TaxTMI Updates e-Newsletter
Jul 06,2023

Input Tax Credit - Electronic Credit Ledger - Reasons in writing for disallowing debit of electronic credit ledger - Disallowance of ITC without show cause notice - Power of Commissioner or authorised officer to restore debit upon satisfaction - Rule 86A of the CGST Rules, 2017

Input Tax Credit - Electronic Credit Ledger - Reasons in writing for disallowing debit of electronic credit ledger - Disallowance of ITC without show cause notice - Rule 86A of the CGST Rules, 2017 - Validity of blocking available Input Tax Credit and creation of negative balance in the Electronic Credit Ledger without furnishing reasons in writing as required by Rule 86A. - HELD THAT: - The Court examined Rule 86A and recorded that it mandates reasons to be recorded in writing when debit from the electronic credit ledger is not permitted for discharge of liabilities or for claim of refund, and contemplates that the Commissioner or an authorised officer may restore such debit upon being satisfied that the conditions for disallowance no longer exist. The petitioner asserted that respondents blocked its available ITC and created a negative balance without any show cause notice or written reasons. The Court observed that no reasons in writing or details have been furnished to the petitioner regarding the impugned action, and noted the petitioner's contention that the action appears to be in breach of the requirements of Rule 86A and therefore without authority or jurisdiction. The Court did not finally adjudicate the merits but recorded these legal observations and directed that respondents be heard on the issues raised. [Paras 3, 4]

Matter adjourned for further hearing; respondents directed to file reply affidavit by 13 July 2023 and to be heard on the listed date; preliminary observation made that blocking of ITC without reasons may violate Rule 86A.

Final Conclusion: Interim directions: respondents to furnish reply affidavit by 13 July 2023 and the matter stood over for hearing on 17 July 2023; Court recorded that Rule 86A requires written reasons before disallowing debit from the electronic credit ledger and that no such reasons were furnished to the petitioner, leaving the substantive question open for adjudication on the adjourned date.

Classification of goods under the First Schedule to the Customs Tariff Act, 1975 using General Rules of Interpretation and HSN Notes - Meaning of "manufacture" under Section 2(72) of the CGST Act, 2017 - Unmanufactured tobacco; tobacco refuse (CTH 2401 / 24013000) - Chargeability of GST and compensation cess linked to presence of brand name / labelling - Application of Notification No. 1/2017-Central Tax (Rate) and Schedule IV

Classification of goods under the First Schedule to the Customs Tariff Act, 1975 using General Rules of Interpretation and HSN Notes - Meaning of "manufacture" under Section 2(72) of the CGST Act, 2017 - Unmanufactured tobacco; tobacco refuse (CTH 2401 / 24013000) - Supply of 'Kandi Rave' is classifiable as unmanufactured tobacco; tobacco refuse under tariff item 24013000. - HELD THAT: - The Authority applied the General Rules of Interpretation, the Section and Chapter Notes and HSN explanatory notes of Chapter 24. The product supplied - crushed tobacco waste mixed with natural clay and water and thereafter dried and packed - falls within the HSN description of unmanufactured tobacco and tobacco refuse (including waste resulting from manipulation of tobacco leaves). Under Section 2(72) of the CGST Act, manufacture requires emergence of a new product having a distinct name, character and use. The process undertaken (crushing and mixing with natural clay and water) does not result in emergence of a new product with a distinct name, character and use. Accordingly, the product remains unmanufactured tobacco / tobacco refuse and is classifiable under CTH 2401, specifically 24013000. [Paras 16]

The supply of 'Kandi Rave' is classifiable under 24013000 as unmanufactured tobacco; tobacco refuse.

Chargeability of GST and compensation cess linked to presence of brand name / labelling - Application of Notification No. 1/2017-Central Tax (Rate) and Schedule IV - GST at 28% (14% CGST and 14% SGST) is payable on supplies of 'Kandi Rave' when goods are cleared without any brand name or labeling; compensation cess applicability depends on presence of brand name. - HELD THAT: - The Authority examined the compensation cess schedule which distinguishes unmanufactured tobacco with or without lime tube and entries referring to goods bearing a brand name. The applicant stated and produced photographs showing the goods are sold in 30-35 kg bags without any brand name or labelling. In view of the product being classifiable under Schedule IV entry for tariff item 2401, and the absence of a brand name or label on the packed goods, the applicable GST rate is 28% (14% CGST and 14% SGST) as per Notification No. 1/2017-Central Tax (Rate), Sr. No. 13, Schedule IV. The Authority's conclusion on compensation cess is based on the absence of branding; presence of a brand name would engage the cess entries in the compensation schedule. [Paras 17]

Applicant liable to pay GST at 28% (14% CGST and 14% SGST) for 'Kandi Rave' supplied without any brand name or labelling; compensation cess position depends on whether goods bear a brand name.

Final Conclusion: The Advance Ruling holds that 'Kandi Rave' is unmanufactured tobacco/tobacco refuse classifiable under 24013000. Where such goods are cleared without any brand name or labelling, GST is payable at 28% (14% CGST and 14% SGST); applicability of compensation cess depends on the presence of a brand name on the goods.

Exemption for services relating to agricultural produce - Definition of "agricultural produce" for exemption purposes - Primary market - Services supplied after goods leave the primary market - Scope of advance ruling under Section 97(2) of the GST Act - Applicability of CBIC Circular No.16/16/2017-GST

Exemption for services relating to agricultural produce - Definition of "agricultural produce" for exemption purposes - Primary market - Services supplied after goods leave the primary market - Whether services by way of loading and unloading of the imported unprocessed toor and black matpe qualify for exemption under serial number 54(e) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. - HELD THAT: - The Authority examined the entry exempting services relating to agricultural produce and the definition of "agricultural produce," which exempts produce on which either no further processing is done or only such processing as is usually done by a cultivator to make it marketable for the primary market. The Authority placed emphasis on the concept of "primary market" - markets proximate to centres of production where farmers largely sell directly - and observed that the legislative intent is to benefit agricultural activity of the producing country up to the primary market. The imported goods in the present case were cultivated abroad and were imported into India after leaving the primary market of the foreign country; documentary evidence (Bill of Lading and Bill of Entry) showed importation from outside India. The CBIC Circular explains that pulses subjected to de-husking or splitting (processes generally performed by millers, not farmers) are not agricultural produce for exemption purposes, and that only whole grains which have not undergone such processing at or before the primary market qualify. Applying these principles, the Authority held that services of loading and unloading supplied after the goods have left the primary market (i.e., post-importation handling by the applicant) do not fall within the exemption under serial number 54(e).

Services of loading and unloading of the imported unprocessed toor and black matpe in the facts of this case do not qualify for exemption under serial number 54(e) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

Applicability of CBIC Circular No.16/16/2017-GST - Scope of advance ruling under Section 97(2) of the GST Act - Whether the Authority should pronounce on applicability of Circular No.16/16/2017-GST to the applicant's case. - HELD THAT: - The applicant sought a ruling on the applicability of the CBIC circular which clarifies the status of pulses after de-husking or splitting. The Authority noted that questions on applicability of a circular, as raised, fall outside the clauses contemplated for advance rulings under sub-section (2) of section 97 of the GST Act. Consequently, the Authority declined to pronounce any ruling on the applicability of Circular No.16/16/2017-GST in this matter.

No ruling is given on the applicability of Circular No.16/16/2017-GST; the Authority declined to pronounce on that issue as it is not covered under Section 97(2).

Final Conclusion: The Authority ruled that the loading and unloading services in question do not qualify for exemption under serial number 54(e) of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017; the request for a ruling on the applicability of CBIC Circular No.16/16/2017-GST was not decided by the Authority as being outside the scope of matters under Section 97(2).

Composite supply - value of supply - consideration not wholly in money - Rule 27(b) - exemption under Notification No. 12/2017 - entry 3A (as amended by Notification No. 2/2018) - Public Distribution System as activity entrusted to Panchayat under Article 243G

Composite supply - Public Distribution System as activity entrusted to Panchayat under Article 243G - Whether the applicant's activity of milling, fortification and packing of wheat constitutes a composite supply in relation to a function entrusted to a Panchayat under Article 243G. - HELD THAT: - The Authority found that the applicant's contracted activities - crushing of wheat into wholemeal atta, premixing micro-nutrients (fortification) and packing into 1 kg poly pouches for delivery to nominated distributors - constitute a composite supply with milling as the principal supply. The empanelment and contractual framework executed pursuant to the Government Order and applicable Public Distribution System guidelines show the supply is made in relation to a function entrusted to a Panchayat (public distribution). The circular (Circular No. 153/09/2021 GST) expressly recognises PDS activities as covered by entry 28 of the 11th Schedule, supporting the conclusion that the composite supply is in relation to a function entrusted to Panchayat/Municipality. [Paras 4]

The supply is a composite supply (milling as principal supply) and is in relation to a function entrusted to a Panchayat under Article 243G.

Value of supply - consideration not wholly in money - Rule 27(b) - exemption under Notification No. 12/2017 - entry 3A (as amended by Notification No. 2/2018) - Whether the value of goods in the composite supply exceeds 25% of the total value of supply when non monetary consideration is included, and consequently whether the supply is eligible for exemption under entry 3A of Notification No. 12/2017. - HELD THAT: - The Authority applied Rule 27(b) to determine value where consideration is not wholly in money, treating the sum of cash consideration and the ascertainable equivalent of non cash consideration (gunny bags, bran and refraction) as the value of supply. Reliance was placed on the Department memos which fix notional values (gunny bags Rs.43 and by products Rs.81 per 100 kg) so that the total value of supply is Rs.260.48 (cash Rs.136.48 + non cash Rs.124). The value of goods component (packing and fortification charges totaling Rs.60) thus amounts to 23.03% of the total value (60/260.48 x 100), which does not exceed 25%. The Authority noted consistent administrative and appellate treatment treating the notional values of by products and bags as part of the agreed supply price. [Paras 2, 4]

Including non monetary consideration under Rule 27(b) yields a goods component of 23.03% of the total value, which does not exceed 25%, and therefore the composite supply qualifies for exemption under entry 3A of Notification No. 12/2017 (as amended).

Final Conclusion: The Authority ruled that the applicant's activity is a composite supply (milling as principal supply) made in relation to a function entrusted to a Panchayat under Article 243G, and that, after including ascertainable non monetary consideration under Rule 27(b), the value of goods does not exceed 25% of the total value; accordingly the supply is exempt under entry 3A of Notification No. 12/2017 (as amended).

Composite supply - value of supply - consideration not wholly in money - Rule 27(b) - sum total of monetary consideration and equivalent amount for non monetary consideration - exemption under Entry 3A of Notification No. 12/2017 Central Tax (Rate) - activity in relation to a function entrusted to a Panchayat under Article 243G - net realizable value of non monetary consideration

Composite supply - Whether the applicant's activities of milling wheat into fortified atta, fortification and packing constitute a composite supply with milling as the principal supply. - HELD THAT: - The agreement requires empanelled mills to crush wheat, premix micro nutrients, pack the fortified atta in 1 kg poly pouches and deliver to nominated distributors. These coordinated activities form a single economic supply where the service of milling is the principal supply. On that basis the Authority held the overall arrangement falls within the definition of composite supply under clause (30) of section 2 of the GST Act, with milling as the principal supply. [Paras 4]

The supply qualifies as a composite supply with the milling service as the principal supply.

