TaxTMI Updates e-Newsletter
Jul 12,2019

Comparability analysis in transfer pricing - arm's length price - functional analysis (Functions, Assets and Risks) - selection of comparable uncontrolled entities - transactional net margin method

Comparability analysis in transfer pricing - functional analysis (Functions, Assets and Risks) - selection of comparable uncontrolled entities - arm's length price - ITAT's exclusion of Axis Integrated System Ltd. as a comparable in the Transfer Pricing analysis for fixing the Arm's Length Price of the respondent for AY 2013-14 was justified. - HELD THAT: - The Court examined whether the Tribunal erred in excluding Axis as a comparable after the TPO had retained it on the basis of an online annual report showing income under 'liaisoning charges'. The Tribunal's reasoning-accepted by the Court-relied on a detailed functional comparison: the assessee was a routine captive sourcing service provider offering high-volume, time-sensitive buying services to group companies, whereas Axis provided liaisoning services to multiple entities and was engaged in issuing digital certification. These material functional differences in Functions, Assets and Risks undermined comparability despite the TPO's extraction from Axis's annual report. The Court recalled the principle that while the transactional net margin method may be less sensitive to some dissimilarities, selection of comparables must adhere to comparability factors and not be diluted; significant functional and business-profile differences require exclusion of a purported comparable. Applying that principle to the facts, the Tribunal's exclusion of Axis was plausible and based on detailed analysis; there was no error warranting interference and no substantial question of law arose. [Paras 5, 8, 9, 10, 11]

Tribunal's exclusion of Axis as a comparable upheld; appeal dismissed.

Final Conclusion: The High Court dismissed the Revenue's appeal, upholding the ITAT's exclusion of Axis as a comparable in the Transfer Pricing analysis for AY 2013-14 and holding that no substantial question of law arises.

Processing of return under Section 143(1) of the Income-tax Act - effect of notice under Section 143(2) of the Income-tax Act on processing of return - grant of refund under Section 143(1D) of the Income-tax Act - withholding refund pending scrutiny and requirement to record reasons - non-binding effect of departmental instructions prejudicial to assessee - obligation on Assessing Officer to act expeditiously on refund requests

Processing of return under Section 143(1) of the Income-tax Act - effect of notice under Section 143(2) of the Income-tax Act on processing of return - grant of refund under Section 143(1D) of the Income-tax Act - withholding refund pending scrutiny and requirement to record reasons - Assessing Officer's obligation to process the assessee's return under Section 143(1) and grant any refund arising therefrom for Assessment Year 2015-16 notwithstanding that a notice under Section 143(2) had been issued, and the consequent entitlement to release of refund with interest. - HELD THAT: - The Court applied its own precedents and those of other High Courts to conclude that the respondent cannot refuse to process the return under Section 143(1) and withhold a refund merely because a notice under Section 143(2) has been issued. The decision in Group M. Media India (Bombay) and the Delhi High Court's ruling in Tata Teleservices establish that CBDT instructions that operate to deny an assessee's statutory entitlement are not binding to the extent they are prejudicial to the assessee. The Court reiterated that, insofar as Section 241A and the amended Section 143(1D) operate for assessment years commencing on or after 01.04.2017, those provisions are not applicable to AY 2015-16; consequently the Department could not rely on the later regime to withhold refund for the year in question. The Court further endorsed the view that while an Assessing Officer may have discretion in appropriate cases, it is impermissible to indefinitely defer processing where the assessee has made a request for refund; the Assessing Officer is expected to respond expeditiously and, if withholding is contemplated, to record justifiable reasons and follow the statutory requirements. Applying these principles to the facts, the respondents had not furnished any justifiable legal reason to deny processing of the return or release of refund for AY 2015-16.

Respondents directed to process the return under Section 143(1) for Assessment Year 2015-16 and release any refund found due, with statutory interest, within one month from receipt of the order.

Final Conclusion: Writ petition allowed; respondents must process the petitioner's return for Assessment Year 2015-16 under Section 143(1) and pay any refund due with statutory interest within one month. The Department cannot withhold the refund for AY 2015-16 merely because a notice under Section 143(2) was issued or by reference to departmental instructions prejudicial to the assessee.

Reopening of assessment under Section 147/148 - reason to believe - change of opinion - tangible material - notice under Section 142(1) and production of documents

Reopening of assessment under Section 147/148 - reason to believe - change of opinion - tangible material - notice under Section 142(1) and production of documents - Validity of the notice issued under Section 148 to reopen assessment for Assessment Year 2013-14 - HELD THAT: - The Court examined whether the Assessing Officer possessed a valid reason to believe that income chargeable to tax had escaped assessment, or whether the purported reopening amounted to a prohibited change of opinion. The record shows that the Assessing Officer had issued a notice under Section 142(1) during original scrutiny, specifically calling for details of sales promotion expenses, and the assessee furnished the required vouchers and other documentary evidence which were considered and verified during framing of assessment dated 26.10.2015. The assessment was completed after such verification and the expenses were not disallowed in that order. Given that the material relied upon for reopening had been called for, produced and considered at the original assessment stage, the Court held that the reopening on the same material amounted to a reopening based on a mere change of opinion rather than fresh tangible material revealing escapement of income. Applying the principle that reassessment must be founded on a live link between new or unconsidered material and the belief that income escaped assessment, the Court found no such basis here and concluded that the notice under Section 148 was unjustified. [Paras 6, 7]

The notice under Section 148 issued to reopen the assessment for Assessment Year 2013-14 is quashed and set aside; consequential proceedings, if any, are terminated.

Final Conclusion: Writ petition allowed; the impugned notice under Section 148 for Assessment Year 2013-14 is quashed and all proceedings arising therefrom stand terminated.

Rejection of books of account where correctness or completeness is in doubt - use of material collected by excise authorities in income-tax assessment - assessment proceedings prior to finality of excise adjudication - burden on assessing officer to bring independent material for making additions

Use of material collected by excise authorities in income-tax assessment - burden on assessing officer to bring independent material for making additions - rejection of books of account where correctness or completeness is in doubt - Whether the Assessing Officer had sufficient material to reject the assessee's books of account and make additions on the basis of excise show-cause materials and witness statements - HELD THAT: - The Tribunal and this Court examined the material placed by the Assessing Officer, which consisted essentially of copies of excise show-cause notices and accompanying witness statements collected by the Excise Department. Merely supplying those documents to the assessee and inviting a denial did not establish the veracity of the allegations nor convert the excise material into independent proof for income-tax additions. The Assessing Officer had not brought any independent material of his own nor carried out verification to establish the correctness of the excise material; by effectively shifting the burden onto the assessee to disprove the excise allegations, the AO failed to satisfy the requisite basis for rejecting books and making additions. Where the AO lacks independent corroborative material and proceeds only on unadjudicated excise statements, the addition cannot be sustained.

Addition deleted; finding that AO did not have sufficient independent material to reject books or make additions on the basis of excise show-cause materials.

Assessment proceedings prior to finality of excise adjudication - burden on assessing officer to bring independent material for making additions - Whether the Assessing Officer was required to await final adjudication of excise show-cause notices before framing an income-tax assessment - HELD THAT: - The Court rejected the contention that assessment must be deferred until excise proceedings attain finality, noting that excise adjudication operates under a different statutory regime with its own timelines and may not be time-barred in the same manner as income-tax assessment. The Assessing Officer is not obliged to await excise adjudication if doing so would risk time-barred assessment; however, the AO must have independent, admissible material to form a belief of escapement of income. Thus, while non-finality of excise proceedings does not automatically preclude income-tax action, reliance solely on unverified excise show-cause material and statements without independent verification is impermissible.

Assessment need not be deferred pending excise finality, but AO must base additions on independent/verifiable material; absence of such material here precluded sustaining the additions.

Final Conclusion: The Revenue's appeals are dismissed; the Tribunal's deletion of the additions is upheld because the Assessing Officer relied solely on unadjudicated excise materials and witness statements without independent verification or additional material sufficient to reject the assessee's books of account.

Deletion of addition under section 69 - treatment of amounts deposited in third party bank account as assessee's income - maturity proceeds of insurance policy and attribution of income - substantial question of law under Section 260A

Deletion of addition under section 69 - treatment of amounts deposited in third party bank account as assessee's income - Deletion of the addition of Rs. 2,76,97,000 (as challenged in substantial question (A)) was not shown to involve any substantial question of law and the Tribunal's deletion was not vitiated by error of law. - HELD THAT: - The Tribunal found, on the material and admissions before it, that the addition had been made by the AO by treating amounts deposited into the bank account of the assessee's brother as the assessee's income and that the Revenue had not successfully controverted that position. The High Court recorded that no error of law was demonstrated in the Tribunal's conclusion and that the question framed by the Revenue did not raise a substantial question of law warranting interference. [Paras 3, 5]

Tribunal's deletion of the addition upheld; no substantial question of law found in respect of (A).

Deletion of addition under section 69 - maturity proceeds of insurance policy and attribution of income - Deletion of the addition of Rs. 8,64,267 (as challenged in substantial question (B)) was correctly sustained by the Tribunal and did not involve a substantial question of law. - HELD THAT: - The Tribunal held that the amount represented the maturity value of an insurance policy standing in the name of the assessee's brother and had been deposited into that brother's account; consequently it could not be treated as unexplained income of the assessee under the provision relied upon. The High Court found no legal error in this factual and legal conclusion and declined to entertain the Revenue's contention as a substantial question of law. [Paras 3, 5]

Tribunal's deletion of the addition sustained; no substantial question of law found in respect of (B).

Deletion of addition under section 69 - treatment of bank interest as unaccounted income - Deletion of the addition of Rs. 1,16,579 (as challenged in substantial question (C)) did not raise any substantial question of law and the Tribunal committed no error of law in the impugned order. - HELD THAT: - Having considered the Tribunal's findings and the materials on record, the High Court observed that the Revenue had not demonstrated any error of law in the Tribunal's disposal of the issue. The question advanced by the Revenue was therefore not a substantial question of law within the meaning of Section 260A warranting judicial interference. [Paras 5, 6]

Tribunal's deletion of the addition sustained; no substantial question of law found in respect of (C).

Final Conclusion: The Revenue's appeal under Section 260A is dismissed; the Tribunal's deletions of the challenged additions are upheld and none of the questions raised by the Revenue constitutes a substantial question of law.

Penalty for furnishing inaccurate particulars under Section 271(1)(c) of the Income tax Act - Disallowance of expenditure under Section 43B(e) and its effect on computation of income - Bona fide inadvertent error versus concealment of income - Rectification under Section 154 as indicia of bona fides - Reliance on disclosures in Tax Audit Report/annual accounts

Penalty for furnishing inaccurate particulars under Section 271(1)(c) of the Income tax Act - Disallowance of expenditure under Section 43B(e) and its effect on computation of income - Reliance on disclosures in Tax Audit Report/annual accounts - Penalty under Section 271(1)(c) is not attracted for the assessee's failure to suo moto disallow unpaid interest under Section 43B(e) in the assessment year 2012-13. - HELD THAT: - The authorities below (CIT(A) and the Tribunal) found that the unpaid interest was disclosed in the statutory Tax Audit Report and in the annual report filed with the return, and that the omission to make the suo motu disallowance under Section 43B(e) was an inadvertent computational error rather than an attempt to conceal income. The assessee, on being pointed out the omission, filed a petition for rectification under Section 154 and explained the mistake. The High Court accepted the factual conclusions of the lower authorities that the conduct of the assessee established bona fide inadvertence, distinguished the Revenue's reliance on Mak Data P. Ltd. (which arose from survey proceedings), and found Price Waterhouse Coopers (where similar disclosure in the Tax Audit Report led to no penalty) to be apposite. In these circumstances the imposition of penalty under Section 271(1)(c) was held not to be justified. [Paras 14, 15]

Penalty under Section 271(1)(c) not attracted; the omission was an inadvertent error and does not constitute furnishing inaccurate particulars.

Bona fide inadvertent error versus concealment of income - Rectification under Section 154 as indicia of bona fides - Failure to file revised return not decisive where disclosure and rectification exist - The assessee is not liable for penalty for furnishing inaccurate particulars despite not having filed a revised return, where disclosure was made in the Tax Audit Report/annual accounts and a rectification petition under Section 154 was filed promptly. - HELD THAT: - The Court accepted the findings of the CIT(A) and the Tribunal that the assessee had disclosed the unpaid interest in the audit report and annual accounts accompanying the return, thereby negating any element of concealment. Upon detection by the Assessing Officer the assessee immediately sought rectification under Section 154 and furnished explanations. The High Court held that the absence of a revised return was not determinative in the presence of these facts, distinguished Mak Data P. Ltd. on its factual matrix (survey proceedings), and applied the principle in Price Waterhouse Coopers where a similar disclosure led to the view that the error was a bona fide human mistake not attracting penalty. [Paras 14, 15]

Assessee not guilty of furnishing inaccurate particulars; failure to file a revised return did not warrant penalty in view of disclosure and prompt rectification.

Final Conclusion: The High Court found no substantial question of law to be decided; the factual findings of inadvertent error, disclosure in audit/annual reports and prompt rectification were accepted, the imposition of penalty was held unjustified and the Revenue's appeal is dismissed.

Validity of notice under section 148 when issued to a deceased person - Notice under section 148 is a jurisdictional notice - Requirement of fresh notice to legal representative under section 159(2)(b) - Curative effect of procedural defects under section 292B is subject to conformity with intent and purpose of the Act

Validity of notice under section 148 when issued to a deceased person - Notice under section 148 is a jurisdictional notice - Requirement of fresh notice to legal representative under section 159(2)(b) - Curative effect of procedural defects under section 292B is subject to conformity with intent and purpose of the Act - Impugned notice dated 29.03.2019 under Section 148 issued in the name of a deceased assessee is invalid and proceedings pursuant thereto cannot be continued. - HELD THAT: - The court held that a notice under Section 148 is a jurisdictional notice and therefore its validity is a condition precedent to the Assessing Officer assuming jurisdiction under Section 147. Although Section 159(2)(b) permits proceedings which could have been taken against the deceased to be taken against the legal representative, that entitlement requires issuance of the requisite notice to the legal representative. Section 292B, which cures procedural mistakes, applies only where the notice is in substance and effect in conformity with the intent and purpose of the Act. Where the legal representative does not waive the requirement of a valid notice and objects to continuation (having not participated by filing a return in response to the defective notice), the defect is not cured by Section 292B. Consequently the Assessing Officer cannot continue proceedings on the basis of a notice issued to a dead person; he may, if not barred by limitation, issue a fresh notice to the legal representative under Section 148. The court applied these principles to the facts on record and found the impugned notice invalid. [Paras 6, 7, 8]

Impugned notice dated 29.03.2019 and all proceedings pursuant thereto quashed and set aside.

Final Conclusion: Writ allowed; the notice dated 29.03.2019 under Section 148 and consequent proceedings are invalid as issued to a deceased person and are quashed; the department may, if permissible by limitation, issue a fresh notice to the legal representative.

Deduction under Section 80IA - Annual Maintenance Charges (AMC) and industrial undertaking nexus - Allowability/exclusion of expenses for computation under Section 80IA - Disallowance under Section 40A(2)(a) and 40A(2)(b) - Specified person transactions and unreasonable/above-market payments - Disallowance of brokerage/commission - Concurrent findings of fact and re appreciation barred in appeals under Section 260A

Disallowance of brokerage/commission - Concurrent findings of fact and re appreciation barred in appeals under Section 260A - The Tribunal's factual findings upholding disallowance of brokerage/commission were not interfered with. - HELD THAT: - The Tribunal, after considering the statements and records, found that the assessee failed to establish necessity or business advantage from payment of sales commission and that even senior officials were unaware of the marketing activity or agents involved. Those findings of fact were concurrent with the Assessing Officer and the CIT(A). The High Court held that it could not re appraise or re weigh these factual findings in a Section 260A appeal and therefore no substantial question of law arose on this point. [Paras 7, 8]

No interference with the Tribunal's factual conclusion; no substantial question of law on brokerage/commission disallowance.

Disallowance under Section 40A(2)(a) and 40A(2)(b) - Specified person transactions and unreasonable/above-market payments - The disallowances under Sections 40A(2)(a) and 40A(2)(b) in respect of software purchases from Diebold Inc. and Chip Trans were upheld. - HELD THAT: - The Tribunal compared purchase and sale prices and found stark disparities: purchases from Chip Trans at higher prices and from Diebold at much lower prices, while sale prices were uniform. The Tribunal concluded that Chip Trans was linked to persons with substantial interest and that payments were excessive and unreasonable in relation to market value and the assessee's needs, thereby attracting the provisions of Section 40A(2). Those factual findings were accepted by the High Court, which declined to re examine the factual matrix in a Section 260A appeal. [Paras 9, 10, 11]

Disallowances under Sections 40A(2)(a) and 40A(2)(b) confirmed; no substantial question of law warranting interference.

Deduction under Section 80IA - Annual Maintenance Charges (AMC) and industrial undertaking nexus - Allowability/exclusion of expenses for computation under Section 80IA - Deduction under Section 80IA qua AMC, installation, technical, consultation charges and licence fees was refused and the alternative claim to exclude AMC expenses from computation under Section 80IA was rejected. - HELD THAT: - The Assessing Officer found that income from AMC and related charges was not derived from the Pondicherry industrial undertaking because the unit's men, material and machinery were not used to earn that income; hence Section 80IA deduction was denied. The Court noted that the assessee failed to establish the claimed nexus before the fact finding authorities and raised substantive factual/contentionary arguments for the first time before the High Court. The alternative plea that AMC expenses should be excluded while computing profits under Section 80IA was considered by CIT(A) and rejected on the ground of absence of positive income from the Pondicherry unit. Given the absence of requisite factual foundation before lower authorities, the High Court declined to entertain the new contention and found no substantial question of law. [Paras 12, 13, 14]

Claim for deduction under Section 80IA and alternative exclusion of AMC expenses rejected; no ground to interfere with Tribunal's order.

Final Conclusion: The High Court dismissed the appeal against the Tribunal's order for AY 2001-02, upholding the disallowances under Sections 40A(2) and the refusal of deduction/exclusion under Section 80IA, and refusing to re open concurrent factual findings in a Section 260A appeal; no costs.

