TaxTMI Updates e-Newsletter
Jul 03,2019

Amusement park - amusement facility - classification of services under Heading 9996 (Recreational, Cultural and Sporting services) - interpretation of notification entries - common parlance test for statutory interpretation - applicability of GST rate on admission to amusement parks versus access to amusement facilities

Amusement park - amusement facility - interpretation of notification entries - classification of services under Heading 9996 (Recreational, Cultural and Sporting services) - Whether the gaming zone operated by the applicant in a mall constitutes an amusement park attracting the reduced GST rate, or an amusement facility attracting the higher rate. - HELD THAT: - The Authority examined the amended entries to Notification No. 11/2017 (as amended by Notification No. 1/2018) which split services into (a) admission to amusement parks (reduced rate) and (b) admission to entertainment events or access to amusement facilities (higher rate). The term amusement park is not defined in the GST Act; the Authority therefore referred to the Bombay Entertainment Duty Act definition and to dictionary/Wikipedia meanings. Those sources indicate that a 'park' denotes a relatively large area of land used for a particular purpose and typically comprises multiple attractions and rides spread over a substantial open area, whereas a 'facility' denotes a place, building, equipment or amenity for a particular purpose and need not be extensive in area. The Authority also noted the applicant's own descriptions and advertising, which described the business as providing amusement facilities within a mall through deployed gaming machines and equipment in a limited area. On that basis the Authority concluded that the applicant's operations are properly characterised as an amusement facility rather than an amusement park, and therefore fall under the entry attracting the higher rate under Heading 9996 rather than the reduced amusement-park entry.

The gaming zone operated by the applicant in the mall is an amusement facility and not an amusement park.

Final Conclusion: The Authority ruled that the services of operating the gaming zone in the mall are classifiable as access to an amusement facility and attract GST at 28% (under the entry for access to amusement facilities) with effect from w.e.f. 25.1.2018.

Classification - Food for special dietary uses - Diabetic foods - Compound preparations for making non-alcoholic beverages - Essential character - Rule 3(a) of the General Rules of Interpretation

Classification - Food for special dietary uses - Diabetic foods - Compound preparations for making non-alcoholic beverages - Essential character - Appropriate classification of Prohance D (Chocolate). - HELD THAT: - The Authority found the product to be a food preparation. Although the applicant contended that Prohance D (Chocolate) is a 'diabetic food' covered by Tariff Item 2106 90 91, the Authority concluded that the product is not exclusively a diabetic food: it is marketed and advertised for broader health and nutrition benefits, and the composition does not demonstrate the specific nutritional characteristics (e.g. high level of dietary fibre or other features) sufficient to treat it as a diabetic food alone. The product is a powdered, compound preparation intended to be mixed with water or milk to produce a non alcoholic beverage. The presence of about 3% cocoa as a flavouring does not alter the essential character of the product. Both parties accepted that the product falls under heading 2106 (food preparations). On the facts and having regard to the nature, composition and use, the Authority held that Prohance D (Chocolate) is classifiable as a compound preparation for making non alcoholic beverages under Tariff Item 2106 90 50 and not as a special diabetic food under 2106 90 91 or as a cocoa/chocolate product under Chapter 18.

Prohance D (Chocolate) is classifiable under Tariff Item 2106 90 50 as a compound preparation for making non alcoholic beverages.

Final Conclusion: The Advance Ruling answers that Prohance D (Chocolate) is classifiable under Tariff Item 2106 90 50 (compound preparations for making non alcoholic beverages) and not under the specific 'diabetic foods' entry; it therefore attracts the rate applicable to that entry under the notified schedules.

Writ of mandamus - direction to permit amendment of tax return - claim of input tax credit - submission of supporting documents - completion of departmental exercise and refund within stipulated time

Writ of mandamus - submission of supporting documents - completion of departmental exercise and refund within stipulated time - Petition disposed by directing the petitioner to submit supporting documents and the first respondent to consider the reply and complete the departmental exercise including refund within a stipulated time. - HELD THAT: - The Court recorded the parties' statements that the petitioner will file supporting documents in response to the communication dated 28.03.2019 and that the respondents will complete their exercise within two months from receipt of all documents. On these undertakings the writ petition was disposed by directing the petitioner to file the reply with supporting documents within one week and directing the first respondent to consider the documents, take such steps as necessitated by the reply and complete the entire exercise including payment of any refund within two months from receipt of the reply. The order contemplates submission of documents by the petitioner and time-bound administrative action by the respondents rather than a final adjudication on the merits of the claimed credit or amendment of the return.

Petitioner to file reply and supporting documents within one week; first respondent to consider the material and complete the exercise including refund within two months of receipt of the reply; writ petition disposed accordingly.

Final Conclusion: Writ petition disposed on the basis of mutual undertakings: petitioner to supply the required documents within one week and respondents to conclude the processing and issue any refund within two months from receipt of those documents.

Mandamus to consider representation - disposal of representation in a manner known to law - IGST refund/benefits (application for) - direction for service of disposal order under acknowledgement

Mandamus to consider representation - disposal of representation in a manner known to law - Direction to the second respondent to consider and dispose of the writ petitioner's representation dated 23.11.2018. - HELD THAT: - The petitioner originally sought a writ of mandamus for sanction of IGST benefits and for consideration of the representation dated 23.11.2018. At the hearing the petitioner abridged the prayer to seek only disposal of that representation. The Revenue accepted that the abridged prayer was innocuous and undertook to have the representation disposed. Having regard to the concession and the limited form of relief sought, the Court directed the second respondent to dispose of the representation in a manner known to law within a specified time frame and to serve the proceedings/orders disposing the representation on the petitioner under due acknowledgement. [Paras 5, 8]

Second respondent directed to dispose of the representation dated 23.11.2018 within three weeks of receipt of the order and to serve the disposing proceedings/orders on the petitioner under due acknowledgement within seven working days of disposal.

Final Conclusion: Writ petition disposed by directing the second respondent to consider and dispose of the petitioner's representation dated 23.11.2018 within three weeks and to serve the disposal order on the petitioner within seven working days; no costs.

Stay pending appeal - CBDT guidelines for stay - deposit as pre-condition for stay - discretionary power of assessing authority in grant of stay - imposition of conditions for stay including undertaking and security

CBDT guidelines for stay - deposit as pre-condition for stay - discretionary power of assessing authority in grant of stay - Applicability and scope of CBDT instructions governing grant of stay of demand pending first appeal and the discretion to fix the quantum of deposit as a pre-condition for stay. - HELD THAT: - The Court examined Instruction No.1914 (1993) and the modified guidelines issued by the CBDT (partial modification) prescribing a standard pre-condition of deposit (15% under the modified circular) for stay where demand is disputed before CIT(A). The Court held that the modified guidelines set a general standard but themselves contemplate deviation-either upward or downward-by the assessing officer/Pr. CIT/CIT after considering relevant facts. Therefore the circulars do not oust or fetter the discretionary power of the authority; rather they provide a standardized framework while permitting the authority to increase or decrease the percentage based on case-specific considerations. Ordinarily, courts will be slow to interfere with bona fide discretionary exercise, but such discretion remains subject to judicial supervision where exigent circumstances or disproportionality are shown. [Paras 14, 15, 16]

The CBDT guidelines prescribe a standard deposit but permit deviation; the assessing authority has discretionary power to fix the lump-sum deposit as a pre-condition for grant of stay, subject to supervisory review.

Stay pending appeal - deposit as pre-condition for stay - imposition of conditions for stay including undertaking and security - Appropriateness of the 20% deposit directed in the present case and the relief to be granted to the writ-applicant in respect of stay pending appeal. - HELD THAT: - Applying the acknowledged discretionary framework to the facts of this case, the Court recognized that the total disputed demand is substantial and that the assessing authority acted within its discretionary domain in directing a deposit. Balancing the revenue interest and the assessee's ability to prosecute the appeal, the Court exercised its supervisory jurisdiction to moderate the requirement. It reduced the deposit requirement to 10% of the disputed demand (noting that Rs.5 lakh has already been deposited) and imposed an additional condition that the assessee shall furnish immovable security to the satisfaction of the assessing authority for the remaining 10%. The Court specified timelines for compliance and made the modified stay conditional on the assessee filing an affidavit undertaking to comply; failure to comply within the stipulated time would result in automatic revival of the impugned order. [Paras 16, 17, 18, 19, 20]

The requirement to deposit 20% is reduced to 10% with the further condition that the assessee furnish immovable security for the remaining 10% and file an affidavit undertaking compliance within the stipulated time; non-compliance will revive the impugned order.

Final Conclusion: The Court upheld the discretionary framework in the CBDT guidelines while exercising supervisory jurisdiction to modify the interim condition in this case: the writ-applicant may secure stay pending first appeal on payment/deposit obligations reduced and subject to furnishing immovable security and filing an affidavit within the timelines directed; non-compliance will result in automatic revival of the original order.

Deduction under Chapter VI-A - computation of gross total income after adjustment of losses - application and scope of non-obstante clause in Section 80 I(6) - treatment of inter divisional losses for computing entitlement to deductions

Deduction under Chapter VI-A - computation of gross total income after adjustment of losses - treatment of inter divisional losses for computing entitlement to deductions - Whether the Tribunal was correct in reversing the CIT(A)'s allowance of deduction under Section 80IB where profits were determinable for the assessee's multiple units, having regard to the requirement to compute gross total income after adjusting losses. - HELD THAT: - The Court examined the Tribunal's order reversing the CIT(A)'s computation of deduction under Section 80IB and considered the Supreme Court's exposition that, although Section 80 I(6) requires only profits of an industrial undertaking be treated as the source for computing the deduction, Sections in Chapter VI A (read with the definition of 'gross total income') require that gross total income be determined after adjusting losses; if gross total income so computed is nil, no Chapter VI A deduction is available. The Tribunal had also failed to note that the Supreme Court decision it should have applied was rendered prior to the Tribunal's order. Distinguishing the facts of Synco Industries (where gross total income before deduction was nil), the High Court observed that in the present case the assessee's gross total income before deduction was positive and substantial, and therefore the methodology adopted by the Assessing Officer of aggregating incomes of all units before considering the eligible deduction under Section 80IB (as upheld by CIT(A)) was incorrect. On the facts, the Tribunal's reversal of the CIT(A) was not justified and the CIT(A)'s approach restoring the deduction was correct. [Paras 5, 7, 8]

Tribunal's order dated 17.12.2008 is set aside; the order of the Commissioner of Income Tax (Appeals) is restored and the substantial questions of law are answered in favour of the assessee.

Final Conclusion: Appeal allowed; Tribunal's order quashed and CIT(A)'s order restored - deduction under Section 80IB sustained on the facts as the gross total income before deduction was not reduced to nil after adjustment of losses.

Entitlement to deduction under Section 80IB(10) - law applicable in the assessment year - transactions concluded prior to statutory amendment - substantial question of law - appeal limited to questions raised in lower forum

Entitlement to deduction under Section 80IB(10) - law applicable in the assessment year - transactions concluded prior to statutory amendment - Deduction claimed under Section 80IB(10) for AY 2010-11 was allowable because the transactions were concluded before the amendment which came into effect on 01.04.2010. - HELD THAT: - The Tribunal found, and this Court agreed, that the registered sale deeds and agreements relating to the flats were executed and the transactions were completed in November 2008, well before the Finance Act 2009 amendment effective from 01.04.2010. Consequently, the legal position applicable to the assessee is the law in force at the time the transactions were concluded. Reliance on the principle that law applicable is that which is in force in the assessment year does not assist the Revenue on the facts because the relevant events pre-dated the amendment. The Tribunal's earlier decision in a substantively identical matter was followed and the Division Bench in Commissioner of Income Tax, Chennai v. Elegant Estates treated the question as not raising a substantial question of law. [Paras 7, 9, 10, 11]

The claim of deduction under Section 80IB(10) for AY 2010-11 was sustained as the transactions were completed prior to the amendment; no substantial question of law arises on this issue.

