TaxTMI Updates e-Newsletter
Jul 10,2019

Input tax credit - return under Section 39 - FORM GSTR-3 - FORM GSTR-3B as a return under Section 39 - Rule 61 - form and manner of monthly return - press release clarification on last date for availing ITC

Return under Section 39 - FORM GSTR-3 - FORM GSTR-3B as a return under Section 39 - Rule 61 - form and manner of monthly return - FORM GSTR-3B is not the return prescribed under Section 39 and is not a substitution for FORM GSTR-3 except in the limited circumstances envisaged by Rule 61(5). - HELD THAT: - Section 39(1) requires a monthly return in such form and manner as prescribed; Rule 61(1) prescribes FORM GSTR-3 as the return required to be furnished under Section 39. While an initial notification (No.10/2017) had described GSTR-3B as being "in lieu of" GSTR-3, the legislature/government rectified that position retrospectively by Notification No.17/2017 substituting Rule 61(5) to remove the "in lieu of" wording. The historical account of the shorter return (GSTR-3B) being a temporary, stop-gap measure for operational reasons does not convert GSTR-3B into the statutory return under Section 39; GSTR-3B is to be filed only in the circumstances specified by Rule 61(5) and not as a general replacement of FORM GSTR-3. Consequently, GSTR-3 remains the return envisaged by Section 39 except where Rule 61(5) validly notifies GSTR-3B for specified circumstances. [Paras 29, 30, 31, 32]

GSTR-3B is not the statutory return under Section 39 and is only a temporary arrangement permissible under the limited circumstances of Rule 61(5); GSTR-3 continues to be the return prescribed by Rule 61(1) read with Section 39.

Press release clarification on last date for availing ITC - input tax credit - return under Section 39 - FORM GSTR-3B as a return under Section 39 - The press release dated 18.10.2018, to the extent its paragraph 3 purports to state that the last date to avail ITC for invoices pertaining to July, 2017 to March, 2018 is the last date for filing FORM GSTR-3B, is contrary to Section 16(4) read with Section 39 and Rule 61 and is illegal. - HELD THAT: - Section 16(4) fixes the last date for availing input tax credit as the due date of furnishing the return under Section 39 for the month of September following the end of the financial year or the annual return, whichever is earlier. Because FORM GSTR-3 is the return prescribed by Rule 61(1) under Section 39, a public clarification equating the last date for availing ITC with the filing date of FORM GSTR-3B (as done in paragraph 3 of the press release) oversteps the legal position except where GSTR-3B has been validly notified under Rule 61(5). The press release therefore misstates the legal position and is inconsistent with Section 16(4) read with Section 39 and Rule 61. [Paras 27, 28, 32, 33]

Paragraph 3 of the press release dated 18.10.2018 is illegal to the extent it purports to make the filing date of FORM GSTR-3B the last date for availing ITC for invoices of July, 2017 to March, 2018.

Final Conclusion: Writ petition disposed of: the Court holds that FORM GSTR-3B is not the return prescribed under Section 39 except in circumstances validly notified under Rule 61(5), and paragraph 3 of the press release dated 18.10.2018 is illegal insofar as it treats the filing date of FORM GSTR-3B as the cut-off date for availing ITC for invoices pertaining to July, 2017 to March, 2018.

Condition of part payment for grant of stay - discretion of appellate authority in granting interim relief - binding precedent of a Full Bench - abeyance of recovery pending disposal of appeal

Condition of part payment for grant of stay - binding precedent of a Full Bench - Requirement of making part payment as condition for grant of interim stay in appeals by the banks - HELD THAT: - The Court examined the insistence by the Commissioner of Income Tax (Appeals) that the appellants pay a portion of the disputed tax as a condition for grant of stay. Having regard to the Full Bench decision in The Mavilayi Service Co-operative Bank Ltd. v. The Commissioner of Income Tax, Calicut [2019 (2) KHC 287], which had decided the substantive question concerning liability of the cooperative banks and required remand for fresh enquiry as to the nature of activities, the High Court found that insisting on part payment in these cases was not appropriate. Although the appellate authority ordinarily has discretion to impose conditions for interim relief, the peculiar merits and binding precedent in these appeals justified not imposing any part-payment condition pending disposal. [Paras 3, 5]

No part payment shall be insisted upon as a condition for grant of interim stay in the appeals before the Commissioner of Income Tax (Appeals) in these cases.

Discretion of appellate authority in granting interim relief - abeyance of recovery pending disposal of appeal - Whether recovery and collection of the assessed tax should be kept in abeyance pending disposal of the statutory appeals and direction to the appellate authority to decide appeals at the earliest - HELD THAT: - The Court directed that, in light of the Full Bench dictum and the nature of the disputes, the Commissioner of Income Tax (Appeals) must consider and dispose of the statutory appeals expeditiously. Concurrently, the Court ordered that recovery and collection of the tax assessed be kept in abeyance pending disposal of those appeals, thereby suspending enforcement steps while the appellate process is concluded. [Paras 6]

The Commissioner of Income Tax (Appeals) is to consider and dispose of the appeals at the earliest and to keep recovery and collection of the assessed tax in abeyance pending disposal.

Final Conclusion: Writ appeals allowed; impugned single Judge orders set aside to the extent they required part payment for stay. The appellate authority is directed to consider and dispose of the statutory appeals expeditiously, with recovery and collection of the assessed tax kept in abeyance pending disposal, having regard to the cited Full Bench decision.

Re-characterisation of transactions - notional interest on share application money - transfer pricing re-characterisation - application of Section 92(2) to share application money - sham transaction - commercial expediency

Re-characterisation of transactions - notional interest on share application money - transfer pricing re-characterisation - sham transaction - commercial expediency - Whether the Assessing Officer/Transfer Pricing Officer was justified in treating share application money with an Associated Enterprise as an interest-free loan and charging notional interest, i.e., re characterising the subscription as a loan for transfer pricing purposes. - HELD THAT: - The Court accepted the Tribunal's conclusion that the TPO/Assessing Officer could not disregard the apparent transaction of subscription to preference shares and substitute it with a finding of an unsecured loan in the absence of material showing that the transaction was a sham or was entered into with intent to conceal the real nature of the transaction. The Court relied on the reasoning in a prior decision of this Court (order dated 28th January 2019 dismissing Revenue's appeal) which upheld the Tribunal's deletion of the notional interest adjustment on similar facts, observing that mere parking of share application money with the Associated Enterprise before allotment did not, without exceptional circumstances or supporting material, justify re-characterisation and a notional interest charge. The Court noted that admission of another appeal by this Court where the Tribunal reached a contrary result did not impel admission of the Revenue's appeal in the present matter, and found no basis to disturb the Tribunal's conclusion that there was no interest free loan and no sham transaction. [Paras 5, 6]

The Tribunal was justified in deleting the notional interest adjustment; the Revenue's appeal is dismissed.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's deletion of the transfer pricing adjustment charging notional interest on the share application money for Assessment Year 2009-10 is upheld in the absence of material showing the transaction was sham or otherwise susceptible to re characterisation.

