TaxTMI Updates e-Newsletter
Jul 10,2023

Requirement of SIPB approval for expansion of existing industry - entitlement to incentives under Bihar Industrial Incentive Policy, 2011 - reimbursement of SGST/VAT - capital subsidy and other incentives - remand for fresh consideration - opportunity of hearing before passing orders

Requirement of SIPB approval for expansion of existing industry - remand for fresh consideration - opportunity of hearing before passing orders - The impugned order rejecting the petitioner's claim was set aside and the matter remanded for fresh consideration because the authority did not take into account the letter dated 15.07.2011 (Annexure-5) which dispenses with SIPB approval for expansion/diversification of an existing industry. - HELD THAT: - The High Court found that Annexure-5, a resolution issued by the Principal Secretary, Department of Industries dated 15.07.2011, expressly provides that separate approval of the State Investment Promotion Board is not required for expansion and diversification of an existing industry. The authority's impugned order rejected the petitioner's claim on the ground that SIPB approval was absent but failed to consider Annexure-5. The respondents conceded that Annexure-5 was issued. In view of this omission and concession, the Court concluded that the impugned order could not stand and directed setting it aside and remanding the matter to the competent authority for fresh consideration. The Court further directed that the authority shall decide the matter expeditiously, preferably within eight weeks from receipt of the order, and shall afford the petitioner an opportunity of hearing before passing any order.

Impugned order set aside; matter remanded to the authority to reconsider afresh in light of Annexure-5 with opportunity of hearing and decision preferably within eight weeks.

Entitlement to incentives under Bihar Industrial Incentive Policy, 2011 - reimbursement of SGST/VAT - capital subsidy and other incentives - remand for fresh consideration - Claims for payment of incentives, reimbursement of SGST/VAT, capital subsidy and other promised benefits under the Bihar Industrial Incentive Policy, 2011 were not adjudicated on merits and were remanded to the authority for fresh consideration. - HELD THAT: - The Court did not decide the substantive merits of the petitioner's claims for release of subsidies, reimbursement of State GST/VAT, capital subsidy or other incentives under the Policy, 2011. Instead, having found that the authority failed to consider the operative letter dated 15.07.2011, the Court remanded those claims for fresh adjudication by the competent authority. The remand contemplates that the authority shall examine entitlement and related factual and legal aspects afresh, after considering Annexure-5 and after providing the petitioner an opportunity of hearing. No determinative finding on entitlement to the claimed incentives or reimbursement was recorded by the Court.

Substantive claims for incentives, SGST/VAT reimbursement, capital subsidy and other benefits remanded for fresh consideration by the authority; no decision on merits by the Court.

Final Conclusion: Writ petition allowed in part: the impugned rejection is quashed and the matter is remanded to the authority to reconsider afresh in light of the letter dated 15.07.2011, affording the petitioner a hearing and disposing the matter preferably within eight weeks; the Court did not adjudicate the merits of entitlement to incentives or reimbursements.

Extension of limitation for filing appeal to the Appellate Tribunal due to non-constitution of the Tribunal - application of Circular dated 18 March 2020 (Clause 4.2) and Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 - suspension of operation of impugned order until expiry of extended appeal period - followership of coordinate bench precedent

Extension of limitation for filing appeal to the Appellate Tribunal due to non-constitution of the Tribunal - application of Circular dated 18 March 2020 (Clause 4.2) - The period for filing an appeal to the Appellate Tribunal stood extended as per Clause 4.2 of the Circular dated 18 March 2020 in view of non-constitution of the Tribunal. - HELD THAT: - The Court accepted and applied the Circular of 18 March 2020, which interprets the effect of the non-constitution of the Appellate Tribunal and the Ninth Removal of Difficulties Order, 2019, to extend the timeframe for filing appeals so that the appeal period runs from the date of communication of the order or from the date on which the President or State President of the Appellate Tribunal enters office, whichever is later. The Court followed the reasoning and order of the coordinate bench in Rochem India Pvt. Ltd. and, on that basis, held that the extended period indicated in Clause 4.2 governs the limitation for filing the appeal in the present matter. All contentions were kept open for adjudication before the appropriate forum under the extended timeline. [Paras 2, 3, 4]

Period for filing appeal extended in terms of Clause 4.2 of the Circular dated 18 March 2020.

Suspension of operation of impugned order until expiry of extended appeal period - followership of coordinate bench precedent - Operation of the impugned Order-in-Appeal was stayed until two weeks after the extended period for filing an appeal under Clause 4.2 expires. - HELD THAT: - Relying on the coordinate bench decision in Rochem India Pvt. Ltd., the Court directed that the impugned order shall not be given effect until two weeks after the period prescribed for filing an appeal as extended by Clause 4.2 of the Circular dated 18 March 2020 has run. This provides the assessee an opportunity to prefer an appeal within the extended timeline before the impugned order is enforced. The Court explicitly followed that precedent and implemented the same protective timeline in disposing of the present petition. [Paras 3, 4]

Impugned order stayed until two weeks after the extended appeal period under Clause 4.2 lapses.

Final Conclusion: The writ petition was disposed of by applying Clause 4.2 of the Circular dated 18 March 2020 and following the coordinate bench decision in Rochem India Pvt. Ltd.; the period for filing an appeal to the Appellate Tribunal is extended accordingly and the impugned order is kept in abeyance until two weeks after the extended appeal period expires.

Provisional attachment under GST - refund of amounts voluntarily deposited - designation officer's jurisdiction to entertain refund claim - judicial review under Article 226

Provisional attachment under GST - Prayers concerning provisional attachment of the petitioners' bank account became infructuous as the attachment was revoked/cancelled. - HELD THAT: - The petition records that the provisional attachment of the petitioners' bank account under section 83 of the CGST Act has already been revoked/cancelled. Consequently, any relief seeking quashing or relief in respect of that attachment no longer survives and the petitioners' related prayers are rendered infructuous. [Paras 1]

Petitioners' prayers relating to the provisional attachment are dismissed as infructuous on account of revocation/cancellation of the attachment.

Refund of amounts voluntarily deposited - designation officer's jurisdiction to entertain refund claim - judicial review under Article 226 - Claim for refund of the amount of Rs.1 crore remitted by the petitioners was not adjudicated by the Court but directed to be considered afresh by the designated officer on an application by the petitioners. - HELD THAT: - The Court declined to determine competing factual and jurisdictional contentions in proceedings under Article 226. The petitioners' contention that the amount was not payable or that the authority lacked jurisdiction to retain it requires determination by the designated authority. The Court directed that if the petitioners file an application for refund within two weeks, the designated officer shall hear the petitioners on the application and pass an appropriate order. All contentions of the parties were expressly kept open for decision by the authority. [Paras 4]

Matter remitted to the designated officer to decide the petitioners' refund application after hearing, subject to the court's directions; the court refrained from deciding the claim on merits.

Final Conclusion: The petition is disposed: the challenge to provisional attachment is rendered infructuous due to revocation; the petitioners' claim for refund is remitted to the designated officer for consideration on an application within two weeks, with all contentions left open.

Input tax credit - Construction of immovable property - Section 17(5)(d) restriction - Capitalization - Immovable property - test of annexation and object of permanent beneficial enjoyment - on his own account

Input tax credit - Section 17(5)(d) restriction - Capitalization - on his own account - Input tax credit in respect of inward supplies used for construction of the warehouse where construction expenses are capitalized in the books - HELD THAT: - Section 16 permits ITC of tax on inputs used in the course or furtherance of business, but clause (d) of section 17(5) bars ITC in respect of goods or services received for construction of an immovable property on the taxable person's own account, with the Explanation limiting the prohibition to the extent of capitalization. The Authority examined the applicant's contention that the warehouse was not constructed on his own account because it was let out. Relying on the meaning of 'on his own account' and the facts that the applicant retained ownership, accounted for the warehouse in its books and provides outward supplies (rent/warehousing) on its own account, the Authority held the construction was on the applicant's own account. Applying the statutory test, and after considering whether the structure is immovable, the Authority concluded the warehouse is intended for permanent beneficial enjoyment at the site and is not reasonably movable so as to fall outside 'immovable property'. Consequently, inward supplies used for construction and capitalized are covered by the prohibition in section 17(5)(d) and ITC is not allowable. [Paras 4]

ITC is not admissible for inward supplies used for construction of the warehouse where such construction expenses are capitalized in the books.

Input tax credit - Section 17(5)(d) restriction - Capitalization - Input tax credit in respect of inward supplies used for construction of the warehouse where construction expenses are not capitalized in the books - HELD THAT: - The Explanation to section 17(5)(d) confines the prohibition on ITC to goods or services used in construction 'to the extent of capitalization' to the immovable property. The Authority noted this statutory limitation and ruled that where construction-related expenses are not capitalized in the books of account, they do not fall within the bar created by clause (d) and therefore ITC can be availed and utilized. [Paras 4]

ITC is admissible for inward supplies used for construction of the warehouse where such construction expenses are not capitalized in the books.

Final Conclusion: The Authority rules that ITC on inputs/services used for construction of the warehouse is disallowed to the extent such construction expenses are capitalized (section 17(5)(d) applies), but ITC is admissible where those construction expenses are not capitalized in the books.

Interpretation of an exemption clause in a taxing statute - benefit of exemption to family business/partnerships formed by close relatives - strict construction of taxing statutes - judicial restraint in interference with specialised tribunals - remand to a larger bench for authoritative determination

Benefit of exemption to family business/partnerships formed by close relatives - interpretation of an exemption clause in a taxing statute - strict construction of taxing statutes - judicial restraint in interference with specialised tribunals - Applicability of the ratio in Mahari & Sons (Gauhati High Court) to claims of exemption by partnerships formed by family members under Section 10(26) - remanded to a larger bench of the Income Tax Appellate Tribunal for fresh consideration. - HELD THAT: - The Tribunal had held that the doctrine in Mahari & Sons (allowing members of the same family who set up a joint business to claim exemption under Section 10(26)) no longer survived in view of subsequent Supreme Court dicta on strict interpretation of taxing statutes and denial of a rule that doubt always favours the assessee. The High Court found the Tribunal's rejection of Mahari & Sons to be cursory and observed that the Tribunal did not distinguish partnerships of close relatives from other partnerships nor did the Supreme Court authorities relied upon directly address the factual situation dealt with in Mahari & Sons. The Court emphasised that Constitutional Courts should exercise caution before overturning conclusions of specialised tribunals and, balancing the long standing application of Mahari & Sons against the Tribunal's contrary conclusion, directed that the question be reconsidered by a larger bench of the Tribunal (excluding members who decided the impugned order). The High Court set aside the common order impugned and remitted the legal issue for fresh decision by a bench of at least three members, with directions for prompt constitution and expedition of disposal; no final opinion on the merits was expressed by the High Court. [Paras 8, 9, 10, 11, 12]

The common order of the Tribunal is set aside and the primary legal question is remitted to a larger bench of the Income Tax Appellate Tribunal for fresh consideration; the appeals are disposed of without expressing any final opinion and with no order as to costs.

Final Conclusion: The High Court set aside the Tribunal's common order and remitted the determinative legal question concerning the applicability of Mahari & Sons to partnerships of close relatives under the exemption provision for fresh consideration by a larger bench of the Income Tax Appellate Tribunal, without expressing any final view on the merits; no costs were awarded.

Compliance with mandatory payment condition under Section 245D(2D) - abatement of settlement application under Section 245HA(1)(ii) - entitlement to interest on refunds including self-assessment tax under Section 244A(1)(b) - remand to Interim Board for fresh adjudication under Section 245AA

Compliance with mandatory payment condition under Section 245D(2D) - entitlement to interest on refunds including self-assessment tax under Section 244A(1)(b) - abatement of settlement application under Section 245HA(1)(ii) - Original petitioner had complied with the payment requirement under Section 245D(2D) by paying tax and interest on or before 31st July 2007 and therefore the settlement application had not abated. - HELD THAT: - The court analysed the statement provided by respondent no. 2 (Statement-A) and the statement tendered on behalf of the petitioner (Statement-B). Statement-A showed a net shortfall of Rs. 1,16,511/-, after adjustment of a refund figure of Rs. 49,477/-. Statement-B demonstrated that (i) interest on the refunds identified for certain assessment years had not been factored into Statement-A (interest on those refunds being Rs. 46,583/-), (ii) additional refund amounts and interest for other years totalled Rs. 26,143/-, and (iii) there was an excess payment of tax by way of self-assessment (reflected as total tax paid exceeding tax payable) which the revenue did not deny. Relying on the Division Bench decision in Stock Holding Corporation (as quoted in the judgment), the court accepted that tax paid on self-assessment falls within the residuary limb of Section 244A(1) and is eligible for interest on refund. On combining the interest on refunds (Rs. 46,583/-), the refund amounts and interest (Rs. 26,143/-) and interest attributable to the excess self-assessment payment (Rs. 50,674/-), the court found that the petitioner had paid a total amount (Rs. 1,23,400/-) exceeding the shortfall shown in Statement-A (Rs. 1,16,511/-). For these reasons the court concluded that the petitioner had complied with the obligations under Section 245D(2D) and that the Settlement Commission's conclusion of non-compliance and consequent abatement was factually incorrect. The court expressly limited its consideration to compliance with Section 245D(2D) and did not decide the merits of the settlement application itself. [Paras 12, 13, 14, 15, 16]

Impugned order dated 3rd January 2008 quashed; original petitioner held to have complied with Section 245D(2D); matter directed to be placed before the Interim Board constituted under Section 245AA for fresh disposal on merits.

Final Conclusion: The High Court set aside the Settlement Commission's order of abatement, concluded that the petitioner had satisfied the mandatory payment requirement under Section 245D(2D), and remitted the settlement application to the Interim Board under Section 245AA for fresh consideration on merits; the court confined its decision to the question of compliance with Section 245D(2D).

Change of opinion doctrine - reopening assessment under the 'reasons to believe' test - reopening notice issued under Section 148 challenged as without bona fide reasons - deductibility of interest as business expenditure under Section 36(1)(iii)

Change of opinion doctrine - reopening assessment under the 'reasons to believe' test - reopening notice issued under Section 148 challenged as without bona fide reasons - Validity of the notice dated 28th March 2008 under Section 148 read with recorded reasons dated 28th March 2008 and order on objection dated 22nd May 2009 insofar as they seek reopening of assessment for AY-2003-2004. - HELD THAT: - The Court found that the matters relied upon in the reasons for reopening - namely the quantum and nature of interest and finance charges and the fact of substantial investment to acquire control - had been specifically queried by the Assessing Officer during the original assessment proceedings and the assessee had replied and furnished explanations. The original assessment order was thereafter passed. The reasons recorded for reopening merely reflect a change of opinion by the Assessing Officer regarding the allowability of the claimed expenditure; the reopening notice also relied on a revision made in a different assessment year. Relying on the principle that a mere change of opinion, where the issue was raised and considered in the original assessment proceedings, does not furnish the statutory "reasons to believe" required to reopen an assessment, the Court held the reopening to be unjustified. Because the Court concluded that the reopening rested on change of opinion, it did not proceed to adjudicate the substantive question on the deductibility of interest under Section 36(1)(iii). [Paras 9, 11, 12]

The notice under Section 148 dated 28th March 2008, the recorded reasons dated 28th March 2008 and the order on objections dated 22nd May 2009 were quashed as the reopening was based on a mere change of opinion and not on bona fide reasons to believe that income chargeable to tax had escaped assessment.

Final Conclusion: Writ petition allowed; the reopening notice and consequential objection order for AY-2003-2004 set aside; Rule made absolute in terms of the prayer; no order as to costs.

Carry forward and set off of unabsorbed depreciation - validity of reassessment initiated after four years under the first proviso to Section 147 requiring failure to disclose fully and truly all material facts - reasoned recording for invoking reassessment - impact of Finance Act, 1996 and Finance Act, 2001 on limitation for carrying forward unabsorbed depreciation

Validity of reassessment initiated after four years under the first proviso to Section 147 requiring failure to disclose fully and truly all material facts - reasoned recording for invoking reassessment - Reassessment notice and consequent order were invalid because reasons did not assert failure to disclose fully and truly all material facts as required when proceedings are initiated after four years. - HELD THAT: - The Court examined the reasons recorded by the Assessing Officer and found no reference to any failure by the petitioner to disclose, fully and truly, all material facts necessary for assessment. Because the reassessment was triggered after the expiry of four years from the end of the relevant assessment year, the first proviso to Section 147 required the officer to record and contend that income had escaped assessment on account of such failure to disclose. In the absence of that necessary assertion in the reasons, the statutory condition for initiating reassessment beyond four years was not satisfied. The Court therefore held that the impugned notice and the order disposing of objections must be set aside on this ground. [Paras 11]

Impugned notice dated 26.03.2018 and order dated 20.11.2018 set aside for failure to comply with the proviso to Section 147.