Appeal limited to questions raised in lower forum - substantial question of law - Revenue is precluded from contesting the character of the assessee (developer versus works contractor) before this Court because that question was decided by the Commissioner (Appeals) and no appeal was preferred against that finding. - HELD THAT: - The Assessing Officer's contention that the assessee was a works contractor and not a developer was considered and decided in favour of the assessee by the CIT(A). The Revenue did not challenge that factual and legal finding by filing an appeal against the CIT(A)'s specific conclusion. Having omitted to appeal, the Revenue cannot raise that contention before this Court. Accordingly the substantial question of law framed in that regard is rejected. [Paras 6, 11]

The challenge to the characterisation of the assessee was rejected for want of appeal against the CIT(A)'s finding; that substantial question of law is not admitted.

Final Conclusion: The Tax Case Appeal is dismissed. The Tribunal's decision allowing the deduction under Section 80IB(10) on the ground that the transactions were completed before the amendment is upheld, and the Revenue's challenge on the assessee's character is rejected for lack of appeal; no substantial question of law survives.

Section 49 - cost of acquisition of previous owner - bogus transaction - reopening of assessment and notice under Section 148 - ex-parte assessment under Section 144

Section 49 - cost of acquisition of previous owner - gift of shares - Application of Section 49 to reckon cost of acquisition of shares received by way of gift - HELD THAT: - The Tribunal found on the material on record that the assessee had not established that he became the owner of the shares by a valid gift from his daughter. The Assessing Officer recorded that no registered gift document or board approvals were produced, the allotment and transfers took place in rapid succession, and supporting evidence for the source of funds of the donor was not furnished. The CIT(A) confined his reasoning to the literal effect of Section 49 without addressing these factual infirmities. On reappraisal, the Tribunal concluded that Section 49(1)(ii) does not apply where the capital asset did not in fact become the property of the assessee. The High Court endorsed the Tribunal's factual conclusion and held that there is no substantial question of law arising from the claim that Section 49 should apply. [Paras 19, 20]

Section 49 does not apply because the assessee failed to prove that the shares became his property by a valid gift.

Bogus transaction - capital gains assessment - Effect of the Tribunal's finding that the gift transaction was bogus on assessment of capital gains in the assessee's hands - HELD THAT: - The Tribunal, after considering the lack of documentary proof, the sequence of allotment and transfers, absence of board approvals, and failure to explain source of funds, concluded that the transaction was a sham and the assessee had not disclosed the sale in the original return. The Assessing Officer therefore proceeded to reopen and complete the assessment ex parte and made additions. The High Court found that the factual findings of the Assessing Officer and Tribunal that the transaction was bogus were not displaced by the assessee, who moreover did not cooperate with assessment proceedings, and that consequently the contention that no capital gains could be assessed in the assessee's hands was not tenable. [Paras 20, 21, 22]

Finding of a bogus transaction justified assessment of capital gains in the assessee's hands; the assessee failed to rebut the factual conclusions.

Final Conclusion: The High Court dismissed the appeal, holding that the Tribunal correctly declined to apply Section 49 where the assessee failed to prove ownership by valid gift and that the factual finding of a bogus transaction warranted assessment; no substantial question of law arises.

Undisclosed investment in block assessment - evidence relatable to search under Chapter XIV-B - valuation report of the Departmental Valuer - absence of incriminating material recovered during search - bonafide difference in valuation

Undisclosed investment in block assessment - evidence relatable to search under Chapter XIV-B - valuation report of the Departmental Valuer - absence of incriminating material recovered during search - Addition for alleged undisclosed investment in construction could not be sustained where no incriminating material relating to that investment was found during search and the Department relied solely on a DVO valuation prepared from material available before the search. - HELD THAT: - The Court held that under the law applicable to block assessments, additions as 'undisclosed income' must be founded on material discovered as a result of the search or on documents or information relatable to such material. The valuation report relied upon by the Assessing Officer was prepared after inspection following a search at the father in law's premises and existed prior to the search at the assessee's premises; therefore it did not amount to incriminating material found during the search of the assessee. Binding decisions of various High Courts were applied to the facts to the effect that an addition in a block assessment cannot be sustained solely on the basis of a DVO report when no incriminating material was recovered during the search at the assessee's premises. Applying those principles to the record, the Court concluded that the Assessing Officer's addition based on the departmental valuation alone was unjustified. [Paras 13, 21, 23, 24, 26]

The addition treating the house construction as unexplained investment in block assessment was set aside; the Tribunal's confirmation was reversed and the substantial question answered for the assessee.

Valuation report of the Departmental Valuer - bonafide difference in valuation - The small difference between the assessee's valuation and the DVO valuation (less than 4%) was to be regarded as a bonafide difference and not a basis for an addition. - HELD THAT: - Relying on precedents recognizing that valuation of house property is an estimate and may vary despite bonafide efforts, the Court observed that a difference of less than 4% falls within a reasonable margin. The construction was still in progress on the date of departmental inspection, and therefore the minor variance in estimated cost was held to be bona fide rather than indicative of undisclosed income. [Paras 25]

The valuation difference was held to be bona fide and not a ground for inclusion in undisclosed income.

Final Conclusion: The appeal is allowed; the Tribunal's order confirming the addition is set aside. The substantial questions of law are answered in favour of the assessee, holding that in the absence of incriminating material recovered during search and given the negligible valuation variance, the impugned addition for undisclosed investment cannot be sustained.

Validity of assessment initiated under section 153C - Cessation of liability addition under section 41(1) - Disallowance of interest under section 40A(2)(b) - Ex parte disposal for non representation

Validity of assessment initiated under section 153C - Ex parte disposal for non representation - Challenge to the validity of proceedings and assessment completed under section 153C - HELD THAT: - The assessee contested initiation of proceedings under section 153C on the ground that satisfaction for issuance of notice was not recorded. The Tribunal had earlier directed production of the record of satisfaction; the Revenue produced communications indicating that satisfaction was recorded. The assessee, having remained unrepresented and having not controverted the production, failed to rebut that material. On the record before it, the Tribunal upheld the validity of initiation of proceedings under section 153C and dismissed the grounds challenging the same. [Paras 4, 5, 7]

Grounds challenging initiation of proceedings under section 153C are dismissed.

Cessation of liability addition under section 41(1) - Sustainability of addition on account of cessation of liability repeated in assessment completed under section 143(3) r/w section 153C - HELD THAT: - The Assessing Officer repeated an addition made in the original assessment order under section 41(1) in the assessment completed after issuance of notice under section 153C, although that addition did not arise from incriminating material discovered in the search. The Tribunal noted that the disputed addition had been the subject matter of dispute in the original assessment and that the Assessing Officer could not re make the same addition in the subsequent assessment when it was not based on search material. On that basis the Tribunal deleted the addition. [Paras 8, 9, 10]

Addition under section 41(1) on account of cessation of liability is deleted.

Disallowance of interest under section 40A(2)(b) - Allowability of interest paid to related concern and deletion of disallowance made by repeating original assessment addition in assessments completed after section 153C action - HELD THAT: - The Assessing Officer in original assessments had disallowed interest by applying a notional reasonable rate; the same disallowance was repeated in assessments completed pursuant to section 153C though it did not stem from incriminating material found in the search. The first appellate authority had deleted the addition in the appeals against the original assessments (and accepted the interest rate claimed by the assessee for earlier years). The Tribunal held that once the addition in the original order was set aside by the first appellate authority, the Assessing Officer could not sustain the same addition in the subsequent assessment under section 153C. Given that the disputed additions were not based on incriminating material, the Tribunal directed deletion of the disallowances in the impugned years. [Paras 19, 22, 23, 25, 26]

Disallowances of interest under section 40A(2)(b) repeated in assessments completed after section 153C are deleted; appeals on this issue are allowed (partly allowed in some appeals, allowed in one).

Final Conclusion: The Tribunal disposed the appeals ex parte against the assessee for non representation. Challenges to initiation of proceedings under section 153C were dismissed; additions repeated from original assessments which were not founded on incriminating material (including cessation of liability under section 41(1) and interest disallowances under section 40A(2)(b)) were deleted. Overall result: ITA No.2719/Mum./2017 allowed; remaining appeals partly allowed.

Allowability of interest on delayed payment of VAT, Service Tax and TDS as deductible under section 37(1) of the Income-tax Act - revisional jurisdiction under section 263 - erroneous and prejudicial to the interest of revenue - when an assessing officer's choice between two permissible views is unsustainable in law

Revisional jurisdiction under section 263 - erroneous and prejudicial to the interest of revenue - when an assessing officer's choice between two permissible views is unsustainable in law - Whether the Principal Commissioner of Income Tax rightly exercised jurisdiction under section 263 to revise the assessment dated 11.05.2016 on the ground that the assessing officer erred in allowing interest on delayed payment of VAT, service tax and TDS. - HELD THAT: - The Tribunal applied the twin tests from Malabar Industries - the AO's order must be both erroneous and prejudicial to the revenue. An order is not to be treated as erroneous merely because the Commissioner disagrees with a view taken by the AO; it must be shown that the view taken by the AO is unsustainable in law, or that the AO failed to apply mind or investigate. The assessee and the AO had taken a possible view that the interest was allowable under section 37(1); that view is permissible in law. The Tribunal emphasised that admissions by the assessee do not alter the legal position: what is allowable under the charging provisions cannot be made taxable by admission. Applying these principles, the Tribunal held the AO adopted one of the courses permissible in law and therefore his order was neither erroneous nor prejudicial to the revenue warranting revision under section 263. [Paras 10, 11, 13]

The exercise of revisional jurisdiction under section 263 was not justified and the order of the Principal CIT is quashed.

Allowability of interest on delayed payment of VAT, Service Tax and TDS as deductible under section 37(1) of the Income-tax Act - Whether interest on late deposit of VAT, service tax and TDS is allowable as business expenditure under section 37(1). - HELD THAT: - The Tribunal examined precedent distinguishing interest on delayed payment of income-tax (which is not deductible) from interest on delayed payment of indirect taxes and TDS. Following decisions of coordinate benches and binding discussion, the Tribunal held interest on delayed payment of VAT, service tax and TDS to be compensatory in nature and allowable under section 37(1). Since the AO's allowance represented a legally sustainable view, it could not be characterized as erroneous for purposes of section 263. [Paras 12, 13]

Interest on delayed payment of VAT, service tax and TDS is allowable under section 37(1); the AO's allowance was a permissible view and stands.

Final Conclusion: The appeal is allowed; the order of the Principal Commissioner of Income Tax passed under section 263 dated 06.02.2019 is quashed and the assessing officer's order dated 11.05.2016 stands affirmed to the extent held sustainable by the Tribunal.

Receivables as separate international transaction - transfer pricing adjustment for notional interest on inter-company receivables - working capital adjustment and its effect on benchmarking - arm's length price of international transactions - deletion of transfer pricing addition where ALP already accounts for credit effect

Receivables as separate international transaction - transfer pricing adjustment for notional interest on inter-company receivables - working capital adjustment and its effect on benchmarking - Whether the transfer pricing adjustment made by the AO/TPO on account of notional interest on outstanding receivables from Associated Enterprises should be sustained. - HELD THAT: - The Tribunal found that the assessee had not charged interest on overdue debts from third parties, was a debt-free entity paying no interest on funds used in business, and earned a substantially higher margin in the software services segment (23.33%) than the weighted margin of comparables (11.42%). The Tribunal accepted that the working-capital adjusted margin of the assessee already reflected the financial effect of delayed receivables and relied on the decision of the Hon'ble Delhi High Court in CIT v. EKL Appliances Ltd to conclude that a separate adjustment for outstanding receivables would amount to double counting. Having determined that the effect of extended credit was incorporated in the working-capital adjustment to ALP, the Tribunal held that the addition computed on benchmarking receivables (interest at SBI PLR plus mark-up) was not warranted. Consequently the Tribunal directed deletion of the transfer pricing adjustment made on account of outstanding receivables and declined to adjudicate ancillary arguments (including contention on applicability of LIBOR), treating them as academic.