Entitlement to deduction under Section 80P for primary agricultural credit societies - abeyance of reassessment notices under Section 148/147 pending disposal of higher court proceedings - revival of notices contingent on outcome of Special Leave Petitions - limited scope of High Court interim relief where higher forum proceedings are pending

Entitlement to deduction under Section 80P for primary agricultural credit societies - abeyance of reassessment notices under Section 148/147 pending disposal of higher court proceedings - revival of notices contingent on outcome of Special Leave Petitions - Whether the impugned notices under Section 148 premised on escaped income under Section 147 should be proceeded with or kept in abeyance in view of Division Bench decisions holding primary agricultural credit societies entitled to benefit under Section 80P and pending Special Leave Petitions in the Supreme Court. - HELD THAT: - The Court recognized that Division Bench decisions of this High Court have held that cooperative societies of the character before the Court are entitled to the benefit of Section 80P. As those Division Bench orders have neither been stayed nor reversed, they remain binding and 'hold the field' for the present. Noting that Special Leave Petitions have been filed by Revenue against those Division Bench orders, the Court exercised an interim, protective jurisdiction: instead of setting aside the impugned Section 148 notices outright, the Court directed that all 33 impugned notices be kept in abeyance and that no further proceedings be taken on them until the Special Leave Petitions are disposed of. The Court further provided that, should the Supreme Court allow the SLPs in favour of Revenue, the notices would be revived and the assessees would be free to raise all available objections including on reasons and limitation; conversely, if the SLPs are dismissed or the Division Bench orders are sustained, the impugned notices will stand set aside without further reference. The Court expressly declined to adjudicate questions of limitation or other defenses at this interim stage, noting those contentions but reserving them for appropriate proceedings depending on the ultimate outcome of the SLPs. [Paras 4, 5]

All 33 impugned notices are ordered to be kept in abeyance until disposal of the Special Leave Petitions; if SLPs succeed for Revenue the notices shall revive (with assessees free to raise objections), and if SLPs fail the notices shall stand set aside.

Final Conclusion: The writ petitions are disposed by ordering abeyance of the 33 reassessment notices under Section 148/147 until the Special Leave Petitions against the Division Bench orders on Section 80P are finally disposed; consequences of revival or setting aside are governed by the outcome of those SLPs.

Treatment of shares as stock-in-trade or investment - Allowability of provision for diminution in value of shares as deduction from business income - Scope for remand to Assessing Officer where earlier assessment years produced different records - Distinguishing precedents on factual matrix

Treatment of shares as stock-in-trade or investment - Allowability of provision for diminution in value of shares as deduction - Shares shown in the books as investments cannot be treated as stock-in-trade and a notional provision for diminution in their market value is not an allowable deduction from the assessee's business income for AY 2001-02. - HELD THAT: - The Assessing Officer recorded that the assessee herself treated the securities as investments and admitted the claim to be a provision only; the claim was contingent and not supported by evidence (para 4). The High Court noted the books consistently showed the shares as investments with no trading activity and that both the CIT(A) and the Tribunal had found there was no material placed to demonstrate trading in the shares (paras 5-7). On the facts of the case the Court held that a notional, contingent diminution provision cannot be allowed as a deduction when the assessee has not shown any trading in the shares or produced substantiating records; the matter was thus a factual finding affirmed by the Tribunal and not open to re-examination in the present statutory appeal (paras 4,5,7,11). [Paras 4, 5, 7, 11]

The finding that the shares were investments and the disallowance of the provision for diminution was upheld; the appeal fails on this issue.

Scope for remand to Assessing Officer where earlier assessment years produced different records - Distinguishing precedents on factual matrix - No remand was warranted for AY 2001-02 merely because the Tribunal in other assessment years had remanded similar issues; the earlier orders were factually distinguishable and the question is one of fact which had been finally decided by the Tribunal for the year under appeal. - HELD THAT: - The Court observed that in the assessment years where the Tribunal ordered remand, records showing trading activity had been produced, whereas for AY 2001-02 no such records were placed before the authorities (para 11). Consequently, the Tribunal's remands in other years (orders dated 05.02.2010 and 08.12.2017) did not assist the assessee for the present year because those decisions turned on a different factual matrix where supporting documents had been placed (para 11). The Court further explained that the Karnataka Bank decision relied upon by the assessee was inapplicable since in that case detailed regulatory accounts and consistent treatment justified treating the shares as stock-in-trade, facts absent here (para 12). The Court accepted the Revenue's reliance on Kerala Small Industries Development Corporation Ltd. which held that isolated or capital investments lacking indicia of trading cannot be treated as trading assets (para 13). As the issue was essentially factual and had been resolved against the assessee by the Tribunal, the High Court would not re-open those factual findings in an appeal under Section 260A (paras 11-13). [Paras 11, 12, 13]

The request for remand and reliance on other orders/precedents was rejected as inapplicable on the facts; the Tribunal's factual conclusion for AY 2001-02 stands.

Final Conclusion: The High Court dismissed the appeal and answered the admitted substantial questions of law against the assessee: the shares were properly treated as investments, the provision for diminution was not allowable as a deduction, and no remand was directed because the other decisions relied on were factually distinguishable.

Taxability of profit or loss on realisation/sale of investments by general insurance companies - treatment of profits realised from investments (real versus hypothetical receipts) - applicability of minimum alternate tax/book profit computation under Section 115JB to insurance companies - liability to deduct tax at source on payments to non-resident surveyors - liability to deduct tax at source on commission paid for receipt of re-insurance premium - interaction of IRDA Regulations and income-tax treatment of investment realisations

Taxability of profit or loss on realisation/sale of investments by general insurance companies - interaction of IRDA Regulations and income-tax treatment of investment realisations - Profit on sale of investments by the assessee (a general insurance company) is not taxable for periods prior to 1 April 2011 insofar as there was no provision requiring the revenue to disallow loss on sale of investments. - HELD THAT: - The Court followed the decision of the High Court of Delhi in Oriental Insurance Co. Ltd., which analysed the legislative history of Rule 5(b) of the First Schedule and the effect of the IRDA Regulations and related CBDT circulars. The rationale for omission of Rule 5(b) and its later re introduction was examined, and the Court noted that the IRDA Regulations required non-life insurers to include profit or loss on realisation/sale of investments in the profit and loss account with effect from AY 2011-12. Prior to 1 April 2011 there was no statutory provision obliging the Revenue to disallow deduction of loss on sale of investments, and the Tribunal and CIT(A) were therefore correct in favour of the assessee. [Paras 6, 7, 8, 9]

Answered against the Revenue; profit on sale of investments not taxable for the periods prior to 1 April 2011 as contended by Revenue.

Liability to deduct tax at source on payments to non-resident surveyors - The Tribunal's conclusion that the assessee was not liable to deduct tax at source on payments made to surveyors outside India is affirmed. - HELD THAT: - This question was considered by a Division Bench of this Court in related matters and decided against the Revenue. The present appeals follow that precedent: the Tribunal's finding that such payments were not taxable in India and therefore did not attract TDS obligations was accepted by this Court. [Paras 10, 12]

Answered against the Revenue; no TDS liability on payments to surveyors outside India for the periods in question.

Applicability of minimum alternate tax/book profit computation under Section 115JB to insurance companies - Provisions of Section 115JB enabling computation of book profit are not to be applied to insurance companies in the manner contended by the Revenue. - HELD THAT: - The Court relied on its earlier decision in Commissioner of Income Tax vs. M/s. Cholamandalam MS General Insurance Company Limited and on a Division Bench decision in Royal Sundaram to reject Revenue's contention. The Tribunal's view that Section 115JB's book profit computation, as invoked by the Revenue, could not be applied to insurance companies for the assessment years under challenge was endorsed. [Paras 11, 12]

Answered against the Revenue; Section 115JB not applicable to the assessee in the manner urged by Revenue.

Liability to deduct tax at source on commission paid for receipt of re-insurance premium - The Tribunal's finding that the assessee was not liable to deduct tax at source on commission paid for receipt of re insurance premium is upheld. - HELD THAT: - A Division Bench of this Court had earlier considered and decided this question against the Revenue; following those decisions, the Court concluded that the Tribunal was correct in holding that no TDS obligation arose on the commission payments for receipt of re insurance premium for the assessment years involved. [Paras 10, 12]

Answered against the Revenue; no TDS liability on commission paid for receipt of re-insurance premium for the periods before the Court.