Carry forward and set off of unabsorbed depreciation - impact of Finance Act, 1996 and Finance Act, 2001 on limitation for carrying forward unabsorbed depreciation - Carry forward and set off of unabsorbed depreciation in AY 2011-12, accrued during AY 1998-99 to AY 2001-02, was permissible. - HELD THAT: - The petitioner contended, and the Court accepted, that before the Finance Act, 1996 unabsorbed depreciation could be carried forward for an unlimited period, that Finance Act, 1996 had restricted the carry forward period to eight years, and that the restriction was subsequently removed by the Finance Act, 2001. Applying these legislative changes to the facts, the Court accepted that in AY 2011-12 there was no bar on the petitioner setting off the unabsorbed depreciation which had arisen in AY 1998-99 to AY 2001-02. The Court also observed that the Assessing Officer's reasons did not contest disclosure of material facts, and on merits the carry forward and set off were permissible. [Paras 6, 7, 8, 12]

Both the carry forward of unabsorbed depreciation and its set off in AY 2011-12 held permissible.

Final Conclusion: The writ petition is allowed: the reassessment notice dated 26.03.2018 and the order dated 20.11.2018 are set aside; the petition is disposed of accordingly.

Levy of penalty under Section 270A - distinction between underreporting and misreporting of income - bonafide belief / reasonable cause as defence to penalty - explanation held to be bonafide under Section 270A(6) - scope of misreporting as defined in Section 270A(9)

Levy of penalty under Section 270A - distinction between underreporting and misreporting of income - explanation held to be bonafide under Section 270A(6) - Whether penalty under Section 270A could be sustained in respect of the addition of interest income. - HELD THAT: - The Tribunal found that the assessee had explained that the interest income was omitted from the return due to a bonafide belief that, as a retired senior citizen, the interest would be covered by the deduction under Section 80TTB. The Assessing Officer originally proceeded for underreporting but ultimately levied penalty on the basis of misreporting. The Tribunal held that the interest-related addition falls within the scope of an honest, bonafide explanation and that the department did not discharge any burden to show that the omission amounted to misrepresentation, suppression or any of the specific categories in Section 270A(9). Consequently, penalty for misreporting could not be sustained on the interest component and the penalty in respect of that addition was deleted. [Paras 9]

Penalty under Section 270A deleted in respect of the interest income addition.

Levy of penalty under Section 270A - bonafide belief / reasonable cause as defence to penalty - scope of misreporting as defined in Section 270A(9) - Whether penalty under Section 270A could be sustained in respect of the addition relating to leave encashment claimed as exempt under Section 10(10AA). - HELD THAT: - The assessee explained that he had a bonafide belief that, by virtue of his prior employment with the erstwhile Gujarat Electricity Board and subsequent service in a State-owned successor company, the leave encashment would be exempt as for a State Government employee. The Assessing Officer treated the employer's Form-16 position (allowing only the statutory limit as exempt) as a basis for addition and levied penalty for misreporting. Applying the settled principle that levy of penalty is not automatic where a taxpayer offers a plausible, bonafide explanation and has disclosed material facts, the Tribunal accepted the assessee's bona fides and held that the case did not sufficiently fall within the misreporting categories of Section 270A(9). The Tribunal therefore held that no penalty could be levied on the leave-encashment addition. [Paras 10]

Penalty under Section 270A deleted in respect of the leave-encashment addition.

Final Conclusion: The Tribunal allowed the appeal and deleted the penalties imposed under Section 270A in respect of both the interest income addition and the leave-encashment addition, finding that the assessee had offered bonafide explanations and that misreporting was not established.

Unexplained cash deposits as unexplained money under Section 69A - Admissibility of books of account and bank statements to explain cash transactions - Ex parte disposal for failure to respond to appellate notices

Unexplained cash deposits as unexplained money under Section 69A - Admissibility of books of account and bank statements to explain cash transactions - The addition of Rs. 11,21,000 made as unexplained cash deposits under Section 69A was not sustainable. - HELD THAT: - The Tribunal examined the material placed before the Assessing Officer, namely the cash book of the business, sales register, purchase register, ledger account and bank statements showing month wise opening cash, cash sales, cash deposits and cash withdrawals for the relevant months. The Assessing Officer did not dispute the business activity or the cash transactions as reflected in the books. The records demonstrated regular cash deposits into the bank account, including comparable cash deposits in the pre demonetization period, and the assessee had explained the impugned amounts by documentary evidence submitted before the Assessing Officer. On this factual foundation the Tribunal held that the addition under Section 69A could not be sustained as the alleged unexplained money stood explained by the books and bank statements. [Paras 7, 8]

Addition of Rs. 11,21,000 under Section 69A deleted and the appeal allowed.

Ex parte disposal for failure to respond to appellate notices - Admissibility of materials placed before the Assessing Officer despite non attendance before CIT(A) - The Tribunal proceeded to decide the appeal on merits notwithstanding the assessee's non response to CIT(A)'s notices, having considered the explanation that notices were not seen and having admitted the evidence placed before the Assessing Officer. - HELD THAT: - The appellant's representatives explained non appearance before the CIT(A) as due to the assessee's failure to monitor email and delay in locating the hearing notices. The Tribunal nevertheless examined the documentary record considered by the Assessing Officer and found those materials sufficient to discharge the onus of explanation for the cash deposits. The Tribunal's determination to decide the matter on the basis of available records led to the conclusion that the addition should be deleted. [Paras 5, 7]

Despite non response to appellate notices, the appeal was considered on merits and allowed by deleting the addition.

Final Conclusion: The appeal is allowed; the addition of Rs. 11,21,000 treated as unexplained cash under Section 69A is deleted after the Tribunal accepted the assessee's books and bank statements as satisfactorily explaining the deposits for A.Y. 2017 18.

Claim of exempt income raised in rectification - pure question of law - power of appellate authority to consider points not raised in original return - rectification application versus revised return - verification by Assessing Officer on nature of receipt

Claim of exempt income raised in rectification - pure question of law - power of appellate authority to consider points not raised in original return - Ld. CIT(A) erred in rejecting the assessee's claim of exemption for the receipt of Rs. 2.25 lacs solely because it was raised for the first time by a rectification application and not by filing a revised return. - HELD THAT: - The Tribunal accepted the assessee's submission that the contention regarding the nature of the receipt (survival benefit from LIC on a single premium policy) raised by letter dated 25/06/2020 is a pure question of law which does not call for fresh evidence or factual enquiry. Reliance on the principle in NTPC v. CIT that points of law may be raised before appellate authorities when they do not necessitate new evidence supports the conclusion that the Ld. CIT(A) was not precluded from considering the claim merely because it was made in a rectification application rather than by a revised return. Accordingly, treating the claim as impermissible in law on that procedural ground was incorrect and would amount to bringing an exempt receipt to tax without inquiry into its character. [Paras 8, 9, 10]

The rejection by Ld. CIT(A) of the exemption claim on the ground that it was first made in a rectification application was set aside and the plea held permissible for consideration as a pure question of law.

Verification by Assessing Officer on nature of receipt - rectification application versus revised return - Whether the impugned receipt is an exempt survival benefit from LIC on a single premium policy required factual verification and was remanded to the Assessing Officer for enquiry. - HELD THAT: - Although the Tribunal held that the legal character of the receipt could be considered notwithstanding the procedural mode of its presentation, it directed that the matter be sent back to the jurisdictional Assessing Officer to verify whether the receipt of Rs. 2.25 lacs was indeed a survival benefit from a single premium LIC policy. The Tribunal recognised that if the AO verifies that the receipt is such a survival benefit, it would qualify as exempt income. The remand is therefore for verification of the factual character of the receipt and consequential tax treatment. [Paras 11]

Matter remanded to the Assessing Officer to verify the nature of the receipt; if found to be a survival benefit from a single premium LIC policy, it shall be treated as exempt income.

Final Conclusion: The Tribunal set aside the rejection of the exemption claim made in the rectification application, held that the legal plea was open for consideration, and remanded the matter to the Assessing Officer for verification of the factual nature of the receipt; appeal treated as allowed for statistical purposes.

Conflict of interest - recusal - institutional engagement of counsel - nemo judex in causa sua - taxation of "other income" under double taxation avoidance agreement - Article 23 (Other Income) of the India-Korea DTAA - guarantee fee - section 263 - revision of assessment - jurisdictional scope of DTAA vis-a -vis domestic assessment

Conflict of interest - institutional engagement of counsel - recusal - nemo judex in causa sua - Preliminary objection that advocates who represented ITAT administratively before the CIC are disqualified by reason of 'conflict of interest' from appearing for private clients before the ITAT, and related objection to their appearance in the captioned appeals. - HELD THAT: - The Tribunal examined the nature and source of the engagement of the counsels who had represented the ITAT/CPIO before the Central Information Commission and the factual matrix of the objection. It analysed the concept of conflict of interest in professional and judicial contexts and noted absence of any allegation of financial or personal interest between the Members and the advocates, or any prior representation of the Members by those advocates. The Bench observed that institutional engagement of panel counsel by courts/registries and by the Tribunal is a recognised practice and that the Tribunal is not the disciplinary forum to disqualify or regulate advocates' practice. The Tribunal further considered whether the objector (the CIT-DR) had locus and whether the letter/application was filed in official capacity; it found that the application was filed in personal capacity and in any event amounted to obstruction of judicial functioning. On the conduct of the CIT-DR the Tribunal recorded adverse observations about filing frivolous applications that impeded hearings, declined to impose costs but directed the Registry to forward the order to higher departmental authorities for information.

The preliminary objection was rejected and the objection to the appearance of the said counsels before the Tribunal was dismissed; the Registry was directed to forward a copy of the order to departmental authorities for information.

Guarantee fee - taxation of "other income" under double taxation avoidance agreement - Article 23 (Other Income) of the India-Korea DTAA - characterisation of income - business income v. other income - Whether the guarantee fee received by the non resident assessee is taxable in India or is taxable only in the contracting state (Korea) under Article 23 of the India-Korea DTAA for AY 2015 16. - HELD THAT: - The AO and the DRP had treated the guarantee fee as 'other income' arising in India and taxed it as the normal income of a foreign company. The Tribunal examined the nature of the guarantee fee, the characterisation adopted by the authorities, the DRP directions and the relevant provisos of the Indo Korea DTAA. Noting that both the AO and DRP treated the receipt as 'other income' (and did not treat it as business income attributable to a PE or as interest), the Tribunal applied Article 23 of the India-Korea DTAA which provides that items of income of a resident of a Contracting State not dealt with in the Convention shall be taxable only in that State. The Tribunal also considered precedents of coordinate Benches where guarantee commission, given the facts (guarantee given by the foreign guarantor outside India to a foreign bank), was held not to arise in India. Applying Article 23 to the facts, the Tribunal held that the guarantee fee is taxable only in Korea and therefore not taxable in India for the relevant year. [Paras 17]

The addition of the guarantee fee for AY 2015 16 was deleted and the appeal allowed on the ground that Article 23 of the India-Korea DTAA confines taxation of such 'other income' to Korea.

Section 263 - revision of assessment - jurisdictional scope of DTAA vis-a -vis domestic assessment - quashing of revision order - Whether the revision order under section 263 setting aside the assessment for AY 2014 15 (on identical issue of taxability of guarantee fee) was sustainable where the Tribunal has held the guarantee fee not taxable by reason of Article 23 of the Indo Korea DTAA. - HELD THAT: - The Commissioner (International Taxation) had set aside the assessment for AY 2014 15 under section 263 relying on the DRP's direction in the later year. The Tribunal, having decided the identical substantive issue in the appeal relating to AY 2015 16 in favour of the assessee (that the guarantee fee is not taxable in India by virtue of Article 23 of the Indo Korea DTAA), held that the revision order under section 263 was not maintainable in light of that legal conclusion and therefore quashed the revision. The Tribunal allowed the assessee's appeal for AY 2014 15 accordingly. [Paras 18]

The revision under section 263 for AY 2014 15 was quashed and the assessee's appeal allowed.

Final Conclusion: Preliminary objection alleging conflict of interest was rejected and objector's conduct deprecated; on merits the Tribunal held that the guarantee fee received by the foreign assessee falls under 'other income' and, by application of Article 23 of the India-Korea DTAA, is taxable only in Korea, resulting in deletion of the addition for AY 2015 16 and quashing of the section 263 revision for AY 2014 15; both appeals were allowed.

Allowability of foreign exchange fluctuation loss as revenue deduction - characterisation of foreign exchange revaluation gains/losses as capital or revenue - restoration/remand for fresh adjudication to the Assessing Officer - treatment of supplemental lease rent/maintenance reserve and applicability of section 10(15A) and DTAA - interpretation of India Ireland DTAA Articles 8 and 12 and exclusion of aircraft from 'royalty' - tax deductibility and obligation to deduct tax at source in respect of cross border lease payments - compensatory nature of interest on delayed service tax payments and allowability under section 37(1)

Allowability of foreign exchange fluctuation loss as revenue deduction - characterisation of foreign exchange revaluation gains/losses as capital or revenue - restoration/remand for fresh adjudication to the Assessing Officer - Claim for deduction of unrealised foreign exchange loss (assessment year 2011-12) and taxation of corresponding foreign exchange gain - HELD THAT: - The Tribunal found that factual contentions and accounting treatment (including reference to Accounting Standard 11 and the assessee's submissions about sale/lease treatment of aircraft and prior taxation of profits on sale) were not sufficiently appreciated by the Assessing Officer and first appellate authority. Having heard the parties and noting the assessee's reliance on authorities, the Tribunal considered it appropriate to remit the matter to the Assessing Officer for fresh examination of facts and application of law after affording the assessee an opportunity of hearing. The remand is for reconsideration of whether the unrealised foreign exchange loss is allowable as revenue deduction or is a capital/notional loss, and for examination of the corresponding treatment of foreign exchange gains in accordance with law. [Paras 10]

Grounds remitted to the Assessing Officer for fresh adjudication in accordance with law.

Allowability of foreign exchange fluctuation loss as revenue deduction - characterisation of foreign exchange revaluation gains/losses as capital or revenue - restoration/remand for fresh adjudication to the Assessing Officer - Identical claims for unrealised foreign exchange loss for assessment years 2012-13, 2015-16 and 2016-17 - HELD THAT: - The Tribunal applied the reasoning adopted in the decision for AY 2011-12 mutatis mutandis to the other assessment years where identical grounds were raised by the assessee. Consequently, the same course of action-reconsideration by the Assessing Officer in accordance with law-was directed for these years as well. [Paras 24, 34, 38]

Assessee appeals for AY 2012-13, 2015-16 and 2016-17 allowed for statistical purposes by applying the decision in AY 2011-12 (remand to Assessing Officer).

Treatment of supplemental lease rent/maintenance reserve and applicability of section 10(15A) and DTAA - interpretation of India Ireland DTAA Articles 8 and 12 and exclusion of aircraft from 'royalty' - tax deductibility and obligation to deduct tax at source in respect of cross border lease payments - Validity of disallowance under section 40(a)(ia)/(i) in respect of supplemental lease rent/maintenance reserve (Revenue appeals for AYs 2011-12, 2012-13, 2015-16, 2016-17) - HELD THAT: - The Tribunal upheld the view of the first appellate authority, following the coordinate bench decision in the assessee's own case and the Special Bench decision in Inter Globe Aviation Ltd. (Indigo). It accepted that supplemental rent/maintenance reserve - being determined with reference to flying hours and having the character of rent rather than payment for spares or services - falls within the exemption framework (section 10(15A) for pre 1.4.2007 agreements and, for post 1.4.2007 agreements, within the India Ireland DTAA regime where Article 12(3)(a) expressly excludes 'aircraft' from 'royalty' and Article 8 attributes taxing right on profits from rental of aircraft to the lessor's state of residence). On that basis the Tribunal found no ground to sustain the additions made by the Assessing Officer for failure to deduct tax at source and rejected the Revenue's grounds. [Paras 20, 21, 22]

Orders of the CIT(A) deleting the disallowances in respect of supplemental rent/maintenance reserve are upheld; Revenue appeals dismissed.

Compensatory nature of interest on delayed service tax payments - allowability under section 37(1) - Disallowance of deduction in respect of interest on late deposit of service tax and VAT (AY 2012-13) - HELD THAT: - The Tribunal found that the assessee furnished service tax returns and evidence showing the interest was levied under Section 75 of the Finance Act, 1994 and is compensatory in nature. Relying on precedents treating interest on delayed tax deposits as compensatory (and therefore deductible under section 37(1)), the Tribunal found no infirmity in the CIT(A)'s deletion of the disallowance to the extent substantiated by the assessee. [Paras 31, 32]

Deletion of disallowance in respect of compensatory interest on delayed service tax (to the substantiated extent) is upheld.

Final Conclusion: The Tribunal remitted the question of allowability of unrealised foreign exchange losses to the Assessing Officer for fresh decision after hearing the assessee (applies to AY 2011-12 and, mutatis mutandis, to AYs 2012-13, 2015-16 and 2016-17). The Tribunal upheld the CIT(A)'s deletion of disallowances relating to supplemental lease rent/maintenance reserve (finding such payments outside the scope of taxable 'royalty' under the India Ireland DTAA and/or covered by section 10(15A) as applicable) and dismissed the Revenue appeals; it also upheld deletion of disallowance for compensatory interest on delayed service tax to the extent substantiated.