Transfer pricing addition on account of notional interest on outstanding receivables deleted; appeal allowed on this ground.

Final Conclusion: The Tribunal allowed the appeal by deleting the adjustment made for notional interest on outstanding receivables for Assessment Year 2010-11, holding that the working-capital adjusted ALP already accounted for the impact of delayed receivables and that a separate addition would result in double counting; other contentions were left academic.

Slump sale - computation of capital gains under Section 50B - holding period for capital assets (short-term vs long-term) - deduction under Section 43B - payment before specified date - diversion of funds and proportionate disallowance of interest - treatment of foreign exchange gain or loss on restatement as revenue or capital

Slump sale - computation of capital gains under Section 50B - holding period for capital assets (short-term vs long-term) - Whether the transfer of the Taloja unit is a slump sale assessable under Section 50B and whether the transaction gives rise to long-term or short-term capital gains. - HELD THAT: - The Tribunal applied the Jurisdictional High Court's reasoning that an industrial unit transferred as a going concern for a lump-sum consideration, without values being assigned to individual assets (save for stamp-duty valuation), falls within the definition of slump sale under Section 2(42C). Section 50B is the specific provision for computation of capital gains on slump sales and governs classification between long-term and short-term for such transfers; its proviso makes assets held for not more than thirty-six months deemed short-term. The High Court had held that the sale documents described the transaction as a slump sale, a Chartered Accountant's certificate in the prescribed form was filed, and that Section 50B, not Section 50, applies even where depreciable assets form part of the undertaking. In view of that authoritative decision in the assessee's own case, the Tribunal allowed the Revenue's appeal and restored the assessment under Section 50B. [Paras 6]

The transfer of the Taloja unit was held to be a slump sale assessable under Section 50B; the Revenue's appeal is allowed and the assessment under Section 50B restored.

Deduction under Section 43B - payment before specified date - Whether interest accrued to banks/financial institutions but not paid before the due date of filing the return is allowable as deduction under Section 43B. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that Section 43B permits deduction of interest to banks/financial institutions only on actual payment and, where payment is required to be made before the specified date for filing the return, non-payment cannot be cured by subsequent waiver or offer of income in a later assessment year. The assessee's concession that the interest was not paid before the due date was noted and the later year treatment of waiver was held irrelevant to allow the deduction in the year under consideration. [Paras 8]

The disallowance under Section 43B is confirmed and the assessee's ground is dismissed.

Diversion of funds and proportionate disallowance of interest - Whether interest should be disallowed proportionately on account of interest-free advances to sister concerns and, if so, the manner of computation. - HELD THAT: - Relying on the Jurisdictional High Court precedent cited by the authorities, the Tribunal agreed that where funds are diverted as interest-free advances without benefit to the assessee, proportionate interest disallowance is justified. The Tribunal observed that computation must be done on outstanding balances on a day-to-day basis to determine the correct proportionate disallowance and therefore remitted the matter to the Assessing Officer for re-computation in accordance with that approach. [Paras 9]

Issue remitted to the Assessing Officer for recomputation of the proportionate disallowance of interest on a day-to-day basis; ground partly allowed for statistical purposes.

Treatment of foreign exchange gain or loss on restatement as revenue or capital - Whether the loss on restatement of foreign currency loans is revenue in nature (allowable) or capital in nature (disallowable), and the appropriate treatment in assessment. - HELD THAT: - The Tribunal applied the tests laid down by the Supreme Court: the character of the gain or loss depends on whether the foreign-currency liability was incurred on revenue account or capital account (Sutlej Cotton Mills Ltd.) and noted the principle that actual payment is not a condition precedent for making year-end adjustments (Woodward Governor India (P.) Ltd.). The assessee had not produced evidence to establish that the transactions were on capital account; the Assessing Officer had not performed the necessary classification exercise. Accordingly, the Tribunal directed that the assessment be re-done by the AO after affording the assessee opportunity to be heard and applying the cited principles to classify and tax/deduct the restatement differences. [Paras 10]

Matter remitted to the Assessing Officer to re-do the assessment in accordance with the principles governing classification of foreign exchange restatement gains/losses, after giving the assessee a reasonable opportunity of hearing.

Final Conclusion: The Revenue appeal in respect of the Taloja transfer is allowed and the assessment under Section 50B restored; the assessee's appeals are partly allowed in that (i) the Section 43B disallowance is confirmed (assessee's ground dismissed), (ii) the interest disallowance for diversion of funds is remitted for day-to-day recomputation by the AO, and (iii) the claim for foreign exchange restatement loss is remitted to the AO for re-assessment in accordance with the judicial principles identified.

Notice under Section 274 specifying limb of Section 271(1)(c) - penalty under Section 271(1)(c) as distinct and civil liability - principles of natural justice in penalty proceedings - curability of procedural defects under Section 292B / 292BB

Notice under Section 274 specifying limb of Section 271(1)(c) - penalty under Section 271(1)(c) as distinct and civil liability - principles of natural justice in penalty proceedings - Validity of a notice issued under Section 274 read with Section 271(1)(c) which did not specifically state whether proceedings were for concealment of income or for furnishing inaccurate particulars of income, and consequent sustainability of the penalty imposed. - HELD THAT: - The Tribunal applied the binding dicta of the jurisdictional Karnataka High Court in Commissioner of Income tax v. Manjunatha Cotton and Ginning Factory that penalty under Section 271(1)(c) is a civil liability distinct from assessment and that a notice under Section 274 must specifically state which limb-concealment of income or furnishing inaccurate particulars-is being invoked so that the assessee may know the precise grounds to meet. Sending a printed form without striking the irrelevant clauses indicates non application of mind and offends natural justice. Where the notice fails to specify the limb, the assessee is prejudiced and the penalty cannot be sustained even if the penalty order later records both defaults. Applying those principles to the facts, the Tribunal found the notice defective and the penalty unsustainable, and therefore upheld the CIT(A)'s deletion of the penalty. [Paras 8]

Notice was defective for not specifying the limb of Section 271(1)(c); penalty deleted.

Curability of procedural defects under Section 292B / 292BB - applicability of precedents addressing notice defects and prejudice - Whether alternative authorities and precedents relied upon by Revenue (including Sundaram Finance Ltd., Sky Light Hospitality LLP, and Parisons Roller Flour Mills) rendered the defective notice curable or the decision distinguishable. - HELD THAT: - The Tribunal examined the judgments relied upon by Revenue and found them distinguishable on facts. Sundaram Finance was inapplicable because the defect there was not raised at earlier stages and prejudice was not shown; Sky Light concerned cure of a clerical error in name under Section 292B in reassessment notices and was not on point for a substantively defective penalty notice; Parisons dealt with different contentions and did not address the specific notice defect issue. The Tribunal therefore held that those authorities did not supplant the binding position of the jurisdictional High Court that a notice which does not specify the limb under Section 271(1)(c) cannot be cured merely by subsequent findings, absent demonstrable absence of prejudice or other distinguishing circumstances. [Paras 9, 11, 14]

Authorities cited by Revenue are distinguishable and do not cure the defect; curative provisions relied upon are inapplicable to the notice defect in this case.

Final Conclusion: Revenue appeals dismissed; CIT(A)'s deletion of penalty under Section 271(1)(c) for AY 2008 09 upheld because the Section 274 notice failed to specify whether proceedings were for concealment of income or for furnishing inaccurate particulars, thereby violating principles of natural justice; related cross objections rendered infructuous.

Growing of hybrid seeds as an agricultural activity - agricultural income - exemption under section 10(1) of the Income-tax Act, 1961 - assessment of income (profit/loss) as distinct from total receipts - application of precedent (CIT v. Ajeet Seeds Ltd.)

Assessment of income (profit/loss) as distinct from total receipts - Whether the Assessing Officer was correct in treating the assessee's total receipts as taxable income instead of determining income or loss arising from the activity - HELD THAT: - The Tribunal found that the Assessing Officer assessed the assessee on the basis of total receipts of Rs. 5.54 crores rather than determining the income or loss arising from the venture. The assessee had filed audited accounts showing a loss for the activity. The CIT(A) correctly held that what is taxable is the income or loss of the venture and not the gross receipts, and the Assessing Officer's approach therefore suffered from infirmity. The Tribunal upheld the CIT(A)'s finding that the Assessing Officer ought to have computed the income/loss and assessed accordingly. [Paras 11]

Assessing Officer's assessment of total receipts as income is unsustainable; income/loss must be determined and taxed accordingly.

Growing of hybrid seeds as an agricultural activity - agricultural income - exemption under section 10(1) of the Income-tax Act, 1961 - application of precedent (CIT v. Ajeet Seeds Ltd.) - Whether income from growing and sale/export of hybrid seeds is agricultural income and exempt under section 10(1) - HELD THAT: - The Tribunal examined whether the activity of producing hybrid/breeder/foundation seeds in net houses amounted to agricultural activity. Relying on the decision of the Aurangabad Bench of the Bombay High Court in CIT v. Ajeet Seeds Ltd., which held that growing breeder and foundation seeds involves usual agricultural operations aided by scientific skill and remains agricultural, the Tribunal held the same reasoning applicable to the assessee's activities. The Tribunal rejected the Revenue's contrary reliance and noted the CIT(A)'s reliance on the Tribunal's earlier decision confirmed by the High Court. Applying that precedent, the Tribunal concluded that growing of hybrid seeds cannot be treated as non-agricultural and that the assessee is entitled to claim exemption under section 10(1). [Paras 12, 13]

Growing and sale/export of hybrid seeds held to be agricultural activity; income therefrom is exempt under section 10(1).

Final Conclusion: The Tribunal dismissed both appeals: (i) the Assessing Officer's assessment of gross receipts as income was set aside and the correctness of assessing income/loss accepted; and (ii) following the Bombay High Court precedent in CIT v. Ajeet Seeds Ltd., income from growing hybrid seeds was held to be agricultural and exempt under section 10(1) for AYs 2012-13 and 2013-14.

Depreciation on assets put to use - Completion certificate evidence - Reliance on architect's certificate - Use of building for business as test for depreciation - Accounting date versus invoice date for determination of date put to use - Disallowance based on suspicion or conjecture is impermissible

Depreciation on assets put to use - Completion certificate evidence - Reliance on architect's certificate - Use of building for business as test for depreciation - Disallowance based on suspicion or conjecture is impermissible - Claim of depreciation on additions to building was allowable despite absence of local authority completion certificate - HELD THAT: - The Tribunal examined the architect's certificate dated 02.03.2010 and the factual finding that the building was utilised for business. Applying the principle that mere non possession of a local authority completion certificate is not, by itself, a ground to deny depreciation where the asset has been put to use, the Tribunal found the Revenue's rejection-based on suspicion about the architect's certificate-was unsupported by corroborative material. Following the Co ordinate Bench decision on similar facts, the Tribunal held that utilisation of the building for business use coupled with the architect's certificate and absence of contrary evidence warranted allowing depreciation. [Paras 6]

Depreciation on additions to building allowed; disallowance based on mere absence of local authority completion certificate and on suspicion set aside.