Final Conclusion: All tax case appeals dismissed; the substantial questions of law framed are answered against the Revenue and the Tribunal's orders affirmed.

Stay of recovery pending appeal - deposit as condition for grant of stay - recording of reasons in interlocutory orders - balancing interest of revenue and assessee - expeditious disposal of appeals

Stay of recovery pending appeal - deposit as condition for grant of stay - recording of reasons in interlocutory orders - Whether refusal to grant stay of recovery in respect of Assessment Year 2011-2012 was legally sustainable and what relief should be granted. - HELD THAT: - The appellate authority's order refusing stay touched the merits of the appeal and did not demonstrate adequate consideration of the interlocutory application; reasons recorded were cursory and amounted to denial of due consideration. To balance the competing interests of the revenue and the assessee and to ensure orderly prosecution of the appeal, the High Court exercised supervisory jurisdiction to grant a conditional stay of recovery for AY 2011-2012. The stay is made subject to the petitioner depositing twenty percent of the tax demanded within the time stipulated; failure to comply renders the stay ineffective. This approach preserves the revenue's interest while permitting the appeal to be adjudicated on merits. [Paras 5]

Stay of recovery for AY 2011-2012 granted subject to deposit of 20% of the tax demanded within four weeks; stay to cease on default.

Stay of recovery pending appeal - deposit as condition for grant of stay - expeditious disposal of appeals - balancing interest of revenue and assessee - Whether stay of further recovery should be granted for Assessment Year 2014-2015 and what directions should be given for disposal of the pending appeals. - HELD THAT: - The petitioner had already deposited twenty percent of the tax demanded for AY 2014-2015. Having regard to that deposit and the need to balance the interests of the parties, the Court granted stay of further recovery for AY 2014-2015. In addition, to ensure that the conditional accommodation to the assessee does not delay final adjudication, the Court directed that the appeals (including those for AY 2011-2012 and AY 2014-2015) be disposed of as expeditiously as possible and preferably within three months from the date of the order. [Paras 5]

Further recovery for AY 2014-2015 stayed (given the 20% deposit); appeals directed to be disposed of preferably within three months.

Final Conclusion: Writ petition allowed in part: conditional stay of recovery granted for AY 2011-2012 subject to 20% deposit within four weeks; stay of further recovery for AY 2014-2015 upheld as 20% deposit made; both appeals directed to be disposed of urgently, preferably within three months.

Penalty under section 271(1)(c) - Notice under section 274 - Concealment of particulars of income - Furnishing inaccurate particulars of income - Requirement of specifying limb for penalty - Variation between show-cause notice and penalty order - Application of mind in issuance of notice

Penalty under section 271(1)(c) - Notice under section 274 - Requirement of specifying limb for penalty - Variation between show-cause notice and penalty order - Application of mind in issuance of notice - Validity of the penalty imposed under section 271(1)(c) where the show-cause notice under section 274 did not specify whether proceedings were initiated for concealment of particulars of income or for furnishing inaccurate particulars of income, and where the charge in the penalty order varied from the charge in the notice. - HELD THAT: - The Tribunal found from the record that penalty proceedings had been shown as initiated in respect of disallowance of a deduction under section 80IB(10) in the assessment order and that the AO issued printed/form proforma notices under section 274 which did not clearly strike out the inapplicable limb but generically recorded that the assessee had "concealed particulars of income or furnished inaccurate particulars of such income." The penalty order ultimately imposed penalty under section 271(1)(c) in respect of an addition of income alleged to have arisen under section 68 (receipt of cash) and characterised the default as furnishing inaccurate particulars of income and concealment of income. The Tribunal applied the settled legal position-reiterated by High Court and other authorities-that concealment of income and furnishing inaccurate particulars of income are distinct defaults and that a notice under section 274 read with section 271(1)(c) must specify the limb under which penalty is proposed to be levied, failing which the proforma notice without striking the irrelevant clause indicates non-application of mind. The Tribunal further noted that where there is variation between the charge in the show-cause notice and the charge in the penalty order (or an uncertain/alternative charge), the penalty cannot be sustained. In the facts of the case, this defect in initiation and the variation in charge rendered the penalty unsustainable, and accordingly the penalty was deleted. [Paras 13, 16]

Penalty imposed under section 271(1)(c) deleted.

Final Conclusion: The appeal is allowed: penalty under section 271(1)(c) for A.Y. 2010-11 is deleted because the show-cause notice under section 274 did not specify the limb of section 271(1)(c) and there was a material variation between the notice and the penalty order, indicating non-application of mind.

Validity of reassessment under section 148 - Change of opinion not a ground for reopening assessment - Scope of assessment under section 153A - Requirement of incriminating material for additions in concluded assessments

Validity of reassessment under section 148 - Change of opinion not a ground for reopening assessment - Reassessment proceedings initiated prior to search for AY 2003-04 were invalid and unsustainable. - HELD THAT: - The Tribunal examined the reasons recorded for reopening and found they merely pointed to a computational 'mistake' in the original assessment and did not identify any failure by the assessee to fully and truly disclose material facts or any new tangible material coming into the AO's possession. The recorded reasons therefore evidenced a change of opinion rather than a valid jurisdictional foundation under section 147/148. As reassessment must be validly initiated, the reopening was held unsustainable and, consequently, no assessment proceedings were pending on the date of search. [Paras 15, 16, 17, 18, 19]

Reopening under section 148 for AY 2003-04 set aside as invalid; reassessment proceedings quashed.

Scope of assessment under section 153A - Requirement of incriminating material for additions in concluded assessments - For AY 2003-04, additions in assessment under section 153A which were not founded on incriminating material seized during the search were unsustainable and were deleted. - HELD THAT: - Having quashed the reassessment, the Tribunal applied the principle that where an assessment for an earlier year stood concluded on the date of search, any additions in proceedings under section 153A that are not connected to incriminating material discovered during the search cannot be sustained. The Tribunal found no reference by the AO to any incriminating material supporting the impugned additions/disallowances (other than the reopened 148 issue which was invalid) and, following the Delhi High Court precedent cited in the order, directed deletion of such additions. [Paras 20, 21]

Additions/disallowances in the section 153A assessment for AY 2003-04 not based on incriminating material deleted; appeal allowed for assessee.

Scope of assessment under section 153A - Requirement of incriminating material for additions in concluded assessments - For AY 2004-05, additions and disallowances made in the section 153A assessment without any incriminating material seized in the search were unsustainable and deleted; the Revenue's cross-appeal on related deletion was dismissed for the same reason. - HELD THAT: - The Tribunal noted the assessment for AY 2004-05 had been concluded before the search; therefore, any further adjustments under section 153A must be traceable to seized incriminating material. The AO and Revenue failed to point to any such seized material supporting the impugned additions (including disallowances under sections 40A(3), 14A and deletion of 80IB relief). Following the same legal principle applied in the earlier part of the order and the cited High Court authority, those additions were held unsustainable and deleted. The Revenue's appeal against deletion of 80IB was dismissed on identical grounds. [Paras 30, 31, 32]

Impugned additions/disallowances in AY 2004-05 deleted for lack of incriminating material; assessee's appeal allowed in part and Revenue's appeal dismissed.

Scope of assessment under section 153A - Requirement of incriminating material for additions in concluded assessments - For AY 2005-06, additions and disallowances in the section 153A assessment made without any incriminating material seized during the search were unsustainable and deleted; the Revenue's appeal against such deletion was dismissed. - HELD THAT: - The Tribunal observed that assessment for AY 2005-06 had been completed prior to the search and that the AO did not point to any seized incriminating material as basis for the additions/disallowances upheld by the CIT(A). Applying the same legal standard as for the earlier years, and following the Delhi High Court precedent relied upon in the order, the Tribunal directed deletion of the impugned disallowances (including under section 40A(3), section 40(a)(ia) and additions for personal expenses). The Revenue's appeal challenging deletion of 80IB was also dismissed for want of seized material supporting the addition. [Paras 40, 41, 42]

Impugned additions/disallowances in AY 2005-06 deleted for lack of incriminating material; assessee's appeal allowed and Revenue's appeal dismissed.