Higher rate of depreciation on motor vehicles used in transportation - Use versus hiring-out test for entitlement to enhanced depreciation - Interpretation of Board Circulars in relation to allowance of higher depreciation - Reliance on precedential coordinate-bench decision

Higher rate of depreciation on motor vehicles used in transportation - Use versus hiring-out test for entitlement to enhanced depreciation - Interpretation of Board Circulars in relation to allowance of higher depreciation - Reliance on precedential coordinate-bench decision - Assessee entitled to higher rate of depreciation @30% on dumpers, tippers and similar vehicles for the assessment year 2014-15. - HELD THAT: - The Tribunal examined whether the vehicles in question were used in the assessee's business as transporters by providing equipment and motor vehicles on hire such that the higher rate of depreciation would apply. The Tribunal reproduced and followed the earlier coordinate-bench reasoning which analysed the nature of contracts, the operational use of dumpers/tippers for excavation and transportation of minerals and overburden, and the applicability of Board Circulars clarifying that higher depreciation applies where motor lorries/motor buses are used in providing transportation services or hired out. The earlier decision and factual findings established that the assessee provided vehicles on hire and earned contract income which included transportation; accordingly the use/hiring-out test for higher depreciation was satisfied. Respectfully following that coordinate-bench precedent and the interpretation of the Board Circulars, the Tribunal found no infirmity in the CIT(A)'s allowance of depreciation at 30%. [Paras 6]

Benefit of higher rate of depreciation @ 30% on dumpers, tippers etc. allowed; Revenue's appeal dismissed.

Final Conclusion: The Revenue's appeal is dismissed and the CIT(A)'s order allowing higher depreciation at 30% on relevant vehicles for A.Y. 2014-15 is upheld, following the coordinate-bench decision and the Board circulars interpreting entitlement to enhanced depreciation.

Revisionary power under Section 263 - Explanation 2(a) to section 263 - lack of enquiry versus inadequate enquiry - Legally plausible view of Assessing Officer and prohibition on substitution of opinion - Payment by purchaser directly to remove encumbrance - no accrual to assessee

Revisionary power under Section 263 - Legally plausible view of Assessing Officer and prohibition on substitution of opinion - Explanation 2(a) to section 263 - lack of enquiry versus inadequate enquiry - Whether the Principal Commissioner of Income Tax was justified in invoking section 263 to set aside the assessment order for having allowed deduction of payment made to Titco Ltd. - HELD THAT: - The Tribunal found that the Assessing Officer had made specific enquiries, recorded the assessee's replies and given thoughtful consideration to the claim that the sum paid to Titco Ltd was deductible while computing capital gains. Authority relied upon by the Principal CIT (VSMR Jagadish Chandran) did not render the AO's view legally implausible in the facts of this case. Explanation 2(a) to section 263 distinguishes between lack of any enquiry and an inquiry that may be inadequate; where some enquiry has been made and the AO applies his mind and takes a view that is not absurd or legally untenable, the Principal CIT cannot usurp that view merely because he prefers a different conclusion. Citing precedents, the Tribunal emphasised that section 263 does not permit substitution of the Commissioner's judgment for that of the AO unless the AO's order is held to be erroneous in law or passed without making enquiries or verification which a reasonable and prudent officer would have carried out. Given that the AO had considered the material and answered the specific issue in the assessment order, the initiation of revisionary proceedings was not justified. [Paras 6, 7, 8]

The Principal CIT's order under section 263 was not justified and the grounds of appeal are allowed; the assessment order is not set aside.

Payment by purchaser directly to remove encumbrance - no accrual to assessee - Legally plausible view of Assessing Officer - Whether the payment of Rs. 1.50 crores made by the purchaser directly to Titco Ltd could be treated as having accrued to the assessee and therefore disallowable as part of capital gains computation. - HELD THAT: - The Tribunal noted precedent (J.B. Engg. Works) where amounts paid directly to a third party by a purchaser to obtain vacant possession were held not to have accrued to the assessee. In the present case the sum in question was paid directly to Titco Ltd by the purchaser to remove encumbrance and obtain clear title. On the facts and material before the AO, a plausible view existed that the amount never accrued to the assessee. Because the AO reached such a view after consideration of the record, the Principal CIT could not treat the allowance as erroneous under section 263 merely by preferring an alternative legal view. [Paras 6]

The AO's allowance could be sustained as a legally plausible conclusion since the payment was made directly by the purchaser to remove encumbrance and did not necessarily accrue to the assessee.

Final Conclusion: The appeal is allowed: the Principal Commissioner's exercise of power under section 263 to set aside the assessment is quashed because the Assessing Officer had made enquiries, applied his mind and taken a legally plausible view that the payment made by the purchaser to remove encumbrance did not accrue to the assessee.

Disallowance under ection 14A read with Rule 8D - attribution of interest expenditure to exempt income - availability of interest free funds vis a vis investments - disallowance of administrative expenses under Rule 8D - inclusion of disallowance in book profit for computing tax under ection 115JB - Atria Power Corporation Ltd.

Disallowance under ection 14A read with Rule 8D - attribution of interest expenditure to exempt income - availability of interest free funds vis a vis investments - disallowance of administrative expenses under Rule 8D - Deletion of disallowance of Rs. 11,09,333 made under Section 14A read with Rule 8D - HELD THAT: - The Tribunal upheld the deletion of the additional disallowance determined by the Assessing Officer because the assessee had substantial interest free funds far exceeding the investments producing exempt income, and therefore the AO failed to establish that interest bearing funds were used for such investments. The assessee had already made a suo motu disallowance (Rs. 65,714) covering direct nexus, and the CIT(A) correctly found that no further disallowance on account of interest was warranted. With regard to administrative expenses, the Tribunal agreed with the CIT(A) and the Coordinate Bench that administrative expenses are subject to disallowance under Rule 8D, but observed that the assessee had already disallowed an amount in the return which was adequate to cover administrative expenditure; accordingly no additional disallowance was required on the facts. The Tribunal relied on the Coordinate Bench's decision in the assessee's own earlier matter and related authority to conclude that the AO's formation of opinion was unsustainable on the material on record. [Paras 10]

The deletion of the disallowance of Rs. 11,09,333 under Section 14A read with Rule 8D is sustained and the Revenue's ground is dismissed.

Inclusion of disallowance in book profit for computing tax under ection 115JB - Atria Power Corporation Ltd. - computation of book profit under the minimum alternate tax regime - Whether the deleted disallowance under Section 14A could be added back in computing Book Profit under Section 115JB - HELD THAT: - Relying on the ratio laid down by the Supreme Court in Atria Power Corporation Ltd. as applied by the Coordinate Bench in the assessee's own earlier proceedings, the Tribunal held that the disallowance under Section 14A, which has been deleted on merits, could not be appropriately added back while computing Book Profit under Section 115JB. The Tribunal found no ambiguity warranting interference with the deletion and followed the precedent that prevents arbitrary inclusion of such deleted disallowances in book profit computation. [Paras 12, 13]

The addition in computing Book Profit under Section 115JB, based on the deleted Section 14A disallowance, is not sustainable and the Revenue's ground fails.

Final Conclusion: Revenue's appeal is dismissed; the order deleting the Section 14A disallowance is sustained and no part of that deleted disallowance can be added in computation of Book Profit under Section 115JB for the Assessment Year 2011-12.

Bogus purchases - addition under section 69C - reopening of assessment under section 147 - treatment of purchases without rejecting books of account - quantification by aligning gross profit rate with genuine purchases - remand for computation and opportunity of being heard

Bogus purchases - addition under section 69C - treatment of purchases without rejecting books of account - Whether the purchases aggregating to Rs. 26.88 lacs from M/s. Shri Khand Agrotech were to be treated as bogus and an addition under section 69C was justified. - HELD THAT: - The Tribunal found on the material on record, including the statement of the proprietor of M/s. Shri Khand Agrotech admitting issuance of bogus purchase bills, and the assessee's failure to substantiate the authenticity of the purchases, that the purchases were bogus. At the same time the A.O. had not rejected the assessee's books of account nor dislodged the sales recorded therein. Having regard to these facts, the Tribunal held that treating the entire purchase amount as income without regard to the accepted sales and books would be inappropriate; nevertheless, the finding that purchases were unsubstantiated and thus not genuine justified an addition under section 69C, subject to proper quantification. [Paras 8, 9]

Purchases were held to be bogus and an addition under section 69C was warranted, but the books of account and recorded sales were not rejected.

Quantification by aligning gross profit rate with genuine purchases - remand for computation and opportunity of being heard - Extent of addition to be made in respect of the bogus/unverified purchases and the manner of quantification. - HELD THAT: - Relying on the principle applied by the Bombay High Court in a comparable decision, the Tribunal concluded that the correct method is to restrict the addition to the profit that the assessee would have made had the goods been procured from the open/grey market, by bringing the gross profit (G.P.) rate on the bogus purchases to the same rate as that of the assessee's other genuine purchases. The Tribunal therefore set aside the quantification to the A.O. with a direction to compute the addition on that basis and to afford the assessee a reasonable opportunity of being heard during the re-computation. [Paras 10, 11]

Matter remitted to the A.O. to quantify the addition by bringing the G.P. rate of the bogus purchases at par with other genuine purchases and to afford the assessee a reasonable opportunity of being heard.

Final Conclusion: Appeal disposed by setting aside the quantification of the addition and remitting the matter to the Assessing Officer to restrict the addition to the profit determined by aligning the gross profit rate of the bogus purchases with that of genuine purchases, with directions to afford the assessee a reasonable opportunity of being heard; otherwise the finding that the purchases were bogus is upheld.

Assessment under section 153A - search and seizure under section 132 - unabated assessment - no incriminating seized material - addition on bogus purchases - restriction of disallowance to a percentage of purchases

Assessment under section 153A - unabated assessment - no incriminating seized material - addition on bogus purchases - Whether additions under section 153A could be sustained in respect of an unabated assessment year when no incriminating seized material pertaining to the assessee was found during the search - HELD THAT: - The Tribunal found that the impugned assessment year arose from the same search operation as other years in which the Tribunal had already held that no incriminating seized material relating to the assessee was found. The Assessing Officer treated purchases from M/s Bright Global Paper Pvt. Ltd. as bogus relying on seized material, but the material relied upon was shown to be the assessee's regular ledger copies and not incriminating documents. In light of the undisputed fact that the assessment for the assessee was unabated (previously completed) and the Revenue failed to establish that any incriminating seized material related to the assessee, the Tribunal applied the established principle that additions under section 153A cannot be made in respect of unabated assessments when no incriminating material is found during the search. The Tribunal also relied on the decisions of the jurisdictional High Court and its own precedents addressing similar facts and deleted the addition which had earlier been restricted by the Tribunal to 12.5% of the impugned purchases; consequently the additional ground alleging absence of incriminating material was allowed and the assessment adjustment deleted. [Paras 8, 9]

Impugned additions under section 153A deleted for AY 2007-08 as no incriminating seized material pertaining to the assessee was found and the assessment was unabated.

Final Conclusion: The appeal is allowed: additions made under section 153A for AY 2007-08 (being an unabated assessment year) are deleted on the ground that no incriminating seized material relating to the assessee was found during the search.

Valuation of unquoted equity shares - Discounted Cash Flow (DCF) method - Rule 11UA(2) option (b) - net asset / book value method (NAV) under Rule 11UA(2)(a) - section 56(2)(viib) deeming provision - acceptance of expert valuation and limits on Assessing Officer's power to substitute valuation - valuation is not an exact science; projections cannot be tested by hindsight

Valuation of unquoted equity shares - Discounted Cash Flow (DCF) method - Rule 11UA(2) option (b) - section 56(2)(viib) deeming provision - acceptance of expert valuation and limits on Assessing Officer's power to substitute valuation - valuation is not an exact science; projections cannot be tested by hindsight - Whether the Assessing Officer could reject the assessee's DCF valuation certified under Rule 11UA(2)(b) and determine FMV by applying the NAV method, thereby treating the share premium as income under section 56(2)(viib). - HELD THAT: - The Tribunal held that the assessee had exercised the statutory option under Rule 11UA(2) to adopt the DCF method and obtained a valuation accordingly. Following the Delhi High Court decision in Pr. CIT v. Cinestaan Entertainment Pvt. Ltd., the Tribunal observed that DCF is a recognized methodology and valuations based on projections are necessarily prospective and cannot be invalidated by comparing projections with subsequent actuals. The Assessing Officer cannot, on a mere dissatisfaction, substitute his own valuation or adopt an alternate method in absence of any statutory empowerment to tinker with a valuation made by the prescribed expert. Where the methodology adopted is a recognized method and no demonstrably wrong approach or error going to the root of the valuation is shown, rejection of the expert valuation and treating the premium as income under section 56(2)(viib) is impermissible. Applying these principles to the facts, the Tribunal held that the AO erred in discarding the accountant/merchant banker certified DCF valuation and in making the addition under section 56(2)(viib). [Paras 10]

Addition under section 56(2)(viib) for assessment year 2015-16 deleted; ground of appeal allowed.

Valuation of unquoted equity shares - Discounted Cash Flow (DCF) method - Rule 11UA(2) option (b) - section 56(2)(viib) deeming provision - acceptance of expert valuation and limits on Assessing Officer's power to substitute valuation - valuation is not an exact science; projections cannot be tested by hindsight - Whether the same conclusion on rejection of DCF valuation and the consequent addition under section 56(2)(viib) applies to assessment year 2016-17. - HELD THAT: - Facts and the legal question for 2016-17 were identical to those decided for 2015-16. The Tribunal applied the decision reached in the earlier issue mutatis mutandis and held that the Assessing Officer similarly erred in rejecting the DCF valuation for 2016-17. No separate or additional infirmity was shown to justify a different approach for this year. [Paras 11]

Addition under section 56(2)(viib) for assessment year 2016-17 deleted; ground of appeal allowed.

Final Conclusion: Both appeals are allowed: the Assessing Officer's rejection of the DCF valuation certified under Rule 11UA(2)(b) was reversed and the additions under section 56(2)(viib) for AY 2015-16 and AY 2016-17 are deleted.

Grant of bail in Customs offence - possession of contraband gold - evidentiary value of extra-judicial confession - procedural safeguards under the Customs Act - conditions of bail including cooperation and prohibition on tampering

Grant of bail in Customs offence - possession of contraband gold - evidentiary value of extra-judicial confession - conditions of bail including cooperation and prohibition on tampering - Petitioner enlarged on bail in connection with alleged possession of 2 kgs. of gold bullion under the Customs Act, subject to conditions. - HELD THAT: - The Court considered the prosecution case of recovery of a bag containing 2 kgs. of gold bullion from a train berth on which the petitioner was travelling, the recording of the petitioner's statement before the DRI, and the submission of a charge-sheet. The petitioner maintained denial, claimed the bag did not belong to him and pointed to absence of any personal belongings or documents linking him exclusively to the seized bag. The Court noted the petitioner's clean antecedents and prolonged custody since 10.12.2022. While the prosecution relied on the recorded statement and averred that requisite procedures under the Customs Act (including notices and prior approvals) were followed, the Court treated the prosecution evidence and the extra-judicial statement as not conclusive for refusing bail. Balancing the nature of allegations, the absence of exclusive incriminating material recovered from the petitioner, his antecedents and period of detention, the Court exercised discretion to grant bail. The Court imposed specific conditions to ensure attendance at trial, to guard against tampering with evidence or witnesses, and directed verification of the petitioner's antecedents by the trial court with a provision for cancellation of bail if antecedents were concealed.

Petitioner released on bail on furnishing bond of Rs. 10,000 with two sureties of like amount, subject to conditions of cooperation, presence at trial, prohibition on tampering and antecedent verification; prosecution free to move for cancellation if conditions breached.

Final Conclusion: Bail allowed in the Customs offence matter concerning alleged possession of 2 kgs. of gold bullion; liberty granted subject to specified bail conditions and verification of antecedents, with liberty to the prosecution to seek cancellation if conditions are violated.

Entitlement to benefits under Merchandise Exports from India Scheme despite procedural/technical errors - validity and scope of procedural requirement of declaration of intent in shipping bills - permissibility of amendment of EDI shipping bills and modification of online systems to correct technical/clerical errors - quashing of administrative decision refusing MEIS benefit on purely procedural grounds

Entitlement to benefits under Merchandise Exports from India Scheme despite procedural/technical errors - validity and scope of procedural requirement of declaration of intent in shipping bills - permissibility of amendment of EDI shipping bills and modification of online systems to correct technical/clerical errors - quashing of administrative decision refusing MEIS benefit on purely procedural grounds - Petitioner entitled to MEIS benefits although the reward column in EDI shipping bills was inadvertently left as 'No', and respondents' refusal to grant relief and to permit amendment/online correction was quashed and set aside. - HELD THAT: - The Court accepted that the petitioner had affirmatively declared its intention to claim MEIS benefits in the invoice and on the shipping documentation, and that the error of selecting the default 'No' in the reward column was a technical/clerical lapse caused while filing the EDI shipping bills. The Court treated the requirement in the Handbook of Procedure as procedural, not substantive, and held that a mere procedural/non-compliance of the formality (clicking 'No' instead of 'Yes') should not defeat a substantive entitlement where the intention to claim the benefit is otherwise clearly manifested. The Court noted relevant coordinate-bench authorities dealing with identical factual situations and observed there was no material resistance to their ratio. Applying that reasoning, the Court found the respondents' decision (including the PRC rejection dated 11.2.2020) to be erroneous insofar as it refused manual amendment or system modification to reflect the declared intent, and concluded that the shipping bills ought to be amended and the online system permitted to be modified so as to allow selection 'Yes' and enable processing of the MEIS claim. [Paras 12, 13, 14]

Notice dated 11.2.2020 is quashed; respondents directed to amend the shipping bills and to permit modification of the online system to allow correction from 'No' to 'Yes' so the petitioner may be granted MEIS benefits.