Depreciation on assets put to use - Accounting date versus invoice date for determination of date put to use - Disallowance based on suspicion or conjecture is impermissible - Claim of depreciation on additions to furniture and fixtures was allowable where invoices and material receipt predated 31.03.2010 despite accounting entries dated 31.03.2010 - HELD THAT: - The Tribunal considered the assessee's documentary record showing invoice dates and material receipts prior to 31.03.2010 while the accounting entry was made on 31.03.2010. In absence of any contrary material or cogent reasons from the Revenue, and noting that the Commissioner of Income Tax (Appeals) relied on surmise and suspicion, the Tribunal concluded that the furniture and fixtures were put to use by 31.03.2010 and directed allowance of depreciation. The Assessing Officer was directed to give effect to this finding. [Paras 11]

Depreciation on furniture and fixtures allowed; order of CIT(A) disallowing depreciation set aside and AO directed to allow claim.

Final Conclusion: The appeal is partly allowed: depreciation on additions to building and on furniture and fixtures is allowed for AY 2010-11; the addition pleaded in ground No.3 was not pressed and is dismissed.

Deductibility of interest paid on borrowed funds for the purpose of business (Section 36(1)(iii)) - Investments in associate concerns as part of business strategy - Business expediency / commercial expediency assessed from a businessman's point of view - Disallowance under Section 14A where no exempt income is earned - Obligation on Assessing Officer to record satisfaction before making disallowance under Section 14A and Rule 8D

Deductibility of interest paid on borrowed funds for the purpose of business (Section 36(1)(iii)) - Investments in associate concerns as part of business strategy - Business expediency / commercial expediency assessed from a businessman's point of view - Interest paid on loans borrowed and invested in equity shares of an associate company is allowable under Section 36(1)(iii) for the assessment years in question. - HELD THAT: - The Tribunal recorded that the undisputed facts establish that funds were borrowed from Bajaj Finance Ltd. and invested in shares of an associate concern, and that detailed working of the borrowed funds and interest paid was placed before the Department. Section 36(1)(iii) requires that borrowed funds be used for the purpose of business; it does not mandate proof of actual profits or income arising from that use. The Revenue's insistence on evidence of future income from the investment goes beyond the statutory test. Precedent establishes that advancing loans or making investments in associate concerns can form part of a business strategy and commercial expediency is to be judged from a businessman's viewpoint rather than by the Revenue substituting its commercial judgment. Applying these principles to the facts, the Tribunal held that the investments were wholly and exclusively for the purpose of business and that the interest on loans used for such investments is deductible, setting aside the disallowance by the AO and CIT(A). [Paras 8, 9, 10, 11, 12]

Addition under Section 36(1)(iii) deleted and grounds 2 to 2.4 allowed for A.Y.2012-13 and A.Y.2013-14.

Disallowance under Section 14A where no exempt income is earned - Obligation on Assessing Officer to record satisfaction before making disallowance under Section 14A and Rule 8D - Disallowance under Section 14A cannot be made where no exempt income is earned and the Assessing Officer has not applied judicious and objective mind. - HELD THAT: - The Tribunal noted that the AO proceeded on surmise and assumption without scrutinising the assessee's claim or recording the requisite satisfaction prior to making a disallowance under Section 14A read with Rule 8D. Reliance was placed on authority that no disallowance is called for where investments yield no exempt income. On the facts of A.Y.2013-14, since no exempt income was earned and the AO failed to record satisfaction based on objective application of mind, the partial confirmation of disallowance by the CIT(A) was set aside to the extent challenged and the additional ground raised by the assessee was allowed. [Paras 16, 17, 19, 20]

Disallowance under Section 14A deleted for A.Y.2013-14 and the additional ground allowed.

Final Conclusion: Both appeals are partly allowed: disallowances under Section 36(1)(iii) for A.Y.2012-13 and A.Y.2013-14 are deleted as the investments in the associate concern were held to be for the purpose of business; the Section 14A disallowance for A.Y.2013-14 is deleted as no exempt income was earned and the AO did not record requisite satisfaction.

Revisional jurisdiction under section 263 of the Income Tax Act - adequacy of enquiries/verifications by the Assessing Officer - change of opinion - erroneous and prejudicial to the interests of revenue - prospective operation of amendment to section 263 by Finance Act, 2015

Revisional jurisdiction under section 263 of the Income Tax Act - adequacy of enquiries/verifications by the Assessing Officer - erroneous and prejudicial to the interests of revenue - change of opinion - Validity of invocation of revisional jurisdiction under section 263 against the assessment for assessment year 2010-11 - HELD THAT: - The Tribunal held that both conditions for exercise of revisional jurisdiction - that the assessment order is 'erroneous' and 'prejudicial to the interests of revenue' - must co-exist and be read together. Where the Assessing Officer has conducted enquiries and verifications, even if a different view could be taken, the revisional jurisdiction cannot be invoked merely because the revisional authority considers the order prejudicial or would have reached a different conclusion. In the present case the Assessing Officer issued a questionnaire under section 142(1), recorded the assessee's replies as to sources of funds, obtained confirmations/affidavits from related lenders and summoned and recorded statement of one lender under section 131. After examining the material the Assessing Officer accepted the explanation and made no addition. The Principal Commissioner attempted to substitute his opinion for that of the Assessing Officer; that amounted to impermissible change of opinion rather than demonstration of an erroneous order. Consequently the revisional order was held to be beyond jurisdiction and set aside. [Paras 5, 6, 9]

Revisional order under section 263 set aside as the Assessing Officer had conducted enquiries and taken a possible view; invoking section 263 amounted to impermissible change of opinion.

Prospective operation of amendment to section 263 by Finance Act, 2015 - Whether the amendment to section 263 by the Finance Act, 2015 (effective 01-06-2015) applied to the assessment year 2010-11 - HELD THAT: - The Tribunal held that the amendment effected by the Finance Act, 2015 operates prospectively from 01-06-2015 and does not apply retrospectively to earlier assessment years. The date on which the revisional order was passed is not determinative; the relevant factor is the assessment year to which the order pertains. Reliance was placed on earlier Tribunal decisions to the same effect. Therefore the enhanced scope of revisional power introduced by the 2015 amendment could not be applied to assessment year 2010-11. [Paras 7, 8]

Amendment to section 263 by Finance Act, 2015 does not apply to assessment year 2010-11.

Final Conclusion: The order passed by the Principal Commissioner under section 263 was quashed: the Assessing Officer had conducted reasonable enquiries and taken a possible view, and the 2015 amendment to section 263 does not apply to assessment year 2010-11; the assessee's appeal is allowed.

Allowability of contributions to unapproved gratuity fund - deduction under section 36(1)(v) and alternative allowance under section 37 - disallowance under section 40A(7) and section 40A(9) - actual payment to insurer versus mere provision - precedent of coordinate bench binding on identical facts

Allowability of contributions to unapproved gratuity fund - actual payment to insurer versus mere provision - disallowance under section 40A(7) and section 40A(9) - deduction under section 36(1)(v) and alternative allowance under section 37 - precedent of coordinate bench binding on identical facts - Whether contributions paid by the assessee to LIC under group gratuity scheme are allowable deductions despite the gratuity fund not being approved by the Commissioner, and whether such payments are hit by sections 36(1)(v), 40A(7) or 40A(9). - HELD THAT: - The Tribunal held that the payments made by the bank to LIC under the group gratuity/master policy were actual payments to an insurer and not merely provisions; accordingly they were not hit by the prohibition in section 40A(7) which targets provisions. The coordinate-bench decisions in the assessee's own earlier proceedings and other Tribunal/High Court authorities were followed: where identical facts existed the Tribunal had allowed similar premiums as deductible, either under the relevant provision or, where section 36(1)(v) strictly requires approval, under the general deduction principle of section 37. Having found the present case materially identical to earlier Tribunal rulings, and that the amounts were genuine payments made to LIC (with no double deduction claimed), the Tribunal found no reason to interfere with the CIT(A)'s direction to allow the expenditure and dismissed the Revenue's appeal. [Paras 9, 10]

Contributions to LIC under the group gratuity scheme are allowable as deductible expenditure (not barred by sections 36(1)(v), 40A(7) or 40A(9)); Revenue's appeals dismissed.

Final Conclusion: Following coordinate-bench precedents and on the facts that the payments were actual payments to LIC under a group gratuity policy (not mere provisions), the Tribunal dismissed the Revenue's appeals and allowed the claim for the Assessment Years 2014-15 and 2015-16; the assessee's cross-objections are infructuous and dismissed.

Interest on delayed refund - expiry of three months from receipt of refund application - Section 27A of the Customs Act, 1962 - pari materia - writ of mandamus

Interest on delayed refund - expiry of three months from receipt of refund application - Section 27A of the Customs Act, 1962 - pari materia - writ of mandamus - entitlement to interest under Section 27A of the Customs Act, 1962 on delayed refund from the expiry of three months from receipt of refund application - HELD THAT: - The Court held that the provision in Section 27A of the Customs Act is pari materia to Section 11BB of the Central Excise Act and is to be interpreted in the same manner as laid down by the Apex Court in Ranbaxy Laboratories Ltd. Accordingly, interest becomes payable where, on expiry of three months from the date of receipt of the refund application, the claimed amount has not been refunded. Reliance was placed on this Court's earlier application of Ranbaxy in Shelf Drilling International Inc., which condemned departmental delay in processing refund claims. The respondents' contention that the case concerns refund of a deposit made on direction of DGFT and therefore interest should run only from the date of the refund order was rejected: the deposits were appropriated following orders subsequently set aside, and the amounts were ultimately held due and payable to the petitioners. Given filing of refund applications dated 10th October 2007, interest under Section 27A accrued from 11th January 2008 (three months thereafter). The Assistant Commissioner had already allowed interest for a later portion of the period; the Court directed payment of interest for the earlier period that was omitted by the impugned order. The Court also declined to remit the parties to the alternate remedy under the Act in view of settled precedent, the facts and the departmental failure to apply the correct legal principle. [Paras 9, 10, 11, 13, 15]

Petition allowed; respondents directed to pay interest under Section 27A for the period 11th January 2008 to 4th December 2016 and impugned orders modified accordingly.

Final Conclusion: Writ of mandamus issued directing payment of interest on the refund for the period 11th January 2008 to 4th December 2016 in terms of Section 27A of the Customs Act, 1962; interest for the later period had already been awarded and the impugned orders are modified. No order as to costs.

Served From India Scheme (SFIS) - mode of payment by scrips - restricted goods - amendment w.e.f. 01.04.2006 - penalty - redemption fine

Served From India Scheme (SFIS) - mode of payment by scrips - restricted goods - amendment w.e.f. 01.04.2006 - Validity of using SFIS scrips as mode of payment of customs duty for import of restricted radar equipment despite the amendment inserting the words 'otherwise freely importable under ITC (HS) EXIM Code'. - HELD THAT: - The Court held that the SFIS scrips issued to the Airports Authority of India in respect of foreign exchange earned for services rendered remained valid documents and could be used to discharge customs duty on future imports. The imported radar equipment were at all times classified as restricted items and were not freely importable; therefore the insertion of the words 'otherwise freely importable under ITC (HS) EXIM Code' w.e.f. 01.04.2006 did not adversely affect the assessee's entitlement to use the scrips. The authorities had improperly debited/cancelled the scrips and also taken cash for the same customs obligations, resulting in double payment. Having regard to the nature of the scrips, their continued validity and the restricted status of the goods, the adjudicating authority and the Tribunal erred in denying the benefit of payment by scrips. [Paras 9, 11, 12]

The appeal allowing use of SFIS scrips for payment of customs duty on the restricted radar imports is allowed; the denial of that benefit by the authorities is set aside.