Final Conclusion: The Tribunal set aside the reassessment initiated under section 148 for AY 2003-04 as invalid; held that where an assessment stood concluded on the date of search, additions under section 153A must be founded on incriminating material seized during the search; and, applying that principle, deleted the impugned additions/disallowances for AYs 2003-04, 2004-05 and 2005-06 and allowed the assessee's appeals while dismissing the Revenue's cross-appeals on similar grounds.

Penalty under section 271(1)(c) - concealment or furnishing inaccurate particulars - Explanation 5A to section 271(1)(c) - deeming fiction and requirements for invocation - Return filed under section 153A treated as return under section 139 - Strict construction of penal provisions - Principles of natural justice and notice requirements for penalty proceedings - Penalty under section 271AAB - conditions for levy after search and seizure

Penalty under section 271(1)(c) - concealment or furnishing inaccurate particulars - Return filed under section 153A treated as return under section 139 - Strict construction of penal provisions - Whether penalty under section 271(1)(c) is leviable where the income returned in response to notice under section 153A equals the assessed income and no addition is made by the Assessing Officer. - HELD THAT: - The Tribunal found that the Assessing Officer did not make any addition over and above the income returned under section 153A and did not bring material on record to demonstrate concealment or furnishing of inaccurate particulars. The return filed pursuant to notice under section 153A is to be treated as a return filed under section 139 for purposes of the Act; in the absence of an assessed income in excess of the return or other incriminating evidence, mere filing of a higher return post-search does not, by itself, establish concealment. Penal provisions like section 271(1)(c) require strict construction and the conditions for levy must be specifically fulfilled and proved by the Revenue. Applying these principles to the facts, the Tribunal held that neither concealment nor furnishing of inaccurate particulars was established. [Paras 14, 15, 16, 18, 19]

Penalty under section 271(1)(c) deleted where returned income under section 153A equalled assessed income and no concealment or inaccurate particulars were established.

Explanation 5A to section 271(1)(c) - deeming fiction and requirements for invocation - Penalty under section 271(1)(c) - concealment or furnishing inaccurate particulars - Whether Explanation 5A to section 271(1)(c) applied automatically and justified levy of penalty in the absence of proof connecting seized assets to income of the particular assessment years. - HELD THAT: - The Tribunal held that Explanation 5A creates a deeming fiction but its applicability is contingent on meeting specific requirements: there must be assets found during the search which the assessee claims were acquired out of his income, and those assets must relate to a particular previous year whose return is filed after the search. Parliament inserted Explanation 5A to address specific factual situations; it cannot be read as making penalty automatic regardless of factual nexus. The Revenue must prove that the conditions of Explanation 5A are satisfied. On the facts, the Revenue failed to concretize concealment year-wise or to link seized assets to the assessment years; hence Explanation 5A could not be invoked. [Paras 16, 17, 18]

Explanation 5A not attracted; penalty could not be sustained in absence of proof satisfying the deeming fiction's conditions.

Principles of natural justice and notice requirements for penalty proceedings - Penalty under section 271(1)(c) - concealment or furnishing inaccurate particulars - Whether the penalty proceedings were vitiated by defects in the penalty notice format or by failure to specify the specific charge/default for levy of penalty. - HELD THAT: - The Tribunal noted authorities that non-issue, defects or mistakes in the form of notice do not necessarily vitiate proceedings where no prejudice is caused and a reasonable opportunity of hearing has been accorded. It observed there is no prescribed proforma for the notice and that the assessee was made aware of the intention to levy penalty. On the facts the Tribunal declined to interfere with the CIT(A)'s conclusion on notice-format and natural justice grounds. [Paras 20]

No interference on notice-format/natural justice plea; defective/formal errors in notice did not invalidate penalty proceedings in the absence of prejudice.

Penalty under section 271AAB - conditions for levy after search and seizure - Whether penalty under section 271AAB was leviable for the assessment year in question where the assessee had made statement under section 132(4), substantiated manner of earning undisclosed income, paid tax before filing return and filed return declaring such income. - HELD THAT: - The Tribunal reviewed the mandatory conditions for levy under section 271AAB: admission of undisclosed income by the assessee and statement under section 132(4), substantiation of manner of earning such income, payment of tax before filing return, and filing of return declaring the undisclosed income. The assessee had complied with these conditions. The Tribunal applied the same rationale of strict construction and requirement of proving conditions for penalty as under section 271(1)(c) and concluded that under the present circumstances the penalty was not to be sustained. [Paras 23, 24]

Penalty under section 271AAB deleted as the statutory conditions were satisfied and penalty is not automatic in the circumstances.

Final Conclusion: The appeals are allowed: penalties levied under section 271(1)(c) and section 271AAB are set aside for the assessment years in issue, the Tribunal finding that the Revenue failed to establish concealment or the conditions necessary for invoking the deeming provisions and that penalties could not be sustained on the facts.

Deduction under Section 80P(2)(a)(i) - Exclusion by Section 80P(4) for co-operative banks - Meaning of "primary co-operative bank" under the Banking Regulation Act - Banking business - accepting deposits from public versus members - Precedent value of Tribunal's own earlier orders

Deduction under Section 80P(2)(a)(i) - Exclusion by Section 80P(4) for co-operative banks - Meaning of "primary co-operative bank" under the Banking Regulation Act - Banking business - accepting deposits from public versus members - Assessee, a primary co-operative credit society, is entitled to deduction under Section 80P(2)(a)(i) for AY 2014-15 and is not excluded by Section 80P(4) as a co-operative bank. - HELD THAT: - The tribunal found on the record and on the assessee's own statement that the society accepted deposits from and provided credit facilities to members only. Applying the definition of a "primary co-operative bank" in Chapter V of the Banking Regulation Act, the three cumulative conditions in Section 5(ccv) were considered: (1) principal business being banking, (2) paid-up capital and reserves not less than Rs. one lakh, and (3) bye-laws prohibiting admission of any other co-operative society as member. Only condition (2) was satisfied; conditions (1) and (3) were not. The tribunal followed its prior decisions in the assessee's own case for AY 2012-13 and 2013-14 and relevant High Court precedents (Quepem and Kalpadi) holding that a co-operative credit society confined to dealing with members does not answer the description of a co-operative bank for purposes of Section 80P(4). Transactions with non-members, being insignificant, do not convert the principal business into banking; to the extent income arises from non-member dealings, Section 80P(1) limits the deduction. Reliance on earlier tribunal orders and the cited High Court decisions governed the conclusion. [Paras 7, 8]

Appeal dismissed; assessee entitled to deduction under Section 80P(2)(a)(i) for AY 2014-15 as it is not a co-operative bank within the meaning of the Banking Regulation Act and Section 80P(4) is not attracted.

Final Conclusion: The Revenue's appeal is dismissed; the assessee, being a primary co-operative credit society dealing with members only and not satisfying the cumulative conditions to be a primary co-operative bank, is eligible for deduction under Section 80P(2)(a)(i) for AY 2014-15 (subject to restriction of deduction to income attributable to member dealings).