Deduction under Section 37(1) - deduction under Section 36(1)(iv) and (v) - computation of depreciation as per Section 32(1) - application of Explanation 6 to Section 43(6) - statutory obligation under the Tuticorin Port Trust Employees Retirement Regulations, 1979 - remand to the Assessing Officer for fresh consideration

Application of Explanation 6 to Section 43(6) - computation of depreciation as per Section 32(1) - remand to the Assessing Officer for fresh consideration - Whether the questions concerning the applicability of Explanation 6 to section 43(6) and computation of depreciation under section 32(1) require adjudication in the present appeals. - HELD THAT: - The Tribunal found uncertainty in the manner in which depreciation was computed and held that the quantum allowable for the impugned assessment years needed re-examination by the Assessing Officer. The High Court records that the first and second substantial questions relate to excess claim of depreciation and that the matter has been remanded to the Assessing Officer for fresh consideration. Consequently those questions have not been answered on merits and are to be re-visited by the Assessing Officer in accordance with law. [Paras 4, 5]

First and second substantial questions of law are left open and the issue of depreciation is remanded to the Assessing Officer for fresh consideration.

Deduction under Section 37(1) - deduction under Section 36(1)(iv) and (v) - statutory obligation under the Tuticorin Port Trust Employees Retirement Regulations, 1979 - Whether expenditure paid directly to retired employees in terms of the Tuticorin Port Trust Employees Retirement Regulations, 1979 is allowable under Section 37(1) notwithstanding deductions claimed under Section 36(1)(iv) and (v). - HELD THAT: - The Assessing Officer disallowed the claim that pension payments (paid directly to retired employees) were deductible under Section 37(1) on the ground that contributions to recognised superannuation and gratuity funds had already been allowed under Section 36(1)(iv) and (v). The CIT(A) and the Tribunal rejected that approach. The court notes that the payments in question were made pursuant to the statutory Tuticorin Port Trust Employees Retirement Regulations, 1979, approved and notified by the Government of India, imposing a contractual and statutory obligation to pay monthly pensions. The funds contributed under Section 36(1)(iv) and (v) were held to have been utilized for commuted pension and gratuity payments, not for the regular monthly pension obligations. Given the statutory regulatory basis for the pension payments and the consistent favourable treatment in earlier years, the payment made in terms of the Regulations falls within the general deduction permitted by Section 37(1) and cannot be displaced merely because other, distinct deductions under Section 36(1)(iv) and (v) were allowed. [Paras 9, 12, 14, 16, 17]

Third substantial question is answered against the Revenue: pension payments made in terms of the statutory Retirement Regulations are allowable under Section 37(1) notwithstanding deductions under Section 36(1)(iv) and (v).

Final Conclusion: The Revenue appeals are dismissed. The questions on depreciation are left open and remanded to the Assessing Officer for fresh consideration; the claim for pension payments made under the Tuticorin Port Trust Employees Retirement Regulations, 1979 is held allowable under Section 37(1), and the disallowance by the Assessing Officer is set aside.

Section 14A read with Rule 8D - presumption of deployment of interest free funds where such funds suffice for investment - disallowance under Section 14A limited by quantum of exempt income - non addition of Section 14A disallowance to book profit under Section 115JB - deduction under Section 80IA(4) - market value of captive power - characterisation of receipts from carbon credits - capital v. revenue - deduction under Section 36(1)(va) r.w. s.2(24)(x) for delayed PF/ESI payments - computation of capital gains on slump sale - date of transfer and irrelevance of DVO valuation for full value of consideration under Section 48

Section 14A read with Rule 8D - presumption of deployment of interest free funds where such funds suffice for investment - Whether disallowance under Section 14A read with Rule 8D was rightly deleted on the assessee's case that investments were made out of its own interest free funds - HELD THAT: - The Tribunal's conclusion that no disallowance under Section 14A read with Rule 8D was called for was upheld. The court accepted the principle that where an assessee has sufficient interest free funds to meet investments giving rise to exempt income a presumption arises that investments were made from such interest free funds and not from interest bearing borrowings; accordingly Rule 8D cannot be mechanically applied merely because funds are mixed. The tribunal had examined the accounts and materials demonstrating that interest free funds exceeded the investments; the Revenue's contention that the assessee did not prove availability at the relevant time was rejected. The court followed earlier High Court and tribunal precedents holding that the Assessing Officer must record satisfaction, on the basis of the accounts, before invoking Rule 8D. [Paras 12, 13, 14, 16, 17]

Tribunal rightly deleted the disallowance under Section 14A read with Rule 8D on the assessee's evidence of sufficient interest free funds; appeal on this point dismissed.

Disallowance under Section 14A limited by quantum of exempt income - Whether the disallowance under Section 14A read with Rule 8D can exceed the amount of exempt income - HELD THAT: - The Tribunal limited the disallowance to an amount not exceeding the exempt dividend income, confirming that disallowance computed under Section 14A should not, in practice, exceed the exempt income for the year. The court found this approach consistent with High Court authority and tribunal practice, and confirmed specified disallowances for the two assessment years (equal to or capped by the dividend income or the sum the assessee itself had disallowed). [Paras 15, 16, 19, 21]

Disallowance confined to amount equivalent to exempt income; Tribunal's working upheld.

Non addition of Section 14A disallowance to book profit under Section 115JB - Whether the amount disallowed under Section 14A should be added back while computing book profit for Section 115JB - HELD THAT: - The Tribunal's conclusion that disallowance under Section 14A (as computed) need not be added back in computing book profit under Section 115JB was affirmed. The court followed binding and persuasive High Court and tribunal precedents holding that the Explanation to Section 115JB does not mandate addition of every Section 14A disallowance calculated under Rule 8D, and that the issue is governed by existing authorities which favoured the assessee. [Paras 17, 18, 22, 24]

No addition to book profit under Section 115JB on the basis of Section 14A calculations; Tribunal's deletion of such additions upheld.

Deduction under Section 80IA(4) - market value of captive power - Whether deduction under Section 80IA(4) must be computed by reference to the rate at which the power generating company supplied power to the GEB rather than the rate at which GEB charged its consumers - HELD THAT: - The court applied existing precedent of this High Court and the Supreme Court (as cited) which treats the market value for captive supply for Section 80IA purposes as the rate charged by GEB to its consumers. The tribunal's allowance of deduction on the basis of the GEB supply rate was therefore in conformity with those authorities. [Paras 25]

Tribunal's allowance of deduction under Section 80IA(4) using the GEB consumer rate upheld.

Characterisation of receipts from carbon credits - capital v. revenue - Whether income from carbon credits is capital in nature - HELD THAT: - The court observed that this question is covered by precedent (including decisions cited) and proceeded on that footing; earlier High Court authorities have addressed the characterisation, and the matter was not reopened afresh. The Tribunal's treatment, following the authorities referred to, was accepted. [Paras 26, 27]

Question treated in accordance with binding precedents; Tribunal's approach accepted.

Deduction under Section 36(1)(va) r.w. s.2(24)(x) for delayed PF/ESI payments - Whether deduction relating to late payment of employees' PF/ESI contributions is allowable - HELD THAT: - The Tribunal allowed deduction as to one payment on the facts that the payment, though initially subject to technical return of cheques, was ultimately made within the due date; for two other payments the Tribunal remanded the matter to the Assessing Officer for verification of the assessee's explanations and directed that if the reasons are borne out the benefit of Section 43B be given. The court accepted the tribunal's fact sensitive approach, noting that the Gujarat State Road Transport Corporation decision is distinguishable on the particular facts. [Paras 29, 45, 46]

One challenged payment allowed; two payments remitted to AO for verification and appropriate relief if explanations are substantiated.

Computation of capital gains on slump sale - date of transfer and irrelevance of DVO valuation for full value of consideration under Section 48 - Whether the Assessing Officer's addition treating slump sale proceeds as short term capital gain and whether the date of transfer was 30.03.2012 - HELD THAT: - The court held that the tribunal correctly dealt with the slump sale issues in light of precedent which explains that Section 48 governs computation of capital gains and the full value of consideration is determinative; reference to the DVO for ascertaining fair market value for the purposes considered would be redundant. The tribunal's approach and conclusion on the timing and computation were found consistent with controlling authority. [Paras 30, 31, 32, 33]

Tribunal's findings on the slump sale and date of transfer affirmed; revenue's additions not sustained.

Final Conclusion: All substantial questions raised by the Revenue were found to be covered by existing authorities and the Tribunal's orders were upheld in substance; both tax appeals are dismissed.

Definition of "transfer" under Section 2(47)(v) - part performance under Section 53A of the Transfer of Property Act - No Objection Certificate under Section 269-UL - capital gains computation - adoption of cost of construction - treatment of damages, deposits and rent-free accommodation for tax purposes - exemption under Section 54

Definition of "transfer" under Section 2(47)(v) - part performance under Section 53A of the Transfer of Property Act - No Objection Certificate under Section 269-UL - Whether the development agreements and the conduct of parties amounted to a 'transfer' in the assessment year 2001-2002 or the transfer had already taken place in an earlier year - HELD THAT: - The Court examined the terms of the development agreements and the legal test of transfer under Section 2(47)(v), which incorporates transactions involving possession in part performance under Section 53A of the Transfer of Property Act. The Appropriate Authority's No Objection Certificates under Section 269-UL, which recorded the extent of land and built-up area agreed to be transferred and the apparent sale consideration, demonstrate that the agreements envisaged transfer with reasonable certainty. The Tribunal's characterisation of the developer as merely a licensee was held to be incorrect in view of the approvals and the clear crystallisation of the extent of transfer. Applying the statutory definition, the transaction qualified as a transfer under Section 2(47)(v) and could not be treated as not involving transfer in the year under consideration. The Tribunal's order on this point was set aside and the question answered in favour of the assessee. [Paras 15, 16, 17, 18, 19]

The development agreements and the No Objection Certificates establish a transfer within the meaning of Section 2(47)(v); the Tribunal's contrary finding is set aside.

Capital gains computation - adoption of cost of construction - Whether the cost of construction to be adopted for computing capital gains should be the developer's cost (as fixed by authorities) or the cost crystallised in the development agreements - HELD THAT: - The Court considered clause 10 of the development agreements which fixed the cost of construction between the parties. In absence of material to doubt those agreed rates, and noting that additions such as damages for delay do not alter the contracted cost of construction, the Court held that the cost as consciously agreed (Rs. 450/- per sq.ft. in respect of the first agreement and Rs. 550/- per sq.ft. in respect of the second) must be adopted. The Assessing Officer's and Tribunal's higher adoption of construction cost was therefore set aside. [Paras 20, 21]

Adopt the cost of construction as agreed in the development agreements; the contrary fixation is set aside.

Treatment of damages, deposits and rent-free accommodation for tax purposes - Whether the entire amounts received as damages, deposits and rent-free accommodation are to be assessed as capital gains in the year under consideration - HELD THAT: - The development agreement expressly provided for alternate accommodation free of rent and made separate provision for payment of rents and deposits, without any clause adjusting these payments against the consideration under the development agreement. Given that these payments were not part of the consideration for transfer of the capital asset, the Tribunal erred in including them in the computation of capital gains. The Court set aside that finding and answered the question in favour of the assessee. [Paras 22]

Damages, deposits and rent-free accommodation, being separate payments not forming part of the consideration for transfer, should not have been assessed as capital gains; the Tribunal's finding is set aside.

Exemption under Section 54 - Whether the assessee is entitled to exemption under Section 54 - HELD THAT: - Section 54 relief requires transfer of a capital asset comprising land and building. The schedule to the development agreement dated 27.03.1994 and the Appropriate Authority's approval recorded transfer of both land and the built-up area (6,500 sq.ft.), establishing that a building was transferred along with land. The second agreement did not involve a building. On this basis the Court held that the assessee has established transfer of land and building as required for Section 54 and is therefore entitled to the exemption. [Paras 23, 24, 25, 26, 27]

Assessee entitled to exemption under Section 54 in respect of the transfer evidenced by the development agreement and the No Objection Certificate.

Final Conclusion: The appeal is allowed. The Tribunal's order is set aside: the agreements and No Objection Certificates establish a transfer under Section 2(47)(v); the contractual construction costs are to be adopted for capital gains computation; amounts received as damages, deposits and rent-free accommodation are not to be treated as capital gains; and the assessee is entitled to exemption under Section 54.

Quashing of non-bailable warrant - consideration of bail application on personal appearance - exemption from personal appearance on medical grounds - application of Raju T.P. principles for exemption from appearance

Quashing of non-bailable warrant - The non-bailable warrant issued against the petitioner was quashed by the High Court. - HELD THAT: - Having considered the petitioner's medical condition and the submissions, the Court concluded that issuing coercive process against the petitioner in the circumstances was not appropriate. The Court exercised its supervisory jurisdiction to set aside the warrant and directed the petitioner to appear before the trial Magistrate on a specified date so that proceedings could be regularised without immediate coercion. [Paras 4, 5]

The non-bailable warrant stands quashed and the petitioner was directed to appear before the learned Magistrate on 26.06.2019.

Consideration of bail application on personal appearance - The trial Magistrate was directed to consider any bail application filed by the petitioner on the day of his appearance and pass orders that day. - HELD THAT: - The Court required that upon the petitioner's appearance the Magistrate shall consider any bail application made and pass orders the same day, rejecting apprehension that the application would not be positively considered in view of the nature of the allegations. This direction was given to ensure expeditious disposal of the bail plea and to regularise the arrest/appearance process without lingering coercion. [Paras 5]

Any bail application filed by the petitioner shall be considered and orders passed by the Magistrate on 26.06.2019.

Exemption from personal appearance on medical grounds - application of Raju T.P. principles for exemption from appearance - The petitioner was permitted, after appearing, to seek exemption from personal appearance by filing an application in accordance with the Court's directions in Raju T.P. v. State of Kerala, and the Magistrate was directed to consider such application on its merits. - HELD THAT: - The High Court indicated that if the petitioner files an application seeking exemption from personal attendance citing medical grounds, that application should be considered by the Magistrate in accordance with the judicial guidance laid down in Raju T.P. The Court did not decide the exemption on merits but remitted the question for fresh consideration by the Magistrate under the established principles. [Paras 6]

After appearing, the petitioner may file an application for exemption from personal appearance in tune with Raju T.P.; the Magistrate shall consider and decide it on merits.

Final Conclusion: Writ petitions disposed of: the non-bailable warrant against the petitioner was quashed; the petitioner was directed to appear before the Magistrate on 26.06.2019, any bail application was to be considered and decided that day, and the petitioner was permitted to seek exemption from personal appearance thereafter by filing an application to be considered by the Magistrate in accordance with Raju T.P.

Disallowance under section 40A(3) - business expediency and genuineness of payment - exceptions under Rule 6DD - treatment of purchase as closing stock versus claim as business expenditure - undertaking not to claim the disputed amount as expenditure in subsequent year

Disallowance under section 40A(3) - business expediency and genuineness of payment - treatment of purchase as closing stock versus claim as business expenditure - undertaking not to claim the disputed amount as expenditure in subsequent year - Whether the disallowance under section 40A(3) for cash payment made towards purchase of land held as stock-in-trade should be sustained or deleted - HELD THAT: - The Tribunal noted that the cash component of the purchase consideration was recorded in registered sale deeds, the transaction and identity of parties were not disputed, and the cost of land was carried forward as closing stock rather than being claimed as expenditure in the profit and loss account for the year. Applying its earlier coordinate-bench decision and relevant authorities, the Tribunal observed that where a payment exceeding the monetary limit is shown to be genuine and is made due to business exigency or seller's insistence, the provision need not be mechanically applied. The Bench recorded that the assessee gave an undertaking (accepted by Revenue at the hearing) that the impugned cash amount would not be claimed as business expenditure in any subsequent year; on that basis, and following precedent, the Tribunal found no justification to sustain the disallowance for the years under appeal. The Tribunal also indicated that invocation of section 40A(3) would remain open in the year in which the amount is actually claimed as expenditure. [Paras 11, 12, 13, 14]

Disallowance under section 40A(3) deleted for Assessment Years 2012-13 and 2013-14 subject to the assessee's undertaking not to claim the disputed cash amounts as expenditure in subsequent years; appeals allowed.

Final Conclusion: Both appeals for Assessment Years 2012-13 and 2013-14 are allowed: the disallowances made under section 40A(3) in respect of cash payments for purchase of land are deleted on the stated facts and subject to the assessee's undertaking not to claim those amounts as business expenditure in any subsequent year.

Allowability of trade discounts as business expenditure under section 37 - disallowance under section 14A and computation under Rule 8D with reference to investments yielding exempt income - application of Rule 8D(2)(ii) where assessee possesses sufficient interest free funds - allowability of interest as business expenditure in related or common control transactions

Allowability of trade discounts as business expenditure under section 37 - Discounts given to doctors held to be allowable business expenditure. - HELD THAT: - The Tribunal followed its earlier reasoning in the assessee's own matters for earlier assessment years where discounts paid to customers, distributors and doctors were held to have direct bearing on turnover and to be incurred for commercial expediency of the business. Applying that view to AY 2013-14, the Tribunal concluded there is no reason to exclude doctors from eligibility for trade discount treatment; such discounts are integrally connected to sales and are incurred wholly and exclusively for the purposes of business and therefore allowable under section 37. [Paras 6, 7]

Ground No.2 of the assessee's appeal is allowed; discount to doctors held allowable.

Disallowance under section 14A and computation under Rule 8D with reference to investments yielding exempt income - Disallowance under Rule 8D(2)(iii) remitted for recomputation with reference to investments that actually yielded exempt income. - HELD THAT: - Relying on the Tribunal's Special Bench precedent (Vireet Investments) as applied in the assessee's earlier years, the Tribunal directed that the deemed managerial/general expense disallowance under Rule 8D(2)(iii) be computed having regard only to those investments which actually yielded exempt income rather than on gross investments. Accordingly the matter is remitted to the Assessing Officer for recomputation on that basis. [Paras 8, 9]

Ground No.3 of the assessee's appeal is partly allowed and remitted to the AO for recomputation under Rule 8D(2)(iii) with reference to investments actually yielding exempt income.