Penalty - redemption fine - misuse of scrips - Consequences for penalty and redemption fine imposed for alleged misuse of the SFIS scrips once the substantive claim to use the scrips is allowed. - HELD THAT: - The Court held that once the substantive claim of the assessee to use the valid SFIS scrips for discharge of customs duty is upheld, the basis for imposing penalty and redemption fine for alleged misuse falls away. In view of the allowance of the appeal on merits, the penalties and redemption fine imposed by the authorities cannot sustain. [Paras 12]

All penalties and the redemption fine imposed are quashed as the substantive claim is allowed.

Final Conclusion: The appeal is allowed in full: the Airports Authority of India is entitled to utilise the SFIS scrips to discharge customs duty on the restricted radar imports and the penalty and redemption fine imposed are set aside; no costs.

Operational debt and default - Genuine dispute vs spurious/moonshine dispute - Admission under Section 9(5) of IBC, 2016 - Appointment of Interim Resolution Professional and moratorium - Jurisdiction - Limitation and date of default

Operational debt and default - Applicant proved existence of operational debt and default by the corporate debtor. - HELD THAT: - The Tribunal found that the applicant supplied goods and raised invoices between 14.09.2016 and 22.12.2016, issued a demand notice which was received by the corporate debtor, and that the corporate debtor made only partial payments thereafter leaving an outstanding amount. The corporate debtor admitted receipt of goods and invoices and did not place on record any correspondence prior to the demand notice that would demonstrate a pre-existing dispute. Technical objections to the completeness of the application were held to be trivial and were addressed by the applicant. On these facts the adjudicating authority concluded that the operational debt and default were established. [Paras 11, 17]

The debt and default are established and proved in favour of the applicant.

Genuine dispute vs spurious/moonshine dispute - Pre-existing dispute requirement under Mobilox - The dispute raised by the corporate debtor is not bona fide and is a spurious ('moonshine') dispute. - HELD THAT: - Applying the standard in Mobilox Innovations (as cited by the Tribunal), the authority examined whether there was a plausible, bona fide dispute requiring further investigation. The corporate debtor's objections were raised belatedly after service of the demand notice, lacked contemporaneous supporting evidence (such as prior correspondence, acknowledged debit notes, or lab reports), and included technical or after thought contentions. Precedents cited supported treating belated, unsubstantiated complaints regarding quality/quantity as not genuine. The Tribunal therefore concluded the alleged dispute was feeble and not a bar to admission. [Paras 11, 12, 13, 14]

The defence is held to be a spurious/moonshine dispute and does not preclude admission of the Section 9 application.

Jurisdiction - Limitation and date of default - The Tribunal has jurisdiction to entertain the application and the claim is not time barred; the date of default is 22.03.2017. - HELD THAT: - The registered office of the corporate debtor is located in Jaipur, conferring jurisdiction on this Tribunal. The adjudicating authority found that default occurred on 22.03.2017 (date of demand/recall) and that the application was filed within the period of limitation, so the claim was maintainable on limitation grounds. [Paras 15, 16]

Jurisdiction in Jaipur is established and the claim is within limitation.

Admission under Section 9(5) of IBC, 2016 - Appointment of Interim Resolution Professional and moratorium - The Section 9 application is admitted; an Interim Resolution Professional is appointed and moratorium imposed in terms of the Code. - HELD THAT: - Finding the application complete and the operational debt/default established, the Tribunal admitted the application under Section 9(5) of the Insolvency and Bankruptcy Code, 2016. The named IRP consented and was appointed. The statutory moratorium under Section 14(1) was directed to operate from the date of the order until completion of the corporate insolvency resolution process, subject to the exceptions in Sections 14(2) and 14(3) and cessation upon approval of a resolution plan or liquidation. [Paras 18, 19, 21, 23]

Application admitted; IRP appointed and moratorium ordered.

Final Conclusion: The Tribunal admitted the Section 9 application: operational debt and default were held established, the corporate debtor's dispute was rejected as spurious, the Tribunal found jurisdiction and that the claim was within limitation, appointed the named Interim Resolution Professional and directed the statutory moratorium to follow.

Proceedings under Section 70 of the CGST Act (power to summon for inquiry) - decision under Section 73 for determination of tax not paid or short-paid - judicial proceedings within the meaning of sections 193 and 228 IPC - quashing of show-cause notice/personal hearing notice - ex parte decision for failure to attend personal hearing

Proceedings under Section 70 of the CGST Act (power to summon for inquiry) - decision under Section 73 for determination of tax not paid or short-paid - quashing of show-cause notice/personal hearing notice - Validity of issuance of summons/personal hearing under Section 70 of the CGST Act prior to disposal of the petitioner's representation under Section 73. - HELD THAT: - The Court examined the statutory scheme and record and held that the proper officer is empowered under Section 70 to summon any person to give evidence or produce documents in an inquiry, in the same manner as a civil court. Sub section (2) deems such inquiry to be a "judicial proceeding" within the meaning of the specified IPC provisions. The petitioner's contention that proceedings under Section 70 can be resorted to only after a decision under Section 73 was rejected: nothing in the statutory scheme requires that a show cause or inquiry under Section 70 be deferred until the determination contemplated by Section 73. On the facts the record disclosed a prima facie opinion of tax evasion and repeated, uncomplied summons and reminders; the petition did not establish any legal bar to initiation of inquiry or to fixing of a personal hearing. Accordingly, the challenge to the notice for personal hearing was not sustainable and no interference was warranted with the statutory summons or the proposed personal hearing. [Paras 5, 6]

Petition to quash the personal hearing notice dismissed; initiation of proceedings under Section 70 was valid and need not await decision under Section 73.

Final Conclusion: The High Court refused to quash the summons/personal hearing issued under Section 70 of the CGST Act and dismissed the petition, holding that inquiry proceedings under Section 70 may validly be initiated notwithstanding the pendency of any representation under Section 73.

Small scale exemption benefit - abatement - value of taxable service for exemption - commercial and industrial construction service

Small scale exemption benefit - abatement - value of taxable service for exemption - Whether the value of services to be taken for computing entitlement to the small scale exemption is the gross value or the value after applying the abatement - HELD THAT: - The Tribunal found that the appellant provided taxable service under the category of commercial and industrial construction service and was a service-tax registered payee. The short question was whether the small scale exemption under Notification No. 6/2005 is to be computed on the full value of services or on the abated value as per Notification No. 1/2006. The Tribunal noted that the question is no longer res integra and relied on earlier Tribunal decisions which held that the value for the purpose of the small scale exemption is the value arrived at after allowing the abatement. Applying those precedents, the Tribunal allowed the appeal and set aside the impugned order, granting consequential relief to the appellant. [Paras 2, 3, 4]

Value for computing the small scale exemption is the value after allowing the abatement; appeal allowed and impugned order set aside

Final Conclusion: The appeal is allowed: entitlement to the small scale exemption must be computed on the value after abatement, and the impugned order is set aside with consequential relief to the appellant.

Levy of service tax on construction of complex vis-a -vis works contract - Valuation of taxable service by reference to gross amount charged and prescribed abatement - Applicability of Notification prescribing 25% taxable value where cost of land not separately charged - Extended period of limitation under proviso to Section 73 for suppression/contravention - Requirement of bona fide belief for avoidance of penalty - Liability for interest on short-paid/unpaid service tax - Penalty under Sections 77 and 78 consequent to confirmed demand

Levy of service tax on construction of complex vis-a -vis works contract - service to self - Whether service tax is not leviable for construction work carried out prior to entering into agreement to sale because such work is 'service to self' or part of a works contract not chargeable under the construction of complex category - HELD THAT: - The Tribunal held that the dispute is one of valuation and measure of levy rather than classification: the services rendered by the appellants fall within the definition of 'construction of complex' introduced effective 01.07.2010 and are taxable. The Tribunal rejected the contention that works carried out prior to entering into an agreement of sale constitute 'service to self' disentitling the Revenue to tax, observing that service tax is levied on the gross amount charged/consideration received for provision of the construction-of-complex service and cannot be dissected on the basis of works performed before or after the date of agreement. Acceptance of the appellants' plea would lead to anomalous variation in taxable value for identical flats based solely on timing of agreements, which the measure of levy prescribed by statute and notifications does not permit. The decision of the Supreme Court on VAT/works contract (Larsen & Toubro and others) does not alter the statutory valuation scheme under the Finance Act for service tax purposes and therefore does not advance the appellants' case. [Paras 5]

Demand of service tax in respect of construction activity, including portions completed prior to agreement of sale, is sustainable and upheld.

Valuation of taxable service by reference to gross amount charged and prescribed abatement - Applicability of Notification prescribing 25% taxable value where cost of land not separately charged - Whether the taxable value of construction-of-complex services must be determined by prescribed rules/notification (25% of gross receipts) and whether the appellants can contend for different valuation because part of work was done earlier - HELD THAT: - The Tribunal held that valuation for service tax is governed by Section 67 read with the Valuation Rules and by the Notification framework (Notification No.1/2006-ST as amended by Notification No.29/2010-ST). Where the statutory scheme prescribes taxable value as 25% of gross receipts (subject to the condition regarding separate recovery of land), that measure is binding and cannot be displaced by arguments about quantum of work completed prior to agreement to sell. The JS (TRU) letter of 01.07.2010 and the explanatory material confirm that the abatement and the prescribed percentage constitute the measure of levy; the appellants' reliance on alternative valuation arguments (including the decision of the Delhi High Court in Suresh Kumar Bansal) is not applicable where the notification conditions are satisfied. The Tribunal also noted that challenges to the delegated legislation and its constitutional competence were not sustainable in light of settled principles upholding composition/abatement schemes. [Paras 5]

Taxable value is to be computed in accordance with the prescribed notification/abatement (25% of gross receipts where cost of land is not separately charged); challenge to that measure is rejected.

Extended period of limitation under proviso to Section 73 for suppression/contravention - Requirement of bona fide belief for avoidance of extended period - Whether the extended period of limitation (five years) under the proviso to Section 73 is invokable and whether appellants' plea of bona fide belief negates invocation - HELD THAT: - The Tribunal found that appellants failed to take registration, file returns and disclose material facts, and thus the conditions for invoking the proviso to Section 73 (fraud/collusion/wilful misstatement/suppression/contravention with intent to evade) were attracted. The Tribunal observed that bona fide belief must be supported by concrete facts or reasonable steps (e.g. consultation with authorities or legal opinion) and cannot be a 'blind belief'; the appellants produced no such evidence. The Tribunal relied on precedent and reasoning that knowledge/date of filing and withholding of information determine the relevant date and that, on the facts, show cause notices were issued within the applicable periods. Consequently, invocation of extended period and re-confirmation of demand was appropriate. [Paras 5]

Extended period of limitation validly invoked; appellants' plea of bona fide belief and time bar contentions rejected.

Liability for interest on short-paid/unpaid service tax - Whether interest on the confirmed service tax is payable - HELD THAT: - Following confirmation of the tax demand, the Tribunal held that interest under the statute is compulsory and flows automatically from the liability to pay the tax that was short-paid or unpaid. The Tribunal referred to authority holding that there is no discretion to waive interest where tax is found to be payable and relied on precedents to sustain the claim for interest. [Paras 5]

Interest on the confirmed service tax is payable and upheld.

Penalty under Sections 77 and 78 consequent to confirmed demand - Scope of Section 80 (waiver) in initial implementation - Whether penalties under Sections 77 and 78 are sustainable and whether waiver under Section 80 is permissible - HELD THAT: - The Tribunal held that penalties under Section 78 follow where extended period is invoked and confirmed (citing apex authority), and that penalties under Section 77(2) follow for failure to furnish correct information/returns (civil penalties for omission/contravention). The Tribunal rejected the appellants' plea for relief under Section 80, observing that Section 80 is not a licence to condone irregularities and was intended for removal of genuine difficulties during initial implementation; the years in dispute (post-2010) do not attract that protective rationale. [Paras 5]

Penalties under Sections 77 and 78 are upheld; claim for waiver under Section 80 refused.