Section 69A - unexplained money - Capital gains already offered and assessed; prohibition of double taxation - Acceptance of assessee's explanation supported by audited accounts and bank statements - Onus on Assessing Officer to bring positive material to displace bona fide explanation

Section 69A - unexplained money - Capital gains already offered and assessed - Acceptance of assessee's explanation supported by audited accounts and bank statements - Onus on Assessing Officer to bring positive material to displace bona fide explanation - Whether the addition of Rs. 60,00,000/- under section 69A in A.Y.2013-14 was justified where the same represented consideration for sale of land the capital gains on which had been offered and assessed in A.Y.2011-12 and the assessee produced audited accounts and bank statements to show non-receipt of cheque in earlier year - HELD THAT: - The Tribunal found on the material on record that the assessee had executed a conveyance deed in F.Y.2010-11 entitling her to one-third of the sale consideration and that the purchaser had issued a cheque which was not deposited on the purchaser's instruction. The sum of Rs. 60,00,000/- was shown in the assessee's audited balance sheet under 'loans and advances' for the relevant earlier years and the assessee's bank statements corroborated that the cheque was not credited and that the cash receipts were ultimately deposited in tranches in the year under appeal. The capital gain attributable to the assessee's share was offered, scrutinised and accepted in A.Y.2011-12 and tax paid. The Assessing Officer brought no positive material to displace the assessee's explanation; attempts to serve notice on the purchaser were singular and remained unavailing. On these facts the Tribunal held that the amount received in A.Y.2013-14 was the consideration for the earlier sale already taxed as capital gain and could not be subjected to fresh addition under section 69A, particularly where audited accounts and bank statements furnished by the assessee supported the explanation and the AO failed to rebut it with independent evidence. [Paras 7, 8, 9]

Addition of Rs. 60,00,000/- under section 69A deleted and assessee's appeal allowed.

Final Conclusion: The Tribunal allowed the appeal for A.Y.2013-14, held that the Rs. 60,00,000/- represented consideration for a sale whose capital gain had already been assessed in A.Y.2011-12 and, on the facts and available records, directed deletion of the addition made under section 69A.

Penalty under Section 271(1)(c) - furnishing inaccurate particulars of income - mere disallowance of claim not amounting to concealment - housing rent allowance exemption under Section 10(13A) - condonation of delay for filing appeal

Condonation of delay for filing appeal - Delay in filing the appeal was condoned. - HELD THAT: - The assessee filed the appeal with delay of 229 days and sought condonation on account of undergoing cancer treatment. The Tribunal, after considering the medical evidence and the nature of the illness, held that the treatment constituted a reasonable cause for the delay and that the delay was neither willful nor wanton. In view of these findings the appeal was admitted for adjudication. [Paras 7]

Delay condoned and appeal admitted.

Penalty under Section 271(1)(c) - furnishing inaccurate particulars of income - mere disallowance of claim not amounting to concealment - housing rent allowance exemption under Section 10(13A) - Levy of penalty under Section 271(1)(c) was deleted as not sustainable. - HELD THAT: - The Tribunal examined the assessment and penalty records and found that the assessee had not produced any supporting details for the HRA claim, and had agreed to other smaller disallowances, but there was no material to demonstrate that the assessee furnished inaccurate particulars amounting to concealment. Applying the settled principle that mere disallowance of a claim does not automatically attract penalty, the Tribunal relied on the precedent cited in the proceedings (Commissioner of Income-tax v. Reliance Petroproducts Pvt. Ltd.) and observed that the basis for levying penalty lacked legs to stand. The fact that the employer did not dispute the HRA claim was noted; overall the circumstances did not justify confirmation of penalty under Section 271(1)(c). [Paras 8, 9]

Penalty of Rs. 2,17,821/- under Section 271(1)(c) deleted and appeal allowed on merits.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, on merits, set aside the penalty imposed under Section 271(1)(c) because the facts did not demonstrate furnishing of inaccurate particulars or concealment; the appeal was allowed.

Arm's length price - Head Office General & Administrative expenses - transfer pricing officer's determination - academic importance of a disputed issue / infructuous ground - interest under section 234C for delayed advance tax - electronic payment mandate for companies - delay in payment not attributable to the assessee

Arm's length price - Head Office General & Administrative expenses - transfer pricing officer's determination - academic importance of a disputed issue / infructuous ground - Merits of determination of arm's length price of Head Office General & Administrative expenses were not adjudicated as the matter was rendered academic and the ground was dismissed as infructuous while leaving the question open for future adjudication. - HELD THAT: - The Transfer Pricing Officer had determined the arm's length price of Head Office General & Administrative expenses at nil. However, the Assessing Officer found that the assessee had not debited or claimed that expenditure in the Profit & Loss account or in the computation of income, and accordingly made no addition in the assessment. Given that there was ultimately no financial consequence in the assessment for the year under consideration, the Tribunal held the challenge to the TPO's determination to be of merely academic importance and declined to examine the merits. The Tribunal expressly refrained from expressing any opinion on whether the TPO was competent to make such a determination and left that substantive question open for adjudication in any other assessment year where it may arise. [Paras 6]

Ground concerning determination of arm's length price of Head Office General & Administrative expenses dismissed as infructuous; merits left open for future adjudication.

Interest under section 234C for delayed advance tax - electronic payment mandate for companies - delay in payment not attributable to the assessee - Levy of interest under section 234C for one day delay in payment of advance tax disallowed because the delay was due to a technical failure in the bank/RBI payment gateway and not attributable to the assessee. - HELD THAT: - The assessee, being a company, was required to make electronic payment of advance tax. On the due date the assessee initiated the e-payment through its banker and the bank processed the payment request, but the transaction could not be completed due to a technical glitch at the RBI payment gateway. The banker communicated this to the assessee and issued a certificate corroborating the failure. The Tribunal found on the available record that the assessee had effected the payment on the due date insofar as its conduct was concerned and that the one day delay in completion of the transaction was for reasons beyond the assessee's control. Consequently, imposition of interest under section 234C in these facts was unjustified. The Tribunal also observed that the Commissioner (Appeals) had the material before her and should have adjudicated the matter on merits rather than leaving it for verification by the Assessing Officer. [Paras 13]

Assessing Officer directed to delete the interest charged under section 234C; additional ground allowed.

Final Conclusion: Appeal partly allowed: the challenge to the Transfer Pricing Officer's determination of arm's length price of Head Office expenses is dismissed as infructuous and left open for future adjudication; the levy of interest under section 234C for one day delay in advance tax payment is deleted and the Assessing Officer is directed to give effect to that deletion.

Disallowance of unverifiable business expenses - self-made vouchers and evidentiary sufficiency - deletion of additions as unreasonable and without basis - cash credit u/s 68 - initial onus to prove identity, creditworthiness and genuineness of creditors - preponderance of probability where creditor is employee

Disallowance of unverifiable business expenses - self-made vouchers and evidentiary sufficiency - deletion of additions as unreasonable and without basis - Whether the disallowance of expenses (wages, vehicle, shop and shop repair/maintenance) sustained by the authorities is sustainable. - HELD THAT: - The Assessing Officer disallowed 20% of certain business expenses on the ground that supporting vouchers were not verifiable and were self-made. The CIT(A) found the AO's 20% disallowance to be unreasonable and excessive and restricted the disallowance to 10%. The Tribunal noted that once the CIT(A) held the AO's disallowance to be unreasonable, excessive and without any basis, there was no justification for sustaining any part of that disallowance. Applying that determinative finding, the Tribunal concluded that the residual 10% disallowance confirmed by the CIT(A) likewise lacked basis and could not be sustained. Consequently the addition/disallowance was deleted in full. [Paras 6]

Addition/disallowance sustained by the authorities is deleted in full.