Activity in relation to a function entrusted to a Panchayat under Article 243G - Public Distribution System - Whether the composite supply is made in relation to a function entrusted to a Panchayat/municipality (i.e., public distribution) and therefore falls within the governmental activity contemplated by the notification. - HELD THAT: - The contract is executed pursuant to government empanelment orders for supplying fortified atta for distribution under the Public Distribution System. Circular guidance notes that public distribution figures in Entry 28 of the 11th Schedule and thus qualifies as an activity entrusted to Panchayats under Article 243G. The Authority therefore found the supply to be made in relation to a function entrusted to a Panchayat and covered by the governmental activity requirement of the relevant notification. [Paras 4]

The composite supply is in relation to a function entrusted to a Panchayat under Article 243G (PDS) and satisfies the governmental activity condition of the notification.

Value of supply - consideration not wholly in money - Rule 27(b) - sum total of monetary consideration and equivalent amount for non monetary consideration - net realizable value of non monetary consideration - exemption under Entry 3A of Notification No. 12/2017 Central Tax (Rate) - Whether the value of goods in the composite supply exceeds 25% of the total value, and the correct valuation method for determining the value of supply. - HELD THAT: - The contract provided for cash consideration and identifiable non cash consideration (retention of two gunny bags and by products - bran and refraction). Rule 27(b) applies where consideration is not wholly in money and prescribes valuing supply as the sum of monetary consideration and any equivalent amount for non monetary consideration when known at time of supply. The Departmental memos quantify the non monetary components (gunny bags and by products) and the applicant accepted those notional values. Applying Rule 27(b) yields total value of supply equal to the cash consideration plus the ascertained non cash consideration. Comparing the component value of goods (packing and fortification elements totalling Rs. 60 as identified in the contract) with the aggregate value thus computed, the value of goods is 23.03% of the total and therefore does not exceed the 25% threshold. Consequently the conditions of Entry 3A of Notification No.12/2017 are met. [Paras 4]

Valuation must include both monetary and identified non monetary consideration under Rule 27(b); the value of goods is 23.03% of the total value and therefore does not exceed 25%.

Exemption under Entry 3A of Notification No. 12/2017 Central Tax (Rate) - Whether the composite supply is eligible for exemption under Entry 3A of Notification No.12/2017 CT(Rate). - HELD THAT: - Having concluded (i) the supply is a composite supply with milling as principal supply, (ii) it is in relation to a function entrusted to a Panchayat (PDS), and (iii) the value of goods component does not exceed 25% when valuation includes the identified non monetary consideration as per Rule 27(b), the cumulative conditions of Entry 3A are satisfied. The Authority therefore applied the notification and held the composite supply to be exempt. [Paras 4]

The composite supply is eligible for exemption under Entry 3A of Notification No.12/2017 CT(Rate) as amended.

Final Conclusion: The Authority ruled that the applicant's milling, fortification and packing arrangement constitutes a composite supply (milling being the principal supply), is made in relation to a function entrusted to a Panchayat under Article 243G (PDS), and, applying Rule 27(b) to include identified non monetary consideration, the value of goods is 23.03% of the total value; accordingly the supply is exempt under Entry 3A of Notification No.12/2017 CT(Rate).

Composite supply - principal supply - exemption under Sl. No. 3A of Notification No. 12/2017-Central Tax (Rate) - value of supply of goods not exceeding 25% of the value of the composite supply - activity in relation to functions entrusted to a Panchayat under Article 243G / Municipality under Article 243W - job work supply taxable at 5% under Notification No. 11/2017-Central Tax (Rate)

Composite supply - principal supply - Whether the supply by the applicant (milling, fortification and packing of wheat supplied by the State) qualifies as a composite supply with the service of milling as the principal supply - HELD THAT: - The Authority applied the statutory definition of composite supply and the agreement terms requiring milling, fortification and specified packing. The activities of crushing wheat into atta, fortifying and packing are naturally bundled and supplied in conjunction with each other; the service of milling is the principal supply. The Authority therefore held that the arrangement satisfies the definition of composite supply with milling as the principal supply. [Paras 4]

The supply qualifies as a composite supply and the service of milling is the principal supply.

Activity in relation to functions entrusted to a Panchayat under Article 243G / Municipality under Article 243W - Whether the composite supply is provided in relation to any function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W of the Constitution - HELD THAT: - The Authority examined the empanelment scheme, the agreement executed under the State Government order and the Circular which notes that Public Distribution figures at entry 28 of the 11th Schedule (functions that may be entrusted to Panchayats). The supply was made to the State Food & Supplies Department for distribution under the PDS pursuant to governmental empanelment and guidelines, and thus is in relation to a function entrusted to a Panchayat/Municipality as contemplated by the exemption entry. [Paras 4]

The composite supply is made in relation to a function entrusted to a Panchayat/ Municipality under Articles 243G/243W.

Value of supply of goods not exceeding 25% of the value of the composite supply - exemption under Sl. No. 3A of Notification No. 12/2017-Central Tax (Rate) - Whether the value of goods in the composite supply exceeds 25% of the total value, and consequently whether the composite supply is eligible for exemption under Sl. No. 3A - HELD THAT: - The Authority accepted the agreed composite supply valuation as set out in the agreement and communications between the miller and the Food & Supplies Department. The applicant's computation included both cash consideration and notional/non cash consideration (value attributed to retention of by products and gunny bags) to arrive at the composite supply value. On the figures before the Authority, the value of goods (fortification inputs and packing materials) stood at Rs. 60 against a composite supply value of Rs. 260.48, i.e. about 23.03%, which does not exceed 25%. Having found that the supply was to a government entity in relation to a PDS function and that the goods component did not exceed 25%, the Authority applied the condition precedent in Sl. No. 3A and held the composite supply exempt. [Paras 4]

The value of goods does not exceed 25% of the composite supply value; therefore the composite supply is eligible for exemption under Sl. No. 3A of Notification No. 12/2017-Central Tax (Rate).

Job work supply taxable at 5% under Notification No. 11/2017-Central Tax (Rate) - Rate of GST to be applied if the composite supply does not qualify for exemption under Sl. No. 3A (i.e., if the goods component exceeds 25%) - HELD THAT: - Relying on the CBIC Circular and the relevant entry in Notification No. 11/2017, the Authority noted that where the milling service supplied to a government entity does not satisfy the Sl. No. 3A condition because the goods component exceeds 25%, such milling qualifies as job work and would attract the concessional rate of 5% (CGST + SGST) under Sl. No. 26 of Notification No. 11/2017, as clarified by the Circular. The Authority recorded this as the applicable rate in that contingency. [Paras 4]

If the goods component exceeds 25% and Sl. No. 3A is therefore inapplicable, the supply would attract tax at 5% under the job work entry of Notification No. 11/2017.

Final Conclusion: The Authority ruled that the applicant's milling, fortification and packing of State supplied wheat for distribution under the PDS constitutes a composite supply with milling as the principal supply; it is in relation to a function entrusted to Panchayats/Municipalities and, on the valuation before the Authority, the goods component does not exceed 25% of the composite supply value. Consequently the supply is exempt under Sl. No. 3A of Notification No. 12/2017 Central Tax (Rate). In the alternative, if the goods component were to exceed 25%, the supply would attract tax at 5% under the job work entry of Notification No. 11/2017.

Composite supply - principal supply - value of goods not exceeding 25% of composite supply - exemption under entry serial no. 3A of Notification No. 12/2017 Central Tax (Rate) - activity in relation to functions entrusted to a Municipality under Article 243W / Panchayat under Article 243G of the Constitution (Public Distribution System) - alternate rate as job-work at 5% under entry serial no. 26 of Notification No. 11/2017 Central Tax (Rate)

Composite supply - principal supply - The supply of milling, fortification and packing by the applicant qualifies as a composite supply with milling services as the principal supply. - HELD THAT: - The agreement requires the applicant to mill wheat, premix micro nutrients (fortification) and pack the fortified atta in specified labelled poly packs. These activities are naturally bundled and supplied in conjunction with each other in the ordinary course of business. Applying the definition of composite supply in clause (30) of section 2, the supply of services by way of milling is the principal supply and the combined activity therefore constitutes a composite supply. [Paras 4]

The supply is a composite supply where milling is the principal supply.

Activity in relation to functions entrusted to a Municipality under Article 243W / Panchayat under Article 243G of the Constitution (Public Distribution System) - exemption under entry serial no. 3A of Notification No. 12/2017 Central Tax (Rate) - The composite supply is in relation to a function entrusted to a Panchayat/Municipality (Public Distribution System) and thus satisfies the territorial/functional precondition of entry 3A. - HELD THAT: - The supply is made to the State Government under an empanelment executed pursuant to the West Bengal Public Distribution System orders and guidelines. Public Distribution specifically figures at entry 28 of the Eleventh Schedule and is an activity which may be entrusted to a Panchayat under Article 243G. On this basis the Authority found that the composite supply is made in relation to a function entrusted to a Panchayat/Municipality and therefore meets the second criterion of entry 3A. [Paras 4]

The composite supply is in relation to a function entrusted to a Panchayat/Municipality (PDS) and meets the functional requirement of entry 3A.

Value of goods not exceeding 25% of composite supply - exemption under entry serial no. 3A of Notification No. 12/2017 Central Tax (Rate) - alternate rate as job-work at 5% under entry serial no. 26 of Notification No. 11/2017 Central Tax (Rate) - The value of goods involved in the composite supply does not exceed 25% of the total value of the composite supply; consequently the supply is exempt under entry 3A. If the value of goods exceeds 25%, the supply would attract 5% as a job work service under entry 26. - HELD THAT: - The Authority accepted the agreed composite supply value of Rs. 260.48 per 100 kg (including notional/non cash consideration such as gunny bags and by products) as the valuation of the composite supply. The cost elements attributable to goods (fortification materials and packing) amount to Rs. 60, which is 23.03% of the total agreed supply value and hence does not exceed the 25% threshold specified in entry 3A. Therefore the supply satisfies the third criterion for exemption. The Authority also recorded the CBIC clarification that where the goods component exceeds 25%, the applicable rate would be 5% under entry 26 as job work; accordingly that rate applies as the alternate position. [Paras 4]

Value of goods is 23.03% of composite supply value; supply is exempt under entry 3A. If goods exceed 25%, the supply would be taxable at 5% under entry 26 as job work.

Final Conclusion: The Authority ruled that the applicant's composite supply of milling, fortification and packing of wheat into fortified atta for the State Food & Supplies Department (for distribution under the PDS) qualifies as a composite supply related to a function entrusted to a Panchayat/Municipality and, since the value of goods in the composite supply does not exceed 25% of the agreed supply value, the supply is exempt under entry serial no. 3A of Notification No. 12/2017 Central Tax (Rate). In the alternative, if the goods component exceeds 25%, the supply would attract tax at 5% under entry serial no. 26 as job work.