Final Conclusion: Writ petition allowed; administrative refusal to grant MEIS benefits for shipping bills filed in 2016 and 2019 quashed, with directions to amend the shipping bills and enable online correction so the petitioner may claim export incentives under MEIS.

Classification of LCD panels under Tariff Item 9013 - Classification of parts of LCD panels and applicability of Section XVI Note 2(b) - Primacy of exclusionary chapter notes (Note 1(m)) over 'pull in' provisions - Narrow construction of pull in or cross reference notes - Interpretation of Chapter and Section Notes for tariff classification

Classification of LCD panels under Tariff Item 9013 - Interpretation of Chapter 90 notes (Note 1 and Note 2(a)) - Reliance on apex court ratio in CCE, Aurangabad v. Videocon Industries Ltd. - LCD panels imported by the appellant are classifiable under Chapter Heading 9013 and not under Chapter 8529. - HELD THAT: - The Tribunal followed the apex court's reasoning in CCE, Aurangabad v. M/s. Videocon Industries Ltd., holding that where goods (LCDs) are specifically provided for in Tariff Item 9013, exclusionary chapter notes (notably Note 1(m) to Chapter 90) must be given effect and any 'pull in' through other notes must be narrowly construed. The Tribunal accepted that LCDs are goods specifically covered by 9013 and that classifying them elsewhere merely because they can be used as parts would defeat the exclusion. Applying Chapter 90 Note 2(a) and the Videocon ratio, the LCD panels fall within their respective heading 9013 rather than being absorbed into Chapter 85 entries.

Appeal allowed insofar as LCD panels are held classifiable under Chapter Heading 9013; impugned classification under Chapter 8529 set aside.

Classification of parts of LCD panels under Chapter 90 - Scope of Section XVI Note 2(b) as subordinate to Chapter 90 exclusions - Application of Note 2(a) of Chapter 90 to parts and accessories - Parts of LCD panels (e.g., Light Guide Plate) are classifiable under Chapter Heading 9013 and not under Chapter 8529. - HELD THAT: - The Tribunal held that parts which are goods included in Chapter 90 must be classified in their respective Chapter 90 headings under Note 2(a) of Chapter 90. Note 2(b) of Section XVI, relied upon by the revenue to classify parts with machines of Chapter 85, is subordinate to the exclusion in Chapter 90 and cannot oust a specific provision for LCDs in 9013. Applying the Videocon precedent, parts of LCD panels are therefore to be classified under Chapter Heading 9013.

Appeal allowed insofar as parts of LCD panels are held classifiable under Chapter Heading 9013; the revenue's classification under Chapter 8529 is set aside.

Final Conclusion: The Tribunal, following the apex court's ratio in CCE, Aurangabad v. Videocon, allowed the appeals: LCD panels and their parts are to be classified under Chapter Heading 9013, and the impugned classification under Chapter 8529 is set aside with consequential relief as may be due.

Pre-packaged goods intended for retail sale - compliance with Legal Metrology Act requirements including declaration of Retail Sale Price / MRP - eligibility for exemption from Special Additional Duty (SAD) under Notification No. 21/2012-Cus. - refund/neutralisation of SAD on subsequent domestic sale under the counter balancing scheme - revenue neutrality as bearing on invocation of extended period of limitation for duty recovery - wilful mis statement/suppression of facts for invoking extended period of limitation

Pre-packaged goods intended for retail sale - compliance with Legal Metrology Act requirements including declaration of Retail Sale Price / MRP - eligibility for exemption from Special Additional Duty (SAD) under Notification No. 21/2012-Cus. - Assessee's claim for exemption from 4% Special Additional Duty under Notification No. 21/2012-Cus. insofar as imported pre-packaged goods intended for retail sale and bearing MRP/RSP declaration. - HELD THAT: - The Tribunal examined the three conditions for claiming the Notification benefit: (i) that the goods are "pre-packaged commodities" as defined under the Legal Metrology Act, (ii) that such imported pre-packaged goods are intended for retail sale as per the Legal Metrology (Packaged Commodities) Rules, 2011, and (iii) that the package bears the required declaration of retail sale price/maximum retail price. The factual findings recorded on the record-inspection/certification by the proper officer that the goods were in pre-packaged condition, sale of the units in pre-packaged condition to channel partners/resellers, production of local sale invoices with payment of applicable VAT/CST/ST, registration under Legal Metrology and affixation of MRP labels either at origin or under customs supervision-demonstrate satisfaction of all three statutory conditions. Exclusion clauses in Rule 3 of the Packaged Commodities Rules (packages over specified weight/volume or packages meant for industrial/institutional consumers) were found not to apply. On these bases the Tribunal concluded that the importer met the requirements of Notification No. 21/2012 Cus. and was entitled to the exemption. [Paras 11, 12, 15, 16]

Assessee entitled to the SAD exemption under Notification No. 21/2012 Cus. as the imported goods met the conditions of being pre packaged, intended for retail sale and bearing the required retail price declaration.

Refund/neutralisation of SAD on subsequent domestic sale under the counter balancing scheme - revenue neutrality as bearing on invocation of extended period of limitation for duty recovery - wilful mis statement/suppression of facts for invoking extended period of limitation - Validity of invoking the extended period of limitation for demand of SAD on the ground of wilful suppression, in light of the counter balancing/refund scheme and the facts on record. - HELD THAT: - The Tribunal explained that SAD is ordinarily levied at import to counterbalance local levies and that where SAD is subsequently neutralised by refund on payment of VAT/ST on domestic sale, the matter is revenue neutral. The Show Cause Notice invoked extended limitation alleging wilful mis statement and suppression; however, the Bills of Entry declared the imported goods, proper officers had inspected and certified the pre packaged condition, and permission/supervision was obtained for affixing MRP labels. Given the Department's awareness of the nature and purpose of the imports and the absence of material nondisclosure designed to evade duty, the foundational allegation of wilful suppression failed. Consequently, invocation of the extended period of limitation was unsustainable. [Paras 17, 18, 19]

Extended period of limitation could not be invoked; allegations of wilful mis statement/suppression not established and the claim was revenue neutral, accordingly the extended period demand was unsustainable.

Final Conclusion: The appeal is dismissed. The Tribunal upheld the adjudicating authority's grant of SAD exemption under Notification No. 21/2012 Cus. on the findings that the imported goods were pre packaged, intended for retail sale and bore the required MRP/RSP declarations, and held that the Department's invocation of the extended period of limitation for alleged wilful suppression was not sustainable given revenue neutrality and the factual record.

Reliance on NIDB for valuation - transaction value under Customs Valuation Rules - re-determination of value - confiscation of imported goods - redemption fine and penalty under the Customs Act - PFA labelling requirements and applicability - repacking and relabelling in customs bonded warehouse - supersession by Food Safety and Standards Act, 2006

Reliance on NIDB for valuation - transaction value under Customs Valuation Rules - re-determination of value - Validity of enhancement of declared value of imported monosodium glutamate on the sole basis of NIDB data and consequent demand of differential duty. - HELD THAT: - The adjudicating authority rejected the transaction value and enhanced assessable value solely by reference to contemporaneous entries in the National Import Data Bank (NIDB), adopting a higher benchmark rate and applying Rule 5 of the Customs Valuation Rules, 2007. The Tribunal recalled the settled principle that transaction value cannot be rejected without clear and cogent evidence showing non-comparability and special circumstances; contemporaneous imports relied upon must be comparable in quality, quantity, country of origin and supplier details. Here, the department failed to furnish the requisite particulars of the contemporaneous imports (supplier, country of origin, quality, quantity) relied upon from NIDB, and therefore could not justify rejection of the declared transaction value or enhancement of value. Following earlier authorities, enhancement based solely on NIDB without demonstrating comparability is impermissible; the demand for differential duty was accordingly set aside. [Paras 24, 25]

Enhancement of value based solely on NIDB data and the consequent demand for differential duty is set aside; declared transaction value accepted.

Confiscation of imported goods - redemption fine and penalty under the Customs Act - PFA labelling requirements and applicability - repacking and relabelling in customs bonded warehouse - supersession by Food Safety and Standards Act, 2006 - Whether the goods could be confiscated and redemption fine and penalties imposed for alleged non-compliance with PFA labelling requirements when deficiencies were rectified pursuant to court directions and repacking/relabelling supervised in bonded premises. - HELD THAT: - The adjudicating authority found that the imported packages lacked manufacturer details as required under the PFA Rules and treated the goods as prohibited under the PFA Act, ordering confiscation and imposing redemption fine and penalties. The Tribunal noted that the High Court ordered provisional release subject to repacking, relabelling and Port Health inspection, and the Division Bench affirmed that release subject to compliance. The deficiencies were rectified in the customs bonded area under supervision and Port Health authorities certified conformity. In these circumstances, and having regard to consistent Tribunal precedent that rectifiable labelling defects corrected in bonded premises warrant release rather than confiscation, the confiscation, redemption fine and penalties could not be sustained. The Tribunal addressed the appellant's alternate submission concerning applicability of the FSS Act 2006 but decided the matter on the ground that non-compliance had been remedied under court direction and supervision. [Paras 26, 28]

Confiscation, redemption fine and penalties are quashed because the labelling/packaging deficiencies were rectified in the customs bonded warehouse under supervision and the goods were certified fit; penalty and fine set aside.

Final Conclusion: The Tribunal allowed the appeal, setting aside the demand for differential duty (enhanced value based solely on NIDB) and quashing the order of confiscation, redemption fine and penalties since the labelling deficiencies were rectified under court direction and supervised repacking/relabelling; consequential relief, if any, to follow.

Appealability of an adjudicative decision communicated during assessment - scope of "decision" under Section 128(1) of the Customs Act, 1962 - maintainability of appeal against communications/queries issued during assessment - obligation of appellate authority to decide on merits and follow principles of natural justice - remand for fresh consideration by Commissioner (Appeals)

Appealability of an adjudicative decision communicated during assessment - scope of "decision" under Section 128(1) of the Customs Act, 1962 - maintainability of appeal against communications/queries issued during assessment - Decision communicated by the assessing officer denying exemption under DFIA while bills of entry were pending is appealable to the Commissioner (Appeals) under Section 128(1). - HELD THAT: - The Tribunal examined the communication recorded in the query memo and held that the assessing officer, by giving reasoned conclusions that the appellant's claim for basic customs duty exemption under the DFIA notification cannot be extended and directing assessment on merits, had taken a conclusive decision denying the exemption. The legislative use of the term "decision" along with "order" in Section 128(1) was noted as deliberate, enabling appeals not only from formal orders but also from determinations made during adjudication. The Tribunal distinguished mere requests for clarification from reasoned determinations and relied on preceding authorities treating such adjudicative communications as challengeable. Consequently, the impugned view that the communication was not an appealable decision was held to be incorrect and the appeal was held maintainable. [Paras 5, 6]

Communication by the assessing officer denying the claimed exemption is a "decision" within Section 128(1) and is challengeable by appeal to the Commissioner (Appeals).

Obligation of appellate authority to decide on merits and follow principles of natural justice - remand for fresh consideration by Commissioner (Appeals) - procedure in appeal under Section 128A - power to make further inquiry and pass just order - Because the Commissioner (Appeals) dismissed the appeal on maintainability without deciding the merits, the matter is remanded to the Commissioner (Appeals) to decide the appeal on merits after giving opportunity and making further inquiry as necessary. - HELD THAT: - The Tribunal recorded that the Commissioner (Appeals) did not examine the substantive entitlement to the exemption but dismissed the appeal as not maintainable. Having held the communication to be a challengeable decision, the Tribunal relied on Section 128A which empowers the Commissioner (Appeals) to hear the appellant, allow additional grounds where omission was not wilful, make further inquiry and pass such order as is just and proper. In the interests of justice, and because the assessing officer's determination pertains to a live consignment and the appeal process has already had two levels, the Tribunal set aside the impugned order and remitted the matter for fresh adjudication on merits in accordance with natural justice, directing a decision within four weeks. [Paras 7, 8]

Impugned order set aside; appeal remanded to the Commissioner (Appeals) to be decided on merits after hearing and necessary inquiry, within four weeks.

Final Conclusion: The Tribunal held that a reasoned communication by an assessing officer denying exemption under the DFIA scheme constitutes a "decision" appealable under Section 128(1); the impugned dismissal on maintainability was set aside and the matter remanded to the Commissioner (Appeals) to decide the appeal on merits in accordance with Section 128A and principles of natural justice within four weeks.

Principles of natural justice - show-cause notice for alleged violations of Warehouse (Custody & Handling of Goods) Regulations, 2016 - punitive action under Section 117 of the Customs Act, 1962 - seizure and confiscation proceedings under Section 110/124 of the Customs Act, 1962 - remand for fresh adjudication

Show-cause notice for alleged violations of Warehouse (Custody & Handling of Goods) Regulations, 2016 - principles of natural justice - punitive action under Section 117 of the Customs Act, 1962 - Imposition of penalty under Section 117 without issuance of a specific show-cause notice for alleged violations of the Warehousing Regulations - HELD THAT: - The Tribunal found that the show-cause notice issued in relation to seizure/confiscation of goods lying outside the bonded area could not substitute for a distinct show-cause notice proposing action for alleged breaches of the Warehouse (Custody & Handling of Goods) Regulations, 2016. Although the Department conducted an inquiry and endorsed a copy of the inquiry report to the appellant, no notice was issued proposing penalty or other action based on that report. The absence of a specific show-cause notice meant that the appellant was not afforded the statutory opportunity to meet allegations of regulatory breach, resulting in a breach of the principles of natural justice. The Tribunal therefore held that the imposition of penalty under Section 117 in the impugned order was unsustainable for want of appropriate notice and opportunity to the appellant. [Paras 6]

Imposition of penalty under Section 117 set aside for violation of principles of natural justice; penalty order cannot stand without issuance of a specific show-cause notice on the Warehousing Regulations violations.

Remand for fresh adjudication - seizure and confiscation proceedings under Section 110/124 of the Customs Act, 1962 - Appropriate remedial course where procedural infirmity in adjudication is found - HELD THAT: - Given the procedural defect-absence of a show-cause notice proposing action for alleged violations of the Warehousing Regulations-the Tribunal did not adjudicate the merits of the alleged regulatory breaches. Instead, it set aside the impugned order and remanded the matter to the adjudicating authority with liberty to initiate proceedings afresh by issuing an appropriate show-cause notice and observing the principles of natural justice. The remand contemplates fresh adjudication on merits only after the statutory procedure of notice and opportunity is complied with. [Paras 6]

Impugned order set aside and matter remanded to the adjudicating authority for fresh proceedings after issuance of an appropriate show-cause notice and observance of natural justice.

Final Conclusion: The penalty and licence-cancellation portion of the adjudicating order was set aside for failure to issue a specific show-cause notice on alleged Warehousing Regulations violations; the matter is remanded for fresh adjudication after issuance of appropriate notice and observance of principles of natural justice.

Rejection of declared value under rule 12 of Customs Valuation Rules - deductive value method - transaction value of identical or similar goods - sequential application of valuation methods - use of retail selling price (RSP) for valuation - onus on customs to establish undervaluation

Rejection of declared value under rule 12 of Customs Valuation Rules - transaction value of identical or similar goods - onus on customs to establish undervaluation - Validity of rejecting the declared transaction value and proceeding to determine value by resort to rule 12 (deductive method) when manufacturer's invoice and local sale invoices were produced. - HELD THAT: - The Tribunal found that the assessing authority rejected the declared value without subjecting the manufacturer's invoice to proper scrutiny, despite the appellant furnishing the manufacturer's invoice and local sale invoices when called for. The Customs Valuation Rules require that where transaction value of identical or similar imported goods is available it must take precedence over substitute methods. The authorities failed to acknowledge the local sale invoices as evidence of existence of transaction value of identical/similar goods and therefore did not discharge the onus of establishing undervaluation. Consequently the authority improperly proceeded to a substitute method (deductive value) without applying the sequential prescription of the valuation rules. [Paras 7]

Rejection of the declared transaction value and resort to deductive valuation was incorrect because the manufacturer's and local sale invoices indicating transaction value were not properly considered.