Cash credit u/s 68 - initial onus to prove identity, creditworthiness and genuineness of creditors - preponderance of probability where creditor is employee - Whether the cash credit of Rs. 3,00,000 treated as unexplained under section 68 was rightly added to the assessee's income. - HELD THAT: - The assessee produced the loan creditor who stated he had PAN, filed returns and explained sources as salary, interest and casual income. However, the creditor had deposited almost the entire amount in cash into his bank account shortly before advancing the loan, and he was an employee of the assessee. The Tribunal accepted the CIT(A)'s detailed findings that the creditor could not satisfactorily account for the deposits, could not substantiate independent creditworthiness, and gave inconsistent particulars about other receipts and advances. Where the creditor is the assessee's employee and cash was deposited into his account immediately prior to the advance, the preponderance of probability pointed against the genuineness of an independent loan and indicated that the amounts were the assessee's own undisclosed funds. On this basis the Tribunal upheld the addition under section 68. [Paras 10]

Addition of Rs. 3,00,000 under section 68 is upheld.

Final Conclusion: The appeal is partly allowed: the disallowance of expenses is deleted in full, while the addition treating the Rs. 3,00,000 cash credit as unexplained under section 68 is upheld.

Reopening of assessment based on specific belief of escaped income - Jurisdiction under section 147/148 for reassessment where reasons relate to specific escaped income - Assessing officer limited to income forming basis of belief; cannot assess other income if original belief is found unfounded - Explanation 3 to Section 147 cannot validate jurisdiction once the originally alleged escapement is held not to exist

Assessing officer limited to income forming basis of belief; cannot assess other income if original belief is found unfounded - Reopening of assessment based on specific belief of escaped income - Addition of unexplained cash deposits sustained by AO despite reopening being on a different basis was not sustainable. - HELD THAT: - The AO recorded reasons for reopening that specifically related to alleged escapement of income from commodity derivative transactions during FY 2009-10. During assessment the returned loss from those transactions was examined and accepted (though carry forward was disallowed for other reasons), such that the income which formed the basis of the belief for reopening was not brought to tax. In these circumstances the Tribunal applied the settled principle that under Section 147/148 the AO's reassessment jurisdiction is confined to the income which formed the basis of the belief; if that basis is found not to have escaped assessment, the AO cannot proceed to make additions on unrelated grounds (here, unexplained cash deposits) without issuing a fresh notice. Reliance on the protective scope of Explanation 3 did not save the impugned addition where the initial reason for reopening was not made the subject matter of assessment. Consequentially the addition of the cash deposits could not be sustained. [Paras 5, 6, 7]

Addition of Rs. 20,90,070/- on account of unexplained cash deposits set aside; ground decided in favour of the assessee.

Jurisdiction under section 147/148 for reassessment where reasons relate to specific escaped income - Grounds challenging jurisdiction and the merits of other additions were not adjudicated. - HELD THAT: - The Tribunal observed that various contentions were raised on legality of the notice and on merits of additions, but having decided the main contention in favour of the assessee it did not find it necessary to examine or adjudicate those additional grounds. They were therefore left unexamined and treated as infructuous by the Tribunal. [Paras 8]

Grounds relating to legality of the notice and merits of other additions treated as infructuous and not adjudicated.

Final Conclusion: The appeal is allowed: the addition on account of unexplained cash deposits is set aside; other grounds raised were not adjudicated and were treated as infructuous.

Demand under Section 28 of the Customs Act - Clearance under Section 47 of the Customs Act - Re classification of imported goods - Distinction between demand proceedings and refund proceedings - Precondition of challenging assessment before raising demand

Demand under Section 28 of the Customs Act - Clearance under Section 47 of the Customs Act - Re classification of imported goods - Requirement to challenge assessment before raising demand - Jurisprudence distinguishing refund under Section 27 and demand under Section 28 - Whether a demand for differential duty under Section 28 can be validly raised after clearance of goods under Section 47 without the department first challenging the assessment in the bill of entry. - HELD THAT: - The Tribunal examined the line of authorities relied upon by the First Appellate Authority and the department. The judgments in Priya Blue and Flock India concern claims for refund under Section 27 where the assessee sought refund without first challenging the assessment recorded in the bill of entry; those decisions do not lay down a rule that prevents the department from raising a demand after clearance. In contrast, the decision in Jain Shudh Vanaspati holds that a demand under Section 28 can be raised subsequent to an order of clearance under Section 47, since clearance under Section 47 does not preclude the revenue from initiating demand proceedings for not levied/short levied duty within the prescribed period. In the present case the Deputy Commissioner issued a show cause notice, proposed re classification, afforded opportunity to the importer to be heard and thereafter confirmed the demand; the First Appellate Authority agreed with the re classification on merits but erred in holding that the revenue could not proceed under Section 28 without first challenging the original assessment. The Tribunal therefore found the First Appellate Authority's reliance on refund jurisprudence misplaced and held that the demand under Section 28 was competent and properly initiated and confirmed following due process.

The First Appellate Authority's order setting aside the demand was incorrect; the demand under Section 28 after clearance under Section 47 was valid and the impugned order is set aside.

Final Conclusion: Appeal allowed. The Tribunal set aside the First Appellate Authority's order and upheld the competence of the department to raise and confirm a demand under Section 28 after clearance under Section 47, the re classification having been considered and upheld on merits.

Customs Notification No. 30/97 - diversion of duty-free goods - actual user condition - job work versus transfer/ sale - liability for duty on breach of notification - penalty under Section 114A - limitation where department lacked knowledge - interest not includible in penalty computation

Customs Notification No. 30/97 - diversion of duty-free goods - actual user condition - job work versus transfer/ sale - Whether the appellants violated the conditions of Customs Notification No.30/97 by diverting/imported material to their sister concern and effecting disposals in the domestic market instead of utilization in discharge of export obligation - HELD THAT: - The Tribunal upheld the adjudicating authority's finding that the appellants had violated the notification. The conclusion rests on the absence of records at the appellants' factory evidencing receipt and utilization of the imported raw material, corroborative admissions by the appellants' partner, recovered invoices from the sister concern, and investigative findings that purchasers and suppliers associated with SCF were bogus or paper transactions. The adjudicator found that the material sent to the sister concern did not return for export and was sold in the domestic market; the appellants had not named the job worker in the licence nor maintained requisite consumption records. The Tribunal accepted that replenishment/imports and redemption of licences do not negate liability where the condition that exempted material 'shall not be transferred/sold' has been breached; substantial compliance with export obligations does not absolve an importer from strict conditions of the notification. Reliance on general principles (including transfer of ownership arguments) was rejected in view of the clear wording of the notification and supporting case law cited by the adjudicator. [Paras 12, 14]

Finding of violation of Notification No.30/97 upheld; duty correctly demanded on diverted quantity.

Limitation - knowledge of department - Whether the show cause notice was barred by limitation - HELD THAT: - The Tribunal accepted the adjudicator's conclusion that the SCN was not time barred. It applied the settled proposition that where goods imported duty free are found to have been diverted in breach of notification conditions, duty becomes payable when diversion is established; since the department was not aware of the diversion earlier, limitation did not operate to bar the demand. Reliance on precedent establishing this principle was upheld. [Paras 15]

SCN not barred by limitation; duty demand valid.

Penalty under Section 114A - interest not includible in penalty computation - Whether penalties imposed on the appellants and on M/s. SCF were justified and whether interest on duty is to be included in calculating penalty under Section 114A - HELD THAT: - The Tribunal sustained the equal penalty under Section 114A on the appellants, observing their liability for diversion of imported goods. In respect of M/s. SCF, the Tribunal found the penalty excessive and reduced it from the adjudicated amount to a lesser, specified sum. On the department's appeal seeking inclusion of interest in the penalty computation, the Tribunal held that the question is no longer res integra and that interest payable on the duty demanded need not be taken into account for fixing the amount of penalty under Section 114A. [Paras 16, 17, 18]

Penalty on appellants sustained; penalty on M/s. SCF reduced; interest not to be included in penalty under Section 114A.

Final Conclusion: Appeal of the importer dismissed upholding duty demand and penalty; departmental appeal for including interest in penalty dismissed; appeal by the sister concern partly allowed by reducing its penalty. The Tribunal affirmed that breach of the strict conditions of Notification No.30/97 attracts duty liability notwithstanding subsequent redemption of licences or partial fulfillment of export obligation.