Works contract - immovable property / permanent beneficial enjoyment - supply to a local authority - composite supply of works contract for sewerage treatment - applicability of concessional rate under Notification No. 11/2017 (entry 3(iii)) - time of supply on change of rate (section 14)

Works contract - immovable property / permanent beneficial enjoyment - The supply qualifies as a works contract service under section 2(119) of the GST Act because the pumps, once installed and fastened to the civil structure, are for the permanent beneficial enjoyment of that structure and thus constitute immovable property. - HELD THAT: - The Authority applied the tests of annexation and object of annexation derived from the General Clauses Act, the Transfer of Property Act and judicial precedent to examine whether the pumps become part of immovable property. Given the tendered scope-design, manufacture, delivery, erection, installation, testing, maintenance and erection of foundation-and the factual finding that the pumps are to be fastened to the sewerage pumping station and remain in place for their operational life, the installation is for the permanent beneficial enjoyment of the civil structure. Accordingly the contract involves transfer of property in goods in execution of contract relating to immovable property and falls within the definition of works contract in section 2(119). [Paras 4]

Supply is a composite works contract service.

Supply to a local authority - The recipient, Kolkata Municipal Corporation, is a 'local authority' within the meaning of section 2(69) of the GST Act. - HELD THAT: - The Authority noted constitutional provisions (Articles 243P and 243Q) and the Kolkata Municipal Corporation Act which establish KMC as a municipal corporation. On that basis KMC qualifies as a Municipality and hence as a local authority for the purposes of the Notification. [Paras 4]

Supply is to a local authority (Kolkata Municipal Corporation).

Composite supply of works contract for sewerage treatment - The contract relates to sewerage disposal and the pumps form an integral part of that process; the supply is for purposes of sewerage treatment or disposal. - HELD THAT: - The tender was issued by the Sewerage and Drainage department and the stated purpose is replacing pumps at drainage pumping stations to pump sewerage for subsequent treatment/disposal. Documentary confirmation from departmental officers described the contract as being for disposal of drainage/sewage and as a composite works contract. Given these facts, the supply falls within the category of works contracts for (inter alia) sewerage treatment or disposal as contemplated in the Notification. [Paras 2, 4]

Supply is for sewerage treatment/disposal and is a composite works contract for that purpose.

Applicability of concessional rate under Notification No. 11/2017 (entry 3(iii)) - time of supply on change of rate (section 14) - The supply, being a composite works contract made to a local authority for sewerage treatment, is covered by entry 3(iii) of Notification No. 11/2017 and would attract the concessional rate specified therein (12% as applied by the Authority), but this applicability is subject to the temporal operation of the Notification and section 14 determining time of supply. - HELD THAT: - Having concluded that the transaction is a works contract supplied to a local authority for sewerage disposal, the Authority held that the supply is covered by entry 3(iii) of Notification No. 11/2017 (read with Notification No. 20/2017) which prescribes the concessional rate that was in force prior to omission of the entry. The Authority observed that the entry was omitted effective 18.07.2022, after which the higher rate applies. Because section 14 governs determination of time of supply when tax rates change, the final tax rate applicable depends on when supply/invoice/payment occurred as per section 14, and therefore the concessional treatment applies only to the extent the time-of-supply facts fall before the omission. [Paras 4]

Supply falls under entry 3(iii) and benefits from the concessional rate to the extent the time of supply (as determined under section 14) falls before the omission of the entry.

Time of supply on change of rate (section 14) - The precise determination of time of supply in respect of the invoices and extent of supply completed before the change in rate could not be ascertained on the record and requires further verification. - HELD THAT: - The applicant produced two invoices dated 17 May 2022 but did not furnish particulars of payments received, the extent of work completed before 18.07.2022, or any mutual agreement as to completion stages. Since section 14(a) and (b) govern time of supply where rates change, and the time of supply determines which rate applies, the Authority was unable to determine whether the concessional rate applies to those supplies or invoices. Consequently the factual determination of time of supply and apportionment (if any) must be verified based on records of supply, invoices, and payments. [Paras 2, 4]

Time of supply not ascertained on record; issue remanded for factual verification under section 14.

Final Conclusion: The Authority rules that the transaction is a composite works contract relating to sewerage treatment supplied to a local authority (KMC) and, subject to determination of time of supply under section 14, is covered by entry 3(iii) of Notification No. 11/2017 (read with Notification No. 20/2017) and eligible for the concessional rate to the extent the time of supply falls before the omission of that entry; the precise time-of-supply facts require further verification.

Reopening of assessment u/s 147 - notice u/s 148 has been issued beyond six years after the end of the AY in question - as decided by HC [2022 (8) TMI 1405 - ORISSA HIGH COURT] impugned notice and the consequential orders/notices, if any, are hereby quashed - HELD THAT:- In terms of Circular No. 17/2019 dated 08.08.2019 issued by Government of India, Ministry of Finance, Department of Revenue, Central Board Direct Taxes, Judicial Section, since the amount of tax involved is low, we are not inclined to interfere with the impugned order.

SLP dismissed.

TP adjustment u/s 92C - ALP determination - international transactions relating to receipts in respect of investment advisory services - order passed by this Court in the case of M/s. SAP Labs India (P) Ltd. v. CIT [2023 (4) TMI 859 - SUPREME COURT] wherein this Court has set aside similar orders and remanded the matter to the High Court for fresh consideration.

In that view without expressing any opinion on merits, the order impugned herein is set aside. The appeal is restored to the file of the High Court of Judicature at Bombay to re-hear on all aspects as indicated in the above referred judgment.

Reopening of assessment u/s 147 - barred by limitation - Period of limitation to issue notice issued u/s 148A(b) - power to extend the time period under the first proviso to section 149(1) - scope of Taxation and Other Laws (Relaxation and Amendment of Certain Provision) Act, 2022 [TLA Act ] - HELD THAT:- Exemption from filing certified copy of the impugned judgment is granted.

Issue notice, returnable on 10.07.2023.

In the meantime, the impugned judgment and order passed by the High Court in [2023 (3) TMI 104 - GUJARAT HIGH COURT] shall remain stayed.

Rectification of assessment orders under Section 154 - limitation for filing rectification under Section 154(7) - scope of giving effect to appellate orders - rectification in respect of matters not subject of appeal - mistake apparent from record - operation of retrospective legislative amendment in rectification proceedings

Rectification of assessment orders under Section 154 - scope of giving effect to appellate orders - rectification in respect of matters not subject of appeal - Whether the Assessing Officer, while giving effect to an appellate order, could rectify the order to alter book profit on a matter which was not the subject matter of the appeal. - HELD THAT: - The Court affirmed the ITAT's conclusion that the AO, when giving effect to an appellate authority's directions, is confined to implementing those directions and cannot, in that process, redetermine issues which were not placed before the appellate or revisional forum. The rectification under Section 154 was held to be impermissible insofar as it sought to alter the order on an issue that had not been considered in the appeals; therefore the AO could not invoke rectification to introduce a change in calculation of book profit based on an issue not litigated on appeal. The Court relied on the tribunal's reasoning and earlier decisions applying the principle that the AO must not go beyond the appellate directions in giving effect to an appellate order, and that Section 154 cannot be used to reopen matters outside the scope of the appeal for the purpose of giving effect to an appellate order. [Paras 9]

AO was not entitled to rectify the order giving effect to the ITAT's decision on an issue which was not the subject matter of the appeal; such rectification was impermissible.

Limitation for filing rectification under Section 154(7) - operation of retrospective legislative amendment in rectification proceedings - mistake apparent from record - Whether the rectification order dated 29/03/2014 was time-barred under Section 154(7) because the issue sought to be rectified did not arise out of the appellate proceedings. - HELD THAT: - The Court held that where the matter sought to be rectified was not the subject of appellate consideration, the period of limitation for rectification must be reckoned from the original assessment order and not from the date of the order giving effect to the appellate decision. Consequently, the AO's reliance on a later date (being the order giving effect to the ITAT decision) could not rescue the rectification when the underlying original order was beyond the four year period prescribed under Section 154(7). The Court therefore concluded that the rectification which purported to give effect to a retrospective amendment, in respect of an issue not litigated on appeal, was barred by limitation. [Paras 9]

Rectification order dated 29/03/2014 is barred by limitation under Section 154(7) insofar as it seeks to alter the original assessment on a matter not subject to appeal.

Final Conclusion: Appeal dismissed; the rectification impugned was impermissible because it sought to alter an issue not before the appellate forums and, in any event, was time barred under Section 154(7).

Interpretation of Explanation clauses to Section 9(1)(vi) regarding royalty - equipment royalty - process royalty - transfer of rights in respect of copyright / licence as sine qua non for copyright royalty - distinction between access to software and transfer/ licence of software rights - Section 90(2) - option to adopt more beneficial provision (Act v. DTAA) - Article 7 DTAA - business profits and Permanent Establishment

Equipment royalty - Section 90(2) - option to adopt more beneficial provision (Act v. DTAA) - Whether the payment for use of the SAP system amounted to equipment royalty and was taxable under the Act for AY 1999-2000 - HELD THAT: - The Court accepted the ITAT's finding that, for AY 1999-2000, Explanation 2 to Section 9(1)(vi) did not include an equipment royalty clause because Clause (iv a) was inserted only by Finance Act, 2001 with effect from 1 April 2002. Applying Section 90(2), the assessee could elect the more beneficial provision; since the Act (as applicable for the year) did not recognise equipment royalty, the payment could not be taxed as such under the Act. The Revenue's contention that the DTAA definition should be applied to treat the payment as equipment royalty was therefore without merit in view of the statutory position and the assessee's right under Section 90(2). [Paras 12, 13]

Payment was not equipment royalty for AY 1999-2000 and could not be taxed as such under the Act; ITAT's conclusion on this point upheld.

Process royalty - Interpretation of Explanation clauses to Section 9(1)(vi) regarding royalty - Explanation 6 - definition of process (transmission by satellite/cable/optic fibre) - Whether the payment constituted process royalty under Clauses (i)/(ii)/(iii) of Explanation 2 and Explanation 6 to Section 9(1)(vi) - HELD THAT: - The Court affirmed the ITAT's factual and legal conclusion that CPI was granted only limited access to the assessee's hosted SAP system to input data and obtain reports, and there was no transfer of any right in a process or related property. Clause (i) requires transfer of rights in respect of a process; Clause (ii) requires imparting information about the working or use; Clause (iii) requires use of the process. On the facts, none of these elements were present. Explanation 6 (construed as covering live transmission such as channel feeds) did not extend to accessing a hosted SAP system for data input/output. Accordingly, the payments did not qualify as process royalty. [Paras 14, 18, 23, 27]

Payment was not process royalty under Clauses (i)/(ii)/(iii) or Explanation 6 to Section 9(1)(vi); ITAT's finding sustained.

Interpretation of Explanation clauses to Section 9(1)(vi) regarding royalty - Explanation 5 - consideration in respect of any right, property or information - Whether the payment was royalty under Explanation 5 as consideration in respect of any right, property or information - HELD THAT: - The Court endorsed the ITAT's factual finding that CPI had only limited access to the SAP system, having established a communication line at its own cost, and did not obtain possession, control or a right to use the system in the sense contemplated by Explanation 5. On these facts, the payments could not be regarded as consideration for any right, property or information falling within Explanation 5, and thus did not amount to royalty under that Explanation. [Paras 29, 33, 34]

Payment did not amount to royalty under Explanation 5; ITAT's conclusion upheld.