Deductive value method - use of retail selling price (RSP) for valuation - conditions for deductive method - Whether the deduced value computed from retail selling price (RSP) by applying uniform abatement derived from lipgloss/lipstick sales could validly be applied across all types of imported cosmetics in the consignment. - HELD THAT: - The Tribunal held that applying abatement percentages derived from local sales of specific products (lipgloss/lipstick) across all types of goods in the consignment was not justified. The deductive method has pre-requisite conditions-sales to unrelated persons, derivation from identical or similar imported goods sold in highest aggregate quantity, and sales in the condition as imported about the relevant time-which were not shown to be satisfied uniformly for the different goods. Treating diverse goods alike without justification therefore rendered the uniform application of the deduced multiplier inappropriate. [Paras 6]

The use of a common abatement/multiplier based on lipgloss/lipstick retail prices across all imported items was not acceptable and could not sustain the deductive valuation adopted.

Sequential application of valuation methods - rejection of declared value under rule 12 of Customs Valuation Rules - Whether the first appellate authority correctly endorsed the assessing authority's departure from the prescribed sequence of valuation methods under the Customs Valuation Rules. - HELD THAT: - The Tribunal observed that the assessing authority proceeded beyond the earlier enumerated methods to adopt deductive valuation without establishing that prior methods were inapplicable. The first appellate authority affirmed the re-determination without noticing this breach of the statutory prescription. Such command performance, without application of mind to the availability of transaction value and to the required sequence, was a legal infirmity. Therefore the endorsement by the appellate authority was vitiated by failure to apply the sequential methodology mandated by the Rules. [Paras 7, 8]

The appellate authority erred in endorsing the deductive valuation because the assessing authority had improperly bypassed the sequential valuation methodology required by the Customs Valuation Rules.

Final Conclusion: The Tribunal set aside the impugned re-determination of value and allowed the appeal, holding that the resort to deductive value was incorrect because the manufacturer's and local sale invoices indicating transaction value were not properly considered, the deductive method was inappropriately applied across diverse goods, and the prescribed sequential valuation procedure was not followed.

Limitation for issuance of show cause notice where no statutory period is prescribed - change of opinion doctrine in assessment and enforcement proceedings - Project Imports Regulations, 1986 - statutory compliance and finalisation of provisional assessment - mandatory v. directory nature of Regulation 7 of Project Imports Regulations, 1986

Limitation for issuance of show cause notice where no statutory period is prescribed - change of opinion doctrine in assessment and enforcement proceedings - Whether the Show Cause Notice dated 30.09.2020 seeking differential duty under Section 18(2) of the Customs Act in respect of B/E No. 7356551 dated 12.11.2014 is barred by limitation - HELD THAT: - The Tribunal found that the material date for limitation is 12 November 2014 when the Bill of Entry was filed and assessed. The Show Cause Notice was issued after more than five years from that date. In the absence of any specific statutory time-limit under Section 18(2), the Tribunal applied the controlling principle that issuing a demand by way of change of opinion beyond a reasonable period (here beyond five years from the material date) renders the notice time-barred. The Tribunal also noted that the appellant had complied with the Project Imports Regulations documentation and that the departmental action amounted to a belated change of opinion, thus attracting the limitation bar. [Paras 10]

The Show Cause Notice dated 30.09.2020 is barred by limitation and is set aside.

Project Imports Regulations, 1986 - statutory compliance and finalisation of provisional assessment - mandatory v. directory nature of Regulation 7 of Project Imports Regulations, 1986 - Whether Regulation 7 of the Project Imports Regulations, 1986 is a mandatory provision whose breach would justify concluding forfeiture of the claimed benefit - HELD THAT: - The Tribunal referred to precedent holdings which treat Regulation 7 of PIR 1986 as not mandatory, observing that compliance with Project Imports Regulations and completion of documentation by the importer had been established. Relying on earlier authorities cited in the order, the Tribunal concluded that Regulation 7 is not mandatory and that its breach did not justify sustaining the departmental demand where the primary show cause notice was already held time-barred. [Paras 11]

Regulation 7 of PIR 1986 is not mandatory for the purpose of denying the claimed benefit, and no adverse consequence arises therefrom in view of the limitation ruling.

Final Conclusion: The appeal is allowed; the impugned orders confirming duty, interest and enforcement of provisional assessment bond are set aside as the Show Cause Notice was time-barred, and the appellant is entitled to consequential relief in accordance with law.

Smuggling - confiscation - redemption fine - recorded statement under Section 108 of the Customs Act, 1962 - absolute confiscation - penalty reduction - evidentiary proof of foreign origin

Recorded statement under Section 108 of the Customs Act, 1962 - confiscation - redemption fine - Whether the vehicle of Shri Mithun Ghosh was liable to confiscation and the penalty and option to redeem imposed on him were sustainable. - HELD THAT: - The three recorded statements were relied upon by the Department. Both carriers (Shri Debabrata Saha and Shri Sanjay Ray) stated that they had borrowed the vehicle of Shri Mithun Ghosh and that he was not involved in the smuggling; Shri Mithun Ghosh likewise stated that he had lent the vehicle to friends and was unaware it would be used for smuggling. The Adjudicating Authority did not give any finding to displace these consistent statements, and the Commissioner (Appeals) did not address this issue on appeal. In the absence of any reasoned finding rejecting the recorded statements or independent material implicating Shri Mithun Ghosh, no case was made out to justify confiscation of his vehicle or imposition of redemption fine and penalty against him. [Paras 5, 6, 7, 8]

Confiscation of the vehicle of Shri Mithun Ghosh, the option to redeem it, and the penalty imposed on him are set aside.

Smuggling - recorded statement under Section 108 of the Customs Act, 1962 - absolute confiscation - penalty reduction - evidentiary proof of foreign origin - Whether the penalties imposed on Shri Debabrata Saha and Shri Sanjay Ray and the absolute confiscation of the seized gold were justified and what relief, if any, was appropriate. - HELD THAT: - The recorded statements of Shri Debabrata Saha and Shri Sanjay Ray admit that they were given gold biscuits by a Bangladeshi national to deliver in India for consideration (Rs. 3,000), and these statements were neither retracted nor displaced before the Adjudicating or Appellate Authority. On this basis, smuggling and liability for confiscation of the gold were established. Recognising that the appellants were carriers and that the gold (valued over Rs. 39 lacs) had already been absolutely confiscated, the Tribunal exercised its discretion to mitigate the punitive monetary consequences by reducing the penalty imposed on each from Rs. 4,00,000 to Rs. 1,00,000. [Paras 5, 9]

Confiscation of the seized gold is sustained; penalties on Shri Debabrata Saha and Shri Sanjay Ray are reduced to Rs. 1,00,000 each.

Final Conclusion: Appeals disposed: the penalty and confiscation/ redemption order against Shri Mithun Ghosh set aside; for Shri Debabrata Saha and Shri Sanjay Ray, confiscation of gold upheld and their penalties reduced to Rs. 1,00,000 each.

Job work - permissibility of sending duty free imported inputs outside the EOU for processing - Notification No. 52/2003 CUS para 4(iii) - 100% Export Oriented Unit - absence of diversion where movements are accompanied by documentation - demand of customs duty for alleged breach of conditions governing duty free imports - penalty for contravention of conditions governing duty free imports

Job work - Notification No. 52/2003 CUS para 4(iii) - absence of diversion where movements are accompanied by documentation - permissibility of sending duty free imported inputs outside the EOU for processing - Whether coating of fabrics by third party job workers using chemicals imported duty free by the appellant falls within the scope of job work permitted under Notification No. 52/2003 CUS para 4(iii), precluding demand of customs duty. - HELD THAT: - The Tribunal examined the nature of the activity where the appellant, a 100% EOU, imported fire retardant chemicals duty free under Notification No. 52/2003 CUS and supplied those chemicals to job workers who coated fabrics and returned the coated fabrics to the appellant. The Tribunal observed that para 4(iii) of the Notification permits taking imported goods outside the EOU for permissible processes including job work, with the processed goods required to be returned to the unit. It noted that the movements of chemicals and return of coated fabrics were accompanied by appropriate documentation and there was no allegation or evidence of diversion. The Tribunal relied on precedent and consistent interpretation that 'job work' is to be construed liberally and does not require that every raw material used by the job worker must be supplied by the principal manufacturer. The record showed that the fabrics on which coating was performed were procured for supply to the appellant, supported by invoices and CT 3 certificates in respect of the principal job worker. On these findings the processing at the job worker's premises was held to fall squarely within para 4(iii) and covered by the permission granted by the Development Commissioner; consequently, there was no justification for imposing the demand of customs duty on the imported chemicals. [Paras 6, 7]

The activity is covered by para 4(iii) of Notification No. 52/2003 CUS and the demand of customs duty (and attendant penalty) is not justified; the impugned order is set aside.

Final Conclusion: The appeal is allowed; the demand and penalty confirmed by the adjudicating authority are set aside and consequential relief, if any, shall follow.

Exemption on re-import - re-import from SEZ/FTWZ to DTA - classification of transfer between DTA and FTWZ/SEZ as 'export', 'import' or 'procure' under SEZ Act - inapplicability of residuary entry in Notification No. 45/2017 where goods are exported by a Unit in FTWZ - scope of CBIC Circular No. 21/2019

Re-import from SEZ/FTWZ to DTA - exemption on re-import - classification of transfer between DTA and FTWZ/SEZ as 'export', 'import' or 'procure' under SEZ Act - inapplicability of residuary entry in Notification No. 45/2017 where goods are exported by a Unit in FTWZ - Applicability of serial number 5 of Notification No. 45/2017-Cus. to clearance of equipment from FTWZ/SEZ to DTA where the equipment were earlier imported into DTA and sent to FTWZ/SEZ for storage - HELD THAT: - The Authority held that the movement of goods between DTA and an FTWZ/SEZ for storage with an LSP does not amount to 'import' or 're-import' within the meaning of the SEZ Act, 2005 or the SEZ Rules, 2006. The SEZ Act and Rules assign distinct meanings to 'export', 'import' and 'procure', and transfers to or from an FTWZ/SEZ for warehousing are governed by those specific definitions and procedures. Units in FTWZs hold goods on behalf of foreign suppliers and may dispatch to DTA under owner's instructions; such supplies by a Unit in FTWZ to DTA fall within the scheme for FTWZs and, where the goods are thereby treated as exported by a Unit in FTWZ, the residuary exemption at serial number 5 of Notification No. 45/2017-Cus. is inapplicable. The applicant's attempt to characterise the transactions as re-imports to attract Notification No. 45/2017 was rejected: the applicant's reliance on an imagined 're-export' condition under Notification No. 50/2017-Cus. was unnecessary and unsupported, and warehousing in FTWZ without substantial processing does not convert the subsequent clearance to DTA into a re-import for purposes of Notification No. 45/2017. The CBIC Circular No. 21/2019 was held to be in a different factual context (exhibition/consignment cases) and not directly supportive of the applicant's position. [Paras 9, 10]

Notification No. 45/2017-Cus., serial number 5, is not applicable to the applicant's proposed clearance of equipment from FTWZ/SEZ to DTA; such transfers are not 're-imports' within the relevant statutory scheme and are excluded where goods are exported by a Unit in FTWZ.

Scope of CBIC Circular No. 21/2019 - exemption on re-import - Whether CBIC Circular No. 21/2019 supports application of Notification No. 45/2017 to the applicant's facts - HELD THAT: - The Authority found that Circular No. 21/2019 addresses cases such as goods exported for exhibition or sent on consignment and provides clarifications in that contextual matrix. The facts before the Authority involve warehousing in an FTWZ and not exports for exhibition or consignment; accordingly the Circular was read to be inapplicable to the applicant's factual scenario and could not be relied upon to extend the residuary exemption under Notification No. 45/2017 to the proposed FTWZ-to-DTA clearances. [Paras 9]

CBIC Circular No. 21/2019 does not support the applicant's claim of exemption under Notification No. 45/2017 for transfers from FTWZ/SEZ to DTA in the facts of this case.

Final Conclusion: The application for advance ruling is decided against the applicant: transfers of the applicant's equipment from FTWZ/SEZ to DTA for subsequent use are not 're-imports' under the SEZ Act/Rules or Customs law and serial number 5 of Notification No. 45/2017-Cus. is therefore not available; the CBIC circular relied upon is not applicable to these facts.

Special Leave Petition - unjust enrichment - final adjudication - defences left open

Special Leave Petition - final adjudication - Whether the Special Leave Petitions should be entertained when the High Court has left the question of unjust enrichment open and no final adjudication has taken place. - HELD THAT: - The Supreme Court noted that the impugned judgment of the High Court had expressly left the question of unjust enrichment open and that no final adjudication or determination on that question had occurred. In view of the absence of a final decision on the contested issue, the Court declined to entertain the Special Leave Petitions at this stage. The petitions were dismissed for that reason without deciding the merits of the underlying question of unjust enrichment.

Special Leave Petitions not entertained and dismissed because the High Court left the question of unjust enrichment undecided.

Unjust enrichment - defences left open - How the question of unjust enrichment should be treated going forward. - HELD THAT: - The Court observed that since the High Court had not finally adjudicated the issue, any future raising of the question of unjust enrichment remains open for consideration. It was made clear that the petitioner may oppose such a contention and that all defences available to the petitioner are left open to be considered and dealt with in accordance with law and on their merits when the issue is actually raised before the appropriate forum.

The question of unjust enrichment remains open for future adjudication; petitioner's defences are preserved for consideration on their merits when the issue is raised.

Final Conclusion: The Special Leave Petitions are dismissed because the High Court left the question of unjust enrichment undecided; the issue of unjust enrichment is left open for future consideration and the petitioner's defences are preserved.

Financial Debt - Default - Initiation of Corporate Insolvency Resolution Process under Section 7 - Record of default in an information utility (NeSL certificate) - Board resolution and bank statements as evidence of loan disbursement - Absence of written financial contract is not fatal where surrounding circumstances establish a loan

Initiation of Corporate Insolvency Resolution Process under Section 7 - Financial Debt - Default - Whether the Adjudicating Authority was justified in admitting the Section 7 application and initiating CIRP against the corporate debtor - HELD THAT: - The Tribunal affirmed the Adjudicating Authority's admission. The Court found that the ingredients for admission under Section 7 - existence of debt and occurrence of default - were established on the record. The financial creditor produced a Board resolution authorising grant of a loan of the stated amount at the specified rate of interest, bank statements showing disbursement in two tranches (cheque and RTGS), and a NeSL information utility certificate deeming the debt authenticated. Although there was no formal written loan agreement, the Tribunal held that surrounding circumstances and the documentary evidence demonstrated an implied loan for the time value of money with interest. The balance-sheet entry in the corporate debtor describing the amount as an advance against property did not, by itself, negate the contemporaneous evidence of disbursement and the creditor's sanctioned loan; that ledger entry was held insufficient to convert the transaction into a non-financial liability in the face of the other material on record. The Tribunal emphasised the statutory scheme under Section 7 that, if the application is complete and the Adjudicating Authority is satisfied that default has occurred, admission follows and detailed reasons are required only when rejecting an application. [Paras 6, 17, 19, 21, 27]

The admission under Section 7 was proper; the appeal against initiation of CIRP is dismissed.

Final Conclusion: The Tribunal dismissed the appeal, holding that the Adjudicating Authority rightly admitted the Section 7 petition as the requirement of debt and default was established by the Board resolution, bank records and NeSL certificate notwithstanding absence of a formal written loan agreement; no costs were imposed.

Scheme of compromise or arrangement under section 230 of the Companies Act, 2013 - Compromise or arrangement under Regulation 2-B of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - 90 days timeline for submission and consideration of a section 230 scheme during liquidation - harmonious construction of Section 230 with the IBC and Liquidation Process Regulations - requirement of 75% consent of secured creditors for corporate debt restructuring under section 230(2)(c) - revival of corporate debtor as a going concern during liquidation

90 days timeline for submission and consideration of a section 230 scheme during liquidation - Compromise or arrangement under Regulation 2-B of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - Validity of refusal to extend the Regulation 2-B ninety days timeline for proposing a scheme under section 230 after liquidation order - HELD THAT: - The Tribunal noted that Regulation 2-B mandates completion of the compromise or arrangement process within ninety days of the liquidation order and that the period so taken (not exceeding ninety days) is excluded from the liquidation period. The Supreme Court and NCLAT jurisprudence recognise a section 230 scheme as a valid mode of revival during liquidation and permit harmonious construction of Section 230 with the IBC. However, the discretion to extend the ninety days has been exercised in prior cases only where a formulated scheme existed or there was demonstrable progress. In the present matter, the Appellant filed IA seeking extension but produced no formulated scheme, no evidence of taking steps to secure the requisite consents, and did not place any scheme before the liquidator, secured creditors or the Stakeholders Consultation Committee within the stipulated time. In these circumstances, the Adjudicating Authority's refusal to extend the period under Regulation 2-B was not an error of law or jurisdiction. [Paras 12, 15, 17, 22]

Refusal to extend the Regulation 2-B ninety days timeline was upheld; no illegality in the Impugned Order.