Computation and re-quantification of demand where show cause contains arithmetical error - Whether the demand as computed in the show cause notice requires modification for Appellant 2 due to incorrect computation of Education Cess - HELD THAT: - The Tribunal observed an arithmetical error in the annexure to the show cause notice for Appellant 2 (Education Cess computed incorrectly) and directed that the demand for Appellant 2 be reworked taking that observation into account. While the substantive demand and ancillary liabilities remain sustained, the quantification requires modification to reflect correct cess computation. [Paras 5, 6]

Demand for Appellant 2 to be re-quantified and modified consequentially; otherwise demand stands sustained.

Final Conclusion: The Tribunal dismissed the appeal of Laxmi Associates and dismissed claims for relief; for L R Associates the appeal was disposed of subject to re-quantification of demand on account of a computation error in education cess, but the demands for service tax, interest and penalties were otherwise upheld.

Utilisation of Cenvat Credit for payment of service tax - Reverse charge under section 66A of the Finance Act, 1994 - Authorization under Rule 3(4) of the Cenvat Credit Rules, 2004 - Precedential effect of High Court and Tribunal decisions

Utilisation of Cenvat Credit for payment of service tax - Reverse charge under section 66A of the Finance Act, 1994 - Authorization under Rule 3(4) of the Cenvat Credit Rules, 2004 - Entitlement to discharge service tax liability on reverse charge basis by utilising Cenvat credit. - HELD THAT: - The Tribunal had held that Rule 3(4) of the Cenvat Credit Rules, 2004 authorises utilisation of Cenvat credit for payment of service tax and dismissed the Revenue's appeal. The Revenue conceded that earlier decisions of the Mumbai CESTAT on the same question were accepted by the Revenue and were not challenged before this Court. The High Court observed that the question is concluded against the Revenue by binding High Court authorities and Tribunal decisions which permit utilisation of Cenvat credit to discharge reverse charge service tax liability. Having regard to the Tribunal's reasoning, the accepted precedents and intervening High Court decisions, the Court found no justification to entertain the appeal on this point. [Paras 4, 5, 6]

Assessee entitled to discharge service tax liability on reverse charge basis by utilising Cenvat credit; Revenue's challenge rejected.

Precedential effect of High Court and Tribunal decisions - Reverse charge under section 66A of the Finance Act, 1994 - Whether the distinction in the nature of services (GTA services versus services from foreign banks) renders the cited precedents inapplicable. - HELD THAT: - The Revenue sought to distinguish earlier decisions on the ground that they related to reverse charge liability in respect of GTA services whereas the present case concerns services received from a foreign bank. The Court held that the distinction does not alter the legal position: in both scenarios the liability was discharged under section 66A on reverse charge basis and the precedents therefore apply. Consequently, the asserted factual difference was not sufficient to displace the coverage of the earlier decisions relied upon by the Tribunal. [Paras 7]

Distinction based on the nature of services is not material; precedents apply and do not favour the Revenue.

Final Conclusion: The appeal is dismissed. The Tribunal's order upholding the assessee's entitlement to utilise Cenvat credit to discharge service tax liability under reverse charge (section 66A) is affirmed, and the Revenue's attempted distinction based on the nature of services is rejected.

Summary order. Tax appeal admitted and the following substantial questions of law are formulated for adjudication: (A) Whether subsequent reversal of input credit attributable to inputs used in manufacture of exempted final products with interest suffices to discharge the demand under the compliance requirements of maintenance of separate accounts and options under Rule 6(3) of the CCR/OCR, including liability computed at 5% or 10% of the value of exempted goods if such accounts/options were not followed; (B) Whether demand for the extended period is barred by limitation where the department discovered income from sale of steam, fly ash and electricity and related availment/utilisation of inputs only after conducting an audit, and whether reliance on the decision in M/s Lonsenkiri Chemicals Industries v. C.C.E., Cus & Service Tax, Vadodara-I (2019 (365) ELT) was justified; (C) Whether the CESTAT was justified in declining to rely on the various precedents cited by the revenue (including decisions in favor of revenue on comparable facts).

Interpretation of time limit in settlement scheme - computation of limitation from date of receipt - retrospective amendment - construction to make remedy effective

Interpretation of time limit in settlement scheme - computation of limitation from date of receipt - construction to make remedy effective - Section 90(2) of the Kar Vivad Samadhan Scheme must be construed so that the 30-day period runs from communication/receipt of the order and not from the date of its passing. - HELD THAT: - Following the authority which held that expressions referring to 'the date of that order' are to be read as the date of communication to the affected party, the Court construed section 90(2) in favour of reading the commencement of the 30-day period from the date the declarant receives the order. The Court applied the principle that, where a statutory time-limit is ambiguous, it should be construed so as to make the remedy practical and effective rather than nugatory, and relied on the reasoning in the cited precedents to support this approach. [Paras 6]

Section 90(2) is to be read as commencing the 30-day period from receipt/communication of the order.

Retrospective amendment - interpretation of time limit in settlement scheme - The amendment to section 90(2) by the Finance Act, 2000, which substitutes 'within 30 days from the receipt of an order' and is deemed effective from 01/09/1998, applies retrospectively to the petitioners' case. - HELD THAT: - The Court noted that section 90(2) was amended retrospectively to 01/09/1998 by the Finance Act, 2000 so as to replace the earlier phrase with an explicit reference to 'receipt of an order'. Consequently, the amended provision governs the present facts and renders the petitioners' challenge to the constitutional validity of the original wording otiose. [Paras 7]

The retrospective substitution operates from 01/09/1998 and governs the computation of the 30-day period in this matter.

Computation of limitation from date of receipt - retrospective amendment - Application of the construed and amended section 90(2) to the facts: the 30-day period ran from 19/02/1999 (date of receipt) and the petitioners' payment on 23/03/1999 was within that period; consequent directions follow. - HELD THAT: - Applying the reading that the period begins on receipt, the Court recorded that the certificate dated 15/02/1999 was received on 19/02/1999 and that the declarant paid the determined amount on 23/03/1999. Considering February had 28 days, the payment fell within 30 days from receipt. The Court therefore directed the designated authority to issue the final certificate under the Scheme and quashed the pending recovery notices that were stayed by interim order. [Paras 8, 9]

Payment was timely; respondent authority directed to issue final certificate and the recovery notices are quashed and set aside.

Final Conclusion: The petition is allowed: section 90(2) is read as commencing the 30-day period from receipt of the order (a construction reinforced by the retrospective amendment), the petitioners' payment was within that period, the designated authority is directed to issue the final certificate and the challenged recovery notices are quashed.

Principles of natural justice - failure of natural justice due to non furnishing of documents - cross examination and reliance on statements - prejudice and failure of justice - remand for fresh adjudication - assessment of duty liability on documentary evidence

Cross examination and reliance on statements - prejudice and failure of justice - Whether refusal to permit cross examination amounted to denial of principles of natural justice. - HELD THAT: - The Tribunal found that the adjudicating authority had not placed decisive reliance on the statements of persons whose cross examination was sought, but had reached its conclusions on the basis of other evidence gathered during investigation. In assessing an allegation of denial of natural justice due to refusal of cross examination, the correct test is whether the refusal caused a failure of justice or prejudice to the appellant's case. Applying that test, the Tribunal correctly concluded there was no failure of justice since the statements were not the basis for assessing duty, interest or penalty. [Paras 5]

Refusal to allow cross examination did not constitute denial of natural justice and did not vitiate the adjudication.

Failure of natural justice due to non furnishing of documents - assessment of duty liability on documentary evidence - prejudice and failure of justice - remand for fresh adjudication - Whether non furnishing of relevant documentary pages to the assessee resulted in denial of principles of natural justice and warranted remand. - HELD THAT: - The Tribunal noted that the adjudicating authority itself recorded the chronology of events relating to non furnishing of documents and that the specific books and pages later relied upon for fixing duty liability were among those not supplied to the assessee. Where duty is assessed on the basis of documentary material collected in investigation, the authority must consider whether non supply was due to its negligence and whether that omission caused prejudice or a failure of justice. Given that the very documents relied upon to quantify liability were not made available for the assessee to contest, the Tribunal rightly held that principles of natural justice were breached and remitted the matters to the adjudicating authority for fresh decision in accordance with law. [Paras 6, 7, 8, 9]

Non furnishing of relevant documents amounted to denial of natural justice; matters remitted for fresh adjudication.

Remand for fresh adjudication - principles of natural justice - assessment of duty liability on documentary evidence - Whether the Tribunal's dismissal of the purchaser's appeal (M/s Kundil Ispat Limited) could stand when the supplier's appeal was remitted for violation of natural justice. - HELD THAT: - The Court observed that when the supplier's duty liability and associated penalties are remitted to the adjudicating authority for fresh determination on account of breach of natural justice, it is incongruous to affirm penalty orders against purchasers without re examining whether those orders were passed in violation of natural justice. For consistency and for the correctness of outcome, the Tribunal's order in respect of the purchaser was set aside and remanded so that the purchaser's case may be considered in light of the fresh adjudication of the supplier's liability. [Paras 11, 12]

Tribunal's dismissal of the purchaser's appeal set aside; matter remanded for fresh decision in accordance with law.

Final Conclusion: The appeals are disposed by upholding the Tribunal's findings that (a) refusal of cross examination did not vitiate the adjudication, and (b) non furnishing of crucial documentary evidence amounted to denial of natural justice; accordingly the matters (including that of the purchaser) are remitted to the Adjudicating Authority for fresh adjudication in accordance with law.

Assessable value - place of removal under Section 4 - transfer of ownership - application of the Sale of Goods Act to determine time of sale - inclusion of freight in valuation

Assessable value - place of removal under Section 4 - transfer of ownership - application of the Sale of Goods Act to determine time of sale - inclusion of freight in valuation - Whether freight for transporting goods from the seller's place of removal to the buyer's premises is includable in the assessable value under Section 4 of the Central Excise Act, 1944 when sale is for delivery at the buyer's premises. - HELD THAT: - The Tribunal examined competing Supreme Court decisions and applied the determinative principle that the point of transfer of ownership under the Sale of Goods Act governs which charges must be included in assessable value. While Roofit Industries held that where ownership transfers at the buyer's premises freight up to that point is includable, the subsequent decision in Ispat Industries clarified the scope of the expression 'place of removal' in Section 4(4)(b)(iii). Ispat held that the statutory phrase refers to places from which the manufacturer sells goods (such as factory, depot, consignment agent) and not to the buyer's premises; therefore the buyer's premises cannot be a 'place of removal' for purposes of Section 4. The Tribunal held that Ispat Industries, which considered the expression both before and after amendment, establishes that goods are removed prior to sale at the buyer's premises and that once ownership has passed to the buyer any expenditure incurred thereafter (including freight to buyer's premises) is for the buyer's account and is not includable in the assessable value. Applying that settled legal position, the demands for duty on such freight are unsustainable. Because the Tribunal decided the matter on merits, limitation contentions became irrelevant. [Paras 8, 10, 11]

Freight from factory/depot/consignment agent to the buyer's premises is not includable in the assessable value; impugned demands set aside, specified appellants' appeals allowed and Revenue's appeal rejected.

Final Conclusion: The Tribunal set aside demands for inclusion of freight to the buyer's premises in assessable value, holding that the buyer's premises cannot be a 'place of removal' under Section 4 and therefore such freight is not includable; consequential relief granted and Revenue's appeal dismissed.