Allowability of interest as business expenditure in related or common control transactions - Interest paid on delayed payment of trading liability held allowable as business expenditure; Revenue's challenge dismissed. - HELD THAT: - The Tribunal adhered to its earlier conclusions in the assessee's prior years that payment of interest to the trading creditor could not be disallowed merely because the creditor and assessee have a common controlling person. The coordinate bench's prior view and the jurisdictional High Court's approval in related years were applied to decline interference with the CIT(A)'s allowance of the interest expenditure. [Paras 12, 13]

Ground No.1 of the Revenue's appeal is dismissed; interest allowed as business expenditure.

Application of Rule 8D(2)(ii) where assessee possesses sufficient interest free funds - No disallowance under Rule 8D(2)(ii) in respect of interest where assessee's interest free funds exceed investments capable of yielding exempt income; Revenue's challenge dismissed. - HELD THAT: - On the material before the Tribunal the assessee had substantial interest free funds (share capital and reserves) in excess of the investments capable of yielding tax free income. In that factual matrix, invocation of Rule 8D(2)(ii) to disallow interest was not permissible. The Tribunal applied relevant High Court and Bombay High Court authorities relied upon in earlier years and declined to interfere with the CIT(A)'s partial relief to the assessee. [Paras 15, 16]

Ground No.2 of the Revenue's appeal is dismissed; no additional disallowance under Rule 8D(2)(ii).

Final Conclusion: Assessee's appeal is partly allowed (discounts to doctors allowed; Rule 8D(2)(iii) disallowance remitted for recomputation with reference to investments that actually yielded exempt income); Revenue's appeal is dismissed (interest allowed and no further disallowance under Rule 8D(2)(ii)).

Disallowance under Section 14A - Attribution of interest expenditure under Rule 8D(2)(ii) - The formulaic disallowance under Rule 8D(2)(iii) - Disallowance under Section 36(1)(va) for delayed employees' provident fund contribution - Remand for fresh adjudication on conversion of land into stock-in-trade and computation of business income vis-a -vis fair market value at conversion - Duty of revenue to rectify over-assessment arising from assessee's mistake

Disallowance under Section 14A - Attribution of interest expenditure under Rule 8D(2)(ii) - The formulaic disallowance under Rule 8D(2)(iii) - Validity of disallowance under Section 14A and Rule 8D for interest and administrative expenses attributable to exempt income. - HELD THAT: - The Tribunal found that where the assessee's own funds substantially exceed the investments yielding exempt income, invocation of Rule 8D(2)(ii) for imputing interest expenditure is not warranted and the interest disallowance computed under that clause must be deleted. However, in respect of administrative and other general expenses attributable to exempt income, the assessee failed to furnish evidence of actual expenditure relatable to the exempt income and no exceptional circumstance was shown to depart from the statutory formula; consequently the disallowance under Rule 8D(2)(iii) was upheld. The Tribunal applied the principle that proof of availability and sufficiency of interest-free own funds rebuts the need to attribute interest cost, while the statutory formula for non-interest expenses cannot be ignored in absence of cogent evidence to the contrary. [Paras 7, 8, 16, 17]

Interest-disallowance under Rule 8D(2)(ii) deleted; disallowance under Rule 8D(2)(iii) sustained (partly allowed as to quantum) for the respective assessment years.

Disallowance under Section 36(1)(va) for delayed employees' provident fund contribution - Validity of disallowance under Section 36(1)(va) for default in payment of employees' provident fund contribution in AY 2013-14. - HELD THAT: - The Tribunal considered the appellate authorities' reasoning and followed the decision of the Gujarat High Court in CIT v. Gujarat State Road Transport Corporation, holding that the disallowance under Section 36(1)(va) was correctly made by the assessing officer where statutory conditions for disallowance were satisfied. The assessee's challenge was rejected on the presented facts and precedential authority relied upon by the Revenue. [Paras 9, 10]

Disallowance under Section 36(1)(va) sustained; ground dismissed.

Remand for fresh adjudication on conversion of land into stock-in-trade and computation of business income vis-a -vis fair market value at conversion - Duty of revenue to rectify over-assessment arising from assessee's mistake - Whether the AO should recompute taxable income on sale of flats by treating fair market value on date of conversion of land to stock-in-trade as cost for part long-term capital gain and part business income, and whether the matter can be reopened to correct assessee's mistake. - HELD THAT: - The Tribunal accepted the assessee's submission and analogous precedents that authorities must ensure only legitimate tax dues are collected and that an assessee may not be estopped from rectifying an incorrect computation resulting in over-assessment. The Tribunal observed that the factual determination required to bifurcate excess consideration over FMV at conversion into capital gain and business income was not examined by the revenue authorities. Consequently, rather than deciding on merits, the Tribunal set aside the issue for fresh adjudication by the AO, directing that the AO determine the matter in accordance with law after affording the assessee an opportunity to produce factual evidence supporting its claim. [Paras 11, 13, 18]

Issue remanded to the assessing officer for fresh determination in accordance with law after giving the assessee an opportunity to produce evidence; allowed for statistical purposes.

Final Conclusion: Both appeals are partly allowed: interest disallowances under Rule 8D(2)(ii) deleted for the two assessment years while disallowances under Rule 8D(2)(iii) were sustained; disallowance under Section 36(1)(va) was upheld for AY 2013-14; the question of computation of income on sale of flats vis-a -vis FMV at conversion is remanded to the assessing officer for fresh adjudication.

Classification of imported goods - Chapter Heading 63014000 - finding of fact - appellate tribunal's conclusion - dismissal of civil appeal

Classification of imported goods - Chapter Heading 63014000 - finding of fact - appellate tribunal's conclusion - The goods imported by the respondent were blankets and correctly classified under Chapter Heading 63014000. - HELD THAT: - The Supreme Court concurred with the Customs, Excise and Service Tax Appellate Tribunal's factual finding that the imported items were blankets. The Court accepted the Tribunal's conclusion on classification, treating the question as one of fact appropriately resolved by the Tribunal, and found no error warranting interference. Having upheld the Tribunal's factual determination and classification under Chapter Heading 63014000, the Court found no merit in the Civil Appeal.

Tribunal's finding that the imported goods are blankets falling under Chapter Heading 63014000 is upheld; the Civil Appeal is dismissed.

Final Conclusion: The Supreme Court upheld the Tribunal's factual finding and classification of the imported goods as blankets under Chapter Heading 63014000 and dismissed the Civil Appeal; delay was condoned and pending applications disposed of.

Scope of interference under Section 130-E(b) of the Customs Act, 1962 - condonation of delay

Scope of interference under Section 130-E(b) of the Customs Act, 1962 - Whether the Supreme Court should interfere with the Customs, Excise & Service Tax Appellate Tribunal's judgment on the grounds of legal infirmity under Section 130-E(b) of the Customs Act, 1962 - HELD THAT: - The Court considered the appeals against the Tribunal's judgment and order and, upon hearing the parties and perusing the record, found no legal infirmity in the impugned judgment that would justify interference under the statutory power conferred by Section 130-E(b). The Court therefore exercised its jurisdiction to review the Tribunal's decision and concluded that interference was not warranted on the legal grounds advanced by the appellant. The procedural step of condoning delay was recorded but did not affect the substantive conclusion.

Appeals dismissed for want of any legal infirmity in the Tribunal's judgment; no interference under Section 130-E(b).

Final Conclusion: Delay was condoned; on merits the Supreme Court found no legal infirmity in the Tribunal's order and dismissed the appeals under Section 130-E(b) of the Customs Act, 1962.

Jurisdiction to issue show cause notice - verification of Certificate of Origin - reciprocal arrangement for exchange of information under section 151B of the Customs Act - treaty superseding domestic rules for verification of origin - privilege against disclosure of state-to-state communications - writ jurisdiction to quash a show cause notice

Privilege against disclosure of state-to-state communications - verification of Certificate of Origin - Validity of claim of privilege and non-disclosure in respect of the CMA agreement and two communications appointing nodal officers. - HELD THAT: - The Court held that the CMA agreement dated 13.3.2015 could not be withheld as privileged because it was available in the public domain; disclosure immunity claimed in respect of that agreement was therefore rejected. However, the Court sustained the claim of privilege for two communications (dated 23.4.2018 and 15.5.2018) which appointed officers by name, accepting the affidavit explanation that disclosure of the contents and the officers' identities would cause public injury and prejudice verification processes. The Court applied the principles in State of Punjab v. Sodhi Sukhdev Singh and found that the affidavit furnished adequate reasons for nondisclosure. [Paras 14, 15]

Privilege claim rejected for the CMA agreement (public domain) but sustained for the two communications appointing officers by name; sealed envelope to be returned to respondents' counsel.

Reciprocal arrangement for exchange of information under section 151B of the Customs Act - treaty superseding domestic rules for verification of origin - verification of Certificate of Origin - Whether the CMA agreement (between India and Sri Lanka) supplants the verification procedure in SAFTA/ISFTA rules for determination of origin. - HELD THAT: - The Court analysed the relationship between the international CMA agreement and the municipal rules (SAFTA/ISFTA Rules) and held that the CMA agreement, being an agreement between sovereign States and covered by section 151B (and its saving provision in sub section (5)), will prevail over the procedure for verification of Certificates of Origin set out in the SAFTA and ISFTA rules. The Court relied on the fact that section 151B, introduced by the Finance Act, 2018, contemplates reciprocal arrangements for exchange of information and deems prior arrangements to be taken under that section. Consequently, the CMA agreement governs the mode of verification in the present case. [Paras 19, 20, 21]

CMA agreement governs verification of COO and prevails over SAFTA/ISFTA rules for that purpose.

Jurisdiction to issue show cause notice - writ jurisdiction to quash a show cause notice - Whether the High Court should quash the impugned show cause notice issued by respondents on grounds of want of jurisdiction or illegality. - HELD THAT: - Applying the settled principle that quashing a show cause notice is an exercise of discretionary writ jurisdiction to be undertaken only in rare and exceptional cases where the SCN is wholly without jurisdiction or wholly illegal, the Court found this case not to be such an exceptional case. Although the petitioner challenged jurisdiction on the ground that verification under SAFTA/ISFTA should have been routed through the Director (International Customs Division), the Court concluded (in light of the CMA agreement and section 151B) that it would not interfere with the impugned SCN. Instead the Court directed that respondents may issue an addendum or corrigendum to the SCN explaining how COOs were verified (without disclosing privileged communications) to afford the petitioner adequate opportunity to meet the allegations; if no addendum is issued within a fortnight, the petitioner may respond raising that issue. [Paras 21, 22, 23, 24, 25]

Writ petition dismissed; Court declined to quash the SCN, granted liberty to respondents to issue an addendum/corrigendum and dismissed the connected miscellaneous petition.

Final Conclusion: The petition is dismissed. The Court sustained privilege for two confidential communications but rejected privilege for the CMA agreement in the public domain, held that the CMA agreement governs verification of Certificates of Origin by virtue of section 151B and will prevail over SAFTA/ISFTA Rules for that purpose, and declined to quash the impugned show cause notice while permitting the respondents to issue an addendum/corrigendum to clarify verification steps without disclosing privileged material.

Appeal to High Court - Determination of the rate of duty of customs - Appeal to the Supreme Court - Jurisdictional bar on High Court where question relates to rate or value - Substantial question of law

Appeal to High Court - Determination of the rate of duty of customs - Appeal to the Supreme Court - Jurisdictional bar on High Court where question relates to rate or value - Maintainability of the appeal under Section 130 of the Customs Act, 1962 where the dispute relates to classification determining the rate of duty. - HELD THAT: - The Court examined the statutory scheme under which an appeal lies to the High Court from an order of the Appellate Tribunal only if the case involves a substantial question of law and is not an order relating to determination of the rate of duty or value for assessment. Conversely, appeals relating to determination of rate of duty or value lie to the Supreme Court. The controversy in this case concerns classification of goods under CTH 26070000 as "Lead Concentrates" and hence directly relates to the determination of the rate of duty. Consequently the High Court lacks jurisdiction to entertain the appeal and it is not maintainable before this Court. The Court therefore declined to enter into the merits and disposed of the appeal as not maintainable, while leaving open any alternative remedies before the appropriate forum in accordance with law. [Paras 5, 6]

Appeal dismissed as not maintainable before the High Court because the dispute relates to determination of the rate of duty; liberty granted to the Commissioner to pursue remedies before the appropriate forum.

Final Conclusion: The High Court held that it has no jurisdiction to entertain an appeal from the Appellate Tribunal where the question relates to the rate of duty or value for assessment; the present appeal concerning classification and rate determination is not maintainable and is dismissed, with liberty to the Commissioner to pursue other appropriate remedies.

Export Promotion Capital Goods (EPCG) scheme - extension of export obligation period - pre-deposit under Section 129-E of the Customs Act - remand for fresh consideration

Extension of export obligation period - Export Promotion Capital Goods (EPCG) scheme - pre-deposit under Section 129-E of the Customs Act - remand for fresh consideration - Impugned adjudication set aside and matter remanded to Commissioner (Appeals) for fresh consideration in light of the DGFT's grant of extension of the export obligation period and after compliance with pre-deposit requirement. - HELD THAT: - The appellant imported machinery under the EPCG scheme and the DGFT granted an extension of the export obligation period by letter dated 28.2.2014 for a further two years from 22.7.2015. The adjudicating authority's original order did not take that extension into account. The Commissioner (Appeals) earlier rejected the appellant's appeal for want of pre-deposit under the statutory provision; the appellant has since made the 10% pre-deposit. In these circumstances the Tribunal found it appropriate to set aside the impugned order and remit the matter to the Commissioner (Appeals) to consider the claim afresh, particularly in view of the extension granted by the competent authority, and to pass an appropriate reasoned order.

Impugned order set aside; appeal allowed by way of remand to the Commissioner (Appeals) to decide the matter afresh within three months from receipt of this order.

Final Conclusion: The Tribunal set aside the impugned order and remitted the matter to the Commissioner (Appeals) for fresh consideration of the claim in view of the DGFT's extension of the export obligation period, with a direction to decide the issue within three months.

Summary order. The appeal was dismissed for want of prosecution on the Tribunal's finding that repeated adjournments had been sought without cogent reason and the appellant was not interested in pursuing the appeal.

Oppression and mismanagement - maintainability of derivative petition by legal heir - transmission of shares - role of statutory auditors/investigative report in company petition - dismissal for want of proof of oppressive conduct

Oppression and mismanagement - dismissal for want of proof of oppressive conduct - role of statutory auditors/investigative report in company petition - The company petition alleging oppression and mismanagement by respondents is not substantiated and is liable to be dismissed. - HELD THAT: - The Tribunal examined the pleadings, the investigative/audit report appointed by the earlier forum and the material on record and found that the allegations of continuous, harsh and burdensome conduct by the majority directors were unsubstantiated. The chartered accountants' report, while disputed by both parties, concluded that compliances were filed (albeit with delay) and disclosed no conclusive diversion of funds or contingent liabilities beyond specified tax liabilities, undermining the petitioner's case. The Tribunal noted the petitioner and his legal heir were not actively involved in corporate governance, which weighed against the claim of ongoing mismanagement. On the totality of evidence and pleadings the acts pleaded by the petitioner did not establish the probity failures or continuous oppressive conduct necessary to grant relief under the provisions invoked. [Paras 10, 11, 12, 13, 14]

The allegations of oppression and mismanagement lack merit and the petition is dismissed on merits.

Maintainability of derivative petition by legal heir - transmission of shares - The legal heir (son) who was impleaded cannot, in his present status and holding, maintain the original petition alleging acts of oppression and mismanagement committed by the deceased petitioner. - HELD THAT: - The Tribunal allowed the son to be impleaded as legal heir of the deceased original petitioner for purposes of prosecution of the proceedings but kept open questions of maintainability. Examination of the record showed the son holds a small shareholding (prima facie 4%), has not participated in company affairs, and has not established grounds to continue the specific oppression/mismanagement petition instituted by his father. The Tribunal observed that transmission of the deceased's shares to the legal heir, if effected in accordance with law and accepted by the company, may afford the heir standing to assert rights thereafter; in that event the heir remains free to file a fresh petition based on his post transmission status. [Paras 12, 13]

While impleaded as legal heir, the son in his present capacity cannot maintain the petition; he may seek transmission of shares and, if aggrieved thereafter, file a fresh petition.

Final Conclusion: The company petition under sections 397/398 is dismissed for want of substantiation of oppression and mismanagement; impleadment of the deceased petitioner's son as legal heir is permitted for limited purposes but he lacks present standing to maintain the petition and may pursue transmission of shares and, if necessary, a fresh petition thereafter. No order as to costs.

Removal of name from the Register of Companies for non-filing of statutory returns - Restoration of company to the Register of Companies - Requirement of filing financial statements and annual returns as statutory compliance - Use of Income Tax returns and bank statements as evidence of carrying on business - Permissibility of striking off only where company is not carrying on business or operation

Removal of name from the Register of Companies for non-filing of statutory returns - Use of Income Tax returns and bank statements as evidence of carrying on business - Permissibility of striking off only where company is not carrying on business or operation - Whether striking off the name of M/s Matrix Power Controls India Pvt. Ltd. from the Register of Companies was justified on the ground that the company was not carrying on business and had failed to file statutory returns. - HELD THAT: - The Appellate Tribunal found on record that the company had filed Income Tax returns and produced bank statements evidencing significant accounting transactions for Assessment Years 2008-09 to 2017-18. The Registrar of Companies itself admitted these documentary materials and their import, thereby conceding that the company was carrying on business and operations during the relevant period. Since the factual predicate for invoking the power to remove the company's name-namely that the company was not carrying on business or operation for the two immediately preceding financial years-did not exist on the record, the finding of the Tribunal upholding the strike-off was erroneous. The appellate court held that the admitted accounting transactions could not be disregarded and, in consequence, the removal under the stated ground was not justified. [Paras 6]

The strike-off was not justified because the record (including Income Tax acknowledgments and bank statements) established that the company was carrying on business during the relevant period.