Requirement of 75% consent of secured creditors for corporate debt restructuring under section 230(2)(c) - scheme of compromise or arrangement under section 230 of the Companies Act, 2013 - revival of corporate debtor as a going concern during liquidation - Whether the Appellant had demonstrated readiness of a scheme and obtained necessary support to warrant extension or to preclude sale as a going concern - HELD THAT: - The Tribunal examined the Appellant's conduct and found that by the expiry of the ninety days (4.1.2023) no scheme had been proposed to the liquidator, Stakeholders Consultation Committee or secured creditors. Although access to the virtual data room was provided on 19.1.2023, the Appellant produced no concrete evidence of a formulated scheme thereafter and did not demonstrate steps taken to secure the 75% consent required under section 230(2)(c). The Tribunal further observed that filing an application for extension does not stay the obligation to present a scheme or to obtain creditor consents. The Stakeholders Consultation Committee had, by majority, decided to proceed with sale as a going concern. In the absence of any demonstrable preparedness or bona fide progress, the Appellant's request for extension was properly rejected. [Paras 18, 19, 20, 21, 22]

Appellant failed to demonstrate existence or readiness of a scheme and absence of requisite creditor support; no ground to restrain or delay sale as a going concern.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority did not err in refusing to extend the ninety days provided under Regulation 2-B where the appellant failed to produce a formulated scheme or evidence of requisite creditor support; sale as a going concern may proceed.

Treatment of security interest in a resolution plan - parties with third party security versus financial creditor status - effect of inclusion of a claim in CIRP on extinguishment or modification of security - scope and application of Regulation 37 of the CIRP Regulations, 2016 - distinction between precedents under Article 141 and directions under Article 142 - need for prior consent of a third party secured creditor for extinguishment of security in CIRP

Treatment of security interest in a resolution plan - effect of inclusion of a claim in CIRP on extinguishment or modification of security - scope and application of Regulation 37 of the CIRP Regulations, 2016 - Security interest of a third party secured creditor that has been brought into the CIRP (by filing a claim and being reflected in the list of creditors) can be dealt with, modified or extinguished under a resolution plan. - HELD THAT: - The Tribunal held that where a third party security holder's claim and security have been taken cognizance of in the CIRP (claim filed in Form C and admitted in the list of creditors, even as an 'Other Creditor' at a notional value), the security interest is part of the insolvency estate for purposes of the resolution process and may be dealt with by the resolution plan. Regulation 37( b ) expressly permits sale of assets 'whether subject to any security interest or not' and Regulation 37(d) permits satisfaction or modification of any security interest. The scheme of the Code and Regulations aims at maximisation of value and revival of the corporate debtor; therefore, assets and security interests included in the CIRP can be addressed in the plan. The Tribunal contrasted this factual matrix with cases where the security was not part of the CIRP and emphasised that the prohibition in Jaypee Kensington arose because the security there was not taken into the resolution process. [Paras 14, 21, 29, 31, 32]

Security interest included in the CIRP may be sold, modified or extinguished pursuant to a resolution plan; the Adjudicating Authority did not err in permitting the plan to deal with the Appellant's security.

Parties with third party security versus financial creditor status - need for prior consent of a third party secured creditor for extinguishment of security in CIRP - A third party secured creditor who has only a security interest does not obtain a higher or different status than financial creditors by virtue of that security, and prior consent of such third party secured creditor is not required for the resolution plan to extinguish or modify that security where the security is part of the CIRP. - HELD THAT: - Relying on Anuj Jain and the statutory scheme, the Tribunal reiterated that a person having only security interest is distinct from a financial creditor and is not entitled to participate in CoC level protections reserved for financial creditors. Once the third party security holder's claim was dealt with in the CIRP (and not challenged by the holder), the resolution process can treat the security like any other asset of the corporate debtor. The Court further observed that Section 14(1)(c) enjoins moratorium against enforcement of 'any security interest' during CIRP, and that Section 52/53 apply in liquidation; consequently, the third party secured creditor cannot insist on enforcement outside the process to the detriment of the CIRP. The Adjudicating Authority rightly held that no prior consent of the Appellant was necessary for extinguishment under the plan. [Paras 16, 17, 18, 40]

The Appellant, being a third party security holder whose claim was adjudicated within the CIRP, had no right to insist on prior consent to prevent the resolution plan from dealing with its security interest.

Distinction between precedents under Article 141 and directions under Article 142 - The decisions relied upon by the Appellant were distinguished: Jaypee Kensington is applicable where the security was not part of the CIRP and thus could not be extinguished; Vistra ITCL was a case where the Supreme Court exercised powers under Article 142 and its remedy is factual and equitable rather than an authoritative precedent binding under Article 141 for all cases. - HELD THAT: - The Tribunal analysed Jaypee Kensington and held its ratio applies where the security interest was not taken into the CIRP (hence could not be annulled by the plan). In the present case the Appellant's security was part of the CIRP, so Jaypee Kensington did not mandate relief. As to Vistra ITCL, the Tribunal observed that the Supreme Court provided an equitable solution under Article 142 in that factual context; such directions do not constitute a binding declaration of law under Article 141 for all cases and therefore the Appellant could not rely on Vistra ITCL as a general legal rule overriding the Code and Regulations. [Paras 25, 31, 33, 34, 38]

Jaypee Kensington is distinguishable on facts; Vistra ITCL was an Article 142 remedy and does not displace the statutory scheme applicable here.

Approval of resolution plan - finality of Adjudicating Authority's order approving the plan - In absence of any other challenge, and having rejected the Appellant's objection to the plan, the Adjudicating Authority's order approving the Resolution Plan is maintainable and is upheld. - HELD THAT: - Having found no merit in the Appellant's grounds (including that the security could not be extinguished), the Tribunal held there was no separate ground to interfere with the Adjudicating Authority's approval of the Resolution Plan under Section 30. The impugned orders rejecting the Appellant's application and approving the plan were accordingly affirmed. [Paras 41, 42]

The Adjudicating Authority's order approving the Resolution Plan stands; both appeals are dismissed.

Final Conclusion: The Tribunal held that the Appellant's third party security interest, having been brought into the CIRP (and not challenged), could be dealt with by the Resolution Plan; Jaypee Kensington was distinguished as relating to security not included in CIRP, and Vistra ITCL was treated as an Article 142 remedy not binding as a general precedent. The Adjudicating Authority's orders rejecting the Appellant's challenge and approving the Resolution Plan are affirmed and both appeals are dismissed.

Admissibility of application under Section 9 of the IBC - threshold requirement of Rs.1 crore for operational debt (post 24.03.2020) - inclusion of contractual interest in computation of operational debt for threshold - effect of Section 10A vis-a -vis date of default and maintainability - proceeding ex parte for non appearance/non prosecution

Admissibility of application under Section 9 of the IBC - threshold requirement of Rs.1 crore for operational debt (post 24.03.2020) - Section 9 application was maintainable and correctly admitted by the Adjudicating Authority as the claimed operational debt exceeded Rs.1 crore. - HELD THAT: - The Tribunal examined Part IV of the Section 9 application and the annexed documents showing an aggregate claim exceeding Rs.1 crore. It held that the claimed amount, which included principal, interest and specified expenses, satisfied the statutory threshold introduced by the post-24.03.2020 notification. On the material before the Adjudicating Authority, debt and default were established and the Adjudicating Authority correctly admitted the petition under Section 9. [Paras 6, 8, 14, 16]

Section 9 application was maintainable and rightly admitted as the operational debt claimed exceeded Rs.1 crore.

Inclusion of contractual interest in computation of operational debt for threshold - Interest stipulated between the parties was to be included in computing the total operational debt for the purpose of the Rs.1 crore threshold. - HELD THAT: - Relying on the contractual terms in the purchase orders and on the Tribunal's three Member Bench precedent in Prashant Agarwal, the Court held that where interest for delayed payment is stipulated between the parties, that interest forms part of the operational debt for threshold computation. The purchase orders and contemporaneous communications showed that interest at 18% p.a. was claimable and was included in the amounts demanded by the Operational Creditor. [Paras 8, 9, 13, 14]

Contractual interest is includible in the operational debt calculation for meeting the Rs.1 crore threshold.

Effect of Section 10A vis-a -vis date of default and maintainability - Section 10A did not render the present Section 9 application inadmissible because the date of default was prior to the 10A period. - HELD THAT: - The Tribunal noted that the Operational Creditor claimed default from 26.07.2018 and that the demand notice dated 21.12.2020 did not alter the fact of earlier default. Consequently, the bar alleged under Section 10A was misconstrued by the Corporate Debtor; an application asserting pre 10A default remains maintainable notwithstanding the later date of the demand notice. [Paras 7, 12, 15]

Section 10A did not bar the Section 9 application where the default occurred prior to the 10A period.

Proceeding ex parte for non appearance/non prosecution - The Adjudicating Authority rightly proceeded ex parte and dismissed the Corporate Debtor's interlocutory application for non prosecution, and no indulgence was due in view of the Corporate Debtor's conduct. - HELD THAT: - The record showed multiple adjournments sought and granted, but the Corporate Debtor failed to file a reply despite time being granted and did not appear on the hearing date. An interlocutory application filed by the Corporate Debtor was dismissed for non prosecution. The Tribunal held that given this conduct, the Adjudicating Authority was justified in directing the matter to proceed ex parte and in admitting the petition on the basis of the uncontradicted record. [Paras 5, 6, 11, 16]

Proceeding ex parte and dismissal for non prosecution were justified; no error was committed by the Adjudicating Authority.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority did not err in admitting the Section 9 application: the claimed operational debt (including contractual interest) exceeded the Rs.1 crore threshold, Section 10A did not bar the petition as default occurred earlier, and the Adjudicating Authority was entitled to proceed ex parte given the Corporate Debtor's failure to file reply or appear.

Maintainability of a Section 7 insolvency petition - existence of a financial debt and default under the Code - effect of settlement/withdrawal of arbitration proceedings on subsistence of debt - balance sheet entry as acknowledgement of debt - assignment of debt as transfer of litigation

Effect of settlement/withdrawal of arbitration proceedings on subsistence of debt - Whether the amicable settlement and withdrawal of arbitration proceedings between the family groups extinguished the alleged debt and precluded the Section 7 petition. - HELD THAT: - The Tribunal found that the monetary claim forming the basis of the Section 7 petition had been directly in issue in the arbitration between the BLS and MKJ groups, that an application for an interim award in respect of substantially the same sum had been dismissed by the sole arbitrator, and that ultimately the parties jointly withdrew their claims and counter claims by joint pursis on 07.08.2021. The Adjudicating Authority's finding that the alleged debt arising out of the Indenture of Family Settlement had been amicably settled and compromised before the Section 7 filing was based on these materials and was upheld. The court held that those findings on the record could not be faulted. [Paras 10, 11]

Arbitration settlement/withdrawal terminated the parties' claims so that no subsisting debt remained for the purpose of sustaining the Section 7 petition.

Existence of a financial debt and default under the Code - maintainability of a Section 7 insolvency petition - Whether the Appellant proved existence of a financial debt and default by the Corporate Debtor such as would render the Section 7 petition maintainable. - HELD THAT: - The Tribunal accepted the Adjudicating Authority's conclusion that no financial debt owed by JNIL to CIAL (or its assignee) had been established. The payments in question were made by CIAL to its lenders for loans originally taken by CIAL for the Strip Mill Division and were reflected as ledger entries following the demerger; the IFS contemplated lease arrangements and only provided for liability to shift to JNIL after formal merger. The court held that those ledger entries did not, by themselves, constitute a disbursement by a creditor to the corporate debtor for the time value of money nor did they transfer the liability to JNIL prior to completion of the merger process. On this basis, the Adjudicating Authority correctly held the Section 7 petition to be not maintainable for want of a proved financial debt/default. [Paras 11, 16]

No financial debt or default was proved; Section 7 petition was not maintainable.

Balance sheet entry as acknowledgement of debt - assignment of debt as transfer of litigation - Whether entries in JNIL's financial statements amounted to an unequivocal acknowledgement of liability, and whether the 2017 assignment amounted to a genuine transfer of debt or merely purchase of litigation. - HELD THAT: - The Tribunal examined the balance sheet entries and the accompanying notes and correspondence. It observed that the 2013 14 financials reflected ledger balances inherited on demerger, but subsequent annual reports (from 2015 16 onwards) expressly recorded that the claimed amount was disputed and the company had taken caveated positions. A contemporaneous letter dated 20.09.2014 denied the liability. Applying the approach in the authorities on balance sheet acknowledgements, the court held that entries accompanied by caveats and explicit denials could not be treated as unequivocal admissions of liability. Further, having regard to the chronology - including failed interim relief in arbitration and the subsequent assignment in 2017 - the Tribunal concluded that the assignee had effectively purchased the litigation rather than acquired an indisputable subsisting debt. [Paras 12, 13, 14, 16]

Balance sheet entries with caveats and contemporaneous denials did not constitute acknowledgement of debt; the assignment was, in substance, a transfer of litigation and did not create a provable financial debt.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority correctly held that (i) the arbitration proceedings had been settled/withdrawn so that no subsisting debt remained, (ii) no financial debt or default by JNIL was established to sustain a Section 7 petition, and (iii) balance sheet entries and the subsequent assignment did not amount to an unequivocal acknowledgement or creation of a provable debt.

Power to recall - inherent powers - principles of natural justice - no power of review under IBC - maintainability of recall application - necessary party not heard

Principles of natural justice - necessary party not heard - power to recall - Recall is a remedy distinct from review and may be available where an order was passed in violation of principles of natural justice (for example, where a necessary party was not heard). - HELD THAT: - The Tribunal noted the authoritative distinctions drawn by the Supreme Court between review and recall and accepted that recall does not go into merits but addresses procedural infirmities such as a judgment rendered without giving an affected or necessary party an opportunity to be heard. Reliance was placed on A.R. Antulay, Asit Kumar Kar and Budhia Swain to extract that recall may be exercised where (i) proceedings culminated in an order rendered in ignorance that a necessary party was not served or heard, (ii) there was fraud or collusion, (iii) the court was misled, or (iv) the court committed a mistake prejudicing a party. The Tribunal reiterated that while it has no statutory power of review under the IBC, that fact does not ipso facto preclude exercise of an inherent power to recall in cases of frank failure of natural justice; however, a pleading styled as a recall which in substance seeks rehearing on merits (i.e., is a review) cannot be entertained. [Paras 8, 11, 12, 13]

The Tribunal held that recall is conceptually distinct from review and may be available to remedy procedural defects amounting to denial of natural justice, but that applications styled as recall which are in substance review will not be entertained.

No power of review under IBC - inherent powers - maintainability of recall application - Whether this Tribunal, which lacks statutory power of review under the IBC, can nevertheless entertain an application to recall its own judgment under its inherent powers (Rule 11 of NCLAT Rules, 2016) and whether prior coordinate-bench decisions denying recall should be followed. - HELD THAT: - The Tribunal examined conflicting coordinate-bench decisions which have declined to entertain recall or review under Rule 11 and recognised that those benches did not sufficiently distinguish recall from review. Given the legal importance and the apparent divergence in approach - between decisions treating recall as unavailable and the Supreme Court authorities recognising limited recall in cases of denial of natural justice - the Tribunal concluded that the correctness and applicability of the coordinate-bench decisions, and the broader question of the NCLAT's power to recall under Rule 11 absent a statutory review provision, raise substantial questions of law requiring consideration by a larger bench. Accordingly, the Tribunal refrained from finally adjudicating the maintainability point and framed specific questions for reference to a larger bench. [Paras 18, 19]

The Tribunal referred the legal questions regarding its power to recall under Rule 11 and the correctness of prior coordinate-bench decisions to a larger bench for authoritative determination.

Final Conclusion: The Tribunal recognised that recall is a procedural remedy distinct from review and may be available to correct orders passed in breach of natural justice, but, because of conflicting coordinate-bench precedents and the absence of a statutory review provision under the IBC, it referred the decisive question - whether NCLAT can entertain recall applications under its inherent powers and whether earlier bench decisions precluding recall are correct - to a larger bench for final adjudication.

Existence of pre existing dispute under Section 8(2) - admission of Section 9 application and triggering of CIRP - acknowledgement of debt and proof of default - role and limits of adjudicating authority in summary proceedings - claim for interest as part of operational claim/Section 3(6) claim - maintainability of appeal by promoter/shareholder as aggrieved person

Maintainability of appeal by promoter/shareholder as aggrieved person - Leave to file appeal by the appellant (promoter/shareholder) as a third party was maintainable and granted. - HELD THAT: - The Tribunal applied the principles in Innoventive and its own precedents to hold that a promoter/shareholder, whose management rights have been affected and who is otherwise aggrieved, may be permitted to seek leave to prefer an appeal as a third party under Rule 31 read with Rule 11 of the NCLAT Rules, 2016. The interlocutory application for leave was allowed in the exercise of the Tribunal's discretion to meet the ends of justice.

IA No.23/2023 for leave is allowed and the appellant's maintainability as an aggrieved person is recognised.

Existence of pre existing dispute under Section 8(2) - admission of Section 9 application and triggering of CIRP - role and limits of adjudicating authority in summary proceedings - Whether the Adjudicating Authority erred in admitting the Section 9 petition despite alleged pre existing disputes regarding test certificates and quality of goods. - HELD THAT: - The Tribunal applied Mobilox and related authorities to examine whether a plausible pre existing dispute was shown. It found that the Adjudicating Authority had considered the record (notably paras 6-10 of the impugned order) and that the material before it did not establish a concrete, admissible dispute that would bar admission. The Tribunal emphasised that the Adjudicating Authority under the Code conducts summary scrutiny and is not a forum for adjudicating detailed contract disputes; if a debt is shown due and payable and the defence is not a plausible, non spurious pre existing dispute, the petition may be admitted. Considering part payments, an email dated 02.11.2017 acknowledging liability and the payment history, the Tribunal held the Adjudicating Authority was justified in concluding debt and default and admitting the petition. [Paras 10, 56, 57, 78, 96]

The admission of the Section 9 application was valid; the alleged pre existing dispute did not displace admission.