Treatment of software in assessable value of hardware - application of extended period of limitation - remand for fresh adjudication - opportunity of hearing to the assessee

Treatment of software in assessable value of hardware - application of extended period of limitation - remand for fresh adjudication - Whether the demand for duty by including the cost of imported software in the assessable value of the hardware and invoking the extended period of limitation could be sustained. - HELD THAT: - The Tribunal set aside the impugned order of the Adjudicating Authority and remanded the matter to the Commissioner for fresh consideration. The Tribunal recorded that the appellant had placed documentary material and relied on several judicial decisions which were not considered by the Adjudicating Authority; accordingly, the matter requires re-examination. The Tribunal expressly refrained from finally adjudicating the merits of whether the software forms part of the assessable value of the hardware and also left open the question of applicability of the extended period of limitation, directing that all issues be re-considered afresh by the Adjudicating Authority after affording the appellant an opportunity to place its case and evidence. [Paras 7]

Impugned order set aside and matter remanded to the Commissioner for fresh adjudication with liberty to the appellant to place evidence and submissions; merits including the question of limitation left open.

Final Conclusion: The Tribunal allowed the appeal in part by setting aside the adjudication and remanding the dispute to the Commissioner for fresh consideration; no adjudication was made on the substantive question whether the software is includible in the assessable value or on the question of extended limitation, both of which remain open for re adjudication after opportunity to the appellant.

Liability to pay duty on waste and scrap of capital goods where Cenvat credit was availed - Rule 3(5A) of Cenvat Credit Rules, 2004 - extended period of limitation - classification of waste and scrap

Liability to pay duty on waste and scrap of capital goods where Cenvat credit was availed - Rule 3(5A) of Cenvat Credit Rules, 2004 - Appellants are liable to pay duty on clearances of waste and scrap of capital goods on which Cenvat credit was availed. - HELD THAT: - Following the insertion of Rule 3(5A) in the Cenvat Credit Rules, 2004, the Tribunal holds that where Cenvat credit has been availed on capital goods, duty is exigible on the transaction value of waste and scrap arising from those capital goods. The Tribunal found no merit in the appellants' contention that they could reasonably believe the clearances were non-dutiable after the provision was introduced, and rejected reliance on earlier decisions dealing with classification where the factual matrix (notably substantial portion not enjoying Cenvat credit) differed. The determinative legal position is that Rule 3(5A) renders such clearances dutiable when Cenvat credit has been taken. [Paras 4]

Demand under Rule 3(5A) sustained and appellants held liable to pay duty on waste and scrap of capital goods for the period in issue.

Extended period of limitation - classification of waste and scrap - Invocation of the extended period and the claim of time-barred demand based on alleged bonafide belief are not sustainable. - HELD THAT: - The Tribunal ruled that the demand was not time-barred. After insertion of Rule 3(5A), there remained no scope for a bona fide belief that duty was not payable on waste and scrap of capital goods where Cenvat credit had been availed. The decision relied on by the appellants (Shriram Alkali & Chemicals) was distinguished on facts because that case concerned classification and involved a substantial portion of goods on which Cenvat credit had not been taken, a factual matrix different from the present matters before the Tribunal. Consequently, the extended period invocation and the appellants' defence of time-bar are rejected. [Paras 4]

Extended period invocation upheld; the plea of time-barred demand based on bonafide belief is rejected.

Final Conclusion: Impugned orders upheld and the appeals dismissed; duty demand under Rule 3(5A) sustained for the period 2005-06 to 2006-07.

Direction to tribunal to expedite hearing of pending appeals - binding precedent - writ of certiorari - writ of mandamus - liberty to prefer appropriate appeal

Direction to tribunal to expedite hearing of pending appeals - binding precedent - VAT Tribunal directed to take up Second Appeal Nos. 637 to 641 of 2016 and Second Appeal No. 975/2016 for hearing. - HELD THAT: - Having regard to the limited relief sought and the fact that the Second Appeals are pending before the VAT Tribunal on issues said to be covered by this Court's decision in Jayant Agro Organics Ltd. (annexed), and noting that the State's Special Leave Petition against that decision was dismissed, the High Court requested the Tribunal to take up the specified Second Appeals for hearing. The Court fixed a preferably prompt timeline, stating that the Tribunal should hear the appeals preferably within four weeks from receipt of the writ of this order. [Paras 4]

Tribunal requested to take up the listed Second Appeals for Assessment Period 2006-07 to 2011-12 for hearing preferably within four weeks.

Writ of certiorari - liberty to prefer appropriate appeal - Prayer for quashing the assessment order by certiorari not pressed; liberty granted to file appropriate appeal. - HELD THAT: - The writ-applicant did not press the substantive relief seeking certiorari to quash the assessment order; the Court recorded that paragraph 5(a) of the writ petition is not pressed and afforded the petitioner liberty to pursue appropriate appellate remedies before the competent forum in accordance with law. [Paras 5]

Relief under para 5(a) not pressed; petitioner given liberty to file appropriate appeal.

Final Conclusion: Writ petition disposed: Tribunal directed to take up the specified Second Appeals for hearing within the stated period; certiorari relief not pressed with liberty to pursue appropriate appeal; direct service permitted.

Public Place under Section 2(17A) of Bihar Excise (Amendment) Act, 2016 - Private vehicle as public place when on public road - Consumption of liquor in a place within the State as ingredient of offence under Section 53(a) - Distinction between Section 53 of Bihar Excise (Amendment) Act, 2016 and Section 37 of Bihar Prohibition and Excise Act, 2016

Public Place under Section 2(17A) of Bihar Excise (Amendment) Act, 2016 - Private vehicle as public place when on public road - Whether a private vehicle in which persons are travelling can be treated as a 'public place' under Section 2(17A) of the Bihar Excise (Amendment) Act, 2016. - HELD THAT: - The Court examined the statutory definitions and context. Section 2(17) of the Bihar Excise Act, 1915 gives an inclusive meaning to 'place' which expressly includes 'vehicle'. The amended definition of 'public place' in Section 2(17A) describes it as any place to which the public have access, 'whether as a matter of right or not', and includes open spaces. The Court interpreted 'access' to include opportunity to approach or communicate with the place. When a private vehicle is passing on a public road it is susceptible to approach by the public and therefore may fall within 'public place' as defined by Section 2(17A). Earlier notifications and judicial decisions under different statutory schemes were considered distinguishable; the statutory amendment removed the public/private conveyance distinction for the purposes of the State's prohibition policy. On this construction, a private vehicle intercepted on a public road can be treated as a public place for attracting the provisions of Section 53(a). [Paras 13, 21, 22, 23, 24]

A private vehicle travelling on a public road can, in the facts of a particular case, be treated as a 'public place' under Section 2(17A) and thus fall within the ambit of Section 53(a) of the Bihar Excise (Amendment) Act, 2016.

Consumption of liquor in a place within the State as ingredient of offence under Section 53(a) - Distinction between Section 53 of Bihar Excise (Amendment) Act, 2016 and Section 37 of Bihar Prohibition and Excise Act, 2016 - Whether, under Section 53(a) as then in force, the consumption of liquor must have occurred within the territory of Bihar to attract the offence, and how that differs from offences under Section 37 of the Bihar Prohibition and Excise Act, 2016. - HELD THAT: - The Court held that under the statutory scheme then in force (Bihar Excise (Amendment) Act, 2016) the offence under Section 53(a) requires that the act of consumption occur within the State of Bihar. The later Bihar Prohibition and Excise Act, 2016 introduced Section 37 which additionally criminalises being 'found drunk or in a state of drunkenness at any place', thereby covering a situation where consumption might have occurred outside the State but drunkenness is observed within Bihar. However, that expanded category was not part of the statutory offence at the time of the incident on 25.06.2016. The Court did not decide whether, on the facts of this case, consumption actually occurred within Bihar; that factual determination must be made by the learned Magistrate on the materials in the chargesheet. [Paras 27, 28]

Under Section 53(a) as in force on 25.06.2016, the consumption must have taken place within Bihar; the later Section 37(b) broadens liability but was not applicable to alter the legal requirement for the incident in question.

Application for discharge and magistrate's inquiry - What further course should be adopted in respect of the charges against the appellants. - HELD THAT: - The Court refrained from adjudicating the factual question whether consumption occurred within Bihar on the present record. In the interests of justice it directed that the appellants be permitted to move the learned Magistrate for discharge, and that the Magistrate decide that application after considering the chargesheet and materials in accordance with law. This provides the trial court the opportunity to examine the factual and evidentiary aspects relevant to the offence's territorial ingredient and other proximate questions of fact. [Paras 28, 29]

Appellants are at liberty to file an application for discharge before the learned Magistrate, who shall decide it on the materials on record in accordance with law.

Final Conclusion: The Court construed 'public place' in Section 2(17A) to include a private vehicle when it is on a public road and held that, as at the date of the incident, Section 53(a) required consumption to occur within Bihar; the question whether consumption occurred within Bihar was left to the Magistrate and the appellants were permitted to seek discharge, which the Magistrate must decide on the record in accordance with law.

Service tax as part of sale price - Application of Rule 58 of MVAT Rules - Composition scheme assessment - Error apparent on face of record - Recall of order on review

Error apparent on face of record - Recall of order on review - Order dated 28th November, 2018 is recalled and the review petition is allowed insofar as the earlier order is concerned. - HELD THAT: - The Bench found that its earlier order of 28th November, 2018 proceeded on an incorrect premise because it did not notice that the assessment under challenge is under the composition scheme whereas the reasoning relied upon (invoking Rule 58 of the MVAT Rules) applies to regular assessments of works contracts. That misapprehension constitutes an error apparent on the face of the record warranting recall of the earlier order. Consequently the earlier appellate disposal is set aside to enable fresh consideration. [Paras 3, 4, 5]

Order dated 28th November, 2018 recalled; review petition allowed to the extent of recalling that order.

Application of Rule 58 of MVAT Rules - Service tax as part of sale price - Composition scheme assessment - Question whether Rule 58 of the MVAT Rules applies to assessments under the composition scheme and, consequently, whether service tax can be treated as part of the sale price in such assessments is remanded for fresh consideration. - HELD THAT: - The Court recognised that Rule 58 applies to regular assessments of works contracts and that its earlier reliance on a Trade Circular accepting a Tribunal decision concerning Rule 58 does not automatically resolve the present case which involves the composition scheme. Because the applicability of Rule 58 (and the attendant conclusion about inclusion of service tax in sale price) was not examined with reference to the composition scheme, the matter requires fresh adjudication by the Bench hearing the appeal. [Paras 3, 4]

Mah. Value Added Tax Appeal No.26 of 2018 is to be placed for fresh consideration on the question of applicability of Rule 58 and treatment of service tax in composition scheme assessments.

Final Conclusion: The review petition is allowed: the earlier order dated 28th November, 2018 is recalled for error apparent on the face of the record, and the appeal is restored for fresh consideration of whether Rule 58 of the MVAT Rules applies to composition scheme assessments and whether service tax forms part of the sale price in that context.

Revised assessment under Section 27 of the TNVAT Act - personal hearing (audi alteram partem) - remand for fresh consideration - reversal of Input Tax Credit under Section 19(5)(c) of the TNVAT Act

Revised assessment under Section 27 of the TNVAT Act - remand for fresh consideration - personal hearing (audi alteram partem) - Impugned revised assessment order dated 30.10.2018 set aside solely to grant personal hearing and matter remitted to the respondent for fresh consideration. - HELD THAT: - The Court observed that the second revised assessment dated 30.10.2018 proceeded on the basis of the notice and reply of November-December 2015 without referring to the subsequent notice and reply of February-March 2017 or to the earlier revised assessment dated 04.08.2017; the first revised assessment dated 04.08.2017 had been passed on the basis of the 2017 notice/reply. In these circumstances, and notwithstanding that multiple revisions under Section 27 are not disputed, the impugned order did not record or consider material earlier proceedings and thereby deprived the petitioner of an adequate opportunity to have all objections and documents considered together. The Court therefore set aside the impugned order only to facilitate a personal hearing, made no expression of opinion on the merits (including on the question of reversal of Input Tax Credit), and directed the respondent to grant personal hearing and thereafter pass a fresh revised assessment taking into account all objections and documents filed by the petitioner.

