that order as well and directed that the same procedural and adjudicatory directions issued for the other years shall apply to F.Y. 2016-17. [Paras 11, 12]

Order dated 12.05.2021 for F.Y. 2016-17 quashed and set aside; matter remanded for de novo consideration in accordance with the directions given for the other years.

Final Conclusion: The writ petition was disposed of as withdrawn after the Court quashed the impugned orders for the specified financial years and remanded the matters for de novo consideration with directions to provide a personal hearing, advance notice, disclosure of authorities to be relied upon and a brief window for post-hearing written submissions; no comment was made on the merits.

Exemption under Entry 29-B of List-A (sale of goods to Defence Service Installation for resale to military installations and personnel) - Burden of proof on dealer to establish sale to Defence Service Installations - Sale to individuals versus sale to Defence Service Installations - Permits or labels stating "for sale to Defence personnel only" not conclusive to attract exemption

Exemption under Entry 29-B of List-A (sale of goods to Defence Service Installation for resale to military installations and personnel) - Burden of proof on dealer to establish sale to Defence Service Installations - Sale to individuals versus sale to Defence Service Installations - Whether sales made to three named individuals qualified for exemption under Entry 29-B as sales to Defence Service Installations and whether the Tribunal was correct in dismissing the claim. - HELD THAT: - The Court accepted the interpretation that Entry 29-B grants exemption only where the dealer has sold goods to Defence Service Installations located inside the State for resale to military installations and personnel. The determinative legal requirement is that the immediate buyer must be a Defence Service Installation (or equivalent authorised entity) such that the sale itself fits within Entry 29-B. The Assessee failed to produce evidence establishing that sales amounting to Rs.1,11,73,805 were made to such installations; the material showed sales to three individuals without any binding condition that they were authorised agents or were precluded from selling to non-Defence buyers. The Tribunal therefore rightly treated those transactions as not falling within Entry 29-B and disallowed the deduction in respect thereof. The Court found no legal error in the concurrent conclusions of the ACST and the Tribunal and affirmed their approach and findings. [Paras 6, 7, 8, 10]

The Tribunal's dismissal of the claim insofar as sales to the three individuals were treated as not being sales to Defence Service Installations is upheld; the exemption under Entry 29-B was correctly denied for those sales.

Permits or labels stating "for sale to Defence personnel only" not conclusive to attract exemption - Burden of proof on dealer to establish sale to Defence Service Installations - Whether the presence of a permit entry and consignment labels stating "for sale to Defence personnel only" sufficed to prove that sales to individuals were, in law, sales to Defence Service Installations for purposes of Entry 29-B. - HELD THAT: - The Court rejected the contention that a permit endorsement or consignment labels alone could transform a sale to an individual into a sale to a Defence Service Installation. The legal test under Entry 29-B requires that the goods be sold to Defence Service Installations (or otherwise satisfy the entry), not merely that permits or labels indicate intended ultimate use. Absent documentary proof that the immediate purchasers were Defence Service Installations or authorised agents whose purchases were effectively sales to such installations, the endorsement and labels were insufficient. Consequently, the court found no error in treating those transactions as non-exempt. [Paras 9, 10]

The submission based on permit entries and consignment labels was rejected; such material did not establish entitlement to exemption under Entry 29-B.

Final Conclusion: The petition is dismissed. The Tribunal and the ACST correctly applied Entry 29-B and the evidentiary burden; sales to the three individuals did not qualify for exemption and the Court will set off amounts paid under the interim order against the petitioner's tax liability.