Transfer of rights in respect of copyright / licence as sine qua non for copyright royalty - distinction between access to software and transfer/ licence of software rights - Explanation 4 - transfer of rights in respect of computer software - Whether the payment fell within clause (v) to Explanation 2 (copyright royalty) or Explanation 4 (rights in computer software) - HELD THAT: - Relying on the Supreme Court authority cited by the parties, the Court agreed with the ITAT that clause (v) and Explanation 4 require a transfer (including by licence) of all or any rights in respect of copyright - i.e., a parting with rights defined under Sections 14(a)/14(b) of the Copyright Act. The factual record showed no transfer or licence of copyright or software rights; CPI was only permitted to access the hosted SAP system for its own use and could not commercially exploit or distribute the software. Consequently, neither clause (v) nor Explanation 4 applied on the facts, and the ITAT correctly refrained from treating the payment as copyright royalty. [Paras 39, 41, 43, 44, 45]

Payment was not royalty under clause (v) or Explanation 4; ITAT's factual and legal conclusion upheld.

Article 7 DTAA - business profits and Permanent Establishment - Section 90(2) - option to adopt more beneficial provision (Act v. DTAA) - Whether, on the DTAA, the consideration could be taxed in India as royalty or otherwise as business profits attributable to a Permanent Establishment in India - HELD THAT: - Having found that the payments were not royalty under the DTAA, the ITAT characterised them as business profits under Article 7. The Court agreed that Article 7 excludes taxation in India of business profits of an enterprise of a Contracting State unless attributable to a Permanent Establishment in India. On the record, the assessee did not have a Permanent Establishment in India as defined in Article 5; accordingly, business profits were not taxable in India. Given these findings of fact and law, the Court found no substantial question of law warranting interference with the ITAT's order. [Paras 46, 49, 50]

Payments characterised as business profits under Article 7 and not taxable in India because no Permanent Establishment existed; ITAT's conclusion affirmed.

Final Conclusion: The Revenue's appeal is dismissed. The ITAT's order of 25 January 2017 is upheld: the payments for access to the assessee's hosted SAP system did not constitute royalty (under the Act or DTAA) and, being business profits not attributable to a Permanent Establishment in India, are not taxable in India for AY 1999-2000.

Penalty under Section 271(1)(c) for furnishing inaccurate particulars of income - Explanation 5A to Section 271 - applicability after search under Section 132 - Effect of revised return filed under Section 153A vis-a -vis earlier return filed under Section 139 - Principles of natural justice - failure to consider material replies and denial of personal hearing - Maintainability of writ petition despite availability of alternative remedy of appeal - Compliance with Faceless Assessment/Penalty Scheme procedures

Principles of natural justice - failure to consider material replies and denial of personal hearing - Impugned penalty orders set aside for failure to consider crucial replies and for not affording an opportunity of personal hearing; matter remitted for fresh consideration after hearing. - HELD THAT: - The Court found that the petitioner had filed detailed replies dated 26.05.2021 and 31.05.2021 raising two pivotal contentions (non-applicability of explanation 5A and that the revised return filed under Section 153A is the operative return) and seeking personal hearing. The impugned orders, however, do not record any consideration of the crucial reply dated 31.05.2021 and do not disclose the reasoning on those contentions. Non-consideration of important pleas and refusal to grant personal hearing amounted to a partial violation of the principles of natural justice. In the interest of justice the Court set aside the penalty orders and remitted the matters to the authority for fresh consideration after affording personal hearing, subject to deposit conditions. [Paras 11, 12, 13, 14, 15]

Penalty orders set aside and remitted for fresh consideration after affording personal hearing; remand conditioned on deposit of 25% of penalty within six weeks.

Explanation 5A to Section 271 - applicability after search under Section 132 - Whether explanation 5A was applicable was not finally determined on merits and requires fresh consideration by the assessing authority after hearing. - HELD THAT: - The petitioner had specifically pleaded in its reply that explanation 5A applies only where tangible assets or undisclosed entries are discovered in search and that mere voluntary rectification of bookkeeping mistakes does not attract explanation 5A. The impugned orders do not show any discussion or reasoning on this contention. Consequently the Court did not adjudicate the applicability of explanation 5A on merits but remitted the issue to the authority to decide afresh after hearing the petitioner and considering the submissions. [Paras 10, 11, 13, 15]

Applicability of explanation 5A not finally decided; remitted to authority for fresh adjudication after hearing.

Effect of revised return filed under Section 153A vis-a -vis earlier return filed under Section 139 - Whether the revised return filed under Section 153A, which was accepted in assessment, precludes initiation of penalty proceedings based on the earlier return was not finally decided and must be considered by the authority on remand. - HELD THAT: - The petitioner had contended that once the revised return filed pursuant to Section 153A was accepted by the Assessing Officer, the earlier return filed under Section 139 becomes irrelevant and cannot form the basis for penalty under Section 271(1)(c). This contention was raised in the reply dated 31.05.2021 but the impugned orders do not discuss it. The Court therefore refrained from adjudicating the legal merit of this contention and directed the authority to examine and decide it after affording personal hearing. [Paras 11, 12, 13, 15]

Contention regarding effect of accepted revised return not decided on merits; remitted for consideration after hearing.

Maintainability of writ petition despite availability of alternative remedy of appeal - Writ petition is maintainable notwithstanding the availability of appellate remedy because there was a violation of principles of natural justice. - HELD THAT: - Respondents argued that an effective alternative remedy of appeal to the Commissioner (Appeals) exists and therefore the writ is not maintainable. The Court, however, applied established principles that availability of an alternative remedy does not bar writ jurisdiction where there is a breach of natural justice. Given the partial denial of natural justice (non-consideration of crucial replies and absence of personal hearing), the High Court entertained the writ petition and exercised its discretion to set aside the orders and remit the matters for fresh decision after hearing. [Paras 16]

Writ petition entertained despite alternative remedy because of violation of natural justice; challenge to maintainability rejected.

Compliance with Faceless Assessment/Penalty Scheme procedures - No separate finding that faceless procedure compliance justified the impugned orders; procedural compliance issues to be addressed by the authority on remand. - HELD THAT: - The respondents contended that the penalty order complied with faceless assessment/penalty procedures and that replies were considered. The Court, however, observed that the impugned orders do not reflect consideration of the crucial reply of 31.05.2021 and do not disclose reasoning on central contentions; hence the question of procedural compliance and sufficiency of consideration must be addressed by the authority when reconsidering the matter after hearing the petitioner. [Paras 13, 15]

Faceless scheme compliance and adequacy of consideration not finally upheld; authority to address these matters on remand after hearing.

Final Conclusion: Writ petitions allowed; impugned penalty orders dated 16.03.2022 and 21.03.2022 set aside and matters remitted to the authority to consider the petitioner's replies (26.05.2021 and 31.05.2021), decide the questions concerning explanation 5A and the effect of the revised return, and pass fresh orders after affording personal hearing; direction subject to deposit of 25% of penalty within six weeks.

Assessment under section 153A - incriminating material requirement for interference with completed assessments - jurisdiction to reopen completed or unabated assessments - additions under section 68 and section 69C in absence of seized material

Additions under section 68 and section 69C in absence of seized material - incriminating material requirement for interference with completed assessments - Validity of additions made under section 68 and section 69C in respect of alleged bogus long term capital gains where no incriminating material was found during search - HELD THAT: - The Court applied the Supreme Court's decision in Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell P. Ltd., which affirmed the approach in Kabul Chawla and Saumya Construction. The determinative legal principle is that, while section 153A enables reassessment/assessment for the specified six years, completed assessments can be interfered with by the Assessing Officer under section 153A only on the basis of incriminating material unearthed during the search or requisition. In absence of any incriminating material found at the assessee's premises, additions to the completed assessment (here, under sections 68 and 69C) cannot be sustained. The Tribunal's deletion of the additions was therefore in accordance with the settled law laid down by the Supreme Court and followed by this Court. [Paras 4, 5]

Additions under sections 68 and 69C set aside; no interference with completed assessment in absence of incriminating material.

Assessment under section 153A - jurisdiction to reopen completed or unabated assessments - Whether any substantial question of law arises warranting interference with the Tribunal's order in view of the Supreme Court precedent - HELD THAT: - The appellant conceded that the controversy falls squarely within the scope of the Supreme Court's ruling in Abhisar Buildwell P. Ltd., which resolves the legal question about the scope of assessments under section 153A and the necessity of incriminating material to revisit completed assessments. Having regard to that binding precedent, no substantial question of law survives for determination by this Court and the Revenue's appeal did not disclose any tenable ground for interference with the Tribunal's order. [Paras 4, 6, 7]

No substantial question of law arises; appeal dismissed.

Final Conclusion: The Revenue's appeal is dismissed; the Income Tax Appellate Tribunal's order deleting the additions under sections 68 and 69C for Assessment Year 2011-2012 is upheld in view of the Supreme Court's decision that completed assessments cannot be reopened in absence of incriminating material found during search.

Validity of penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars where returned income is accepted without additions - Requirement of recorded satisfaction by assessing officer before invoking penalty u/s. 271(1)(c) - Principle in SAS Pharmaceuticals: no penalty when returned income and assessed income are identical and conditions of section 271(1)(c) are not satisfied

Validity of penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars where returned income is accepted without additions - Requirement of recorded satisfaction by assessing officer before invoking penalty u/s. 271(1)(c) - Application of SAS Pharmaceuticals principle - Penalty invoked under section 271(1)(c) quashed where return filed in response to notice under section 148 was accepted by the assessing officer without any additions or demand. - HELD THAT: - The Tribunal noted that the assessee filed a return in response to a notice under section 148 which was accepted by the revenue in reassessment proceedings with no disallowance, addition or demand. In such circumstances the conditions for invoking section 271(1)(c) - namely concealment of income or furnishing inaccurate particulars - were not shown to be satisfied. The Tribunal held that the ratio of the High Court of Delhi in SAS Pharmaceuticals, followed by the Delhi Tribunal in Meeta Gutgutia, applies: penalty under section 271(1)(c) cannot be sustained where returned income and assessed income are identical and there is no recorded satisfaction that the assessee concealed income or furnished inaccurate particulars. The Tribunal rejected reliance on precedents where assessed income was varied from returned income, finding those authorities inapplicable on the facts. Applying this reasoning, the Tribunal found the NFAC was not justified in confirming the penalty. [Paras 7]

The penalty imposed under section 271(1)(c) is not justified and is set aside; the assessee's appeal is allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal, setting aside the penalty imposed under section 271(1)(c) because the return filed in response to the section 148 notice was accepted without any addition or demand and the conditions for levy of penalty were not satisfied.

Deemed income under section 56(2)(vii)(b) - Stamp duty valuation versus declared consideration - Requirement to refer to Valuation Officer under section 50C - Assessee's burden to explain discrepancy in valuation - Ex parte adjudication for non appearance of assessee

Deemed income under section 56(2)(vii)(b) - Stamp duty valuation versus declared consideration - Assessee's burden to explain discrepancy in valuation - Validity of addition under section 56(2)(vii)(b) based on difference between stamp duty valuation and declared purchase consideration - HELD THAT: - The Tribunal upheld the addition computed as the difference between stamp authority valuation and the declared consideration, apportioned to the assessee, because the assessee failed to furnish any explanation when confronted by the AO about the large disparity. Before the CIT(A) the assessee merely referred to section 50C and asserted, without particulars or substantiation, that the stamp duty value was high and requested valuation by the Valuation Officer; no concrete evidence or reason was placed on record to rebut the stamp valuation. The Tribunal held that, in absence of a valid explanation or supporting material from the assessee, the statutory consequence under section 56(2)(vii)(b) follows and the addition was rightly made and sustained by the lower authorities.