Restoration of company to the Register of Companies - Requirement of filing financial statements and annual returns as statutory compliance - Whether the company's name should be restored to the Register of Companies and on what conditions. - HELD THAT: - Having concluded that the ground for removal did not exist, the Appellate Tribunal exercised its discretion to allow restoration. Restoration was directed subject to the statutory requirement that the company file the outstanding financial statements and annual returns along with payment of prescribed fees and penalties as mandated by law. A time frame of thirty days was set for the Registrar to restore the name, subject to any extension the Registrar may allow. [Paras 7]

The appeal is allowed; the Registrar of Companies is directed to restore the company's name on payment/filing of the statutory compliances, fees and penalties within thirty days (unless extended).

Final Conclusion: The Tribunal's order upholding the strike-off is set aside. The company is to be restored to the Register of Companies, subject to filing the outstanding statutory returns and balance sheets and payment of applicable fees and penalties within the period directed by the Appellate Tribunal.

Legality of resolutions passed in EOGM and Board meetings - effect of interim injunction on corporate acts and validity of subsequent corporate resolutions - validity of share allotments and equitable redistribution to rightful shareholders - procedure under Section 62 for pro rata offer and re allotment of shares - appointment and powers of a court appointed administrator to manage corporate affairs - rectification of statutory records and reporting to ROC

Legality of resolutions passed in EOGM and Board meetings - effect of interim injunction on corporate acts and validity of subsequent corporate resolutions - Validity of the EOGM dated 14.11.2009 (removal of original R 5 and appointment of others) and the Board meeting dated 25.11.2009 (appointment of P 1 as MD). - HELD THAT: - The Tribunal held that the decisions taken at the EOGM dated 14.11.2009 in respect of Item No.2 were illegal because they were taken in contravention of the injunctions/restraint orders communicated by the civil court. Consequently, the removal of R 5 on 14.11.2009 was not effective and no casual vacancy arose; therefore all subsequent appointments made in the EOGM of 14.11.2009 and the Board meeting of 25.11.2009 (including appointment of the 1st respondent as Director and as Managing Director) are declared non est and set aside. The Appellate Tribunal set aside the corresponding directions in the NCLT order and expressly held the decisions of 14.11.2009 and 25.11.2009 to be void and of no legal effect.

The EOGM decision of 14.11.2009 removing R 5 and the Board decision of 25.11.2009 appointing the 1st respondent as MD are set aside and held illegal.

Validity of share allotments and equitable redistribution to rightful shareholders - procedure under Section 62 for pro rata offer and re allotment of shares - Validity of allotment of 6715 shares dated 20.02.2010 and 15.09.2010 and the appropriate remedy for such allotments. - HELD THAT: - While the NCLT had declared the impugned issuances of shares illegal and directed refund with interest, the Appellate Tribunal accepted that the company was in financial distress but found the allotments were not made on a fair pro rata basis to existing shareholders. Rather than directing immediate repayment (which could imperil the company), the Tribunal appointed an Administrator and directed that the 6715 shares be re allotted by the Administrator to the shareholders as on 14.11.2009 on a pro rata basis at the price originally paid, adopting as far as may be the procedure under Section 62. The Administrator is to complete the exercise within three months and report the new shareholding to the ROC, thereby providing an equitable method to restore rightful share proportions while protecting the company's continuing operations.

The allotments of 20.02.2010 and 15.09.2010 are to be re allotted by the court appointed Administrator to the shareholders as on 14.11.2009 on a pro rata basis following the Section 62 procedure; the process to be completed within three months and reported to ROC.

Appointment and powers of a court appointed administrator to manage corporate affairs - suspension of existing board and reconstitution by Administrator - Whether interim management steps were required and, if so, the nature and scope of directions for management pending rectification of shareholding and reconstitution of the board. - HELD THAT: - The Tribunal found entrenched internal rivalries and confusion that threatened corporate governance and the company's functioning. To set matters right and to effect the ordered re allotment and subsequent reconstitution, the Tribunal suspended the existing Board of Directors and appointed an Administrator with specified powers, term (six months, with power to seek extension), remuneration and reimbursement. The Administrator is entrusted to offer and re allot the disputed shares, hold an EOGM thereafter and reconstitute the Board to run the company; parties are directed to cooperate with the Administrator. The order balances restoration of corporate democracy with protection of the company's ongoing operations.

Existing Board suspended; Administrator appointed for six months with powers and directions to implement re allotment, hold EOGM and reconstitute the Board; parties to cooperate.

Rectification of statutory records and reporting to ROC - effect of prior NCLT directions for refund and alternative remedial framework - Whether the NCLT directions (including refund with interest) should be upheld and whether ROC records should be amended. - HELD THAT: - The Appellate Tribunal set aside the impugned NCLT order insofar as it directed immediate refund with interest, observing that such a remedy would likely imperil the company's finances. Instead, the Tribunal substituted an equitable remedial scheme involving re allotment under the Administrator and expressly directed that the new shareholding pattern be reported to the ROC; earlier NCLT declarations that led to immediate repayment were not enforced by this Tribunal. The Tribunal further directed that copies of its order be sent to the ROC and the Administrator to enable necessary amendments in statutory records.

NCLT's refund direction set aside; ROC to be informed and necessary amendments to records to follow the re allotment and the new shareholding reported by the Administrator.

Final Conclusion: The impugned NCLT order dated 8.3.2018 is set aside to the extent indicated; the EOGM (14.11.2009) and Board (25.11.2009) decisions removing/appointing management are held void, the disputed allotments of 6715 shares shall be re allotted by a court appointed Administrator to the shareholders as on 14.11.2009 on a pro rata basis following Section 62 procedure within the stipulated timeframe, the existing Board is suspended pending reconstitution, and the ROC is to be informed of the revised shareholding.

Rectification of Register of Members - without sufficient cause - Articles of Association as binding on company - Conversion procedure of CCDs and 5 day period - Quorum requirement including Company Investor Director - Reserved Matters requiring Investors' Consent - NCLT jurisdiction to decide rectification under Section 59 - Civil court jurisdiction ousted by Section 430 - exclusive forum - Arbitration clause not an automatic bar to NCLT deciding rectification

Rectification of Register of Members - without sufficient cause - Articles of Association as binding on company - Conversion procedure of CCDs and 5 day period - Entry of 906,599 equity shares in the register of members purportedly on conversion of CCDs was made without sufficient cause and is to be cancelled. - HELD THAT: - The Tribunal examined the Articles of Association (which incorporate the Investment Agreement) and found that the CCD conversion procedure required receipt of a written Conversion Notice and completion of conversion within five days. The investors exercised the conversion option by notices dated 29.08.2017 and 05.09.2017; the company and promoters did not act within the prescribed five day period but instead pursued litigation and delay. The company's subsequent conduct - including initiation and withdrawal of proceedings and failure to put the Board resolution (dated 26.03.2018) on record - did not justify treating the post litigation conversion as valid. Given the Articles' mandatory procedure and the company's failure to show sufficient cause for the entry, the Tribunal concluded the entry was without sufficient cause and directed cancellation. [Paras 25, 28, 33, 34]

The entry of 906,599 equity shares in favour of the appellant is without sufficient cause and the entry in the register of members shall be cancelled.

Quorum requirement including Company Investor Director - Reserved Matters requiring Investors' Consent - Articles of Association as binding on company - The Board lacked the requisite quorum and authority to convert the CCDs because Investor Director presence and prior written Investors' consent for reserved matters were absent. - HELD THAT: - The Articles required the Board to consist of a maximum of five directors and specifically mandated that the quorum include at least one Company Investor Director present throughout the meeting. Conversion of CCDs involved a 'Reserved Matter' (change in issued/share capital) requiring prior written Investors' consent. The investor directors resigned, leaving the Board without the mandatory presence; no Investors' consent was shown. Accordingly, any resolution taken in those circumstances was ultra vires the Articles and unlawful. [Paras 26, 27, 33]

The purported Board action to convert CCDs in the absence of an Investor Director and without Investors' consent is invalid.

NCLT jurisdiction to decide rectification under Section 59 - Civil court jurisdiction ousted by Section 430 - exclusive forum - Arbitration clause not an automatic bar to NCLT deciding rectification - The NCLT has jurisdiction to adjudicate the rectification claim under Section 59 and to decide incidental and peripheral questions notwithstanding arbitration clauses; such disputes are not to be relegated to civil courts. - HELD THAT: - The Tribunal held that the Companies Act, 2013 (read with Section 430) vests exclusive jurisdiction in the NCLT to decide matters it is empowered to determine, including rectification of the register under Section 59. Prior authorities permitting referral to civil suit in complex title disputes were reconsidered in light of the changed statutory scheme. The presence of an arbitration clause in the underlying investment agreement did not automatically oust the NCLT's power to decide whether an entry in the register was made without sufficient cause. The Tribunal therefore proceeded to decide the rectification claim on merits. [Paras 31, 32, 33]

The NCLT is the appropriate and competent forum to decide rectification under Section 59; arbitration does not preclude the Tribunal from adjudicating whether the register entry was made without sufficient cause.

Final Conclusion: Appeal allowed. The impugned NCLT order is set aside; the entry of 906,599 equity shares in the register of members of the company in favour of the appellant (purportedly on conversion of CCDs) is declared made without sufficient cause and is directed to be cancelled. No order as to costs.

Power to order meeting for compromise or arrangement under Section 230 - Dispensing with meetings where 90% consent exists (Section 230(9)) - Tribunal's jurisdiction at the threshold stage - not to decide merits before meeting/dispensation - Effect of pending investigations on sanction of a scheme of demerger - Sanction of reconstruction/merger/amalgamation under Section 232

Power to order meeting for compromise or arrangement under Section 230 - Dispensing with meetings where 90% consent exists (Section 230(9)) - Tribunal's jurisdiction at the threshold stage - not to decide merits before meeting/dispensation - Whether the Tribunal was obliged, at the threshold stage, to either call meetings of creditors/members or dispense with such meetings where requisite affidavits of consent were filed, before adjudicating on sanction of the scheme. - HELD THAT: - The Tribunal is required, on an application under Section 230 read with Section 232, to order calling of meetings of creditors or members for consideration of the proposed compromise or arrangement unless it dispenses with such meetings under Section 230(9) where creditors/members holding at least ninety per cent in value have filed affidavits consenting to the scheme. This procedural mandate is a preliminary requirement and the Tribunal is not entitled at that stage to examine the merits of the proposed scheme. Where affidavits evidencing the required consent are filed, the discretion vested in the Tribunal is to either dispense with meetings under sub-section (9) or to call the meetings; declining to follow either course and proceeding to decide the scheme on merits at the threshold stage constitutes a breach of the statutory procedure and is without jurisdiction. The impugned order declined sanction without addressing dispensation or calling of meetings despite the filing of consent affidavits by 100% of shareholders of each company, 100% of creditors of the Resulting Companies and 97.18% of creditors of the Demerged Company, and therefore cannot be sustained. [Paras 5, 6]

Impugned order set aside to the extent it dismissed the applications on merits at the threshold; the Tribunal erred in failing to either call the meetings or dispense with them under Section 230(9) before adjudicating the scheme.

Effect of pending investigations on sanction of a scheme of demerger - Whether pendency of investigations/proceedings in respect of past transactions or other business activities of the Demerged Company is a legal impediment to sanctioning the proposed scheme of demerger. - HELD THAT: - Pendency of criminal or other investigations in relation to past transactions does not, by itself, constitute a legal bar to the sanction of a scheme of demerger. The scheme can be sanctioned subject to and without prejudice to any liability in civil or criminal proceedings arising out of past events; such liabilities continue notwithstanding sanction. The Tribunal therefore ought not to have treated pending investigations as an absolute impediment to proceed with the scheme at the stage when the statutory requirement of calling or dispensing with meetings was to be determined. [Paras 7]

Pending investigations cannot be treated as an automatic impediment to sanctioning the demerger; any liability in civil or criminal proceedings in respect of past transactions will continue despite sanction.

Tribunal's jurisdiction at the threshold stage - not to decide merits before meeting/dispensation - Whether the matter should be remanded to the Tribunal for further proceedings in accordance with the statutory scheme after rectifying the procedural error. - HELD THAT: - Given the Tribunal's failure to comply with the procedural mandate under Section 230 by neither calling meetings nor dispensing with them despite requisite affidavits of consent, the appropriate course is to set aside the impugned order and remit the matter to the Tribunal. The Tribunal is directed to proceed further in the light of the observations in this judgment and the provisions of law, hear the parties and take steps either to call the necessary meetings or to dispense with them in accordance with Section 230(9), and thereafter consider sanction in accordance with law. [Paras 8]

Matter remanded to the National Company Law Tribunal, Bengaluru Bench for fresh consideration in accordance with this judgment and the statutory provisions, after hearing the parties.

Final Conclusion: The impugned order of the Tribunal is set aside. The appeals are allowed and the matter is remitted to the National Company Law Tribunal, Bengaluru Bench to proceed afresh in accordance with the statutory scheme - namely by calling meetings or dispensing with them under Section 230(9) as appropriate, hearing the parties, and then considering sanction of the demerger scheme; pending investigations do not ipso facto preclude sanction and any liabilities arising therefrom remain unaffected.

Eligibility under Section 29A of the Insolvency and Bankruptcy Code - Res judicata and finality of Supreme Court determination on eligibility - Duty of resolution applicant to specify distribution to stakeholders in the resolution plan - Limits on powers of the Committee of Creditors and prohibition on delegation to a sub committee - Prohibition on intra class discrimination among financial creditors in the resolution plan - Treatment and classification of operational creditors and minimum payment requirement under Section 30(2)(b) and Regulation 38(1A) - Role of the resolution professional in collation of claims and admissibility of disputed claims - Right to pursue disputed claims after moratorium under Section 60(6) - Distribution of profit generated during CIRP among creditors

Eligibility under Section 29A of the Insolvency and Bankruptcy Code - Res judicata and finality of Supreme Court determination on eligibility - Eligibility of ArcelorMittal India Pvt. Ltd. to submit the resolution plan - HELD THAT: - The Tribunal declined to re open the question of AMIPL's eligibility which had been fully considered and addressed by the Hon'ble Supreme Court. Attempts by promoters or intervenors to relitigate points already dealt with by the Supreme Court were held to be barred by res judicata; consequent applications challenging eligibility were rejected. Delay and laches in raising belated contentions were also noted. The Tribunal therefore refused to revisit eligibility and dismissed the related appeals. [Paras 27, 28, 29, 31, 32]

Applications challenging AMIPL's eligibility under Section 29A are rejected; the Supreme Court's determination on eligibility is final and not reopenable before this forum.

Duty of resolution applicant to specify distribution to stakeholders in the resolution plan - Limits on powers of the Committee of Creditors and prohibition on delegation to a sub committee - Role of the resolution professional in collation of claims and admissibility of disputed claims - Whether the Committee of Creditors or its sub committee may determine or delegate the inter stakeholder distribution to itself instead of the resolution applicant - HELD THAT: - The Tribunal held that Regulation 38(1A), Section 30(2) and the RFP require the resolution plan to state how the interests of all stakeholders will be dealt with, including specific break ups. The distribution methodology is therefore the responsibility of the resolution applicant and must be reflected in the resolution plan presented to the CoC. The CoC has power to evaluate feasibility and viability of plans but cannot assume the role of the resolution applicant by deciding or delegating the distribution among creditors; constitution of an ad hoc sub committee to negotiate and reallocate the resolution applicant's proposed distribution was impermissible. The CoC may, however, negotiate and ask the resolution applicant for a revised (non discriminatory) plan and the Adjudicating Authority may examine the plan for discrimination. [Paras 141, 142, 143, 144, 145]

The resolution applicant must propose the distribution among stakeholders in its resolution plan; the CoC (and any sub committee) cannot delegate to itself the manner of distribution and cannot lawfully substitute the resolution applicant in that role.

Prohibition on intra class discrimination among financial creditors in the resolution plan - Prohibition on subclassification of financial creditors for distribution - Whether financial creditors can be subclassified (e.g., 'secured with project charge' v. 'secured without project charge' or 'unsecured') for differential distribution under the plan - HELD THAT: - Reading Section 5(7) and 5(8) together, the Tribunal found that all persons to whom a financial debt is owed form a single class 'financial creditor' for the purposes of the Code. The resolution applicant may not, in the resolution plan, discriminate among financial creditors by creating subclasses for distribution purposes so as to advantage some secured creditors and disadvantage others on novel criteria unrelated to the plan's terms. Such intra class discrimination is impermissible and liable to be examined and corrected by the Adjudicating Authority. [Paras 164, 172, 173]

Financial creditors as a class cannot be arbitrarily subclassified for the purpose of distribution in a resolution plan; discrimination among them on such basis is not permissible.

Treatment and classification of operational creditors and minimum payment requirement under Section 30(2)(b) and Regulation 38(1A) - Permissible differentiation among operational creditors who are differently situated - Permissibility and extent of classification and differential treatment of operational creditors in the resolution plan - HELD THAT: - Operational creditors fall into different categories by statute (employees/workmen, suppliers/service providers, and statutory authorities). Regulation 38(1A) and Section 30(2)(b) require the plan to state how interests of all stakeholders are dealt with and guarantee operational creditors at least their liquidation value. The Tribunal held that similarly situated operational creditors must be treated alike, but different categories may receive different treatment depending on circumstances. In the facts before it, the Tribunal upheld 100% treatment for workmen/employees and for small operational claims under Rs.1 crore, while declaring that large operational claims and statutory dues could not be ignored or given nil treatment; the plan as approved was modified to ensure non discriminatory allocation and to provide a mechanism (including engagement of auditors/chartered accountants) to compute and effect distributions. [Paras 175, 176, 178, 179, 180]

Operational creditors may be classified by statutory categories and similarly situated creditors must receive similar treatment; the plan must not give wholesale nil treatment to admitted large operational claims and the approved plan was modified to secure a non discriminatory distribution in favour of operational creditors.