Appointment of a Joint Commissioner as an arbitrator under the TNVAT regime - assessment pursuant to revision notice based on Enforcement (D3) proposal - principles of natural justice and requirement of opportunity of hearing before assessment - quashing and remand for fresh adjudication with directions to file reply and pass speaking order

Appointment of a Joint Commissioner as an arbitrator under the TNVAT regime - assessment pursuant to revision notice based on Enforcement (D3) proposal - Validity of the petitioner's request for appointment of a Joint Commissioner to arbitrate the legality of the revision notices - HELD THAT: - The Court held that the statutory scheme under the TNVAT Act does not envisage appointment of an Arbitrator/Joint Commissioner to examine the correctness of revision notices issued for reassessment. The petitioner's reliance on administrative practice in other matters and on D-3 proposals from the Enforcement Wing did not create a statutory right to have the matter referred to a Joint Commissioner as an arbitrator. Consequently, the request for such appointment was without merit and could not prevent the assessment authority from proceeding to adjudicate the revision notices in accordance with law. [Paras 19]

Request for appointment of a Joint Commissioner as an arbitrator was rejected; TNVAT Act does not contemplate such appointment.

Principles of natural justice and requirement of opportunity of hearing before assessment - quashing and remand for fresh adjudication with directions to file reply and pass speaking order - Whether the assessment orders dated 16.09.2019 should be sustained where they were passed without the petitioner having filed substantive replies and without explicit notice that no appointment of an arbitrator would be made - HELD THAT: - The Court found that the impugned assessment orders were passed without the petitioner having filed substantive replies to the revision notices and without informing the petitioner that the request for appointment of an arbitrator would not be acceded to. In view of the absence of a proper opportunity to file a reply on merits and to be heard before passing final orders, the Court considered the procedure infirm. Rather than deciding merits, the Court quashed the impugned assessment orders and remitted the matters for fresh consideration. The Court directed the petitioner to file replies to the revision notices within 30 days of receipt of this order and directed the assessing authority to pass a speaking order on merits within 60 days thereafter; the impugned assessment orders were to be treated as corrigendum to the revision notices. [Paras 19, 20]

Impugned assessment orders dated 16.09.2019 quashed; matters remitted for fresh adjudication with directions for filing of reply within 30 days and passing of a speaking order within 60 days.

Final Conclusion: The writ petitions were allowed to the extent that the assessment orders dated 16.09.2019 for Assessment Years 2013-2014 and 2014-2015 were quashed and remitted for fresh consideration; the petitioner's plea for appointment of a Joint Commissioner as an arbitrator under the TNVAT scheme was rejected; directions were given for filing of replies and for the assessing authority to pass speaking orders within specified timelines.

Mandatory pre litigation conciliation under Section 22 C of the Legal Services Authorities Act - adjudicatory power of Permanent Lok Adalat as a statutory mechanism under Chapter VI A - award of Permanent Lok Adalat deemed to be a decree of a civil court and final - step wise statutory procedure for Permanent Lok Adalat proceedings

Mandatory pre litigation conciliation under Section 22 C of the Legal Services Authorities Act - step wise statutory procedure for Permanent Lok Adalat proceedings - Conciliation proceedings prescribed by Section 22 C are mandatory before a Permanent Lok Adalat can decide a dispute on merits. - HELD THAT: - The Court construed Section 22 C as laying down a sequential procedure: (i) filing of application which ousts court jurisdiction; (ii) exchange of written statements and documents; (iii) conduct of conciliation proceedings; (iv) formulation and proposal of settlement terms; and (v) only upon failure of settlement under Sub section (7) can the Permanent Lok Adalat decide the dispute under Sub section (8). The statutory scheme and legislative history show that settlement is the principal objective of Chapter VI A and adjudication is a residuary last resort. Allowing the Permanent Lok Adalat to bypass the conciliation steps merely because a party is absent would permit ex parte adjudication producing final awards treated as decrees, contrary to the parliamentary scheme. Prior precedents of this Court were cited to support the mandatory character of the conciliation steps. [Paras 24, 25, 26, 27]

Conciliation proceedings under Section 22 C are mandatory and must be attempted and settlement terms proposed (and rejected) before the Permanent Lok Adalat can adjudicate on merits.