Addition under section 56(2)(vii)(b) upheld; appeal on this ground dismissed.

Ex parte adjudication for non appearance of assessee - Proceeding and decision of appeal ex parte due to non appearance and failure to respond to notices - HELD THAT: - The assessee did not appear despite multiple listings and service attempts; no adjournment application was filed. The Tribunal, after noting repeated opportunities afforded and returned speed post notices, proceeded with the hearing ex parte and decided the appeal on the materials on record and submissions of the Revenue. The decision to proceed and decide ex parte was therefore upheld as the assessee had been given ample opportunity but offered no assistance or explanation.

Hearing proceeded ex parte and appeal decided on merits in absence of the assessee.

Final Conclusion: The Tribunal dismissed the appeal, upholding the addition under section 56(2)(vii)(b) based on the stamp duty valuation less the declared consideration for AY 2014 15, and confirmed that the appeal was decided ex parte due to the assessee's non appearance and failure to substantiate any challenge to the stamp valuation.

Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - Requirement of specificity in show cause notice under section 274 and principle of audi alteram partem - Application of jurisdictional High Court precedent on defective penalty notice

Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - Requirement of specificity in show cause notice under section 274 and principle of audi alteram partem - Application of jurisdictional High Court precedent on defective penalty notice - Sustainability of penalty imposed u/s 271(1)(c) where assessment order and show cause notice did not specify whether the default was concealment of income or furnishing inaccurate particulars. - HELD THAT: - The Tribunal found that the assessment order merely recorded that penalty proceedings under section 271(1)(c) were being initiated without specifying the nature of the alleged default, and the show cause notice issued under section 274 likewise failed to specify whether the proceedings were for concealment of income or for furnishing inaccurate particulars. Applying the jurisdictional High Court decision in Kulwant Singh Bhatia, the Tribunal held that a clear specification of the charge is necessary both as a statutory requirement and as part of the audi alteram partem principle so that the assessee can meet the specific allegation. The Tribunal rejected the Revenue's reliance on a non jurisdictional High Court decision (Sundaram Finance) because the facts differed and because the jurisdictional High Court's ruling was directly applicable. In view of these defects, the penalty proceedings were held not sustainable and the penalty order was set aside. [Paras 9, 11]

Penalty order under section 271(1)(c) set aside as not maintainable for failure to specify the particular charge in the assessment order and show cause notice.

Voluntary disclosure and disclosure after initiation of scrutiny proceedings - Whether the correctness of the assessee's conduct (voluntary disclosure or bonafide error) was adjudicated by the Tribunal. - HELD THAT: - Because the Tribunal set aside the penalty order on the procedural ground of defective notice, it did not decide the rival contentions as to whether the assessee's rectification and payment were voluntary or made after initiation of scrutiny such that they were not voluntary. The Tribunal expressly left the parties' submissions on merits open and did not adjudicate them. [Paras 10]

Merits of concealment, voluntariness of disclosure and related contentions left open without adjudication.

Final Conclusion: The penalty imposed under section 271(1)(c) for AY 2013-14 was quashed because the assessment order and the show cause notice failed to specify the particular limb of section 271(1)(c) alleged to have been violated; factual and merit-based contentions were left undecided.

Deduction/exemption under section 80P(2)(d) - exemption under section 80P(2)(a)(i) - power of revision under section 263 - erroneous and prejudicial to the interests of the revenue - debatable or plausible view test for invocation of section 263

Deduction/exemption under section 80P(2)(d) - exemption under section 80P(2)(a)(i) - Whether interest income earned by cooperative societies from investments with cooperative banks qualifies for deduction/exemption under section 80P(2)(d) and section 80P(2)(a)(i). - HELD THAT: - The Tribunal, following the Coordinate Bench decisions of the Pune Tribunal and other precedents, held that interest income earned by a cooperative society from investments placed with cooperative banks qualifies for deduction/exemption under the provisions invoked. The Court treated the question as being covered in favour of the assessees by existing judicial decisions and accepted that the cooperative bank is a species of cooperative society, making such interest income attributable to the activities of the society and eligible for relief under the cited provisions. [Paras 5]

Interest income from investments with cooperative banks is eligible for deduction/exemption under the invoked provisions; issue decided in favour of the assessees.

Power of revision under section 263 - erroneous and prejudicial to the interests of the revenue - debatable or plausible view test for invocation of section 263 - Whether the Principal Commissioner of Income Tax rightly exercised revisionary jurisdiction under section 263 by setting aside the assessment on the ground that the assessment order was erroneous and prejudicial to the interests of revenue. - HELD THAT: - The Tribunal applied the well established test that section 263 can be invoked only where the error in the assessment order is not a debatable or plausible view and where the Assessing Officer had failed to apply his mind. As the question of taxability/exemption of the interest in issue was covered by judicial precedents in favour of the assessees and the Assessing Officer had taken a plausible view, the error relied upon by the PCIT was not of the kind that would sustain revision. Consequently, the revision under section 263 was held unsustainable. [Paras 5, 6]

Order of revision under section 263 set aside; revision held not sustainable because the issue involved a plausible/debatable view and was covered in favour of the assessees.

Final Conclusion: Appeals allowed: the Tribunal held that interest earned on investments with cooperative banks is eligible for the claimed relief under the cited provisions and that the PCIT's exercise of revisionary power under section 263 was unjustified; consequential orders of revision were set aside.

Reopening of assessment - reassessment under section 147/notice under section 148 - change of opinion - reason to believe - capital subsidy - capital receipt v. revenue receipt - reduction of cost of asset for computation of depreciation - prospective effect of amendment to the definition of "income" (sub clause relating to subsidy)

Reopening of assessment - reassessment under section 147/notice under section 148 - change of opinion - reason to believe - Validity of reassessment proceedings (reopening) for the assessment years in which the capital subsidy and its accounting were disclosed and examined in the original assessment - HELD THAT: - The Tribunal found on the record that the assessee had disclosed the capital subsidy, its accounting treatment and the relevant supporting documents in the original assessment proceedings and that the Assessing Officer had examined those materials when framing the assessment under section 143(3). The reassessment was initiated later and additions were made by disallowing depreciation on the ground that the subsidy should have been reduced from the cost of assets. The Tribunal held that where the original assessment after consideration of the material on record had not made any addition, subsequent reopening on the same facts amounted to reopening based on mere change of opinion and was impermissible. The decision applies the principle that post amendment reopening under section 147 requires tangible material and reasons having a live link with the formation of belief, and that reassessment cannot be used as a vehicle for review; earlier decisions of coordinate benches, the Supreme Court in Kelvinator and relevant high court authority were applied. For AY 2013 14 the same reasoning was held to apply mutatis mutandis because the identical facts and disclosure were on record for that year as well. Consequently the reassessment notices and the additions founded on them were quashed. [Paras 19, 20, 21, 22, 26]

Reopening under section 147/148 quashed as being on mere change of opinion; additions sustained on reassessment set aside for A.Y. 2012 13 and A.Y. 2013 14.

Capital subsidy - capital receipt v. revenue receipt - reduction of cost of asset for computation of depreciation - prospective effect of amendment to the definition of "income" (sub clause relating to subsidy) - Whether the 2015 amendment to the inclusive definition of "income" (by including 'subsidy') applies retrospectively to treat the capital subsidy as taxable income and require reduction from asset cost for depreciation - HELD THAT: - The Tribunal examined the nature of the subsidy and the fact that the assessee had treated the amount as a capital receipt in the audited financial statements and tax audit report, relying on judicial precedents applying the purpose/motive test to characterise subsidies. Following the Calcutta High Court decision in Pr. Commissioner of Income Tax v. Ankit Metal & Power Ltd., the Tribunal held that the Finance Act, 2015 insertion of sub clause (xviii) in section 2(24) operates prospectively w.e.f. 01.04.2016 (assessment year 2016 17) and therefore does not affect the subject assessment years. Applying that ratio, the Tribunal allowed the ground challenging the applicability of the amended definition and held that the amendment could not be invoked for the assessment years under consideration. [Paras 23]

Amendment to section 2(24) by Finance Act, 2015 held to have prospective effect; the amendment does not apply to the assessment years under appeal and cannot be invoked to tax the capital subsidy for those years.

Final Conclusion: The Tribunal allowed the assessee's grounds concerning reopening and the retrospective applicability of the 2015 amendment: reassessment proceedings under section 147/148 (and the additions sustained thereunder) were quashed for A.Y. 2012 13 and, applying the same ratio, for A.Y. 2013 14; the Finance Act, 2015 amendment to the definition of "income" was held to be prospective and inapplicable to the years before it.

Capacity utilization adjustment in transfer pricing - Extra ordinary/abnormal expenses in benchmarking - Exclusion of toll manufacturing charges from operating cost for benchmarking - Restriction of transfer pricing adjustment to international/transactional turnover (not entity level) - Deduction for contribution to approved gratuity fund (Section 36(1)(v) of the Act) - Remand for recomputation to give effect to DRP directions

Exclusion of toll manufacturing charges from operating cost for benchmarking - Extra ordinary/abnormal expenses in benchmarking - Toll manufacturing charges directed by DRP to be excluded from operating costs for benchmarking and the Tribunal directed the AO/TPO to give effect to that direction. - HELD THAT: - The DRP had held that the tolling charges were paid as an extra ordinary cost and directed the TPO to exclude this expenditure from operating cost for benchmarking. Despite that direction, the final assessment order did not fully exclude the said tolling charges. The Tribunal records the DRP's categorical direction and, on review of the materials and submissions, directs that toll manufacturing charges be excluded from operating costs for the purpose of benchmarking in accordance with the DRP order. [Paras 18]

Toll manufacturing charges to be excluded from operating cost for benchmarking as per DRP; assessee granted relief.

Capacity utilization adjustment in transfer pricing - Extra ordinary/abnormal expenses in benchmarking - DRP's allowance of capacity utilization adjustment was upheld but the DRP's refusal to grant separate adjustments for repairs & maintenance, excess stores and excess power/electricity was also upheld; the assessee's claim for those extra ordinary expense adjustments was dismissed. - HELD THAT: - The DRP recognised that the year under consideration was the assessee's first year after change in management, one plant remained non operational and capacity utilization was only 58%, and directed capacity utilization adjustment for comparables; it also directed exclusion of tolling charges. The DRP, however, held that since capacity utilization adjustment was allowed, no separate adjustment for excess stores, electricity and other extraordinary costs should be permitted. The Tribunal found the DRP's approach reasonable on the facts: the assessee had not provided necessary bifurcation of power expenses and other details to justify separate adjustments, and therefore there was no error in refusing additional adjustments beyond capacity utilization. [Paras 12, 13]

Assessee's claim for separate adjustments on account of repairs & maintenance, excess stores and excess power/electricity dismissed; DRP's approach upheld.

Remand for recomputation to give effect to DRP directions - Capacity utilization adjustment in transfer pricing - Matters relating to classification of expenses as fixed or variable in comparables and certain arithmetical/computational errors in giving effect to DRP directions were not finally decided on merits and were restored to the file of the TPO for recomputation and verification. - HELD THAT: - The assessee pointed out factual inaccuracies and arithmetical discrepancies in the manner the TPO/AO implemented the DRP's directions (including classification of expenses and computation for specified comparable entities). In the interest of justice and having regard to the DRP's specific directions (paras 8-9 of the DRP order), the Tribunal found it appropriate to remit these issues to the TPO for fresh computation giving full effect to the DRP directions. The assessee was permitted to file written submissions and documentary evidence before the TPO during recomputation. [Paras 22, 23]

Grounds relating to classification and computation as directed by the DRP are remanded to the TPO for recomputation and verification; restored to TPO's file.