Inclusion and collation of admitted operational claims by the resolution professional - Adjudicating Authority's power to direct registration of claims - Inclusion of certain operational creditors' admitted claims and direction to the resolution professional to register and collate those claims - HELD THAT: - The Tribunal gave effect to the Adjudicating Authority's directions that specific interlocutory applications succeed only to the extent that the resolution professional must register and update the claims in the creditors' list. On the appeals, the Tribunal accepted the chart produced by the resolution professional and held that the amounts so reflected are to be added to operational creditors' claims; several named operational creditors' claims were specifically directed to be included. [Paras 42, 43, 189, 195, 196]

The amounts identified by the Adjudicating Authority and set out in the resolution professional's chart are to be included as operational creditors' claims and the resolution professional was directed to register and update those claims.

Right to pursue disputed claims after moratorium under Section 60(6) - Limits of resolution professional's jurisdiction to adjudicate claims - Whether creditors with disputed claims may pursue remedies after completion of moratorium and whether RP can decide disputed claims during CIRP - HELD THAT: - The Tribunal reiterated that the resolution professional's role is collation of claims and that it lacks jurisdiction to adjudicate disputed factual claims. Section 60(6) excludes the moratorium period for limitation purposes and permits filing suits/applications against the corporate debtor after moratorium; accordingly, claimants with disputed claims may pursue appropriate proceedings after moratorium. Where the Adjudicating Authority or this Tribunal could not decide claims on merit, appellants were permitted to pursue remedies under Section 60(6). [Paras 217, 218, 219, 220, 221]

Creditors with disputed claims may pursue appropriate proceedings after the moratorium under Section 60(6); the RP cannot finally decide disputed claims during CIRP.

Distribution of profit generated during CIRP among creditors - Non entitlement of the successful resolution applicant to profits generated during CIRP - Entitlement and distribution of profit/EBITDA generated by the corporate debtor during the CIRP period - HELD THAT: - On the record the RP's affidavit showed provisional EBITDA/profits during CIRP (subject to audit). The Tribunal held that profits generated during CIRP do not belong to the successful resolution applicant (which did not invest during CIRP) and should not be appropriated by it. After completion of the primary distribution from the resolution consideration, any verified profit arising from operations during CIRP is to be distributed among financial and operational creditors on a pro rata basis of their admitted claims (subject to not exceeding admitted claim amounts) following independent audit verification. [Paras 201, 203, 204, 210, 211]

Any profit generated during CIRP (after audit) shall be distributed pro rata among the financial and operational creditors; the successful resolution applicant is not entitled to appropriate such profit.

Final Conclusion: The Tribunal rejected late challenges to AMIPL's eligibility, held that the resolution applicant must state the distribution to stakeholders in the resolution plan, and ruled that the CoC (and any sub committee) cannot usurp or delegate that function. Financial creditors cannot be arbitrarily subclassified for discriminatory treatment; operational creditors must be treated consistently within statutory categories and given at least liquidation value, and specific additional operational claims were directed to be registered. Disputed claims may be pursued after moratorium under Section 60(6). The plan was modified to remedy discriminatory allocations, a mechanism for calculating and effecting distributions (including appointment of accountants) was directed, and any verified profit earned during CIRP must be shared pro rata among creditors.

Verification of claims by the liquidator - admission or rejection of claims by the liquidator - appeal against liquidation decision to Adjudicating Authority under Section 42 - liquidator's quasi-judicial duty to record and communicate decisions - compromise or arrangement under Section 230 of the Companies Act, 2013 during liquidation - revival and continuation of the corporate debtor as primary object of the Code - sale of corporate debtor as a going concern as last resort - role of Committee of Creditors in assessing a scheme

Verification of claims by the liquidator - admission or rejection of claims by the liquidator - appeal against liquidation decision to Adjudicating Authority under Section 42 - liquidator's quasi-judicial duty to record and communicate decisions - Whether the Appellant can challenge before the Appellate Tribunal the decision of the erstwhile Interim Resolution Professional rejecting its claim at the stage when liquidation has commenced. - HELD THAT: - The Tribunal held that the Appellant, being a financial creditor whose claim was not admitted by the Interim Resolution Professional, had not availed the statutory remedy available at that stage by filing an application under the relevant provision against the IRP's decision. Having failed to challenge the IRP's decision in accordance with the procedure then available, the Appellant cannot re-open that decision at the stage of liquidation. The judgment explains the liquidator's statutory process: verification of claims, access to information, consolidation and verification, and thereafter admission or rejection of claims; the liquidator must record and communicate any decision and such decisions are subject to appeal to the Adjudicating Authority under the Code. Consequently, the proper course is for the Appellant to file its claim before the liquidator who must consider it afresh and communicate admission or rejection, and if aggrieved, the Appellant may avail the appeal remedy provided under the Code. [Paras 3, 4, 5, 6]

The Appellant cannot, at the liquidation stage, reopen the IRP's rejection where it did not challenge that decision earlier; the liquidator must verify and decide claims and communicate the decision, subject to statutory appeal.

Compromise or arrangement under Section 230 of the Companies Act, 2013 during liquidation - revival and continuation of the corporate debtor as primary object of the Code - sale of corporate debtor as a going concern as last resort - role of Committee of Creditors in assessing a scheme - What procedural steps the liquidator and Adjudicating Authority must take before selling the corporate debtor's assets and how proposals for compromise or arrangement are to be considered during liquidation. - HELD THAT: - Relying on the Appellate Tribunal's earlier observations and Supreme Court dicta emphasising revival as the primary object, the Tribunal directs that before taking steps to sell the corporate debtor or its assets, the liquidator should pursue proposals for compromise or arrangement under Section 230 of the Companies Act, 2013. The liquidator must verify creditors' claims, take custody and control of assets, and, where proposals for arrangement are received, move an application under Section 230 before the Adjudicating Authority. The Adjudicating Authority, acting in its dual role, may entertain such applications, constitute or consult the Committee of Creditors to assess viability, and has power to overrule irrelevant objections if the scheme furthers the objectives of the Code (maximisation of assets and balancing stakeholder interests). Only upon failure of revival or arrangement should the liquidator proceed to sell the business as a going concern or otherwise, avoiding the corporate debtor's 'death by liquidation' where possible. The Tribunal also notes timelines and that the Adjudicating Authority may extend periods if genuine steps toward revival are ongoing. [Paras 12, 13, 17, 18, 19]

The liquidator must, before selling assets, initiate and pursue compromise or arrangement proceedings under Section 230 to attempt revival; the Adjudicating Authority may approve such a scheme after consulting creditors and may only permit sale where revival fails.

Liquidator's quasi-judicial duty to record and communicate decisions - appeal against liquidation decision to Adjudicating Authority under Section 42 - Whether the present liquidator is required to act without bias and to consider any scheme or claim unimpaired by decisions of the former Resolution Professional. - HELD THAT: - The Tribunal observed that the earlier Resolution Professional is no longer functioning and a new liquidator has been appointed; consequently there is no ground to impute bias to the present liquidator. The liquidator is obliged to consider any scheme or claim submitted within the statutory framework, uninfluenced by prior decisions taken by the Interim Resolution Professional. If the liquidator does not admit a claim, he must record and communicate his decision and the aggrieved creditor may challenge it before the Adjudicating Authority under the Code. The Tribunal further clarified that if a proposal is preferred within a prescribed short period, the liquidator must consider it in accordance with the Code and communicate his decision under the statutory provision. [Paras 2, 6, 7, 8]

The appointed liquidator must consider claims and schemes afresh and act impartially; prior IRP decisions do not preclude fresh consideration and the liquidator's adverse decisions are subject to appeal to the Adjudicating Authority.

Final Conclusion: The appeal is disposed of with directions that the liquidator shall verify, consolidate and decide creditors' claims and, before selling assets, take steps under Section 230 of the Companies Act, 2013 to attempt revival of the corporate debtor; claims and schemes must be considered afresh by the liquidator and any adverse decision may be challenged before the Adjudicating Authority.

Existence of debt and default - admissibility of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - power of attorney and board authorisation - usurious or penal interest not a ground for rejection of Section 7 application - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - bar on civil court jurisdiction in matters within the Code

Power of attorney and board authorisation - Whether the alleged absence of a board resolution supporting the power of attorney vitiates the Section 7 application. - HELD THAT: - The Tribunal examined the objection that the power of attorney relied upon was signed by two directors but was not supported by a board resolution authorising them to execute the POA. The Bench found the objection insufficient to defeat the application. The decision records that the POA executed by two directors authorising initiation of insolvency proceedings does not, in the facts of this petition, amount to an infirmity warranting rejection of the Section 7 application. [Paras 9]

Objection to the power of attorney for want of a board resolution is rejected and is not a ground to reject the Section 7 application.

Usurious or penal interest not a ground for rejection of Section 7 application - bar on civil court jurisdiction in matters within the Code - Whether contention regarding interest rate (alleged usurious/penal interest) can be a ground to reject the Section 7 application. - HELD THAT: - Relying on the reasoning in precedents cited (NCLAT and Supreme Court authorities reproduced in the order), the Tribunal held that challenges to the quantum or nature of interest - including allegations of usurious or extortionate interest - do not defeat a Section 7 application at the threshold. Initiation of the corporate insolvency resolution process is not a recovery proceeding and the adjudicating authority need not decide disputed questions of claim or interest for the limited purpose of determining whether a default has occurred. Consequently, the objection based on the rate of interest did not invalidate the application. [Paras 10, 11]

The interest rate objection (alleged usurious interest) does not furnish a ground to reject the Section 7 petition.

Existence of debt and default - admissibility of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Whether there is a debt due to the financial creditor and whether a default has occurred such that the Section 7 application is complete and must be admitted. - HELD THAT: - The Tribunal applied the statutory scheme: 'debt', 'claim' and 'default' are broadly defined and the Code is triggered once default (of one lakh rupees or more) exists. The record included assignment documents, loan agreements, statements of account and several communications from the corporate debtor acknowledging indebtedness and proposing one time settlements. The application was filed in prescribed Form 1 with the proposed IRP's particulars and requisite fee. On the material before it, the Bench was satisfied of existence of debt and default and found the application complete. Where these conditions are met and no other infirmity is shown, the adjudicating authority must admit the Section 7 application. [Paras 10, 12, 13, 16]

There is existence of debt and default, the Section 7 application is complete and is admitted.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Whether moratorium must be declared consequent to admission of the Section 7 petition and what its effect is. - HELD THAT: - Upon admission of the petition, the Tribunal declared the moratorium in terms of Section 14(1) of the Code, prohibiting institution or continuation of suits, transfer or disposal of assets by the corporate debtor, actions to enforce security interest (including under SARFAESI) and recovery of property by owners or lessors. The order further directed continuation of supply of goods and essential services during the moratorium and clarified the duration of the moratorium from receipt of authenticated copy of the order until completion of CIRP or approval of a resolution plan or liquidation, as applicable. [Paras 17, 18, 19]

Moratorium is declared with the statutory prohibitions and directions, effective from receipt of authenticated copy of the order until completion of the CIRP or earlier final disposal as prescribed by the Code.

Final Conclusion: The Section 7 petition filed by the financial creditor is admitted: the Tribunal found the application complete, held that there is debt and default, rejected objections concerning the power of attorney and the rate of interest as not being grounds to dismiss the petition, declared the moratorium in terms of Section 14 and directed communication of the order to the parties and the proposed Interim Resolution Professional.

Corporate Insolvency Resolution Process - default - Section 7 application - completeness of Form-1 - disputed claim - adjudicating authority's satisfaction of default - debt not payable in law or in fact - Section 12A settlement

Section 7 application - completeness of Form-1 - adjudicating authority's satisfaction of default - Admission of the Section 7 application and validity of Form-1 filing - HELD THAT: - The Tribunal held that an application under Section 7 is not a petition in litigation and does not require pleadings or affidavits in the manner of ordinary civil suits. The Adjudicating Authority must ascertain existence of default from records and evidence as prescribed; if satisfied that a default has occurred and the application is complete it must admit the application. The record disclosed in Part IV and Part V of Form-1 was sufficient for the Adjudicating Authority to be satisfied as to completeness and occurrence of default, and therefore the admission was correctly made. The Tribunal relied on its previous decision in Binani Industries Limited Vs. Bank of Baroda & Anr. and the exposition in Innoventive Industries Limited v. ICICI Bank and Another regarding the scheme of the Code, the role of Form-1 and the limited scope at the admission stage. [Paras 4, 8, 9]

The admission under Section 7 is upheld and Form-1 is held to be complete for purposes of admission.

Disputed claim - default - debt not payable in law or in fact - Effect of alleged discrepancy in SARFAESI notice and disputed amounts on admission - HELD THAT: - The Tribunal observed that a 'debt' under the Code includes a 'claim', which may be disputed. However, at the admission stage the only substantive plea available to the corporate debtor to resist admission is that the debt is not payable in law or in fact. A mere discrepancy in the sale amount of a mortgaged property or non-disclosure of that discrepancy in the application does not displace the Adjudicating Authority's satisfaction of default unless it establishes that the debt is not payable in law or fact. The appellants did not contend that the debt was not payable in law or in fact; therefore the discrepancy did not vitiate admission. [Paras 3, 6, 7, 8]

The challenge based on discrepancy in the SARFAESI notice / mismatch of amounts is rejected; it does not invalidate admission in the absence of a demonstrable legal or factual non-payability of the debt.

Final Conclusion: Appeal dismissed; the Adjudicating Authority's admission of the Section 7 application is confirmed. Appellants remain free to settle with creditors and to approach the Committee of Creditors under Section 12A of the I&B Code.

Corporate Insolvency Resolution Process initiation under Section 7 of the Insolvency and Bankruptcy Code, 2016 - evidence of debt and default (Section 7(3)(a)) - proposal and eligibility of Interim Resolution Professional (Section 7(3)(b)) - admission of petition (Section 7(5)(a)) - moratorium and its consequences (Section 14) - effect of pending arbitration/other proceedings on Section 7 petition - conduct of financial creditor towards third party debtors

Corporate Insolvency Resolution Process initiation under Section 7 of the Insolvency and Bankruptcy Code, 2016 - evidence of debt and default (Section 7(3)(a)) - admission of petition (Section 7(5)(a)) - Petition filed by Punjab National Bank under Section 7 of the Code is admissible and is to be admitted. - HELD THAT: - The Tribunal found that the petitioner complied with Form No.1 and furnished abundant evidence of sanction, loan documents, hypothecation/mortgage deeds, balance confirmation letters and certified statements of account admissible under the Bankers Book Evidence Act, 1891. Those documents establish the existence of debt and default and satisfy the requirement of Section 7(3)(a). The Tribunal further considered the computation of outstanding amounts as furnished in the application and held that the petitioner satisfied the conditions under Section 7(5)(a). Objections based on alleged non disclosure of an e auction realisation were examined and the Tribunal accepted the bank's explanation that the credit entries are reflected in the statement of account. Accordingly the petition was admitted and CIRP ordered to be initiated. [Paras 22, 23, 25, 29, 32]

The petition under Section 7 is admitted and Corporate Insolvency Resolution Process is initiated against the corporate debtor.

Proposal and eligibility of Interim Resolution Professional (Section 7(3)(b)) - The name proposed as Interim Resolution Professional is acceptable and the proposed professional is eligible for appointment. - HELD THAT: - The original proposed professional was replaced when it was observed he held conflicting engagements. The petitioner filed fresh Form 2 with written consent of Mr. Desh Deepak, who certified that he was not serving as IRP/RP/Liquidator elsewhere and that no disciplinary proceedings were pending against him. The Tribunal examined the Form 2 compliance and found it to be in order, satisfying the requirement of Clause (b) of Section 7(3). [Paras 29, 30, 36]

Mr. Desh Deepak is appointed as Interim Resolution Professional in terms of the Code.

Moratorium and its consequences (Section 14) - Moratorium under Section 14 is declared with attendant prohibitions and directions. - HELD THAT: - On admission of the petition the Tribunal declared the moratorium in terms of Section 14(1), restraining institution or continuation of suits or proceedings against the corporate debtor, transfer or disposal of assets, actions to enforce security interests (including under the SARFAESI Act, 2002) and recovery of property occupied by the corporate debtor. The Tribunal reiterated the statutory exceptions and directed continuation of supply of essential goods or services as provided by Section 14 and relevant regulations. The moratorium effect is made to operate from the date of the order until completion of CIRP or approval of a resolution plan or order for liquidation. [Paras 33, 34, 35]

Moratorium is declared from the date of the order until completion of the CIRP or other terminal event under the Code.

Effect of pending arbitration/other proceedings on Section 7 petition - Pendency of arbitration challenge and the corporate debtor's pursuit of recovery proceedings against its debtors do not preclude admission of the Section 7 petition. - HELD THAT: - The Tribunal observed that the existence of an arbitral award in favour of the corporate debtor and subsequent challenge under Section 34 of the Arbitration and Conciliation Act, 1996, do not affect the financial creditor's claim based on the corporate debtor's default under the loan agreements. Similarly, the fact that the corporate debtor has initiated proceedings under the Code against its own debtors does not justify resisting the financial creditor's application; the petitioner's entitlement is to enforce compliance with the loan terms and prove default. The Tribunal therefore held such contentions to be irrelevant to the question of admission. [Paras 11, 12, 26]

Pending arbitration or the corporate debtor's own recovery actions do not prevent admission of the Section 7 petition.

Conduct of financial creditor towards third party debtors - Bank's issuance of letters to debtors of the corporate debtor advising them to pay the bank is improper but does not vitiate the petition. - HELD THAT: - The Tribunal noted that the bank had sent notices to sundry debtors requesting them to remit amounts to the bank and warning of civil/criminal consequences. While this conduct was deprecated as an excess of competence and an improper assumption of jurisdiction, the Tribunal held that such conduct did not legally preclude admission of the petition. The Tribunal clarified that those debtors remain free to fulfil obligations to the corporate debtor notwithstanding such notices. [Paras 15, 16, 27]

The bank's conduct in issuing such notices is improper but does not defeat the financial creditor's petition.

One time settlement proposal and bank's commercial decision - The respondent's OTS proposal, having been rejected by the bank, is not a ground for this Tribunal to interfere with admission of the petition. - HELD THAT: - The Tribunal recorded that the corporate debtor had sought settlement under the bank's OTS policy but the bank had rejected the proposal. The Tribunal held that the propriety or commercial decision of the bank in rejecting OTS is not for the Tribunal to revisit while deciding the Section 7 petition, and therefore the OTS plea cannot prevent admission. [Paras 14, 18, 31]

OTS proposals rejected by the bank do not preclude admission of the Section 7 petition; the Tribunal will not substitute its view for the bank's commercial decision.