Adjudicatory power of Permanent Lok Adalat as a statutory mechanism under Chapter VI A - award of Permanent Lok Adalat deemed to be a decree of a civil court and final - Permanent Lok Adalats possess adjudicatory functions under the LSA Act, but subject to the mandatory conciliation procedure in Section 22 C. - HELD THAT: - The Court distinguished ordinary Lok Adalats (which only attempt settlement and return matters to courts if settlement fails) from Permanent Lok Adalats created by Chapter VI A. The legislative purpose, composition of Permanent Lok Adalats and the express provision in Section 22 C(8) demonstrate that, where conciliation fails, the Permanent Lok Adalat may decide disputes on merits (except offences and beyond pecuniary limits). Earlier decisions of this Court were cited to confirm the constitutionality and statutory adjudicatory role of Permanent Lok Adalats. However, that adjudicatory power is conditional upon compliance with the step by step conciliation process. [Paras 28, 29, 30, 31, 32]

Permanent Lok Adalats have statutory adjudicatory power on merits, but such power is exercisable only after the mandatory conciliation process under Section 22 C is complied with.

Award of Permanent Lok Adalat deemed to be a decree of a civil court and final - mandatory pre litigation conciliation under Section 22 C of the Legal Services Authorities Act - The award dated 19 November 2014 of the Permanent Lok Adalat was set aside for failure to follow the mandatory conciliation procedure. - HELD THAT: - Applying the principles that conciliation is mandatory and that adjudication by a Permanent Lok Adalat is permissible only after settlement efforts fail, the Court found that the impugned award contained no indication that terms of settlement were proposed to the parties and rejected. Instead, the Permanent Lok Adalat proceeded to decide the dispute on merits in the absence of the opposite party. That procedure was contrary to the statutory scheme and therefore the award was vulnerable and set aside. The Court expressly held earlier findings of the High Court that Permanent Lok Adalats lack adjudicatory power to be incorrect while upholding the High Court's ultimate order insofar as the award was invalid for procedural non compliance. [Paras 33, 34]

The award dated 19 November 2014 is set aside because the Permanent Lok Adalat failed to follow the mandatory conciliation steps required by Section 22 C.

Final Conclusion: The appeal clarifies two points: (a) Permanent Lok Adalats do have statutory adjudicatory power under Chapter VI A, but (b) the conciliation procedure prescribed by Section 22 C is mandatory and must be exhausted (including proposal of settlement terms) before adjudication on merits. Applying these principles, the Court set aside the Permanent Lok Adalat's award of 19 November 2014 for failure to follow the mandatory conciliation procedure; other rights and contentions remain open and no order as to costs was made.

Liability of partner for offence under Section 138 of the Negotiable Instruments Act - Application of deeming provision relating to person in charge of or responsible to a firm - Effect of dissolution of partnership and requirement of public notice under Section 45 and mode under Section 72 of the Indian Partnership Act, 1932 - Permissibility of raising pure question of law in appeal

Liability of partner for offence under Section 138 of the Negotiable Instruments Act - Application of deeming provision relating to person in charge of or responsible to a firm - Whether the complaint and evidence fulfilled the requirement to attract liability under Section 138 read with the deeming provision for a person in charge of or responsible to the firm, and whether the Trial Court erred in failing to examine this aspect. - HELD THAT: - The Trial Court did not record a definite finding whether the substance of the allegations in the complaint met the requirement of the deeming provision in Section 141 of the Act and thereby whether a partner or a person in charge/responsible to the firm could be prosecuted. The High Court held that this was a vital aspect which the Trial Court ought to have examined on the materials and that whether the allegations suffice to attract culpability under the deeming provision is a matter for adjudication at trial. Consequently, the Court found that the Trial Court's omission to consider this question required fresh consideration and directed that the issue be gone into after further evidence is led. [Paras 11, 12, 19]

Acquittal on this ground set aside; issue remitted to the Trial Court for fresh evidence and adjudication whether the elements of the deeming provision / Section 141 are satisfied.