Restriction of transfer pricing adjustment to international/transactional turnover (not entity level) - Transfer pricing adjustment is to be restricted to the turnover relating to international transactions with associated enterprises (transaction level) and not applied at the entity level. - HELD THAT: - Having considered judicial precedents on whether PLI adjustments of comparables should be applied at transaction level or entity level, the Tribunal followed the authorities holding that transfer pricing adjustments must be confined to international transactions with associated enterprises and not be applied across the assessee's entire entity turnover. On this basis, the assessee's ground seeking restriction of TP adjustment to international transactions was allowed. [Paras 26]

Transfer pricing adjustment restricted to international/transactional turnover; ground allowed.

Deduction for contribution to approved gratuity fund (Section 36(1)(v) of the Act) - Contribution to the employees' gratuity fund made during the year is allowable as a deduction under Section 36(1)(v) notwithstanding that formal approval to the fund was granted subsequently. - HELD THAT: - The DRP had disallowed the contribution on the ground that the gratuity fund was not approved in the year of contribution. Relying on the principles articulated by the Supreme Court in Textool Company Ltd. and consistent tribunal decisions, the Tribunal held that where the employer has no control over the irrevocable trust and the contribution is for the exclusive benefit of employees, deduction under section 36(1)(v) is permissible even if formal approval is granted in a subsequent year. Applying those principles to the facts, the Tribunal allowed the deduction. [Paras 32]

Deduction for contribution to the gratuity fund allowed.

Final Conclusion: The appeal is partly allowed for statistical purposes: (a) the DRP's capacity utilization allowance was upheld and separate claims for repairs, stores and excess power were dismissed; (b) toll manufacturing charges are to be excluded from operating cost for benchmarking as directed by the DRP; (c) issues concerning classification and computation for certain comparables are remitted to the TPO for recomputation in accordance with DRP directions; (d) transfer pricing adjustment is restricted to international/transactional turnover; and (e) deduction for contribution to the gratuity fund is allowed.

Addition under section 68 of the Income Tax Act - treatment of inherited amounts in capital accounts - correction of clerical/error in balance sheet entries - remand to Assessing Officer for verification and assessment - condition of no benefit taken in subsequent assessment years

Addition under section 68 of the Income Tax Act - treatment of inherited amounts in capital accounts - correction of clerical/error in balance sheet entries - Validity of the addition of the unexplained credit of Rs. 8,04,17,440/- made under section 68 where the assessee explained the amount arose from inherited bank balances but the accountant had misstated figures in the balance sheet. - HELD THAT: - The Tribunal accepted that the assessee inherited moveable and immovable properties, including bank deposits, from his uncle and that the accountant had erroneously recorded higher figures in the balance sheet. The assessee furnished a revised balance sheet showing the correct figures and explained that the repetition of the wrong figure in the return for a subsequent year arose from the accountant carrying forward the incorrect entry, the assessee being an individual without books of account. In view of these explanations and the produced revised balance sheet, the Tribunal found that the factual position warranted reconsideration rather than outright sustaining the addition. The Tribunal therefore declined to affirm the addition on the record before it and directed further verification by the Assessing Officer to adopt the correct FDR figure in place of the erroneously recorded amount. [Paras 3, 4]

The addition is not sustained on the present record; the Tribunal directed reconsideration by the Assessing Officer and adoption of the correct FDR figure of Rs. 96,00,000/- in place of Rs. 9,60,00,000/- as erroneously shown in the balance sheet.

Remand to Assessing Officer for verification and assessment - condition of no benefit taken in subsequent assessment years - Whether the matter should be remanded to the Assessing Officer for assessment taking into account the revised balance sheet and subject to conditions concerning subsequent assessment years. - HELD THAT: - The Tribunal remitted the matter to the Assessing Officer for fresh consideration of the revised balance sheet and reassessment of income for A.Y. 2016-17, directing the AO to adopt the corrected bank deposit figure. The remand was made on the basis that the assessee had supplied a plausible explanation and documentary revision, and because the alleged repetition of the mistake in later returns was explained as a consequence of the accountant carrying forward the incorrect entry. The Tribunal qualified the remand by requiring that the reassessment on the revised figures be undertaken only if the assessee has correctly reflected the figures in subsequent assessment years (A.Y. 2018-19 and onwards) and has not taken advantage of the earlier incorrect figures. [Paras 4]

Matter restored to the file of the Assessing Officer for reassessment on the basis of the revised balance sheet and adoption of the correct FDR figure, subject to the stated condition regarding subsequent assessment years.

Final Conclusion: Appeal allowed for statistical purposes; the Tribunal set aside the addition on the existing record and remitted the matter to the Assessing Officer to reassess A.Y. 2016-17 adopting the corrected balance-sheet figures (including the correct FDR amount), conditioned upon correct treatment in subsequent assessment years and absence of benefit taken from the earlier incorrect entries.

Deduction under section 36(1)(va) and deeming under section 2(24)(x) - Due date for deposit of employees' contribution under the Employees Provident Fund Scheme (para 38) - Non-applicability of section 43B extension to employees' contributions - Retrospective effect of a Supreme Court decision - Due date for deposit of employees' contribution to ESI

Deduction under section 36(1)(va) and deeming under section 2(24)(x) - Non-applicability of section 43B extension to employees' contributions - Whether deduction under section 36(1)(va) in respect of employees' contribution to PF/ESI can be claimed where deposit to the statutory fund was made after the statutory due date - HELD THAT: - The Tribunal applied the ruling of the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. which holds that amounts deducted from employees' wages are deemed income under section 2(24)(x) and that deduction under section 36(1)(va) is available only if such deducted amounts are deposited by the specific due date prescribed for deposit of employees' contribution. The Court further held that the due date prescribed by section 43B (date of filing of return) does not operate to extend the due date for employees' contribution which are governed by the specific welfare enactments and the Scheme. The Tribunal recorded that the assessee did not dispute this legal position. [Paras 3, 4]

Deduction under section 36(1)(va) is not allowable where employees' contribution was deposited after the statutory due date; section 43B's filing-date rule does not apply to employees' contributions.

Due date for deposit of employees' contribution under the Employees Provident Fund Scheme (para 38) - Purposive interpretation of social welfare legislation - Proper interpretation of the expression 'within fifteen days of the close of every month' in para 38 of the Employees' Provident Fund Scheme - whether the 15-day period is to be reckoned from the end of the month to which wages relate or from the month in which wages are actually disbursed - HELD THAT: - The Tribunal examined the Scheme and the Act and concluded that contributions are payable on wages 'whether paid or payable' and that the statutory obligation to deposit contributions lies initially on the employer (para 30 read with paras 32 and 38). The Tribunal considered the assessee's submission about ambiguity and coordinate decisions favouring the assessee, but held that authoritative decisions of the Supreme Court and several High Courts establish that the employer's obligation is absolute and the 15 day period is to be calculated from the close of the month to which the wages relate. A purposive construction was applied given the social welfare object of the legislation and the risk that accepting the assessee's construction would permit employers to postpone salary payments to avoid timely deposit. The Tribunal also noted that contrary Tribunal decisions have been overruled by higher courts. [Paras 10, 11, 12, 13, 14]

The 15 day due period in para 38 is to be computed from the close of the month to which the wages relate; ambiguity cannot be invoked to extend the due date and the assessee's contention is rejected.

Due date for deposit of employees' contribution to ESI - Whether payments to the ESI fund were made within the statutory due date - HELD THAT: - The Tribunal noted the ESI regulation prescribing payment within 21 days of the last day of the calendar month in which contributions fall due and that the assessee admitted delay in depositing employees' contribution to ESI. The Tribunal observed that the assessee did not dispute the statutory due date under the ESI provisions and therefore the admitted delay attracts disallowance pursuant to the legal position governing employees' contributions. [Paras 6, 7]

Assessee admitted delay in ESI deposits; disallowance applies as the statutory 21 day due date is not met.

Final Conclusion: The Tribunal dismissed the appeal. The Supreme Court's decision in Checkmate governs that employees' contributions are deemed income and deduction under section 36(1)(va) is available only if deposited by the statutory due date; the EPF Scheme's 15 day timeline is to be reckoned from the close of the month to which wages relate (employer's obligation is absolute), and admitted delay in ESI deposits (21 day rule) entails disallowance.

Refund of tax on zero-rated supplies - refund under Section 54 of the CGST Act - refund under Rule 96 of the CGST Rules - double benefit doctrine (IGST refund versus duty drawback) - statutory interest on delayed refund

Refund of tax on zero-rated supplies - refund under Section 54 of the CGST Act - refund under Rule 96 of the CGST Rules - double benefit doctrine (IGST refund versus duty drawback) - Entitlement to refund of IGST paid on exports treated as zero-rated supplies despite correspondence suggesting a claimed higher duty drawback. - HELD THAT: - The Court held that exports admitted to be zero-rated supplies fall within the refund scheme contemplated by Section 54 of the CGST Act and Rule 96 of the CGST Rules, and that those provisions apply once the factual foundation for zero-rating and concordance between invoice and shipping bill is established. The authorities' closure of the petitioner's grievance on the ground that a higher duty drawback had been availed was found to lack factual foundation and to be contrary to the record. Following precedents (Awadkrupa Plastomech, Gujarat Nippon and Kishan Lal Kuria Mal International as discussed in the judgment), where the rate of higher and lower drawback are the same and the exporter has not availed the option of higher drawback in place of IGST refund, no question of granting a double benefit arises. Consequently, denial of IGST refund on the ground of alleged higher drawback was unsustainable and the petitioner was entitled to the IGST refund claimed. [Paras 10, 11, 12, 13, 14]

The petitioner is entitled to refund of the IGST paid on the exported goods (zero-rated supplies); the claim cannot be rejected on the record-based assertion that a higher duty drawback was availed where no such factual basis exists.

Statutory interest on delayed refund - Entitlement to interest and administrative direction for release of the refund. - HELD THAT: - The Court directed payment of the refunded IGST with simple interest at 7% per annum from 22 February 2018, and ordered release of the amounts within two weeks of receipt of the authenticated copy of the order by the officer authorised to release the amounts. The imposition and rate of interest, and the timeline for disbursement, were directed as part of the remedy for wrongful delay in granting the refund. [Paras 15]

Respondents directed to refund the IGST with interest at 7% p.a. from 22 February 2018 and to release the amounts within two weeks of receipt of the authenticated order.

Final Conclusion: Writ petition allowed; respondents directed to sanction and release the IGST refund due on the zero-rated exports with interest at 7% p.a. from 22 February 2018, payment to be made within two weeks of receipt of authenticated copy of the order.