Final Conclusion: The Tribunal admitted the Section 7 petition filed by Punjab National Bank against Ria Constructions Limited, declared the moratorium under Section 14, appointed Mr. Desh Deepak as Interim Resolution Professional and directed him to perform statutory duties; objections based on arbitration pendency, OTS proposals or the bank's contested conduct towards third party debtors were held not to prevent admission.

Taxable service requires consideration - point of taxation under Point of Taxation Rules, 2011 - invoice as condition precedent for point of taxation - continuous supply of service and date of completion - issuance of invoice versus mere demand letters - extended period of limitation

Taxable service requires consideration - service definition under Section 65B(44) - Whether interconnection usage for SMS provided free of charge during April 2011 to September 2012 constituted a taxable service - HELD THAT: - The Tribunal applied the statutory definition of service which requires that the activity be carried out for another for consideration. The undisputed record, including statements recorded by DGCEI, establishes that the six telecom operators declined to enter into agreements and the appellant provided interconnection usage for SMS without charging any consideration for the period in question. Precedents cited hold that services rendered free of charge do not attract service tax. On these findings the Tribunal concluded there was absence of consideration and therefore no taxable service during the disputed period. [Paras 20, 21, 31]

No taxable service was rendered for the period April 2011 to September 2012 in the absence of consideration.

Point of taxation under Point of Taxation Rules, 2011 - invoice as condition precedent for point of taxation - continuous supply of service and date of completion - Whether the point of taxation had occurred for the disputed services under the Point of Taxation Rules, 2011 - HELD THAT: - The Tribunal examined Rule 3(a) and its provisos. Raising an invoice is a condition precedent under Rule 3(a); when no invoice is issued, the proviso fixes point of taxation as date of completion of service. For continuous supply, completion is tied to periodical events specified in a contract. There was no contract specifying periodical payment obligations and no invoice or payment received in the period April 2011 to September 2012. Consequently the point of taxation did not arise under Rule 3(a) or under Rule 3(b) (receipt of payment). The Tribunal therefore held that liability to pay service tax had not arisen for the disputed period. [Paras 25, 26, 27, 28, 31]

Point of taxation did not occur during April 2011 to September 2012; no liability to pay service tax arose under the Point of Taxation Rules, 2011.

Issuance of invoice versus mere demand letters - invoice as commercial document evidencing agreed price - Whether the letters sent by the appellant to the six telecom operators amounted to issuance of invoices triggering point of taxation - HELD THAT: - The Tribunal analysed commercial and authoritative descriptions of an invoice and held that an invoice presupposes an agreement as to price and is a commercial document debiting the recipient with the agreed price. In the absence of any contract or agreed price, the appellant's letters demanding payment could not be treated as invoices. As no invoice was issued, Rule 3(a)'s point of taxation was not satisfied. [Paras 23, 24, 25, 31]

The demand letters did not constitute invoices; therefore they did not trigger point of taxation.

Extended period of limitation - Whether the show cause notice invoking the extended period of limitation for the disputed period was valid - HELD THAT: - The Tribunal noted that enquiries into the transactions began in February 2013 while the show cause notice invoking extended period was issued on 31-3-2014 for April 2011 to September 2012. Coupled with the finding that no taxable service or point of taxation arose for the period, the Tribunal found the show cause notice to be bad for invoking the extended period of limitation. [Paras 12, 28, 31]

The show cause notice is bad for invoking the extended period of limitation.

Final Conclusion: Appeal allowed. The demand and penalty confirmed by the Commissioner for April 2011 to September 2012 are set aside: there was no taxable service in absence of consideration, the point of taxation had not occurred, the appellant's letters did not amount to invoices, and the show cause notice wrongly invoked the extended period of limitation; appellant entitled to consequential relief in accordance with law.

Exemption to specified services provided to government authorities - eligibility for exemption under Notification No.25/2012-ST - negative list covering transmission of electricity - classification of construction of electric substation as related to transmission of electricity - Works Contract Service - Erection Commission And Installation Service - penalty under Section 78 of Finance Act, 1994 - reliance on prior notifications and departmental circulars

Exemption to specified services provided to government authorities - eligibility for exemption under Notification No.25/2012-ST - reliance on prior notifications and departmental circulars - Whether services rendered by the assessee for various government authorities for the period 01.04.2009 to 31.03.2014 were taxable or eligible for exemption - HELD THAT: - The adjudicating authority examined each contract separately for the period prior to 01.07.2012 and for the period w.e.f. 01.07.2012 with reference to Notification No.25/2012-ST, earlier notifications and departmental rulings. On this analysis the authority held the services eligible for exemption for the period from 01.07.2012 and addressed coverage for the earlier period by reference to relevant decisions, notifications and circulars. The Tribunal found that the Original Adjudicating Authority had given considered findings on each contract and on the applicability of the notifications and precedents, and accordingly saw no merit in the revenue challenge to the dropping of the demand generally. [Paras 2, 5]

Dropping of the impugned demand in respect of the various works for the periods examined by the Original Adjudicating Authority is upheld; revenue appeal in this respect is rejected.

Classification of construction of electric substation as related to transmission of electricity - negative list covering transmission of electricity - penalty under Section 78 of Finance Act, 1994 - application of earlier Notifications No.45/2010-ST and No.11/2010-ST - Whether the confirmed service tax demand and penalty relating to construction of electric substations and construction of a boundary wall were sustainable - HELD THAT: - The Tribunal relied on earlier appellate authority reasoning that, in view of Notifications No.45/2010-ST and No.11/2010-ST and the subsequent inclusion of transmission of electricity in the negative list w.e.f. 01.07.2012, construction of electric substations is related to transmission of electricity and not taxable. Applying that principle the Tribunal set aside the confirmed service tax demand and the equal penalty in respect of the electric substations. As to the demand relating to the boundary wall, the assessee could not substantiate that the work was for an exempt trust; they did not contest the service tax and interest but challenged the penalty. The Tribunal accepted the submission and set aside the penalty imposed under Section 78 for the boundary wall while leaving the duty and interest intact. [Paras 4]

Service tax demand and equal penalty confirmed by the Original Authority in respect of electric substations are set aside; penalty imposed in respect of the boundary wall is set aside but the duty and interest for that work remain payable.

Final Conclusion: The Tribunal allows the assessee's appeal except to the extent of duty and interest payable in respect of the boundary wall work, sets aside the service tax demand and penalty relating to electric substations, sets aside the penalty for the boundary wall, and dismisses the revenue appeal challenging the Original Adjudicating Authority's findings.

Summary order. Delay condoned; admission refused and the civil appeal dismissed.

Condonation of delay - power of Commissioner (Appeals) under Section 85 of the Finance Act to condone delay - exclusion of the Limitation Act (Sections 4 to 24) by a special statute - application of Section 5 of the Limitation Act to proceedings under a special statute - statutory period of limitation for filing appeals under the Finance Act - taxability of services rendered by a State police department - meaning of 'security agency' for service tax purposes

Condonation of delay - power of Commissioner (Appeals) under Section 85 of the Finance Act to condone delay - application of Section 5 of the Limitation Act to proceedings under a special statute - exclusion of the Limitation Act (Sections 4 to 24) by a special statute - statutory period of limitation for filing appeals under the Finance Act - Whether the statutory limitation prescribed under Section 85 of the Finance Act can be extended by applying Section 5 of the Limitation Act, and whether the Commissioner (Appeals) has power to condone delay beyond the period prescribed in the Finance Act. - HELD THAT: - The Tribunal held that the limitation regime in the Finance Act must be read in light of legislative intent and existing precedent. The Finance Act, by incorporation of certain provisions of the Central Excise Act, has prescribed a specific period for filing appeals and does not contain an express rider permitting importation of Sections 4 to 24 of the Limitation Act to enlarge that period. Reliance was placed on the reasoning in Hongo India and Singh Enterprises to conclude that where a special statute prescribes both the primary limitation period and a limited condonation window, Parliament has excluded broader application of Section 5 of the Limitation Act. The decision in Anshuman Shukla, which dealt with a different statutory scheme conferring suo motu power on the High Court, was held inapplicable to the Finance Act because the two statutes differ in structure and legislative intend. Applying these principles, the Tribunal concluded that the Commissioner (Appeals) cannot condone delay beyond the statutory scheme under Section 85 of the Finance Act and that delays beyond the prescribed period are not enlargable by Section 5 of the Limitation Act. [Paras 11, 12]

Ratio of Anshuman Shukla not applicable; Commissioner (Appeals) has no power to condone delay beyond the statutory period under Section 85 of the Finance Act; appeal against order dated 28.8.2017 is sustainable on limitation grounds.

Taxability of services rendered by a State police department - meaning of 'security agency' for service tax purposes - service tax on government police activities - Whether the activities carried out by the State police department amount to taxable 'security agency' services attracting service tax. - HELD THAT: - The Tribunal, following its earlier Final Order, held that the police department, being an agency of the State Government, cannot be treated as a person engaged in the business of running security services. The activities of the police were characterised as statutory functions with fees deposited into the Government Treasury, and therefore fall outside the definition of 'security agency' for service tax purposes. On that basis the impugned order was set aside and the appeal on merits allowed. [Paras 13, 14]

The police department's activities do not constitute taxable 'security agency' services; appeal on merits allowed.

Final Conclusion: The Tribunal condoned delay in entertaining the appeals as an exception but held that the Commissioner (Appeals) cannot, as a matter of law, condone delay beyond the period prescribed under Section 85 of the Finance Act by invoking Section 5 of the Limitation Act; accordingly Appeal No. 53900/2018 (order dated 28.8.2017) is rejected on limitation grounds, and Appeal No. 53901/2018 (order dated 1.3.2016) is allowed on merits (police activities held not taxable as 'security agency').

Works Contract Service - Erection, Commissioning and Installation Service - Service Tax liability prior to 01.06.2007 - Exemption under Notification No. 45/2010 ST (exercise of powers under section 11C) - Scope of taxable service - distinction between composite works contract and service contract simpliciter - Change of classification beyond scope of show cause notice - CBEC circulars on scope of erection, commissioning and installation

Works Contract Service - Erection, Commissioning and Installation Service - Service Tax liability prior to 01.06.2007 - Liability of erection of transmission towers to service tax for the period 1.7.2003 to 9.9.2004 - HELD THAT: - The Tribunal examined the nature of the appellants' activity - supply of transmission towers together with erection at site - and found it to be a composite works contract rather than a stand alone taxable service. Reliance was placed on the Apex Court's reasoning in Larsen & Toubro that works contracts are not chargeable to service tax prior to 01.06.2007 because the charging provisions of the Finance Act, 1994 target service contracts simpliciter and do not sufficiently identify or value composite works contracts. CBEC circulars and subsequent administrative classification of the same activity as works contract for later periods also supported that the impugned activity fell within works contract ambit. Applying these principles to the material facts, the Tribunal held that erection services rendered during the impugned period are not liable to service tax. [Paras 5, 6]

Erection services rendered by the appellant during 1.7.2003 to 9.9.2004 are not liable to service tax; demand unsustainable.

Exemption under Notification No. 45/2010 ST (exercise of powers under section 11C) - Scope of taxable service - relation to transmission and distribution of electricity - Applicability of Notification No. 45/2010 ST (immunity/exemption) to services related to transmission and distribution of electricity - HELD THAT: - The Tribunal observed that the appellants' activities related to erecting towers for transmission of electricity and were therefore within the ambit of services 'in relation to' transmission and distribution. Notification No. 45/2010 ST, issued under section 11C of the Central Excise Act, granted immunity/exemption for taxable services relating to transmission and distribution of electricity for the relevant period. The Tribunal followed precedent where installation, erection and commissioning of transmission infrastructure were held to have a direct and proximal nexus with transmission/distribution and to attract the immunity conferred by the notification. This reinforced the conclusion that the impugned demand could not be sustained. [Paras 5]

Services related to erection of transmission towers fall within the exemption/immunity conferred by Notification No. 45/2010 ST and are not exigible to service tax for the impugned period.

Change of classification beyond scope of show cause notice - Validity of confirming demand under a different taxable category than that specified in the show cause notice - HELD THAT: - The show cause notice originally proposed demand under the category of 'Consulting Engineer'. The adjudicating authority confirmed demand under 'erection, commissioning and installation services', thereby altering the classification on which liability was sought to be imposed. The Tribunal held that such re classification resulting in a demand outside the scope of the original show cause notice is impermissible. Reliance was placed on precedents condemning substitution of the basis of demand without adequate notice to the respondent. Given this procedural defect, the demand could not be sustained on this ground as well. [Paras 6]

Demand is not sustainable because it was confirmed under a category different from that alleged in the show cause notice.

Final Conclusion: The appeal is allowed. The Tribunal set aside the impugned order dated 20.09.2010 and held that the service tax demand and penalty confirmed against the appellant for the period 1.7.2003 to 9.9.2004 are not sustainable (on grounds of works contract character, applicability of Notification No.45/2010 ST, and impermissible change of classification beyond the show cause notice).

Cenvat credit reversal - penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC - interest liability under amended Rule 14 of the Cenvat Credit Rules - liability for interest limited to utilisation of wrongly availed credit - verification by the Adjudicating Authority

Cenvat credit reversal - penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC - Whether penalty imposed on the appellant for wrongful availment of cenvat credit is sustainable where the credit was reversed prior to issuance of show cause notice and such reversal is verified by the appellate authority. - HELD THAT: - The Commissioner (Appeals) recorded that the appellant had produced a certified journal showing reversal of the disputed cenvat credit which was verified. The Tribunal accepted that finding and held that, insofar as the reversal of the credit took place prior to issuance of the show cause notice and was verified, imposition of penalty under Rule 15(2) read with Section 11AC is not sustainable. The factual finding of reversal, as recorded by the Commissioner (Appeals), is treated as decisive for the purpose of penalty liability. [Paras 2, 8]

Penalty imposed under Rule 15(2) read with Section 11AC is set aside.

Interest liability under amended Rule 14 of the Cenvat Credit Rules - liability for interest limited to utilisation of wrongly availed credit - verification by the Adjudicating Authority - Extent of interest payable in respect of wrongly availed cenvat credit in light of amendment to Rule 14 and the manner of its determination. - HELD THAT: - Relying on the amended wording of Rule 14, the Tribunal held that interest is payable only to the extent the wrongly availed cenvat credit was actually utilised and not for amounts merely availed and subsequently reversed before utilisation. The Tribunal directed the appellant to submit calculations or evidence of utilisation to the Adjudicating Authority within a specified time, and required the Adjudicating Authority to verify such submissions; any interest found payable is to be communicated and paid within a further specified period. The issue of quantification of interest is therefore left to the Adjudicating Authority for verification and computation based on the appellant's submissions. [Paras 8]

Appellant liable to pay interest only to the extent of utilisation; computation and verification remitted to the Adjudicating Authority with directions to verify appellant's calculations and intimate any payable interest.

Final Conclusion: The appeal is allowed: the penalty imposed under Rule 15(2) read with Section 11AC is set aside in view of the verified reversal of the cenvat credit prior to the show cause notice; liability for interest is confined to the extent of utilisation of the wrongly availed credit and the matter of computation/verification of interest is remitted to the Adjudicating Authority with directions for submission, verification and payment if found due.

Limitation for appeal under Section 35 of Central Excise Act, 1944 - discretionary extension of thirty days by Commissioner - power to condone delay by Appellate Tribunal - condonation of delay consequential on communication/receipt of order - service tax liability for renting of immovable property service

Condonation of delay - condonation of delay consequential on communication/receipt of order - power to condone delay by Appellate Tribunal - Application for condonation of delay in filing the appeal before the Tribunal - HELD THAT: - The Tribunal found that the Commissioner(Appeals) Order dated 28.06.2018 was communicated to the appellant on 09.10.2018 and that the appeal to the Tribunal was filed within two months of that receipt. The Department produced no cogent evidence that the appellant had received the Order earlier. In these circumstances the Tribunal exercised its discretion to treat the appeal as within time and disposed of the condonation application accordingly.

Condonation application allowed and appeal admitted as within time before the Tribunal.

Limitation for appeal under Section 35 of Central Excise Act, 1944 - discretionary extension of thirty days by Commissioner - Commissioner (Appeals) has no authority to condone delay beyond statutory period - Validity of Commissioner (Appeals) order dismissing the earlier appeal as time-barred - HELD THAT: - The appellant admitted receipt of the original Order-in-Original dated 23.03.2017 on 06.12.2017, which placed the filing beyond the statutory period. Section 35 prescribes sixty days for filing an appeal with a discretionary further period of thirty days by the Commissioner, making the outer limit ninety days. The admitted position showed the appeal exceeded the ninety-day period. The Tribunal relied on the authority of Singh Enterprises to the effect that the Commissioner (Appeals) has no power to condone delay beyond the statutory period. Applying this principle, the Tribunal found no infirmity in the Commissioner (Appeals) order holding the appeal barred by limitation.

The Commissioner (Appeals) order dismissing the appeal as time-barred is upheld; the appeal is dismissed.

Final Conclusion: The Tribunal allowed the condonation application in respect of the appeal filed before it (accepting the appellants' date of receipt of the Commissioner(Appeals) order), but on the merits of limitation upheld the Commissioner(Appeals) finding that the earlier appeal was barred by time and dismissed the appeal.

Service tax on penalty deductions - taxability of encashment of bank guarantee - declared service of agreeing to tolerate an act or to refrain from an act - destination based tax - Reverse Charge Mechanism

Service tax on penalty deductions - destination based tax - Service tax demand on amounts retained as penalty/deductions from contractor/supplier bills - HELD THAT: - The Tribunal found that the amounts claimed as penalties were part of the gross contract bills which had already been subjected to service tax (including under the Reverse Charge Mechanism where applicable). As service tax is a destination based tax and the gross amount had already been taxed, the amounts subsequently deducted as penalty and reflected as miscellaneous income could not be subjected to service tax again. The Tribunal also rejected the characterization of those deducted amounts as a separate declared service under the clause described as agreeing to tolerate or refrain from an act, holding that the penal deductions did not constitute a new taxable service within that description in the facts of this case. Consequential relief was granted to the appellant. [Paras 7]

Demand and penalty insofar as they relate to penalty/deductions from contractor/supplier bills are set aside; appeal allowed.