Effect of dissolution of partnership and requirement of public notice under Section 45 and mode under Section 72 of the Indian Partnership Act, 1932 - Permissibility of raising pure question of law in appeal - Whether the partners remained liable for acts done after dissolution because public notice of dissolution as required by Sections 45 and 72 of the Partnership Act was not given, and whether this point could be raised in appeal though not taken below. - HELD THAT: - The record showed the firm was dissolved prior to the transaction but there was no evidence that the partners complied with the statutory mode of public notice under Sections 45 and 72 of the Partnership Act. The Trial Court failed to deal with this question. The High Court held that non-compliance with the requirements of public notice is a question of law and may be raised at any stage, including on appeal, and that the absence of proof of publication disentitles the respondents to rely on dissolution to escape liability. In view of these lacunae, the Court directed that parties be permitted to adduce further evidence on this aspect and the Trial Court should decide the question afresh. [Paras 13, 15, 18, 19]

Impugned finding set aside; matter remitted to the Trial Court to permit further evidence and to decide whether statutory public notice was given and its legal effect on partner's liability.

Final Conclusion: The High Court set aside the Trial Court's order of acquittal and remitted the matter for fresh enquiry: the Trial Court is to permit further evidence and decide (a) whether the allegations satisfy the deeming provision rendering the partners or persons in charge liable under Section 138 read with Section 141 of the Negotiable Instruments Act, and (b) whether public notice of dissolution as required by Sections 45 and 72 of the Partnership Act was given; the parties to appear before the Trial Court as directed.

Interlocutory order - revisional jurisdiction - Section 148 of the Negotiable Instruments Act, 1881 - bar under sub-section (2) of Section 397 CrPC - inherent jurisdiction under Section 482 CrPC

Interlocutory order - Section 148 of the Negotiable Instruments Act, 1881 - revisional jurisdiction - bar under sub-section (2) of Section 397 CrPC - Maintainability of a criminal revision under Section 397 CrPC against an order passed by the first appellate court under Section 148 of the Negotiable Instruments Act, 1881 directing deposit pending disposal of appeal. - HELD THAT: - Applying the tests and authorities considered in Madhu Limaye v. State of Maharashtra and subsequent decisions, the court held that the power exercised under Section 148 NI Act to direct deposit is essentially procedural - a direction as to interim deposit pending appeal which does not finally determine the rights of the parties. The Court accepted the Halsbury formulation and the tests adopted by the Supreme Court: an order which merely directs procedure or preserves the subject-matter pending final determination, and which does not culminate the proceedings in either event, is interlocutory. Orders under Section 148, being directions to deposit a percentage pending appeal and not determining the appeal on merits, fall within that ambit. Applying these principles and precedents, the Court concluded that the order impugned is interlocutory in character for the purposes of Section 397(2) and thus a criminal revision under Section 397 CrPC is not maintainable against such an order. [Paras 15, 16]

Revision under Section 397 CrPC against the order passed under Section 148 NI Act is not maintainable and is dismissed.

Section 148 of the Negotiable Instruments Act, 1881 - inherent jurisdiction under Section 482 CrPC - Availability of alternative remedy after dismissal of revision. - HELD THAT: - While declining to entertain the revision, the Court recognised that the petitioner is not left remediless: following Madhu Limaye, the Court observed that the petitioner remains at liberty to invoke the inherent jurisdiction of the High Court under Section 482 CrPC for appropriate relief. The order therefore dismisses the revision as not maintainable but permits the petitioner to pursue relief by way of proceedings under Section 482 CrPC. [Paras 17, 18]

Revision dismissed as not maintainable, with liberty to the petitioner to approach the High Court under Section 482 CrPC.

Final Conclusion: The Criminal Revision is dismissed as not maintainable being directed against an interlocutory order passed under Section 148 of the Negotiable Instruments Act, 1881; the petitioner is granted liberty to seek appropriate relief by invoking the High Court's inherent jurisdiction under Section 482 CrPC.