Refund under Section 27 of the Customs Act - applicability of SRF Ltd. precedent to refund claims - finality of High Court order and effect of dismissal of Special Leave Petition - maintainability of departmental appeal after judicial determination and compliance - jurisdiction of Commissioner (Appeals) to entertain appeal rendered impotent by prior court order

Refund under Section 27 of the Customs Act - applicability of SRF Ltd. precedent to refund claims - The claim for refund of excess additional customs duty for imports made between 30.03.2015 and 14.07.2015 was sustainable in view of SRF and the High Court direction, and the Assistant Commissioner rightly granted and paid the refund with interest. - HELD THAT: - The Delhi High Court, applying the law in SRF Ltd., held that the writ petitioner's refund claim must succeed and directed the respondents to process and pay the refund with interest (order dated 08.11.2016). Pursuant to that direction the Assistant Commissioner re-examined the claim, found the computation correct and unjust enrichment not attracted, sanctioned the refund by order dated 29.11.2016 and thereafter rectified the interest computation under section 154, leading to actual payment to the claimant. Those steps resolved the substantive claim for the specified import period in accordance with the Supreme Court precedent relied upon by the writ petitioner. [Paras 13, 14, 23, 24]

The refund application for the period 30.03.2015 to 14.07.2015 was to be allowed in accordance with SRF and the High Court's directions and was correctly sanctioned and paid by the Assistant Commissioner.

Finality of High Court order and effect of dismissal of Special Leave Petition - maintainability of departmental appeal after judicial determination and compliance - jurisdiction of Commissioner (Appeals) to entertain appeal rendered impotent by prior court order - The departmental appeal filed before the Commissioner (Appeals) against the Assistant Commissioner's earlier rejection was not maintainable after the Delhi High Court had decided the matter in favour of the claimant and the Assistant Commissioner had complied with that order; consequently the Commissioner (Appeals) lacked jurisdiction to set aside and remand the matter. - HELD THAT: - The department filed an appeal before the Commissioner (Appeals) on 16.01.2017 against the Assistant Commissioner's order dated 22.09.2016, but by then the Delhi High Court had on 08.11.2016 allowed the writ petition, directed processing and payment of refund with interest, and the Assistant Commissioner had complied by sanctioning and paying the refund. The correct legal course for the department, if aggrieved by the High Court's decision, was to challenge that judgment in the Supreme Court (which it did by SLP, later dismissed). Having failed to obtain a stay and with the High Court order complied with, the departmental appeal before the Commissioner (Appeals) amounted to an attempt to relitigate a matter already judicially determined and executed; the Commissioner (Appeals) therefore acted without jurisdiction in setting aside the Assistant Commissioner's earlier order and remanding the matter. [Paras 22, 24, 25]

The departmental appeal was not maintainable after the High Court's order and compliance; the Commissioner (Appeals) entertained the appeal without jurisdiction and the departmental appeal is dismissed.

Final Conclusion: The departmental appeal and the further appeal to the Tribunal are dismissed: the High Court's determination applying SRF attained finality (the SLP was dismissed), the Assistant Commissioner lawfully sanctioned and paid the refund for imports between 30.03.2015 and 14.07.2015 with interest, and the departmental appeal filed thereafter was without jurisdiction and liable to be dismissed.

Custody of title deeds - joint custody - powers under Section 9 of the Arbitration and Conciliation Act, 1996 - effect and implementation of a scheme of demerger - right to seek independent proceedings for proprietary rights

Custody of title deeds - joint custody - powers under Section 9 of the Arbitration and Conciliation Act, 1996 - Title deeds of the project land to be released by the Registrar General and placed in the joint custody of the petitioner and the respondents. - HELD THAT: - The court examined the fora and scope of the present proceedings under Section 9 of the Arbitration and Conciliation Act, 1996 and the prior interim directions regarding deposit of title deeds. Noting that the arbitration between the parties to the Collaboration Agreement is ongoing and that the title deeds had been secured with the Registrar General, the court held that there was no occasion to expand the present Section 9 proceedings to adjudicate proprietary disputes with third parties not party to the arbitration. On the joint request of the petitioner and the respondents and having regard to the need to secure documents crucial to the arbitral proceedings, the court directed the Registrar General to release the title deeds to be held in joint custody by the petitioner (Emaar India Limited) and Mr. Vikram Bhatnagar as authorized representative of the respondents, subject to further orders in the arbitration. [Paras 28, 30, 36, 38]

IA No. 2935/2020 disposed of by directing release of the title deeds from the Registrar General to be held in joint custody by the petitioner and the respondents, subject to further orders in the pending arbitration.

Effect and implementation of a scheme of demerger - right to seek independent proceedings for proprietary rights - Prayer for joint custody in favour of MGF Developments Limited rejected; MGF/Rakshit Jain may initiate independent proceedings to assert any rights under the demerger or other agreements. - HELD THAT: - The court considered the Scheme of Demerger and the NCLT order of 16.07.2018 which excluded the Capital Tower project (including the land in question) from the demerged undertaking and retained it with the demerged company (Emaar MGF Land Ltd, now Emaar India Limited). The court noted that MGF Developments Limited is not a party to the arbitration and has not impleaded itself in those proceedings. Allegations based on the purported "Capital Towers Economic Benefit Agreement" or letter agreements did not furnish a basis in the present Section 9 proceedings to grant MGF joint custody of the title deeds. The court therefore declined to expand the present lis to adjudicate MGF's asserted rights, while expressly leaving MGF and/or Mr. Rakshit Jain free to prosecute independent proceedings to claim any proprietary rights; the present order is not an expression of opinion on those rights. [Paras 33, 34, 35, 37, 38]

I.A. Nos. 14881/2022 and 7896/2023 dismissed; the prayer to grant joint custody to MGF Developments Limited is rejected, with liberty reserved to MGF/Rakshit Jain to seek appropriate relief in separate proceedings.

Final Conclusion: The court ordered that the title deeds presently with the Registrar General be released to and retained in the joint custody of the petitioner (Emaar India Limited) and the respondents (through their authorised representative Mr. Vikram Bhatnagar), dismissed the applications seeking custody for MGF Developments Limited, and left open MGF/Rakshit Jain's right to pursue independent proceedings to assert any proprietary claim; the release is subject to further orders in the pending arbitration.

Financial debt under Section 5(8)(e) of the Insolvency and Bankruptcy Code, 2016 - receivables sold other than on non-recourse basis - recourse in factoring agreements - interest entitlement up to insolvency commencement date

Financial debt under Section 5(8)(e) of the Insolvency and Bankruptcy Code, 2016 - recourse in factoring agreements - receivables sold other than on non-recourse basis - Whether the amount claimed under the Factoring Agreement is a "financial debt" within the meaning of Section 5(8)(e) of the Code despite the appellant's contention that the agreement was on a no-recourse basis. - HELD THAT: - The Tribunal examined the Factoring Agreement dated 05.07.2018, noting the defined term "Recourse" and the provisions in Clause 12 which expressly grant the financier a right of recourse against the client where creditor protection is zero, including recourse against each receivable remaining unpaid after the Recourse Date. Clause 12.1 and the definition of "Recourse" demonstrate that the agreement contemplated recourse to the corporate debtor and is not a non-recourse arrangement. Section 5(8)(e) excludes only receivables sold on a non-recourse basis from the definition of "financial debt"; since the agreement here provides for recourse, the receivables fall within the definition of financial debt. The Tribunal therefore found no merit in the appellant's contention that the agreement was non-recourse and concluded that the debt is a financial debt under the Code. [Paras 8, 9, 10, 11, 12]

The Factoring Agreement is not a non-recourse agreement; the receivable/claim is a financial debt within Section 5(8)(e) of the Code.

Interest entitlement up to insolvency commencement date - effect of deposit/offered payment on Section 7 admission - Consequences of the appellant's offer and deposit of the claimed amount and the extent of the financial creditor's entitlement to interest. - HELD THAT: - The appellant deposited the principal amount claimed in the Section 7 application pursuant to this Tribunal's interim direction and expressed willingness to pay the outstanding dues. The Tribunal accepted that the principal sum claimed was the amount due as on 28.01.2019 and observed that the financial creditor is entitled to interest on the debt at least up to the insolvency commencement date (11.11.2022). In view of the appellant's offer and deposit, the Tribunal directed that the deposited sum be paid to the financial creditor and ordered the appellant to pay simple interest at the rate of 14.50% p.a. up to 11.11.2022 within three months; failure to comply would permit the Adjudicating Authority to proceed with the insolvency resolution process. Parties to bear their own costs. [Paras 13, 14, 15]

Deposited principal to be paid to the financial creditor; appellant to pay simple interest at 14.50% p.a. up to 11.11.2022 within three months, failing which the Adjudicating Authority may proceed with the insolvency process.

Final Conclusion: The appeal is disposed of by upholding that the disputed receivable under the Factoring Agreement is a financial debt (not on a non recourse basis); the amount deposited by the appellant is to be paid to the financial creditor and the appellant must pay simple interest at 14.50% p.a. up to the insolvency commencement date (11.11.2022) within three months, failing which the Adjudicating Authority may continue the insolvency resolution process; parties to bear their own costs.

Preservation and custody of assets by the Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code - operational debt and government dues to be adjudicated under the IBC - jurisdiction under Section 60(5)(c) to issue directions relating to assets of the corporate debtor - prohibition of coercive recovery measures during CIRP - priority of creditors under the waterfall mechanism

Preservation and custody of assets by the Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code - prohibition of coercive recovery measures during CIRP - jurisdiction under Section 60(5)(c) to issue directions relating to assets of the corporate debtor - operational debt and government dues to be adjudicated under the IBC - RP entitled to a direction from the Adjudicating Authority for release of goods attached prior to CIRP so that they may be taken into custody as assets of the corporate debtor - HELD THAT: - The Tribunal held that goods attached by the revenue prior to initiation of CIRP remained assets of the corporate debtor and, after commencement of CIRP, coercive recovery measures are barred by the moratorium under Section 14. Circulars and clarifications of the tax authorities recognise that pre CIRP dues are to be filed as claims and that coercive action should not be resorted to during CIRP. The Supreme Court authority cited establishes that crystallised government dues become operational debt to be adjudicated under the Code and paid by the mechanism prescribed therein. Applying these principles, the Adjudicating Authority erred in holding that it had no jurisdiction to direct a State authority to release attachment: an application under Section 60(5)(c) seeking directions to protect or vest assets in the RP is maintainable where it concerns assets of the corporate debtor required to be dealt with in the insolvency process. In the facts, the attachment continued to prevent inclusion of the tiles in the corporate debtor's assets and impeded the RP's duty to take custody and preserve value for the benefit of creditors; accordingly the Adjudicating Authority should have granted relief directing release of the attachment so the assets could be brought into the insolvency estate. [Paras 17, 18, 19]

Impugned order rejecting the RP's application was set aside and the Respondent directed to release the attachment so the goods may be included in the assets of the corporate debtor

Final Conclusion: Appeal allowed; order dated 07.02.2023 set aside and revenue directed to release the attached tiles so they may be taken into custody as assets of the corporate debtor; parties to bear their own costs.