Taxability of encashment of bank guarantee - declared service of agreeing to tolerate an act or to refrain from an act - Service tax demand on amounts realized by encashment of bank guarantees furnished by defaulting suppliers/contractors - HELD THAT: - The Commissioner (Appeals) had held that service tax was not demandable on the amount realized on encashment of a bank guarantee in respect of non-return of a transformer entrusted to a contractor/repairer, and accordingly reduced the demand. The Tribunal, having considered the matter and the broader finding that the penal/retained amounts which formed part of already taxed gross receipts could not be subjected to service tax again, allowed the appeal and did not sustain a tax demand on such encashments in the facts before it. [Paras 7]

Service tax is not demandable on the encashment of bank guarantees in the circumstances of this case; the portion of demand on this head as retained by the Commissioner (Appeals) is not sustained.

Final Conclusion: The appeal is allowed; the service tax demand and penalty insofar as they relate to penal deductions from contractor/supplier bills and the encashment of bank guarantees (as considered) are set aside, and the appellant is entitled to consequential relief in accordance with law.

Interest on refund under Section 11 BB - condition No.2(j) of Notification No.17/2009-ST - refund of service tax on input services used in export

Condition No.2(j) of Notification No.17/2009-ST - substitution of earlier notification - Applicability of Condition No.2(j) of Notification No.17/2009-ST to the appellant's refund claim - HELD THAT: - The Tribunal held that Condition No.2(j) was applicable to the appellant because Notification No.17/2009-ST was issued by way of substitution of the earlier notification. The appellant's contention that the condition did not apply to their refund claim was rejected on that basis.

Condition No.2(j) of Notification No.17/2009-ST applied to the appellant and their plea to the contrary was rejected.

Interest on refund under Section 11 BB - delay by Revenue - Entitlement to interest on the refunded amount under Section 11 BB of the Central Excise Act - HELD THAT: - After remand the Adjudicating Authority found that the appellant satisfied the certification requirement and allowed and disbursed the refund. The Commissioner (Appeals) and the Tribunal concluded there was no delay attributable to the Revenue in granting the refund because the appellant was required to comply with Condition No.2(j). In view of the applicability of that condition and the subsequent compliance, interest under Section 11 BB was not payable for the period claimed.

Claim for interest under Section 11 BB was rejected; no interest awarded.

Final Conclusion: The appeal seeking interest on the refunded service tax is dismissed: Condition No.2(j) of Notification No.17/2009-ST applied to the refund claim, the appellant's certification requirement was later met, and there was no delay by the Revenue warranting interest under Section 11 BB.

Refund of tax collected without authority of law - double recovery of tax from service receiver - availability of cenvat credit where supplier defaults to deposit tax - bona fide recipient protection - violation of Article 265 of the Constitution - CBEC Circular No. 766/82/2003-CX - precedent: Commissioner of C. Ex. Delhi-II vs. R.S. Industries

Refund of tax collected without authority of law - double recovery of tax from service receiver - availability of cenvat credit where supplier defaults to deposit tax - bona fide recipient protection - violation of Article 265 of the Constitution - Denial of refund of amount deposited by the appellant after the service-provider failed to deposit service tax; whether such refund was rightly refused. - HELD THAT: - The Tribunal held that there is no authority under the Act or Rules permitting the Revenue to collect service tax a second time from a service receiver who had already paid the tax to the service provider. Reliance was placed on the Board's guidance in CBEC Circular No. 766/82/2003-CX that reversal or recovery from a bona fide consignee/recipient need not be resorted to where the recipient's bona fides are not in dispute. The Tribunal also referred to the decision of the Delhi High Court in Commissioner of C. Ex. Delhi-II vs. R.S. Industries which supports the proposition that in case of default by the supplier, tax cannot be demanded again from the receiver unless complicity or abetment is shown. Applying these principles, and observing that the appellant had paid the provider and produced records, the Tribunal found the Revenue's second collection (followed by the appellant's deposit under coercion) to be without legal authority and contrary to Article 265 of the Constitution. Accordingly the rejection of the refund claim was set aside and the appellant was held entitled to refund with interest as per rules. [Paras 7]

Refund claim allowed; appellant entitled to refund of the full amount deposited along with interest as per rules.

Final Conclusion: The Tribunal set aside the orders rejecting the refund and directed refund of the amounts deposited by the appellant with interest, observing that Revenue has no power to recover tax twice from a bona fide recipient and that such double recovery is without authority and contrary to Article 265.

Condonation of delay - limitation - restoration of appeal - mistake of fact apparent on record - remand for fresh consideration - hearing on merits - modification of final order

Limitation - condonation of delay - mistake of fact apparent on record - Whether the ex parte dismissal of the appeal by the Tribunal and prior dismissal by the Commissioner (Appeals) on the ground of limitation could be sustained in view of the Uttarakhand High Court's indulgence. - HELD THAT: - The Tribunal found that the order of the Uttarakhand High Court, which had observed that the order in original was appealable and granted indulgence to file the appeal within 30 days, was not taken into account by the Commissioner (Appeals) and was overlooked by this Tribunal at the time of passing the ex parte Final Order. That omission amounted to a mistake of fact apparent on the record. Given that the High Court had relegated the matter to the appellate authority with an indulgence to decide on merits, the prior dismissals purely on limitation could not be sustained without giving effect to that direction.

The ex parte dismissal and the dismissal by the Commissioner (Appeals) on limitation were found to involve a mistake of fact and could not be sustained in the face of the High Court's indulgence.

Restoration of appeal - remand for fresh consideration - hearing on merits - modification of final order - Whether the appeal should be restored and the matter remanded to the Commissioner (Appeals) for adjudication on merits. - HELD THAT: - In view of the omission to consider the High Court's order and the consequent mistake of fact, the Tribunal exercised its corrective power to modify its Final Order dated 20.12.2016 and allowed the miscellaneous application for restoration. The appeal is remitted to the Commissioner (Appeals) with a direction to hear the appellant on merits and to pass a reasoned order in accordance with law. The appellant was directed to appear before the Commissioner (Appeals) with a copy of the Tribunal's order to seek hearing.

The miscellaneous application for restoration is allowed; the Final Order is modified and the appeal is remanded to the Commissioner (Appeals) for hearing and a reasoned decision on merits.

Final Conclusion: Miscellaneous application for restoration allowed; Tribunal's ex parte Final Order dated 20.12.2016 modified and the appeal remanded to the Commissioner (Appeals) for hearing on merits in accordance with the Uttarakhand High Court's earlier indulgence.

Service tax liability on amounts not received but TDS deducted - remand for fresh consideration - failure to consider documentary evidence on record - right to opportunity of hearing

Service tax liability on amounts not received but TDS deducted - failure to consider documentary evidence on record - remand for fresh consideration - right to opportunity of hearing - Appeal remanded to adjudicating authority for fresh adjudication of liability for service tax in respect of amounts on which TDS was deducted under Section 194C of the Income Tax Act - HELD THAT: - The Tribunal found that the appellant had placed before the Commissioner documents (a letter from M/s Hindustan Construction Company Limited and a certificate from the chartered accountant) supporting the contention that no TDS certificate had been issued and that amounts corresponding to certain credit entries were not received. The Commissioner, however, did not examine those documents while rejecting the appeal. In the interest of justice the matter is remitted to the adjudicating authority to decide the question of service tax liability afresh after considering the cited documents and any other necessary evidence. The appellant is directed to produce all necessary documents again and the authority shall afford a reasonable opportunity of hearing. The Tribunal has not expressed any view on the merits of the tax liability itself. [Paras 4]

Appeal allowed by way of remand to the adjudicating authority for fresh decision after considering the documents and granting opportunity of hearing

Final Conclusion: The Tribunal allowed the appeal by remanding the matter to the adjudicating authority for fresh consideration of the appellant's liability for service tax in respect of amounts where TDS was purportedly deducted, directing production of the documents already filed and conferring a reasonable opportunity of hearing; merits were not decided.

Power of Commissioner (Appeals) to condone delay beyond thirty days - jurisdiction to condone delay after expiry of the normal appeal period - limitation for preferring appeal - no power to condone delay beyond thirty days after sixty days

Power of Commissioner (Appeals) to condone delay beyond thirty days - no power to condone delay beyond thirty days after sixty days - limitation for preferring appeal - Whether the Commissioner (Appeals) has jurisdiction to condone delay in filing appeals beyond the thirty-day limit where the delay exceeds thirty days after the normal sixty-day appeal period. - HELD THAT: - The Commissioner (Appeals) dismissed the appeals on the ground of limitation, recording delays of 478 days and 435 days and observing an absence of power to condone delay beyond thirty days. The appellant did not contest the existence or quantum of delay. Reliance was placed on the decision in Singh Enterprises, which holds that the Commissioner (Appeals) lacks jurisdiction to condone delay beyond thirty days after the sixty-day normal period for filing appeals. Applying that settled principle to the present facts, where the delay far exceeds thirty days, there is no jurisdictional basis for condonation and no scope for interference with the Commissioner (Appeals)' order. [Paras 2, 3]

The appeals are barred by limitation and, in view of the lack of power in the Commissioner (Appeals) to condone delay beyond thirty days after the sixty-day period, the tribunal refuses to interfere and rejects the appeals.

Final Conclusion: The tribunal, applying the Supreme Court precedent in Singh Enterprises, affirms the dismissal of the appeals for want of jurisdiction to condone the substantial delay and accordingly rejects both appeals.

Exemption for production of goods on behalf of the client - job work exemption - condition of goods returned to the client for use in manufacture - requirement of appropriate duty of excise being payable - interpretation of proviso to notification

Exemption for production of goods on behalf of the client - requirement of appropriate duty of excise being payable - interpretation of proviso to notification - Whether the proviso to Notification No. 8/2005 requires actual payment of excise duty by the manufacturer as a condition for exemption, or only that appropriate duty of excise is payable by the manufacturer. - HELD THAT: - The Tribunal construed the proviso to Notification No. 8/2005 as requiring that the goods produced by the job worker are returned to the client for use in or in relation to manufacture of goods on which appropriate duty of excise is payable. The provision speaks to the existence of a liability to pay appropriate duty of excise and does not mandate proof of actual payment by the manufacturer prior to the grant of exemption. The certificate furnished by the manufacturer stating that the raw materials/components sent for job work are meant for use in the final excisable products and that the manufacturer has discharged or shall be discharging the excise duty liability upon clearance meets the condition prescribed in the proviso. Consequently the Appellate Authority was in error in denying the exemption on the ground that the appellant had not substantiated actual payment of excise duty by the manufacturer. [Paras 3, 4, 5, 6]

The proviso requires that appropriate duty of excise be payable by the manufacturer and does not require prior actual payment; the manufacturer's certificate that it will discharge the excise liability satisfies the condition and the denial of exemption was unsustainable.

Final Conclusion: The order of the Commissioner (Appeals) dated 4 March 2016 is set aside; the appeal is allowed and the appellant is entitled to the benefit of the exemption under Notification No. 8/2005 as construed.

Taxability on reverse charge of technical testing and analysis services received from a non-resident/foreign service provider - classification of payments for technical know-how/royalty as consulting engineer services - invocation of extended period of limitation for service tax demand

Taxability on reverse charge of technical testing and analysis services received from a non-resident/foreign service provider - Technical testing and analysis services performed abroad by a foreign service provider, where samples sent to the foreign provider are tested and not returned, are not taxable in India on reverse charge in the facts of this case. - HELD THAT: - The Tribunal accepted the appellant's contention that the testing and analysis were performed outside India and relied on the earlier Tribunal decision in Glaxosmithkline Consumer Healthcare Ltd. vs. CST, Delhi-III to conclude that such services do not attract service tax on reverse charge in India. Applying that precedent to the material facts - samples sent abroad, testing carried out outside India and no return of samples - the Tribunal found that the element of provision of service in India was absent and therefore the demand in respect of these services could not be sustained.

Demand in respect of technical testing and analysis services received from the foreign service provider is set aside in favour of the appellant.

Classification of payments for technical know-how/royalty as consulting engineer services - Payments made to foreign collaborators as royalty/for technical know how do not fall within the category of 'consulting engineers' services for the purpose of imposing service tax in the circumstances of this case. - HELD THAT: - The Tribunal applied the decision in Commissioner of Central Excise & Service Tax, Bangalore vs. Molex (India) Ltd. , and having regard to that authority (and its subsequent affirmation by the Karnataka High Court), held that procurement of technical know how from foreign collaborators against royalty did not constitute consulting engineer services attracting service tax. On that basis the portion of demand framed on the ground of consulting engineers was rejected.

Demand framed under the head of consulting engineers for payments towards technical know how/royalty is quashed.

Invocation of extended period of limitation for service tax demand - Extended period of limitation for issuing the show cause notice could not be invoked against the appellant for the period in question. - HELD THAT: - The Tribunal noted that the demand related to the period '2009-10 till September, 2011' while the show cause notice was issued on 22nd June, 2012. It accepted the appellant's submission that the service tax, if any, had been available as cenvat credit and that the revenue position was neutral; there was no material to demonstrate mala fide or facts warranting invocation of the longer period. In view of the acceptance of the primary legal issues in favour of the appellant and absence of justification for extended limitation, the Tribunal found no merit in sustaining the demand on limitation grounds.

Invocation of the extended period of limitation is not sustained and the related demand is not maintainable.

Final Conclusion: The impugned order confirming service tax, interest and penalties is set aside; the appeal is allowed and the appellant is given consequential relief.

Cash refund under proviso to section 11B(2) of the Central Excise Act, 1944 - utilisation of credit on inputs - binding precedent of a larger Bench

Cash refund under proviso to section 11B(2) of the Central Excise Act, 1944 - inability to utilise input credit - Cash refund under clause (c) to the proviso to section 11B(2) where an assessee is unable to utilise credit on inputs is not permissible in the facts of this case. - HELD THAT: - The Court admitted the substantial question of law framed by the Revenue and observed that the issue has been conclusively answered by a larger Bench decision in M/s. Gauri Plasticulture P. Ltd. v. The Commissioner of Central Excise, Indore. Applying the binding precedent of the larger Bench, which decided the same question in favour of the Revenue, the Court held that clause (c) to the proviso to section 11B(2) does not permit a cash refund to an assessee unable to utilise input credit. The Court therefore reversed the Tribunal's allowance of the respondent's appeal and answered the substantial question in favour of the Revenue. [Paras 6, 7, 8]

Appeal allowed and substantial question answered in favour of the Appellant-Revenue and against the Respondent-Assessee.

Final Conclusion: Following the larger Bench decision in M/s. Gauri Plasticulture P. Ltd., the appeal is allowed and the Tribunal's order allowing cash refund is set aside; cash refund under clause (c) to the proviso to section 11B(2) is not permissible where the assessee is unable to utilise input credit.

Principles of natural justice - statutory right of appeal under Section 35(B) of the Central Excise Act, 1944 - deposit requirement under Section 35(F) of the Central Excise Act, 1944 - interim injunction against coercive recovery

Statutory right of appeal under Section 35(B) of the Central Excise Act, 1944 - deposit requirement under Section 35(F) of the Central Excise Act, 1944 - Whether the writ-application should be relegated to the Appellate Tribunal despite availability of an appeal against the Commissioner's order. - HELD THAT: - The Court noted that the impugned order of the Commissioner is an appealable order under Section 35(B) and that Section 35(F) prescribes deposit obligations pending appeal. The availability of a statutory appeal before the Appellate Tribunal was acknowledged and the petitioner was called upon to show cause why the writ petition should not be relegated to that remedy. The Court nevertheless proceeded to consider the petitioner's contention that the Commissioner recorded principal submissions but did not deal with them, which was said to amount to a breach of the principles of natural justice. Having considered the material and submissions, the Court concluded that the petitioner had made out a strong prima facie case warranting interlocutory relief despite the existence of the statutory appellate remedy.

Availability of appeal acknowledged, but writ entertained for interim relief as a prima facie case was made out.

Principles of natural justice - interim injunction against coercive recovery - Whether interlocutory relief in the form of restraint on coercive recovery of duty, interest and penalty should be granted pending further proceedings. - HELD THAT: - The Court observed that the petitioner's core submissions (concerning the nature of the fire fighting vehicles and expert certificates) were recorded in the impugned order but not dealt with, and that on the material before it a strong prima facie case existed. In view of this, and in order to preserve the petitioner's position until the respondents file their response and the matter is heard, the Court directed that no coercive steps for recovery of the demanded duty, interest and penalty shall be taken until the next returnable date. Notice was ordered to be issued to the respondents and direct service on respondent No.2 was permitted.

Interim restraint granted: respondents restrained from taking coercive recovery steps till the next returnable date; notice ordered and direct service permitted.

Final Conclusion: Petition entertained for interim purposes: notice issued to respondents, direct service on respondent No.2 permitted, and respondents restrained from taking any coercive steps for recovery of the demanded duty, interest and penalty until the next returnable date on account of a strong prima facie case and alleged non consideration of material submissions.

Admissibility of cenvat credit for commission paid to selling/commission agents as input service - Definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004 - Post-manufacture sales activity and ineligibility of input credit - Allowability of credit where agent effects sale of goods manufactured by the assessee - Tribunal's independent view in presence of conflicting High Court decisions

Admissibility of cenvat credit for commission paid to selling/commission agents as input service - Definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004 - Post-manufacture sales activity and ineligibility of input credit - Allowability of credit where agent effects sale of goods manufactured by the assessee - Tribunal's independent view in presence of conflicting High Court decisions - Cenvat credit claimed on commission paid to commission/selling agents for effecting sale of finished goods is admissible as input service under Rule 2(l) of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal, applying its precedent in Simbhaoli Sugars Ltd., held that commission paid to agents who effect the sale of goods manufactured by the appellant falls within the definition of input service and is eligible for cenvat credit. The Tribunal noted existence of contrary High Court decisions but, following earlier Tribunal decisions (including Essar Steel and Maheshwari Solvent Extraction) and the principle that where High Courts differ the adjudicating authority may take an independent view, examined the matter on merits and concluded entitlement to credit. The reasoning relied on the distinction between mere post-manufacture activities that do not qualify as input services and activities where the agent effects sale/marketing of the appellant's goods, which attract input service treatment; in the present case the latter was found to be applicable, warranting allowance of the credit. [Paras 5, 6]

Appeal allowed; impugned order set aside and cenvat credit on commission to selling agents allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, setting aside the Commissioner's order and permitting cenvat credit on commission paid to selling/commission agents for the period November, 2008 to June, 2013, with consequential benefits to the appellant.