Rebate of Swachch Bharat Cess - interpretation of condition 2(e) of Notification No.39/2012 - treatment of Swachch Bharat Cess for purposes of CENVAT credit - Explanation 1 to Notification No.39/2012 as amended by Notification No.03/2016

Rebate of Swachch Bharat Cess - interpretation of condition 2(e) of Notification No.39/2012 - treatment of Swachch Bharat Cess for purposes of CENVAT credit - Explanation 1 to Notification No.39/2012 as amended by Notification No.03/2016 - Entitlement to rebate of Swachch Bharat Cess on input services used for exported output services for the specified quarters where no CENVAT credit was availed. - HELD THAT: - The original authority examined the rebate claims under Notification No.39/2012 as amended and found that the appellant had not availed CENVAT credit on the inputs/input services for which rebate was claimed, and accordingly sanctioned rebate. The Commissioner(Appeals) reversed that view by reading para 2(e) in isolation and denying rebate. The Tribunal finds that the admitted fact that no CENVAT credit was claimed is decisive; para 2(e) cannot be interpreted in isolation to deny rebate where Explanation 1 (as extended by Notification No.03/2016) contemplates inclusion of Swachch Bharat Cess for rebate and the purpose of the notification is to ensure that taxes are not exported. On the material before the authority, the condition in para 2(e) was not breached and the Commissioner(Appeals) erred in setting aside the original sanction of rebate. [Paras 6]

Impugned orders setting aside the original sanction of rebate are quashed and the appeals of the appellant are allowed with consequential relief.

Final Conclusion: The Tribunal allows the appellant's appeals, sets aside the Commissioner(Appeals) orders, and restores the original sanction of rebate of Swachch Bharat Cess for the three specified quarters, since the appellant did not avail CENVAT credit and condition 2(e) was not contravened.

Non speaking order - Principles of natural justice - Stay application - requirement of brief reasoned order - Judicial review of adjudicatory orders for adequacy of reasons - Remand for fresh consideration

Non speaking order - Principles of natural justice - Judicial review of adjudicatory orders for adequacy of reasons - The Tribunal's order dated 31st December, 2018 rejecting the Revenue's stay application was a non speaking order and in breach of principles of natural justice. - HELD THAT: - The Court found that the impugned order did not record the dispute leading to the refund, did not summarise or notice the parties' submissions, and contained no examination of the contentions placed before the Tribunal. An order disposing of a stay application, while not required to be lengthy, must indicate the dispute, briefly note the submissions, and show consideration of the matter on the touchstone of principles governing grant of stay. The impugned order's terse conclusion that there were 'no cogent and valid reasons' without any recorded reasoning rendered it a non speaking order and amounted to breach of natural justice. [Paras 3, 4]

Impugned order set aside as non speaking and in breach of principles of natural justice.

Stay application - requirement of brief reasoned order - Remand for fresh consideration - The stay application was remitted to the Tribunal for fresh consideration and disposal in accordance with law. - HELD THAT: - Given the inadequacy of reasons in the impugned order, the Court restored the Revenue's stay application to the Tribunal's file and directed the Tribunal to decide the application afresh, expeditiously and in accordance with law, ensuring compliance with the requirement to record the dispute, the parties' submissions in brief, and the Tribunal's reasoning for granting or refusing stay. [Paras 5]

Stay application restored to the Tribunal for fresh consideration and disposal in accordance with law.

Final Conclusion: The Tribunal's order of 31st December, 2018 is set aside for being non speaking and violative of natural justice; the stay application is remitted to the Tribunal for fresh, expeditious decision in accordance with law.

Reconsideration in view of subsequent developments - remand for fresh consideration - reliance on earlier adjudicatory order rendered infructuous - entitlement to rebate under Central Excise Rules, 2002

Reliance on earlier adjudicatory order rendered infructuous - entitlement to rebate under Central Excise Rules, 2002 - Impugned order dated 31st January, 2018 passed by the Government of India in Revision is liable to be set aside in view of subsequent orders which have restored the foundation on which the impugned order proceeded. - HELD THAT: - The Court noted that the sole foundation for denying the petitioner's rebate claims was the order dated 31st July, 2009 against the seller (M/s. Rachana) which disallowed CENVAT credit. Subsequent appellate proceedings resulted in that order being set aside by the Tribunal and on fresh consideration the adjudicating authority by order dated 31st May, 2019 dropped the demand as time barred and restored CENVAT credit. Since the impugned revision order of 31st January, 2018 proceeded only on the basis of the earlier order against M/s. Rachana, that order cannot now be allowed to stand when the foundational order has been set aside and the credit restored. The Court therefore set aside the impugned order and directed further action consistent with these developments. [Paras 5, 6, 7]

Impugned order dated 31st January, 2018 is set aside.

Remand for fresh consideration - reconsideration in view of subsequent developments - Respondent Revenue's Revision Application is restored to the Government of India in Revision for fresh consideration taking into account the subsequent orders restoring CENVAT credit to M/s. Rachana. - HELD THAT: - The Court restored the Revision Application to the Government of India in Revision and directed that it be decided afresh, expeditiously, with due regard to the order dated 31st May, 2019 which set aside the earlier adjudication against M/s. Rachana and restored the CENVAT credit. The Court expressly held that the earlier order of 31st July, 2009 cannot be relied upon in disposing of the Revision, and left all contentions open for consideration by the revisional authority in light of the updated factual and legal position. [Paras 6, 7, 8]

Revision Application restored to Government of India in Revision for fresh consideration; all contentions left open.

Final Conclusion: The High Court set aside the Government of India's revisional order dated 31st January, 2018 and restored the Revenue's Revision Application for expeditious fresh consideration in light of the subsequent order of 31st May, 2019 restoring CENVAT credit; the revisional authority to decide the matter in accordance with law, leaving other contentions open.

CENVAT credit refund under Rule 5 of CENVAT Credit Rules, 2004 - export of exempted goods and entitlement to input credit refund - manufacture versus non-manufacture: grinding GBFS into GGBS - reversal of CENVAT credit on domestic clearance

CENVAT credit refund under Rule 5 of CENVAT Credit Rules, 2004 - export of exempted goods and entitlement to input credit refund - Entitlement to refund of CENVAT credit under Rule 5 of CCR, 2004 in respect of inputs (GBFS) used to produce GGBS which is exported - HELD THAT: - The Tribunal applied its earlier decisions in the assessee's own appeals, which followed the principle in Repro India Limited that input credit may be refunded under Rule 5 where inputs have gone into goods that are exempt and exported. The appellant procures Granulated Blast Furnace Slag (GBFS), grinds it to GGBS and exports bulk quantities; for domestic clearances the assessee reverses proportionate CENVAT credit. Relying on the Bench's prior orders allowing refund of CENVAT credit on GBFS/GGBS and the Bombay High Court precedent, the Tribunal found no reason to depart from those decisions and held that the appellant is entitled to refund under Rule 5 in respect of inputs used in exported GGBS.

Appeal allowed insofar as refund of CENVAT credit under Rule 5 in respect of inputs for exported GGBS; impugned order set aside with consequential relief.

Manufacture versus non-manufacture: grinding GBFS into GGBS - reversal of CENVAT credit on domestic clearance - Effect of finding that grinding GBFS to GGBS does not amount to manufacture on entitlement to CENVAT credit and the consequence of reversal for domestic sales - HELD THAT: - Revenue contended that if the process is not manufacture (as held in Andhra Cements Limited), no CENVAT credit could be availed; the Tribunal distinguished the present relief sought (refund under Rule 5 for exported exempted goods) from a general availment contention and noted that the assessee has been reversing proportionate credit for domestic clearances. Given the Tribunal's earlier decisions permitting refund in the assessee's own cases and the undisputed practice of reversal on domestic sales, the Tribunal declined to deny refund on the ground that the process was non-manufacture and allowed the appeal.