Impugned revised assessment dated 30.10.2018 is set aside solely to afford personal hearing; matter remitted to respondent for fresh decision after hearing.

Personal hearing (audi alteram partem) - remand for fresh consideration - Procedure and timetable for fresh consideration after remand, and revival of impugned order if opportunity not availed. - HELD THAT: - By consent the Court fixed a date for personal hearing and recorded the petitioner's undertaking to appear and produce documents; the respondent was directed, if personal hearing is availed, to consider all objections and documents and to pass a fresh revised assessment expeditiously and in any event within eight weeks from the date of personal hearing, and to communicate the redone order within seven working days. The Court further directed that if the petitioner fails to avail the personal hearing on the fixed date, the impugned order shall stand revived. The Court made clear that these directions are procedural and that it expresses no view on the merits.

Personal hearing fixed; respondent to pass fresh revised assessment within prescribed timeline if hearing availed; impugned order to revive if petitioner does not avail hearing.

Final Conclusion: The impugned revised assessment dated 30.10.2018 (Reference No. TIN 33280581113/2014-15) is set aside only to secure a personal hearing; the matter is remitted to the respondent to consider all objections and documents and pass a fresh revised assessment within the prescribed timetable, failing which the impugned order will be revived if the petitioner does not avail the hearing. No opinion is expressed on the merits and there shall be no order as to costs.

Mismatch verification - departmental enquiry - show cause notice with particulars - revised assessment procedure - JKM principle

Mismatch verification - departmental enquiry - show cause notice with particulars - revised assessment procedure - Validity of the revised assessment order insofar as mismatch findings were based on comparison with only one seller's annexure despite the assessee having furnished seven annexures. - HELD THAT: - The Court applied the principle in JKM Graphics that where mismatch between dealer returns and purported sellers' sale particulars is the basis for assessment action, the assessing authority must first conduct departmental verification rather than mechanically issuing a show cause or revising assessment. The impugned revised assessment relied on comparison with only one set of annexure II though seven sets (sale particulars from seven sellers) were furnished by the assessee in the reply dated 10.04.2018. The revised assessment does not articulate consideration of the remaining six enclosures nor is there material to demonstrate that verification was carried out with respect to those six sellers. In these circumstances the assessment cannot stand: the assessing officer must consider all annexures furnished, make such inter-dealer or other verifications as are mandated by the JKM principle, and only thereafter, if justified, pass a reasoned revised assessment or issue a show cause notice specifying the scope and basis of the prima facie view.

Impugned revised assessment order set aside insofar as it rests on the mismatch comparison that considered only one seller's annexure; matter remitted for fresh consideration after taking into account all six enclosures and conducting departmental verifications in accordance with law.

Final Conclusion: The impugned revised assessment order is quashed and the matter is remitted to the assessing authority to reconsider the mismatch aspect by taking into account all annexures furnished by the assessee, conducting necessary verifications in accordance with the JKM principle and passing a fresh reasoned order expeditiously.

Group of companies doctrine - assent to an arbitration agreement by conduct of a non signatory - existence of an arbitration agreement under the Arbitration and Conciliation Act, 1996 (Section 11(6) read with Section 11(6A)) - domestic commercial arbitration v. international commercial arbitration - indemnity clause as basis for binding a disclosed principal

Group of companies doctrine - assent to an arbitration agreement by conduct of a non signatory - indemnity clause as basis for binding a disclosed principal - Whether respondent No.2, a non signatory and constituent of the Reynders group, could be impleaded and subjected to arbitration under the agreement dated 1 May 2014 - HELD THAT: - The Court applied the established principle that a non signatory within a group of companies can be bound by an arbitration agreement only where the circumstances manifest the non signatory's intention to be bound. The applicant bore the burden of establishing that respondent No.2 assented to the arbitration agreement (even if only for enforcing the indemnity in clause 9). The Court found that respondent No.2's averments-denying participation in negotiations, denying authority of the persons alleged to have represented it, and asserting lack of privity-were unrebutted on the central point that Mr. Frederik Reynders acted for respondent No.2. The documentary record relied upon by the applicant (including pre contract emails and post contract correspondence) did not demonstrate that respondent No.2 participated in negotiations or intended to be party to the arbitration agreement; post contract communications could not supply the requisite assent. Consequently the applicant failed to discharge the burden of proving that respondent No.2 had consented to the arbitration agreement or was bound by it under the group of companies rationale. [Paras 9, 10, 11]

Application dismissed as against respondent No.2; respondent No.2 cannot be subjected to the proposed arbitration proceedings.

Existence of an arbitration agreement under the Arbitration and Conciliation Act, 1996 (Section 11(6) read with Section 11(6A)) - domestic commercial arbitration v. international commercial arbitration - Whether, notwithstanding dismissal as against respondent No.2, a sole arbitrator should be appointed to conduct arbitration between the applicant and respondent No.1 as a domestic commercial arbitration - HELD THAT: - Having held that respondent No.2 was not bound, the Court observed that respondent No.1 (an Indian company) did not contest appointment of a sole arbitrator to resolve disputes under clause 13 of the agreement and accepted that the arbitration between the applicant and respondent No.1 would be a domestic commercial arbitration. The Court therefore, in the interest of justice and on the basis that the agreement contains an arbitration clause governing disputes between the applicant and respondent No.1, appointed a sole arbitrator to conduct the arbitration proceedings in New Delhi in accordance with the Act. [Paras 12, 13, 14]

Mr. Justice Badar Durrez Ahmed is appointed as sole arbitrator to conduct domestic commercial arbitration at New Delhi between the applicant and respondent No.1; the application is disposed of accordingly.

Final Conclusion: The arbitration application is dismissed insofar as it seeks to subject respondent No.2 (a non signatory) to arbitration for lack of proved assent; however, a sole arbitrator is appointed to conduct domestic commercial arbitration in New Delhi between the applicant and respondent No.1. No costs.

Winding up petition - ascertained and liquidated debt - deemed inability to pay debts - invocation of pledge and realization of security - substantial grounds of defence not dishonest, illusory, speculative, spurious or specious - company court discretion and equity - summary suit and winding up petition similarity

Ascertained and liquidated debt - deemed inability to pay debts - Wazir Financial had not demonstrated an undisputed ascertained and liquidated debt against Birla Cotsyn sufficient to warrant winding up. - HELD THAT: - The court accepted the Single Judge's conclusion that the petitioning creditor must show an unequivocal liquidated sum due and payable in order to establish a deemed inability to pay. On the record, it was not possible to ascertain how much Wazir Financial had actually recovered, and therefore it could not be held that an indisputable liquidated debt remained. The ratio in IBA Health (India) Pvt Ltd vs Info-Drive Systems requiring that a company court refuse winding up where substantial bona fide defence exists was applied to hold that the petitioner had not discharged the onus of showing an unanswerable debt. [Paras 8, 9, 11]

The petition did not establish an undisputed ascertained and liquidated debt; therefore winding up could not be ordered on that basis.

Invocation of pledge and realization of security - company court discretion and equity - summary suit and winding up petition similarity - Disputed factual questions arising from invocation of the pledge and alleged recoveries precluded a winding up order and made a conditional order inappropriate in the circumstances. - HELD THAT: - The court observed that Wazir Financial had invoked the pledge but had not shown unequivocally that realization had not satisfied the debt or that any shortfall remained recoverable as an unliquidated claim. Whether the petitioner could have called for top-up security, and the extent of realization, were contested factual issues constituting substantial grounds of defence. The Court reiterated that winding up and summary suit proceedings require absence of tenable or plausible defences; where such bona fide disputes exist, a winding up order cannot be granted and a conditional order was not warranted on the facts of this case. [Paras 6, 10, 11]

Existence of bona fide disputed questions as to realization of pledged security and recoveries barred the grant of winding up; no conditional order was made.

Final Conclusion: The appeal is dismissed as wholly without substance; the petitioning creditor failed to prove an indisputable liquidated debt and the presence of bona fide factual disputes relating to pledged security precluded granting a winding up order.

Statutory notice under Section 138 of the Negotiable Instruments Act - incorrectly addressed notice - presumption of service - cause of action under Section 138 of the Negotiable Instruments Act - agency of building staff/security guard to receive notices

Statutory notice under Section 138 of the Negotiable Instruments Act - incorrectly addressed notice - presumption of service - cause of action under Section 138 of the Negotiable Instruments Act - Validity of the statutory notice and whether legal presumption of service arises when the notice was not addressed to the correspondence address shown by the accused. - HELD THAT: - The Court found that the statutory notice was not correctly addressed: the complainant sent the notice to the Barakhamba Road address while the letterhead relied upon by him specifically recorded a correspondence address at New Friends Colony. Where a notice is incorrectly addressed no legal presumption of service arises. Section 138 requires issuance and service of the statutory notice as a pre-condition for accrual of cause of action; in the absence of service (or circumstances warranting a legitimate presumption of service) the cause of action to file a complaint under Section 138 does not arise. The record showed returned registered envelopes and the complainant's own admission that he had not met or corresponded with the petitioner at the Barakhamba Road address; consequently the pre-condition for filing the complaint was not satisfied and the complaint could not be maintained. [Paras 22, 24, 25, 34]

No presumption of service arises where the notice was not correctly addressed; because statutory notice was not served, no cause of action under Section 138 accrued and the complaint was unsustainable.

Agency of building staff/security guard to receive notices - presumption of service - Whether the trial and appellate courts could permissibly infer service from the fact that the petitioner had an ancestral interest in the multi-occupant building and the complainant's visit to the building where a security guard gave information. - HELD THAT: - The High Court held that the trial and appellate courts erred in drawing a legal presumption of service from the complainant's affidavit that he visited the building and that a security guard indicated the petitioner did not keep fixed hours. The premises was a multi-storeyed commercial complex with numerous independent occupants; there was nothing on record to show the petitioner had a regular office or any specific portion of the building at the relevant time. A security guard of such a building is not an agent empowered to receive notices on behalf of all occupants and the complainant produced no material to show the petitioner was in possession of, or regularly used, any office there when the notice was sent. The appellate courts' inferences were therefore unsustainable. [Paras 26, 29, 30, 31, 33]

The courts below wrongly inferred service from the building ownership/visits and security guard's statements; that inference cannot sustain a presumption of service.

Conviction under Section 138 of the Negotiable Instruments Act - effect of failure to satisfy pre-condition for filing complaint - Whether the conviction and sentence could be sustained in view of the defective notice and absence of service. - HELD THAT: - Because the statutory pre-condition of service of notice under Section 138 was not satisfied and no legal presumption of service could be drawn from the facts, no cause of action accrued and the complaint was not maintainable. Consequently, conviction and sentence founded on that complaint could not stand. The High Court quashed the conviction and sentence and dismissed the complaint. [Paras 34, 35, 36]

Impugned conviction and sentence quashed; complaint under Section 138 dismissed.

Final Conclusion: The High Court held that the statutory notice under Section 138 was not correctly addressed and no presumption of service arises in such circumstances; as service was not established the cause of action did not accrue, the conviction and sentence were unsustainable, and the complaint under Section 138 was dismissed.