Acknowledgement of debt and proof of default - claim for interest as part of operational claim/Section 3(6) claim - Whether the operational creditor had established an operational debt and default (including interest) sufficient for admission under Section 9. - HELD THAT: - The Tribunal examined the documents in Form 5 and Form 3, the part payments, the email of 02.11.2017 confirming outstanding sums and a proposed payment schedule, and the returned cheque. It held that such materials amounted to a clear acknowledgement of liability and supported the finding of debt and default. The Tribunal further held that a claim for interest can form part of a 'claim' under Section 3(6) and that where the principal outstanding exceeds the threshold, the permissibility of claimed interest does not vitiate admission. The Tribunal noted that precise quantification can be carried out in the CIRP by the IRP/RP and that the Adjudicating Authority need not compute the exact claim in summary admission proceedings. [Paras 58, 59, 89, 96]

Operational debt and default (including interest claim as part of the claim) were established for the purpose of admitting the Section 9 petition.

Role and limits of adjudicating authority in summary proceedings - Whether the Adjudicating Authority was required to adjudicate the merits of the contract (quality, damages under Section 73, or unliquidated damages) before admitting the petition. - HELD THAT: - The Tribunal reiterated that the Adjudicating Authority is not a civil court and is not to determine detailed money claims or adjudicate unliquidated damages in Section 9 admission proceedings. Reliance on precedents established that claims for unliquidated damages require adjudication by a competent civil forum and cannot, by themselves, serve to prevent admission unless a plausible pre existing dispute is demonstrated. The Tribunal observed the corporate debtor had not instituted any suit or adjudicatory proceeding to enforce its claimed rights and that summary jurisdiction does not permit detailed resolution of such claims at the admission stage. [Paras 51, 55, 56, 62]

The Adjudicating Authority correctly declined to adjudicate detailed contractual disputes or unliquidated damages at the admission stage; such matters are for appropriate forums or for determination within CIRP.

Service of demand notice and sufficiency of service - Whether service of the demand notice on the company at its registered office (per MCA records) was sufficient. - HELD THAT: - The Tribunal held that service at the company's registered office address as per MCA records constituted sufficient service in the circumstances. The corporate debtor's contention of non receipt was not sufficient to vitiate service, in light of statutory mechanics and the materials placed before the Adjudicating Authority. [Paras 94]

Service of the demand notice on the company at its registered office was sufficient.

Final Conclusion: The Appellate Tribunal dismissed the appeal. The interlocutory application for leave by the promoter/shareholder was allowed; on merits, the admission order under Section 9 was upheld as valid and proper, the operational creditor's debt and default (including claimed interest) were held established for admission purposes, and detailed contract disputes were held unsuitable for adjudication at the summary admission stage.

Software activation charges - service tax under Business Auxiliary Service - sale of goods versus taxable service - definition of "goods" for sales tax purposes - principal that payment of VAT/CST on transaction indicates sale - binding effect of tribunal's earlier decision in identical facts

Software activation charges - service tax under Business Auxiliary Service - sale of goods versus taxable service - definition of "goods" for sales tax purposes - Activation charges for enabling feature-related software in EPABX sold to customers are not liable to service tax but constitute sale of goods. - HELD THAT: - The Tribunal found that the appellant collected activation charges in respect of software/features in EPABX systems sold to customers and had discharged VAT/CST on those amounts. On the facts, activation was effected pursuant to the sale transaction, the appellant retained no service obligation and merely billed the amount (part of which was passed on to overseas suppliers). Applying the principle that software, when put on a medium or otherwise having attributes of transferability, delivery and possession, falls within the definition of "goods" for sales tax purposes, the Tribunal concluded that the activity was a sale and not a service. The Tribunal relied on the reasoning in the appellant's earlier decision on identical facts and on the authoritative view that software possessing the attributes of goods cannot be recharacterised into a taxable service. Consequently, the impugned demand for service tax under Business Auxiliary Service was set aside. [Paras 4, 5]

Impugned order demanding service tax on activation charges set aside; activation charges treated as sale of goods and not taxable as Business Auxiliary Service.

Principal that payment of VAT/CST on transaction indicates sale - time-bar and extended period of demand - Demand raised for an extended period was not sustainable since the appellant had disclosed the transactions and paid sales tax/VAT and there was no suppression warranting extended limitation. - HELD THAT: - The Tribunal observed that the appellant had issued invoices, disclosed the activation receipts in the balance sheet and paid VAT/CST on the transactions. On these facts, there was no suppression or mis-declaration that could justify invoking the extended period of limitation. Accordingly, the demand for the longer period was held to be unsustainable. [Paras 4, 5]

Extended period demand disallowed; limitation defence accepted and demand for longer period not sustained.

Final Conclusion: Following the Tribunal's earlier decision in the appellant's own case on identical facts, the appeal is allowed: activation charges are treated as sale of goods (not taxable as Business Auxiliary Service) and demands raised for an extended period are unsustainable; the impugned order is set aside with consequential relief as per law.

Abatement of 75% for Goods Transport Agency services - non-mandatory nature of Board circulars - denial of substantive benefit by imposing conditions not in notification

Abatement of 75% for Goods Transport Agency services - non-production of transporter's declaration - non-mandatory nature of Board circulars - entitlement to abatement of 75% of gross freight for GTA services despite absence of a certificate/declaration from the transporter - HELD THAT: - The Tribunal found that Notification No. 32/2004 providing the 75% abatement does not itself impose the consignment-note endorsement or transporter certificate condition; the Board's circular merely clarifies practice and cannot introduce a substantive pre-condition not contained in the notification. Co-ordinate Tribunal decisions and the reasoning in the cited authorities establish that non-production of the transporter's declaration cannot be used to deny the statutory abatement. Applying that principle to the facts, the amount already appropriated and the balance demand and penalties arising solely from non-production of the declaration could not be sustained. The Tribunal therefore set aside the adjudicating authority's order and allowed the appeal with consequential relief as per law. [Paras 3, 6]

Impugned order set aside; appeal allowed and abatement of 75% upheld despite absence of transporter's declaration, with consequential relief as per law.

Final Conclusion: The appeal is allowed: the appellant is entitled to the 75% abatement for GTA services for 2005-06 and the adjudication confirming demand and imposing penalty on the ground of non-production of the transporter's declaration is set aside, with consequential relief as provided by law.

Supply of goods as well as services - works contract services - classification of service for levy of service tax - taxability of advances received for execution of contract - interest on delayed payment where no tax is payable

Works contract services - taxability of advances received for execution of contract - Advances mobilised for execution of contracts involving supply of goods as well as services (works contract services) are not liable to service tax where the department has not classified the activity as works contract services and has not made any demand for works contract services. - HELD THAT: - The Tribunal found on the admitted facts that the appellant's contracts involved supply of goods along with services, making the true (merit) classification of the activity works contract services. The department, however, did not classify the activity as works contract services and did not make any demand under that classification. Since the advances were received for execution of works contract services and no demand was raised for works contract services, the advances mobilised by the appellant cannot be taxed as service tax under the classifications relied upon by the department. The Tribunal therefore held that the demand of service tax confirmed by the lower authority was not sustainable. [Paras 7, 8]

Demand of service tax on advances is not payable and the impugned demand set aside.

Interest on delayed payment where no tax is payable - No interest is payable on delayed payment of service tax where no service tax was payable in the first place. - HELD THAT: - Having concluded that no service tax was payable on the advances, the Tribunal addressed the consequential claim for interest. Relying on its earlier reasoning and precedent, the Tribunal observed that where there is no liability to pay duty/tax, liability to pay interest does not arise. Applying that principle, the Tribunal held that the demand of interest made against the appellant for delayed payment of service tax is unsustainable and must be set aside. [Paras 9, 10]

Demand of interest is not sustainable and is set aside.

Final Conclusion: Impugned order confirming service tax demand and interest is set aside; appeal allowed with consequential relief to the appellant.

Charging provision under Section 66 of the Finance Act, 1994 - deeming fiction in Section 66A treating the recipient as provider for import of services - reverse charge mechanism and applicability of Chapter V provisions to the recipient - availability of exemption under Notification No.17/2004-ST to a recipient paying under reverse charge

Deeming fiction in Section 66A treating the recipient as provider for import of services - reverse charge mechanism and applicability of Chapter V provisions to the recipient - availability of exemption under Notification No.17/2004-ST to a recipient paying under reverse charge - charging provision under Section 66 of the Finance Act, 1994 - Whether the recipient of taxable services, who is liable to pay service tax under Section 66A (reverse charge), is entitled to the exemption under Notification No.17/2004 ST dated 10.09.2004 - HELD THAT: - The Tribunal held that Section 66 is the charging provision for service tax and the deeming fiction created by Section 66A treats the recipient of certain imported services as if the recipient had provided the service in India, thereby making all provisions of Chapter V applicable to the recipient. Consequently, once liability to pay service tax is fixed on the recipient under the reverse charge mechanism, no distinction can be drawn between the recipient and a provider for the purpose of applying Chapter V concessions. The Tribunal relied on its earlier decision in United News of India and the decision in Cummins Technologies India Ltd., which interpreted Section 66A to permit application of notifications conferring exemptions to recipients who satisfy the conditions of those notifications. The Court further observed that the Bombay High Court's reasoning in Indian National Shipowners Association does not treat Section 66A as a charging provision distinct from Section 66, and therefore does not preclude application of Chapter V benefits to the recipient. Applying these principles to the facts, the Tribunal found no infirmity in the appellate authority's conclusion that the respondent assessee, having discharged service tax liability as recipient under Section 66A, was entitled to the exemption under Notification No.17/2004 ST. [Paras 6, 7, 8, 9]

The respondent assessee paying service tax under Section 66A is entitled to the benefit of Notification No.17/2004 ST; the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the Revenue appeal, upholding the appellate authority's order that the respondent assessee, being liable to pay service tax under Section 66A by virtue of the reverse charge deeming fiction, is eligible for the exemption under Notification No.17/2004 ST for the periods in dispute.

Eligibility of Cenvat credit on inputs used in provision of output service - definition of "input" under Rule 2(k) of the Cenvat Credit Rules, 2004 - treatment of towers and parts as excisable "goods" for credit purpose - capital goods versus input distinction under Cenvat Credit Rules - non-denial of substantive benefit for procedural or technical lapses - role of Input Service Distributor registration and inter-office credit transfers (ATD/TED)

Treatment of towers and parts as excisable "goods" for credit purpose - definition of "input" under Rule 2(k) of the Cenvat Credit Rules, 2004 - capital goods versus input distinction under Cenvat Credit Rules - Validity of allowing Cenvat credit on Towers and Parts & Accessories of Towers falling under Chapter 73 when claimed as input rather than capital goods - HELD THAT: - The adjudicating authority and the Tribunal found that duty of excise had been paid on the Towers and their parts, and therefore they were treatable as excisable "goods". Having accepted that they are goods on which duty was paid, the Tribunal examined whether they satisfy the definition of "input" under Rule 2(k). The Tribunal agreed with the adjudicating authority's reasoning that, even if the items do not fall within the specific chapters listed for "capital goods", they plainly qualify as "input" used in provision of the telecommunication output service because installed towers and their parts are essential and directly used for receiving and transmitting signals. The Tribunal held that once the department itself recognised payment of duty treating the items as excisable goods, credit on inputs used in manufacture of those excisable goods could not be denied. Applying this determinative reasoning, the demand for disallowance of the credit in respect of the Towers and parts was held to be unsustainable and appropriately dropped. [Paras 7, 8]

Credit on Towers and parts was properly allowed as "input" and the demand in respect thereof is unsustainable; the impugned demand is dropped.

Role of Input Service Distributor registration and inter-office credit transfers (ATD/TED) - non-denial of substantive benefit for procedural or technical lapses - eligibility of Cenvat credit on inputs used in provision of output service - Validity of allowing Cenvat credit transferred by ETR and ETP through ATD/TED where those branches had not complied with ISD registration/formal procedure - HELD THAT: - The adjudicating authority found, and the Tribunal concurred, that ETR and ETP were branches of the assessee which received duty-paid inputs, capital goods and input services and transferred the credit to the assessee via ATD/TED. There was no allegation that excise duty or service tax had not been paid or that the inputs were not used in rendering the output service. The Tribunal relied on the principle that a substantive benefit cannot be denied on mere procedural or technical grounds where the substantive conditions for credit-payment of duty/tax and use in provision of output service-are satisfied. Given the assessee's fulfillment of these two primary conditions and the absence of evidence to the contrary, the Tribunal held that the credit could not be denied merely for lack of ISD registration or other procedural non-compliance, and therefore the demand was correctly dropped. [Paras 9]

Cenvat credit transferred by ETR and ETP via ATD/TED was admissible despite procedural lapses; the demand based on absence of ISD registration or technical defects is unsustainable and dropped.

Final Conclusion: The departmental appeal is rejected: the Tribunal affirms the adjudicating authority's dropping of demands - credit on Towers and their parts qualifies as input and the inter-branch transferred credit via ATD/TED is admissible where duty-paid inputs were used in rendering the output service; procedural non-compliance alone did not justify denial of the substantive benefit.

Penalty under Section 78 of the Finance Act, 1994 - revisionary power under Section 84 of the Finance Act, 1994 - limitation on issuing show cause notice under Section 73(3) of the Finance Act, 1994 - reasonable cause for delay - recovery of tax with interest where default occurred before 31 December 2005

Penalty under Section 78 of the Finance Act, 1994 - reasonable cause for delay - Whether penalty could be imposed on the appellant for delayed payment of service tax where delay was due to non receipt of transport subsidy and tax (with interest) was paid on receipt of subsidy - HELD THAT: - The Tribunal found that the appellant had taken registration and paid service tax for the earlier period and that the delay in payment for the period April 2005 to September 2007 was attributed to non receipt of transport subsidy from the Central Government. The revisionary authority did not record any finding rejecting the appellant's explanation or establishing intent to evade tax. The appellant voluntarily paid the tax along with interest immediately on receipt of the subsidy. In the absence of evidence of deliberate fraud, collusion, suppression of facts or willful misstatement to evade tax, the circumstances constituted a reasonable cause for delay and disentitled the department to impose penalty under Section 78. The Tribunal therefore held that penalty was not imposable and that only interest for delayed payment (which had been paid) was payable. [Paras 9, 10]

Penalty under Section 78 not imposable; only interest payable (already paid).

Revisionary power under Section 84 of the Finance Act, 1994 - limitation on issuing show cause notice under Section 73(3) of the Finance Act, 1994 - Whether the Commissioner in exercise of revisionary power could sustain the revision order imposing penalty when original authority had waived penalty - HELD THAT: - The Tribunal observed that the Commissioner reviewed and set aside the original authority's waiver of penalty by exercising powers under Section 84. However, given the absence of findings discrediting the appellant's explanation and the facts showing voluntary payment of tax with interest on receipt of subsidy, the case was fit for not issuing a show cause notice as contemplated by Section 73(3). The exercise of revisionary power to impose penalty was therefore held unsustainable. [Paras 9, 10]

Revision order imposing penalty under Section 84 is unsustainable and set aside.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned Revision Order dated 31.03.2010, held that penalty under Section 78 was not imposable in the absence of deliberate evasion and that only interest for delayed payment (which was paid) was payable.

Valuation under Section 4 of the Central Excise Act, 1944 - valuation under Section 4A of the Central Excise Act, 1944 - medicaments supplied to institutional buyers (not for retail sale) - transaction value - MRP printing requirement under the Drugs (Price Control) Order, 1995

Valuation under Section 4 of the Central Excise Act, 1944 - valuation under Section 4A of the Central Excise Act, 1944 - medicaments supplied to institutional buyers (not for retail sale) - MRP printing requirement under the Drugs (Price Control) Order, 1995 - Medicament supplies to institutional buyers intended for exclusive consumption are to be valued under Section 4 and not under Section 4A of the Central Excise Act, 1944. - HELD THAT: - The Tribunal found on the material that the medicaments were supplied to institutional buyers (such as Indian Railways, Government Hospitals, BHEL) for exclusive use, were not offered for retail sale and in many instances bore the marking 'NOT FOR SALE' with no MRP printed. The Drugs (Price Control) Order, 1995 requires printing of retail sale price / MRP only for formulations 'offered for retail sale'. Accordingly, the DPCO obligations (and the notification bringing medicaments within Section 4A assessment on the basis of retail sale price) do not apply where the products are not intended for retail sale. The Tribunal relied on its consistent earlier decisions (including the appellant's own earlier order and decisions in Medley, Zydus, USV and others) holding that institutional supplies consumed by hospitals/institutions are to be assessed on transaction value under Section 4, and that valuation under Section 4A (MRP-based assessment) is not attracted. Applying that reasoning, the impugned orders treating such supplies under Section 4A were held unsustainable. [Paras 4, 5]

The impugned orders are set aside and the appeals are allowed; medicament supplies to institutional buyers are to be valued under Section 4 and not under Section 4A.