Shareholder status - transfer of shares and registration in the Register of Members - Financial debt versus equity - Verification of claims by the Resolution Professional - evidentiary value of financial statements filed with the Registrar of Companies

Shareholder status - transfer of shares and registration in the Register of Members - evidentiary value of financial statements filed with the Registrar of Companies - Whether the appellants were shareholders of the corporate debtor and whether the infusion of funds stood converted into equity. - HELD THAT: - The Tribunal held that documentary evidence on record-namely the endorsement on Share Certificate No. 36 dated 17/12/2019, the MGT-7 filed with the RoC for FY 2019-20 reflecting transfer of 18,60,000 equity shares in the names of the partners of the appellant, and the corporate debtor's letter dated 27/01/2020 intimating the partners that they are shareholders-establish that the sums were infused as investment convertible into equity. There was no reliable evidence of any Board meeting on 27/09/2019 or valid revocation of the MoU; consequently the Tribunal found no basis to treat the amounts as outstanding loan in the company's Financial Statements or Auditor's Report. The Tribunal emphasised that Financial Statements and filings with the RoC carry greater evidentiary weight than internal ledger extracts, and that the appellants took no effective steps under Section 59 of the Companies Act, 2013 in the interval before CIRP commenced. [Paras 10, 11, 12, 14, 15]

Appellants are to be regarded as shareholders and the infusion of funds is treated as investment converted into equity; no interference with the Adjudicating Authority on this finding.

Verification of claims by the Resolution Professional - Financial debt versus equity - Whether the Resolution Professional acted ultra vires by rejecting the appellant's claim and whether such rejection amounted to an adjudicatory function. - HELD THAT: - The Tribunal found that the Resolution Professional's rejection of the claim was within his duty to verify and collate claims under Regulation 13 of the CIRP Regulations, 2016. On the documentary record-particularly the filings with the RoC and the share transfer endorsement-the RP was justified in rejecting the claim as a financial creditor's claim because the transactions evidenced equity conversion and active participation/shareholding by the appellants. The Tribunal rejected the submission that mere rejection by the RP amounted to impermissible adjudication in the facts of the case. [Paras 13, 14, 15]

The RP did not exceed his role by rejecting the claim; the rejection was justified on the available documentary evidence.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority's finding that the appellant is a shareholder and the RP's rejection of the claim are upheld; connected interlocutory applications are closed and no costs are awarded.

Maintainability of appeals - valuation issues and forum competence - withdrawal of appeals - liberty to apply for restoration of appeals

Maintainability of appeals - valuation issues and forum competence - High Court's rejection of revenue appeals on the ground that appeals involving valuation issues were not maintainable. - HELD THAT: - The special leave petitions confined the challenge to the High Court's conclusion that appeals raising valuation issues were not maintainable. The Court considered the procedural posture: the appellant-revenue had earlier withdrawn appeals before this Court with liberty to refile in the High Court. The High Court took the view that valuation issues rendered the appeals not maintainable. The petitions did not seek substantive adjudication on valuation; instead the revenue sought relief from the High Court's maintainability finding. Having heard the parties, this Court did not decide the merits of the valuation controversy but addressed only the procedural consequence of the withdrawals and the maintainability ruling. In consequence the Court granted liberty to the revenue to apply for restoration of the appeals which had been withdrawn on various dates, including 13.04.2016, thereby leaving the question of maintainability for determination by the appropriate forum on any restoration application or on merits, rather than finally adjudicating the maintainability point in the special leave petitions.

The special leave petitions were disposed of and liberty was granted to the revenue to apply for restoration of the withdrawn appeals.

Final Conclusion: Special leave petitions disposed; challenge limited to High Court's maintainability ruling was not decided on merits and liberty granted to the revenue to seek restoration of the withdrawn appeals.

Remission of duty under Rule 21 of Central Excise Rules, 2002 - Jurisdiction of CESTAT for cases emanating from Yanam - Assessment and valuation of lost excisable goods for duty demand

Jurisdiction of CESTAT for cases emanating from Yanam - Commissionerate competence for pre-GST Central Excise matters - Tribunal competence to hear the appeal and proper forum for matters arising from Yanam - HELD THAT: - The Registrar raised whether the Appeal should be heard by CESTAT Hyderabad or CESTAT Chennai after a change of Cause Title. A harmonious reading of the statutory materials and administrative practice shows that cases emanating from Yanam fall within the jurisdiction of the Visakhapatnam Commissionerate for Central Excise and that appeals from Yanam are heard by CESTAT Hyderabad. The Adjudicatory Registry and the departmental AR accepted these statutory and administrative positions and gave consent for the appeal to proceed before this Bench. On that basis the Tribunal took up the appeal for hearing. [Paras 1, 2]

Proceedings before CESTAT Hyderabad were proper for a matter arising from Yanam; appeal was taken up and heard by this Tribunal.

Remission of duty under Rule 21 of Central Excise Rules, 2002 - Unavoidable accident / destruction by mob arson as ground for remission - Assessment and valuation of lost excisable goods for duty demand - Entitlement to remission of duty under Rule 21 in respect of finished and semi-finished goods lost/destroyed by arson and whether the confirmed duty demand was sustainable - HELD THAT: - Rule 21 permits remission where goods are shown to have been lost or destroyed by natural causes or by unavoidable accident. The Tribunal examined the factual matrix: violent arson at the factory on 27.01.2012, FIRs and fire-department involvement, inventories taken by the Superintendent, the insurance claim and assessment by the insurance surveyor, and the Arbitral Tribunal award. The Arbitral Tribunal awarded substantial compensation after detailed consideration, and the Appellant's insurance claim expressly excluded any component of excise duty. The departmental valuation of stocks for demand was materially higher and on the Tribunal's view arbitrary compared to the insurance/Arbitral valuation. On these facts the destruction was found to be an unavoidable event beyond the control of the management and squarely within Rule 21; accordingly the confirmed duty demand could not be sustained. [Paras 11, 12]

Benefit of remission under Rule 21 granted; impugned Order-in-Original confirming duty demand set aside and the appeal allowed with consequential relief as per law.

Final Conclusion: The Tribunal held that it properly had jurisdiction to hear the appeal from Yanam before CESTAT Hyderabad and, on the merits, granted remission under Rule 21 of the Central Excise Rules, 2002 for goods destroyed by unavoidable mob arson, set aside the confirmed duty demand and allowed the appeal with consequential relief.

Cenvat credit eligibility on input services - input service - inclusion clause - exclusion clause - modernisation, renovation or repair - construction or execution of a building or civil structure - requirement of supporting documents (contract / work order / agreement) - remand for fresh consideration

Cenvat credit eligibility on input services - input service - inclusion clause - exclusion clause - modernisation, renovation or repair - construction or execution of a building or civil structure - requirement of supporting documents (contract / work order / agreement) - Whether the cenvat credit availed on the impugned input services is admissible or must be disallowed, and whether the matter requires remand for reconsideration in light of documentary evidence and the scope of the definition of 'input service'. - HELD THAT: - The Tribunal examined the definition of input service, noting it comprises the means clause, the inclusion clause (which expressly covers services used in relation to modernisation, renovation or repair of a factory or related office) and the exclusion clause (which excludes certain construction or execution of a building or civil structure and other specified services). The authorities below had disallowed credit primarily by reference to the exclusion clause. However, the Adjudicating Authority recorded that the assessee had not produced contracts, work orders or agreements to identify the scope of the work and had relied only on certain invoices; subsequently the assessee furnished a compilation of agreements and invoices before the Tribunal. Given the wide amplitude of terms like modernisation, renovation or repair and the need to distinguish such activities from excluded construction work (which ordinarily requires drawings/sanctioned plans and is to be treated on a different footing), the Tribunal considered that the matter could not be finally adjudicated without fresh examination of the material documents and factual classification of the services. For these reasons the Tribunal concluded that the impugned orders must be set aside and the matter remitted to the Adjudicating Authority to reassess entitlement to credit after evaluating the documents and applying the inclusion and exclusion components of the definition of input service. [Paras 6, 8, 9]

The impugned order is set aside and the matter is remanded to the Adjudicating Authority for reconsideration of admissibility of cenvat credit in light of the documents to be examined and the proper application of the inclusion and exclusion clauses of the definition of input service.

Final Conclusion: Appeal allowed by way of remand; impugned order set aside and matter remitted to the Adjudicating Authority for fresh consideration of entitlement to cenvat credit on the impugned services after examination of the contracts, invoices and application of the inclusion and exclusion clauses of the definition of 'input service'.

Classification of polished granite/marble slabs - application of Chapter Note 6 to Chapter 25 - exclusion of Chapter 25 goods from Chapter 68 - concessional benefit under Notification No. 4/2006-C.E. - relevance of Board Circular dated 3-9-2008 - verification/quantification of differential duty payments - limitation/periodicity of demand

Classification of polished granite/marble slabs - application of Chapter Note 6 to Chapter 25 - exclusion of Chapter 25 goods from Chapter 68 - concessional benefit under Notification No. 4/2006-C.E. - relevance of Board Circular dated 3-9-2008 - Whether the polished granite slabs are classifiable under tariff item 21561200 (Chapter 25) or under 68022390 (Chapter 68) and whether the demand on that basis is sustainable. - HELD THAT: - Relying on earlier coordinate tribunal decisions (including Classic Marbles) and on the reasoning that processes such as sawing, resin filling, fibre backing, edge cutting and polishing do not, by themselves, convert marble/granite into a new distinct commodity, the tribunal held that such processed slabs remain classifiable under Chapter 25 and are eligible for concessional treatment under Notification No. 4/2006-C.E. The court noted that Chapter 68 expressly excludes goods of Chapter 25 and that Note 6 to Chapter 25 (which deems cutting/sawing etc. to be manufacture) must be read in its proper context; Board Circular dated 3-9-2008 supports that application of fibre or resin which leaves the slab surface uneven does not take the slab out of Chapter 25. Applying these authorities and principles, the demand premised on classification under 68022390 was found unsustainable and set aside.

Demand confirmed on classification (Rs.1,05,59,320/-) set aside; product held classifiable under 21561200 and eligible for Notification No. 4/2006-C.E.

Verification/quantification of differential duty payments - limitation/periodicity of demand - Adjudicatory verification of appellant's claim of payment of differential duty for the period April 2010 to June 2010 and consequent computation of demand. - HELD THAT: - The appellant claimed that differential duty for April-June 2010 was paid on 30-06-2010 and declared in the ER-1 return for June 2010. The tribunal did not decide the computation on the papers before it but directed the adjudicating authority to verify the appellant's claim and arrive at the correct computation of demand.

Matter remanded to adjudicating authority for verification and correct computation of the claimed payment for April 2010 to June 2010.

Limitation/periodicity of demand - Sustainability of the demand of Rs.49,811 in respect of clearance of marble slabs without payment of duty when the appellant did not press that demand. - HELD THAT: - The appellant expressly did not press the small demand. The tribunal therefore recorded that the demand in that amount would be sustained as not pressed by the appellant.

Demand of Rs.49,811/- is sustained as not pressed by the appellant.

Verification/quantification of differential duty payments - Verification of appellant's payment of duty in respect of clearance of marble slabs (claimed payment of Rs.2.24 lacs against demand of Rs.2,26,598/-). - HELD THAT: - The appellant submitted that duty of Rs.2.24 lacs had been paid in respect of the clearance in question. The tribunal directed the adjudicating authority to verify the payment and adjust the demand accordingly rather than adjudicating the point itself.

Matter remanded to adjudicating authority for verification of the payment of Rs.2.24 lacs and proper adjustment of the demand of Rs.2,26,598/-.

Final Conclusion: The appeal is partly allowed: the classification-based demand is set aside (slabs classifiable under 21561200 and eligible for Notification No. 4/2006-C.E.); the differential-duty claim for April-June 2010 and the payment in respect of one marble-slabs demand are remitted for verification and recomputation by the adjudicating authority; a small unpressed demand is sustained.