Recovery, interest and penalties proposed in the show cause notice were set aside to the extent they sought to deny refund for exported GGBS; domestic reversal practice remains recognized.

Final Conclusion: The appeals are allowed; the impugned order is set aside and the appellant is entitled to consequential relief in respect of refund of CENVAT credit under Rule 5 of CCR, 2004 for inputs used in exported GGBS, subject to the admitted reversal for domestic clearances.

CENVAT credit on capital goods - availability of CENVAT credit where capital goods received before levy - interpretation of Rule 4(2)(a) of CENVAT Credit Rules, 2004 - time-bar/limitation for duty demand - penalty not leviable where availment arises from bona fide legal interpretation - bona fide availment by public sector undertakings

Time-bar/limitation for duty demand - CENVAT credit on capital goods - penalty not leviable where availment arises from bona fide legal interpretation - bona fide availment by public sector undertakings - Whether the demand of duty, interest and penalty for alleged wrongful availing of CENVAT credit on capital goods is barred by limitation and liable to be set aside. - HELD THAT: - The Tribunal found the appeal could be disposed of on the point of limitation. The appellant consistently maintained that the excavator was received in knocked down condition on 17.02.2011 but was assembled, accepted (GRN prepared) and recorded in books only on 17.06.2011, and relevant documents supporting this position were placed before the authorities and not disputed in adjudication or first appeal. Given that the central excise levy on coal was a new levy in 2011, the Tribunal treated the matter as a one-time issue likely to arise from inadvertence and as involving interpretation of statutory provisions. Relying on precedents recognizing that public sector undertakings lack motive for tax evasion and that penalty is not ordinarily leviable where the question turns on legal interpretation, the Tribunal concluded there was no wilful suppression or intent to evade duty. On these bases the Tribunal held the demand for duty, interest and penalty to be time-barred or otherwise not sustainable and allowed the appeal on limitation grounds. [Paras 7, 8]

Demand of duty, interest and penalty set aside and appeal allowed on the ground of limitation and bona fide/legal interpretation of entitlement to credit.

Final Conclusion: The Tribunal allowed the appeal and set aside the demand of duty, interest and penalty on the basis that the matter was time-barred and arose from a bona fide legal interpretation and accepted factual position regarding date of acceptance/GRN, particularly in view of the appellant being a PSU and the levy on coal being newly introduced.

JKM Graphics principle - invoice-wise break up requirement - appeal under Section 51 of the TNVAT Act - relegation to alternate statutory remedy in fiscal matters - appellate authority to examine factual/invoice details and condonation of delay

JKM Graphics principle - Whether the assessment (head 'Sales return not accounted for by customers') violated the JKM Graphics principle and whether that principle entitled the writ petitioner to relief. - HELD THAT: - The Court examined the impugned order confirming the proposal under the head 'Sales return not accounted for by customers' and compared it with the procedure and concerns articulated in the JKM Graphics decision. While noting that the Assessing Officer did not receive documentary proof of returns from the petitioner and that the Assessing Officer proceeded on the basis of annexures and lack of conclusive evidence, the Court found that the factual matrix here is distinguishable from JKM Graphics. The Court observed that JKM Graphics emphasises a more holistic, centralized departmental mechanism before issuing notices based on mismatches, but on the facts before it the Assessing Authority's approach could not be said to attract the protective principle of JKM Graphics in favour of the petitioner.

JKM Graphics principle is distinguishable on the facts and does not assist the writ petitioner; the impugned order in respect of the said head was not set aside on that ground.

Invoice-wise break up requirement - appeal under Section 51 of the TNVAT Act - appellate authority to examine factual/invoice details and condonation of delay - relegation to alternate statutory remedy in fiscal matters - Whether the writ petitioner should be relegated to the alternate statutory remedy of appeal and whether the appellate authority should consider the invoice-wise break up and any application for condonation of delay. - HELD THAT: - The Court recognised that an alternate statutory remedy in the form of appeal under Section 51 of the TNVAT Act is available to the petitioner and reiterated the well-established principle that writ jurisdiction should be exercised with greater rigour in fiscal matters. Applying that discretion, the Court held that this was an appropriate case to remit the matter to the jurisdictional Appellate Deputy Commissioner. The Court directed that, if the petitioner avails the statutory appeal, the Appellate Authority-being a fact finding forum-shall examine the invoice-wise break up issue. The Court also recorded that, if there is any delay in preferring the appeal, the petitioner may seek condonation of delay and exclusion of time spent in the writ proceedings under Section 14 of the Limitation Act, and such prayers shall be considered on merits by the Appellate Authority.

Writ petition relegated to statutory appeal before the Appellate Deputy Commissioner under Section 51 of the TNVAT Act; appellate authority to examine invoice-wise details and any condonation application.

Final Conclusion: Writ petition dismissed by relegation to the alternate statutory remedy: the petitioner is directed to prefer an appeal under Section 51 of the TNVAT Act (Assessment year 2014- 2015), the Appellate Deputy Commissioner to examine invoice-wise break up and any condonation of delay; no costs.

Leave to defend under Order XXXVII CPC - plausibility standard for defence in summary proceedings - sham or moonshine defence - imposition of conditions by way of deposit/security when granting leave - remand for fresh trial

Leave to defend under Order XXXVII CPC - plausibility standard for defence in summary proceedings - sham or moonshine defence - imposition of conditions by way of deposit/security when granting leave - Whether the Trial Court erred in refusing the appellant leave to defend the summary suit. - HELD THAT: - The Court examined the material placed before the Trial Court and the appellant's affidavit filed under Order XXXVII Rule 3(5) CPC. Although the appellant did not specifically plead certain factual contentions before the Trial Court (such as participation in a chit fund or the RBI notification regarding a bank name change), his affidavit expressly averred that the transactions pleaded by the plaintiff were concocted and that no money had passed between the parties. The Court held that the discretion to grant or refuse leave to defend in summary proceedings depends on the peculiar facts of each case and that a defence which is plausible, even if not highly probable, is not to be rejected as wholly vexatious. Relying on the acknowledged principle that wholly sham or moonshine defences may be rejected while plausible defences merit an opportunity to be tested, the Court concluded that the appellant's defence could not be characterized as wholly frivolous. However, consistent with established jurisprudence, the Court retained the power to impose conditions when granting leave to defend, to balance the interests of the parties and protect the plaintiff's claim. [Paras 11, 13, 14, 15]

Trial Court's refusal to grant leave to defend set aside; appellant granted leave to defend subject to conditions.

Imposition of conditions by way of deposit/security when granting leave - remand for fresh trial - On what terms leave to defend should be granted and the consequent procedural direction. - HELD THAT: - Balancing the plaintiff's entitlement and the appellant's plausible defence, the Court exercised its discretion to grant leave to defend on terms. The appellant was required to deposit 50% of the principal amount with the Trial Court within eight weeks as a condition for leave to defend. The Court remitted the suit to the Trial Court for fresh consideration of the merits and directed expeditious trial, preferably within one year, while expressly refraining from expressing any opinion on the merits. [Paras 16, 17]

Leave to defend granted on condition of deposit of 50% of the principal within eight weeks; matter remitted to Trial Court for fresh trial to be concluded expeditiously, preferably within one year.

Final Conclusion: The appeal is allowed: the Trial Court's order refusing leave to defend is set aside; the appellant is granted leave to defend subject to depositing 50% of the principal within eight weeks; the suit is remitted to the Trial Court for fresh trial expeditiously, preferably within one year; no opinion expressed on merits.