Final Conclusion: Appeals allowed; consistent Tribunal precedent affirmed that medicaments supplied to institutional buyers for exclusive consumption are not liable to MRP-based valuation under Section 4A and must be assessed on transaction value under Section 4.

CENVAT credit on input services - Certified copy of Railway Receipts (RRs) as supporting document for credit - Monthly Consolidated Certificate (MCC) and STTG certificate - Proviso to Rule 9(2) of the CENVAT Credit Rules, 2004 - Rule 4A of the Service Tax Rules - Assessable value requirement for admissibility of credit - Qualification of transportation service as input service

Certified copy of Railway Receipts (RRs) as supporting document for credit - Monthly Consolidated Certificate (MCC) and STTG certificate - Proviso to Rule 9(2) of the CENVAT Credit Rules, 2004 - Rule 4A of the Service Tax Rules - Certified copies of RRs read with MCC and STTG certificate are valid supporting documents under Rule 9 read with Rule 4A for claiming CENVAT credit for the relevant period. - HELD THAT: - The Tribunal found that the fact of receipt of taxable transportation services from Western Central Railway and payment of service tax was undisputed. The documents produced - certified photocopies of RRs, Monthly Consolidated Certificates and a re-revised STTG certificate dated 31.12.2022 - together contained the required particulars including name of service provider, registration number, recipient details, description of service, value of service and service tax payable. The proviso to Rule 9(2) confers discretion on the adjudicating authority to allow credit where the documents produced contain requisite particulars despite formal infirmities. The Tribunal relied on earlier decisions which held that documents authenticated by Railways satisfy the object of Rule 9 and that denial merely because the form was later prescribed is not justified. Applying this reasoning, the Tribunal concluded that the conjoint documents complied with the proviso to Rule 9(2) read with Rule 4A and thus constituted valid evidence for availing credit for the disputed period.

Allowed the claim that certified RRs, MCC and STTG certificate are valid documents for availing CENVAT credit for the relevant period.

Assessable value requirement for admissibility of credit - CENVAT credit on input services - Absence of a separately stated assessable value in the STTG certificate did not justify denial of credit where the freight/assessable amount was evident from the RRs and payment of tax was not disputed. - HELD THAT: - The Commissioner (Appeals) denied credit for December 2012 to May 2013 on the ground that the assessable value was not mentioned in the certificate issued by the Railways. The Tribunal observed that the freight amount (assessable value) was invariably stated in the RRs submitted for the respective months and that payment of service tax and receipt of service were not in dispute. Given that the re-revised STTG and accompanying documents together furnished the particulars contemplated by the proviso to Rule 9(2), denial of credit solely on the asserted omission in the certificate was unwarranted. The Tribunal therefore directed allowance of the disputed credit.

Directed grant of CENVAT credit notwithstanding the alleged absence of assessable value in the certificate, since the assessable amount appeared from the RRs and tax payment was established.

Final Conclusion: The Tribunal modified the impugned order and allowed the appellant to avail the CENVAT credit held inadmissible, concluding that certified copies of RRs supported by MCC and STTG certificate satisfied the requirements of the proviso to Rule 9(2) read with Rule 4A and that absence of a separately stated assessable value in the certificate did not justify denial where the freight amount and tax payment were evident.

Principles of natural justice - non-speaking order - manufacture - transformation test for manufacture (nomenclature, character and use) - upgradation and calibration not amounting to manufacture - burden on the Revenue to prove emergence of a commercially distinct commodity - extended period of limitation and suppression

Principles of natural justice - non-speaking order - Impugned order vitiated for violation of principles of natural justice and being non-speaking for failure to consider submissions and judicial precedents relied upon by the appellant. - HELD THAT: - The adjudicating authority on 05.08.2011 heard the appellant through Commissioner Dr. Sanjay Agarwal, but the final Order-in-Original dated 23.12.2011 was signed by a different Commissioner, Shri Prashant Kumar, who did not afford a fresh hearing nor considered the submissions and judicial pronouncements relied upon by the appellant. The Tribunal found this sequence amounted to gross violation of principles of natural justice because the officer who passed the order was required to hear the appellant on merits. The non-consideration of the authorities and submissions relied on by the appellant rendered the order non-speaking and legally defective. [Paras 7, 8]

Issue answered in favour of the appellant; impugned order set aside for violation of principles of natural justice and for being non-speaking.

Manufacture - transformation test for manufacture (nomenclature, character and use) - upgradation and calibration not amounting to manufacture - burden on the Revenue to prove emergence of a commercially distinct commodity - Processes of calibration, upgradation and configuration undertaken by the appellant do not amount to manufacture liable to excise duty. - HELD THAT: - The Tribunal applied the established transformation test: manufacture involves bringing into existence a new substance known to the market with a distinctive name, character or use. Relying on CBEC Circular No.454/20/99-CX (12.04.1999) and authoritative decisions of the Apex Court, the Tribunal held that mere calibration/upgradation/configuration that does not change nomenclature, character or use of the goods cannot be equated to manufacture. The test reports before and after registration were of the same nature and contents, and no new commercially distinct product emerged; accordingly the processes in issue did not satisfy the requirement for levy of excise duty. The Tribunal also noted the burden lies on the Revenue to prove that a commercially distinct article emerged from the processes claimed as manufacture. [Paras 11, 12, 13, 14, 15]

Issue answered in favour of the appellant; the activities do not amount to manufacture.

Extended period of limitation and suppression - burden on the Revenue to prove manufacture - Demand is barred by limitation; extended period cannot be invoked. - HELD THAT: - The appellant had dealer registration from 03.12.2001 and regularly filed dealer returns, later registering as a manufacturer on 13.03.2009 and submitting ER-1 returns; departmental officers inspected records on 11.12.2009. Given that the activity and filings were known to the Department and returns were submitted, the Tribunal held the show-cause notice dated 27.12.2010 invoking the extended period was unsustainable. In these circumstances, the extended period of limitation based on alleged suppression was not invokable. [Paras 16, 17]

Issue answered in favour of the appellant; all demands are time-barred.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned Order in Original as violative of principles of natural justice and non-speaking, held the processes undertaken did not amount to manufacture, concluded the demand was barred by limitation, and granted consequential relief.

Exemption under Notification No. 6/2006-CE - supply against international competitive bidding - Condition 19 requiring corresponding customs exemption - eligibility of sub contractor supplies where main contractor secured the contract by international competitive bidding - goods required for a mega power project covered by Customs Notification No.21/2002 Cus subject to certificate by Joint Secretary, Ministry of Power

Exemption under Notification No. 6/2006-CE - Condition 19 requiring corresponding customs exemption - supply against international competitive bidding - goods required for a mega power project covered by Customs Notification No.21/2002 Cus subject to certificate by Joint Secretary, Ministry of Power - Whether the appellant was entitled to exemption under Notification No. 6/2006 CE dated 1.3.2006 for clearances to a contractor (IVRCL) who was a sub contractor to a main contractor engaged under international competitive bidding and whether the conditions of Condition No.19 and Customs Notification No.21/2002 Cus were satisfied. - HELD THAT: - The Tribunal found that the supplies were made to IVRCL, which had obtained the order from Jindal Power Ltd. pursuant to international competitive bidding, and that project authority certificates and the certificate by the Joint Secretary, Ministry of Power, were on record. The Tribunal applied established precedent holding that supplies made by a sub contractor to the main contractor executing a mega power project procured through international competitive bidding satisfy the requirement that goods be "supplied against International Competitive Bidding" for the purpose of the exemption. The Tribunal also held that classification of the goods under different Central Excise headings did not preclude coverage under the Customs entry for goods required for mega power projects where the statutory certificate under Notification No.21/2002 Cus was produced. In these circumstances, the conditions of Condition No.19 of Notification No.6/2006 CE (i.e., corresponding customs exemption) were satisfied and the impugned demands could not be sustained. The Tribunal relied on earlier Tribunal decisions with comparable facts and applied their ratio to the present case.

The appellant is entitled to the benefit of Notification No.6/2006 CE dated 1.3.2006; the demands confirmed in the impugned orders are not sustainable and are set aside.

Final Conclusion: Appeal allowed; impugned demands set aside and the appellant granted the exemption under Notification No.6/2006 CE subject to the conditions being complied with.

Exemption from Clean Energy Cess where cess paid at raw coal extraction - liability to remit amounts collected as duty under Section 11D of the Central Excise Act - Clean Energy Cess payable on removal from mine and charging on cleared quantity - presumption of excess collection by reference to post-facto price adjustments

Exemption from Clean Energy Cess where cess paid at raw coal extraction - Clean Energy Cess payable on removal from mine and charging on cleared quantity - No fresh Clean Energy Cess was payable on clean coal cleared from the washery where cess had been paid on the gross extracted raw coal at the stage of removal from the mines. - HELD THAT: - The tribunal accepted that the appellant paid Clean Energy Cess on the gross extracted quantity of raw coal for the period July 2010 to March 2013 in compliance with Rule 6(1). Notification No. 4/2010 dated 22.06.2010 exempts goods (including clean coal) from Clean Energy Cess provided cess has been paid at the stage of raw coal removal from the mine. The raw coal sent to the washery was processed into clean coal and other products; the notification applies so that no further cess is leviable at washery clearance. The adjudicating authority's approach to re-charge cess at washery clearance overlooked that (a) the exemption applies to goods produced from raw coal when cess was already paid, and (b) cess is fixed on the cleared quantity and not by reference to price-based adjustments. Applying these principles, the tribunal held that the impugned re levy is inconsistent with the notification and rules cited. [Paras 13, 14, 15, 16]

Exemption under Notification No. 4/2010 applies and no additional Clean Energy Cess was payable on clean coal cleared from the washery for the period in question.

Liability to remit amounts collected as duty under Section 11D of the Central Excise Act - presumption of excess collection by reference to post-facto price adjustments - The demand under Section 11D (and interest under Section 11DD) for alleged excess collection of Clean Energy Cess was unsustainable because excess collection was not established. - HELD THAT: - Section 11D requires that amounts collected as duty, if any, be deposited into government account; it applies only when collection in excess of actually payable duty is proved. The adjudicating authority premised its demand on a presumption that amounts recovered pursuant to post-facto MOUs and debit/credit adjustments represented separate cess collections (calculated at an assumed rate). The tribunal found the presumption unjustified: the disputed sums reflected negotiated price differentials and mutually agreed MOU adjustments with public sector buyers, and the appellant had produced evidence of return adjustments (credit notes) and that overall collections were not in excess of the cess already paid by the appellant at extraction. The investigation did not establish any collection over and above the cess actually paid on raw coal; accordingly Section 11D could not be invoked and the consequential interest claim under Section 11DD also failed. [Paras 17, 18, 19, 20]

Demand under Section 11D and interest under Section 11DD set aside for lack of proof of excess collection.

Final Conclusion: The impugned adjudication confirming demand and interest for alleged excess collection of Clean Energy Cess is set aside: (i) clean coal cleared from the washery was exempt where cess was paid on raw coal at extraction, and (ii) the authorities failed to establish any excess collection attractable under Section 11D/11DD for the period July 2010 to March 2013.

CENVAT credit of outward transportation charges - Assessable value inclusive of freight - Place of removal - FOR / Door Delivery contracts - CENVAT Credit on Goods Transport Agency service (GTA) - Remand for factual verification

CENVAT credit of outward transportation charges - Assessable value inclusive of freight - CENVAT Credit on Goods Transport Agency service (GTA) - Whether cenvat credit of service tax paid on outward freight is admissible where central excise duty has been paid on a value inclusive of freight - HELD THAT: - The Tribunal applied the CBIC Circular F.No.116/23/2018-CX dated 08.06.2018, which summarizes the law on determination of place of removal and notes the Supreme Court's decisions distinguishing FOR/destination sales. The Circular expressly records that where central excise duty has been discharged after including the freight element in the assessable value, cenvat credit of GTA/service tax attributable to the freight up to the place of removal is admissible. The Tribunal observed that the sample invoices produced prima facie indicate duty was paid on value inclusive of freight. However, only sample documents were filed before the Tribunal; therefore the question requires factual verification across the records to ascertain whether, in respect of all relevant removals, duty was paid after including the freight element. Because the lower authority had denied credit essentially on contract/invoice wording such as 'Door Delivery' or 'FOR' without full verification, the Tribunal set aside the impugned order and remanded the matter to the adjudicating authority to examine all documents in light of the Circular and determine admissibility of cenvat credit accordingly.

Impugned order set aside and matter remanded to the original adjudicating authority for fresh adjudication to verify whether central excise duty was paid inclusive of freight; if so, cenvat credit on GTA/freight is to be allowed in accordance with the CBIC circular.

Final Conclusion: The Tribunal allowed the appeal in part by setting aside the impugned order and remanding the matter for detailed verification of documents to determine whether central excise duty was paid inclusive of freight; where duty was so paid, cenvat credit of GTA/service tax on the freight must be allowed in terms of the CBIC circular.

Penalty for deliberate concealment or furnishing inaccurate particulars - Mens rea / deliberate suppression as prerequisite for imposition of penalty - Quasi criminal nature of penalty proceedings and burden on department to prove deliberate concealment - Effect of filing revised returns after detection on liability for penalty - Distinction between branch transfers and inter State sales for tax liability

Penalty for deliberate concealment or furnishing inaccurate particulars - Mens rea / deliberate suppression as prerequisite for imposition of penalty - Effect of filing revised returns after detection on liability for penalty - Distinction between branch transfers and inter State sales for tax liability - Validity of penalty imposed under Section 48 of the Haryana General Sales Tax Act for suppressing inter State sales by treating them as branch transfers and filing revised returns after detection - HELD THAT: - The Court held that the assessing authority was justified in imposing penalty because material on record showed that consignments destined to Ghaziabad and Secunderabad depots were intercepted at the Sales Tax Check Barrier and, following verification, the assessee filed revised returns for the relevant quarters only after detection. The assessee had initially treated inter State sales as branch transfers, and later admitted enhanced interstate turnover and paid additional tax belatedly. The Court applied the established principle that penalty under the provision requires deliberate concealment or furnishing of inaccurate particulars (mens rea), and found that the assessee's conduct-waiting to file revised returns until after detection and not filing them under the statutory provision during the return period-demonstrated lack of bona fides. Reliance on precedents emphasising that mere filing of a revised return does not automatically negate deliberate suppression was accepted, and the Division Bench decision in Sant Lal Tek Chand was held directly applicable in sustaining the penalty in these circumstances. No material was produced by the assessee to rebut inference of deliberateness; thus the imposition of penalty was upheld.

Penalty under Section 48 of the Haryana General Sales Tax Act upheld and the appeal dismissed.

Final Conclusion: The High Court dismissed the appeal, holding that penalty for deliberate suppression of turnover (by treating inter State sales as branch transfers and filing belated revised returns after detection) was rightly imposed; no substantial question of law arises.

Section 138 of the Negotiable Instruments Act - security cheque - legally enforceable debt or other liability - Section 139 presumption - inherent powers under Section 482 CrPC to quash criminal proceedings - quashing of criminal proceedings on prima facie factual disputes

Section 138 of the Negotiable Instruments Act - security cheque - legally enforceable debt or other liability - Section 139 presumption - inherent powers under Section 482 CrPC to quash criminal proceedings - Maintainability of proceedings under Section 138 NI Act and propriety of quashing the summoning order and notice under Section 251 CrPC on the ground that the cheques were 'security' and no legally enforceable debt existed at presentation. - HELD THAT: - The Court held that the factual defence that the cheques were given only as security and did not represent a legally enforceable debt could not be examined and finally adjudicated in proceedings under Section 482 CrPC. The learned Magistrate had taken cognizance after considering the complaint supported by pre-summoning evidence and framed notice; the issuance and ownership of the cheques were not disputed. Section 139 raises a rebuttable presumption that a cheque is issued in discharge of a debt or liability, and at the quashing stage allegations in the complaint must be accepted unless unimpeachable evidence to the contrary is produced. Precedents recognise that a cheque described as 'security' may nevertheless mature for presentation once the underlying liability becomes due; whether that occurred here is a triable question of fact. Consequently, the High Court should not exercise inherent powers to usurp the trial court's function by resolving contested factual issues unless extraordinary, incontrovertible evidence warrants quashing. The burden to rebut the presumption is on the accused at trial, and absent evidence of an unimpeachable character, the complaint cannot be quashed on the pleaded defence. [Paras 46, 50, 51, 53, 54]

The petition seeking quashment of the summoning order and notice is dismissed and the criminal proceedings under Section 138 NI Act are not quashed at this stage.

Final Conclusion: The High Court declined to quash the summoning order and notice under Section 251 CrPC arising from the complaint under Section 138 NI Act; disputed factual defences that the cheques were mere security and no enforceable liability existed are matters for trial and do not justify exercise of inherent jurisdiction under Section 482 CrPC in the absence of unimpeachable evidence.