Penalty not sustainable where underlying duty demand is unsustainable - duty demand - evidence of transportation of extra quantity of iron ore - impugned order set aside - appeal allowed

Penalty not sustainable where underlying duty demand is unsustainable - duty demand - evidence of transportation of extra quantity of iron ore - Whether the penalty imposed on the appellant could be sustained in view of the viability of the underlying duty demand. - HELD THAT: - The Tribunal recorded that there was no evidence of transportation of any extra quantity of iron ore by the carriers relied upon. On that basis it concluded that a duty demand under the Finance Act, 1994 could not be sustained. Given that the duty demand itself was held to be unsustainable, the consequential penalty imposed on the manufacturing units and on the appellant as authorised signatory could not be maintained. The Tribunal therefore set aside the penalty and allowed the appeals.

Penalty set aside and appeals allowed as the underlying duty demand was unsustainable for want of evidence of transportation of extra quantity of iron ore.

Final Conclusion: The impugned order imposing penalty is set aside and the appeal is allowed, because the Tribunal found no evidence to sustain the duty demand and consequently the penalty was held to be unsustainable.

Cenvat credit of input service - credit where duty/tax has been paid by supplier - supplementary invoice treated as escalated price - reopening assessment at recipient's end - invocation of extended period of limitation in absence of mens rea

Cenvat credit of input service - credit where duty/tax has been paid by supplier - supplementary invoice treated as escalated price - Admissibility of Cenvat credit in respect of compensation (supplementary invoice/escalated price) paid to the service provider where the service provider has discharged the service tax liability. - HELD THAT: - The Tribunal applied the settled principle that a recipient is entitled to take credit of duty/tax which has been paid by the supplier. Reliance was placed on the Apex Court's decision in CCE v. MDS Switchgear Ltd. and subsequent clarifications and tribunal decisions holding that supplementary or escalated invoices, raised in pursuance of the contractual arrangement and on which duty has been paid by the supplier, constitute adjuncts to the value of services/goods received and entitle the recipient to Cenvat credit. The compensation paid in the present case was held to be the enhanced value for services actually received; the service provider had discharged the liability. Accordingly, denial of credit on that ground was not sustainable. [Paras 6, 7, 8]

Cenvat credit cannot be denied where the supplier/service provider has paid the duty on the supplementary/escalated amount; the credit availed by the appellant is admissible.

Reopening assessment at recipient's end - invocation of extended period of limitation in absence of mens rea - Validity of reopening assessment and invocation of the extended period of limitation at the recipient's end where there is no mens rea or malafide to evade duty. - HELD THAT: - The Tribunal concluded that there was no apparent mens rea or intention on the part of the appellant to evade duty, since the duty in question had already been paid by the service provider. In such circumstances the Department was not entitled to invoke the extended period of limitation based on alleged suppression or misrepresentation. The show cause notice, therefore, suffered from limitation and the assessment could not be validly reopened against the recipient merely because of a supplementary claim by the supplier. [Paras 9]

Extended period of limitation cannot be invoked; the show cause proceedings are time-barred in the absence of mens rea, and the assessment reopening at the recipient's end is not sustainable.

Final Conclusion: The order under challenge is set aside; the appellant's Cenvat credit in respect of the compensation/supplementary amount is upheld and the appeal is allowed.

Levy of oil cess under Oil Industries Development Act - classification of condensate vis-a -vis crude oil for excise/cess liability - time-bar/limitation under Section 11A(1) of the Central Excise Act - charging section to be construed strictly; tax cannot be imposed by implication - inapplicability of Central Excise classification to expand OIDA levy without express statutory mention - need for chemical testing/expert opinion to determine classification

Classification of condensate vis-a -vis crude oil for excise/cess liability - levy of oil cess under Oil Industries Development Act - inapplicability of Central Excise classification to expand OIDA levy without express statutory mention - need for chemical testing/expert opinion to determine classification - Whether oil cess and related duties (NCCD, education cesses) are leviable under OIDA and allied enactments on the condensate recovered during processing of natural gas. - HELD THAT: - The Tribunal held that the product recovered during surface processing is condensate as defined in the Petroleum and Natural Gas Rules and not crude oil. OIDA imposes cess only on specified items (crude oil and natural gas); condensate is not specifically listed. Reliance on Central Excise classification or administrative letters treating condensate as crude oil for other purposes (such as royalty) cannot be used to expand the scope of OIDA by implication. Given the distinct physical and chemical characteristics of condensate as compared to crude oil, the Department ought to have procured and produced expert chemical test reports before concluding that condensate is crude oil; absence of such testing and non-provision of test reports violated principles of fair adjudication. Construing the charging provision strictly and not by implication, the Tribunal concluded that oil cess and attendant duties are not leviable on condensate produced during gas processing and set aside the demand on merits.

Oil cess and ancillary duties are not leviable on the condensate; the demand is set aside on merits.

Time-bar/limitation under Section 11A(1) of the Central Excise Act - charging section to be construed strictly; tax cannot be imposed by implication - Whether the demand in the show-cause notice (relating to the condensate) was barred by limitation for the period March, 2014 to October, 2014. - HELD THAT: - The Tribunal noted the show-cause notice invoked Section 11A(1) of the Central Excise Act read with Section 15 of OIDA but did not invoke any extended period of limitation. The demand alleged for the period March, 2014 to October, 2014 was therefore time-barred as per the law on limitation. The Tribunal relied on established principle that charging provisions must be strictly construed and that extension of limitation must be expressly invoked when applicable; absence of such invocation rendered the notice barred by time.

The demand for the period March, 2014 to October, 2014 is time-barred; the demand is not maintainable on limitation grounds.

Final Conclusion: The Tribunal allowed the appeal, holding that the condensate obtained during natural gas processing is not liable to oil cess or related cesses under OIDA (on merits) and that the demand for the stated period is time barred; the impugned order of the lower authority was set aside.

Classification of beverages under First Schedule / Harmonized System of Nomenclature - distinction between lemonade (aerated/mineral waters with flavouring) and fruit pulp/fruit juice based drinks - common parlance test - precedential effect of Larger Bench decision - penalty for misclassification and liability of company and responsible officer

Classification of beverages under First Schedule / Harmonized System of Nomenclature - distinction between lemonade (aerated/mineral waters with flavouring) and fruit pulp/fruit juice based drinks - common parlance test - precedential effect of Larger Bench decision - Nimbu Masala Soda (IIMP Masala Soda 7 UP) is correctly classifiable as a fruit pulp or fruit juice based drink (Tariff Item No. 22029029) and not as lemonade (Tariff Item No. 22021020). - HELD THAT: - The Tribunal applied the Larger Bench's final order which examined interpretation rules, the First Schedule, and supporting regulatory definitions, and applied the common parlance test. The Larger Bench held that products classifiable under 22021020 must be essentially waters (including mineral/aerated waters) with flavouring elements such as lime/lemon; where lemon is not merely a flavouring but constitutes the basis of a fruit drink, the product falls under 22029029. The impugned product is the same as that considered by the Larger Bench (product of the earlier plant now taken over by the appellant). The adjudicating authority failed to apply the criteria that lemon juice in the product was used as a fruit juice basis rather than merely as a flavouring agent. In view of the Larger Bench precedent and identical factual matrix, the classification under 22029029 was accepted and the earlier order was set aside. [Paras 5, 6]

Order confirming classification under 22021020 set aside; product classified under 22029029.

Penalty for misclassification and liability of company and responsible officer - common parlance test - Penalties imposed on the company and on the plant accountant Shri Gopal Krishna Kasturi were unsustainable and are set aside. - HELD THAT: - Having accepted the Larger Bench's reasoning on classification and the application of the common parlance test, the Tribunal found no mala fide intention to evade duty. The record showed prior show cause notices on similar observations, indicating the issue was not a deliberate evasion. In these circumstances penal consequences against the company and the officer were held to have been wrongly imposed and therefore quashed. [Paras 7]

Penalties on the company and the plant accountant quashed.

Final Conclusion: Both appeals allowed; the adjudicatory order confirming duty liability and imposing penalties is set aside in view of the Larger Bench precedent and the factual identity of the product, with classification accepted under Tariff Item No. 22029029 and penal orders quashed.

NCCD is in the nature of excise duty - Entitlement to benefit of exemption notification - Refund of amounts paid pursuant to impugned order

NCCD is in the nature of excise duty - Entitlement to benefit of exemption notification - Imposition of National Calamity Contingent Duty (NCCD) and attendant Education Cess and Secondary and Higher Education Cess under the order dated 7 September, 2016. - HELD THAT: - The Tribunal accepted the binding precedent of the Supreme Court in Civil Appeal Nos. 1600-1605 of 2018 which, following Bajaj Auto Limited v. Union of India, held that NCCD is in the nature of excise duty and therefore entitled to the benefit of the exemption notification. Applying that decision to the present appeal, the Tribunal held that the levy of NCCD under the impugned order must be set aside. Consequentially, amounts collected as Education Cess and Secondary and Higher Education Cess pursuant to the same order are also to be set aside. The Tribunal directed refund of amounts paid by the appellant within two months from submission of a copy of this order to the authority concerned, following the terms of the Supreme Court's order which mandated refund in similar appeals.

The demand for NCCD, and the consequential demands for EC and SHEC, under the order dated 7 September, 2016 are set aside and the amounts paid shall be refunded within two months from submission of a copy of this order.

Final Conclusion: Appeal allowed; the impugned order dated 7 September, 2016 is set aside in view of the Supreme Court's decision that NCCD is in the nature of excise duty and entitled to exemption; amounts paid shall be refunded within two months on production of this order.

Reversal of Cenvat credit on purchase of finished/semifinished goods - manufacture as defined in Section 2(f) of the Central Excise Act - exemption under Notification No. 5/2006-CE for goods with fly ash content - revenue neutrality of credit and output duty adjustment

Reversal of Cenvat credit on purchase of finished/semifinished goods - manufacture as defined in Section 2(f) of the Central Excise Act - revenue neutrality of credit and output duty adjustment - Whether the assessee was liable to have Cenvat credit demanded and recovered on procurements of finished/semifinished AC pressure pipes which were subsequently cleared on payment of duty, and whether the activity at the assessee's premises amounted to 'manufacture' so as to preclude reversal of credit. - HELD THAT: - The Tribunal examined the factual claims that the appellant procured semifinished/finished AC pressure pipes, undertook finishing operations (cutting, turning, simpering and testing) and cleared the goods on payment of duty. The adjudicating authority treated the procurements as outright purchases of finished goods and held that the appellant was not engaged in 'manufacture' so as to justify the Cenvat credit claimed. Having considered the matter, the Tribunal found the facts to be covered by earlier decisions of high courts cited by the appellant (Ajinkya Enterprises; Delta Corporation; Creative Enterprises) and concluded that the impugned demand could not be sustained. The Tribunal accepted that where the goods are cleared on payment of duty and the credit taken corresponds to the output duty paid, the position is revenue neutral, and that the appellant's activities fell within the scope of lawful processing/inspection as contemplated by the statutory definition of manufacture. On that basis the Tribunal set aside the demand, penalty and interest confirmed by the lower authorities.

Impugned order confirming demand, interest and penalty set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, setting aside the demand, interest and penalty imposed for the period 20th June 2006 to 7th July 2009, concluding that the facts were covered by the cited precedents and that reversal of Cenvat credit was not warranted in the circumstances.

Input tax credit - Input Service Distributor - registration of service provider - eligibility of credit on basis of documents - onus on service recipient to verify registration - remand for verification of registration and returns

Input Service Distributor - registration of service provider - eligibility of credit on basis of documents - remand for verification of registration and returns - Verification of whether input credit of service tax paid to Western Central Railway (distributed through the ISD) can be allowed where the service provider obtained registration only subsequently; remand to ascertain registration/return-filing and compliance of Western Railway. - HELD THAT: - The Tribunal found that it was necessary to ascertain the actual status of registration and statutory compliance of the service provider (Western Railway) before deciding the appellant's entitlement to input credit. Rather than deciding the eligibility on the record before the adjudicating authority, the Tribunal directed a remand so that the adjudicating authority may obtain verification from the Commissionerate where Western Railway is registered (Service Tax-I, Mumbai, Division-II, Range Group-X). The appellant was directed to assist and furnish any details it has. The Tribunal recorded that if Western Railway is found to have filed returns and complied with statutory requirements, the input credit could not be denied. The Tribunal left the question of limitation open for the adjudicating authority to consider. [Paras 10]

Appeal allowed by way of remand to the adjudicating authority to verify Western Railway's registration and return-filing; if returns/ compliance are established, input credit cannot be denied; appellant to assist; limitation issue left open.

Final Conclusion: The Tribunal remanded the matter to the adjudicating authority with directions to ascertain from the Commissionerate where Western Railway is registered whether Western Railway had obtained registration and filed returns; upon verification of such compliance the appellant's input credit should not be denied; the question of limitation was left open.

Residual waste not a manufactured product - excisability of residual waste - reversal of Cenvat credit under Rule 6(3)(i) of the Cenvat Credit Rules - treatment of fly ash as exempted goods for the purposes of Rule 6 - application of Rule 6 where both dutiable and exempted finished products are manufactured

Reversal of Cenvat credit under Rule 6(3)(i) of the Cenvat Credit Rules - excisability of residual waste - Whether the appellant was required to reverse Cenvat credit at the specified rate under Rule 6(3)(i) on the sale value of fly ash/coal ash arising from the captive thermal power plant. - HELD THAT: - The Tribunal held that fly ash/coal ash generated from burning coal in the captive thermal power plant is a residual waste and not a manufactured product. As such it is not an excisable article and excise duty does not attach to its sale. Rule 6(3)(i) of the Cenvat Credit Rules, which mandates reversal in specified situations, is inapplicable where the material in question is not a manufactured excisable product. The Tribunal followed earlier judicial precedents to conclude that no reversal under Rule 6(3)(i) was warranted in the facts of this case.

No reversal of Cenvat credit under Rule 6(3)(i) was required on the sale value of fly ash/coal ash; the impugned order directing reversal was set aside.

Treatment of fly ash as exempted goods for the purposes of Rule 6 - application of Rule 6 where both dutiable and exempted finished products are manufactured - Whether fly ash/coal ash can be treated as exempted goods for the purpose of Rule 6 of the Cenvat Credit Rules, thereby obliging reversal of credit. - HELD THAT: - The Tribunal reasoned that Rule 6 is directed to situations where a manufacturer produces both dutiable and exempted finished products, necessitating apportionment or reversal of credit. Fly ash, being a residual waste and not a manufactured or exempted finished product, does not fall within the scope of Rule 6. Consequently, treating fly ash as an exempted good to attract reversal under Rule 6 is legally unsustainable. The conclusion follows established case law relied upon by the appellant.

Fly ash/coal ash cannot be treated as exempted goods for the purposes of Rule 6; Rule 6 is inapplicable and no reversal is required.

Final Conclusion: The appeal is allowed; the impugned order directing reversal of Cenvat credit in respect of sale of fly ash/coal ash is set aside and consequential benefits granted to the appellant.

Dismissal for non-prosecution - restoration of appeal - refusal of adjournment - duty to prosecute appeal / due diligence in prosecution - ex parte adjudication for failure to reply - exercise of discretion in the interest of justice

Dismissal for non-prosecution - refusal of adjournment - duty to prosecute appeal / due diligence in prosecution - Whether the appeal should be dismissed for non-prosecution and whether a further adjournment should be granted. - HELD THAT: - The Tribunal recorded that after initiation of proceedings the appellant repeatedly sought adjournments and failed to take steps to prosecute the appeal on merits, including not filing a reply to the show cause notice despite time being granted by the original adjudicating authority, which led to an ex parte order. Although the Tribunal had previously restored the appeal as a liberal exercise in the interest of justice, the appellant thereafter persisted in seeking adjournments and did not avail the opportunity to represent its case. Having regard to the sustained pattern of delay and non appearance, the substantial duty involved, and the authority relied upon refusing adjournments in comparable circumstances, the Tribunal concluded that the appellant had not shown diligence or sufficient cause to justify further adjournment and therefore dismissal for non prosecution was warranted.

Appeal dismissed for non prosecution and the request for further adjournment refused.

Final Conclusion: Having repeatedly failed to prosecute the appeal despite restoration and opportunities, the Tribunal dismissed the appeal for non prosecution and refused the adjournment sought by the appellant.

Denial of Cenvat credit - limitation and extended period of limitation under the proviso to sub-section (1) of section 11A of the Central Excise Act, 1944 - knowledge of omission arising from departmental audit - remand to original authority for decision within the normal period - penalty not imposable where extended period is inapplicable

Limitation and extended period of limitation under the proviso to sub-section (1) of section 11A of the Central Excise Act, 1944 - knowledge of omission arising from departmental audit - penalty not imposable where extended period is inapplicable - Whether the demand and penalty for denial of Cenvat credit could be sustained when the show cause notice was issued about 26 months after the departmental audit. - HELD THAT: - The Tribunal noted that the show cause notice was issued after a gap of 26 months from the date of the audit. Relying on the reasoning of the Allahabad High Court in Commissioner of Central Excise & Service Tax v. Triveni Engg. & Industries Ltd., where it was held that issuance of a show cause notice after a gap exceeding 22 months from audit does not attract the proviso to sub-section (1) of section 11A unless there is a clear indication of suppression, fraud or deliberate evasion, the Tribunal found the same principle squarely applicable. The omission on the part of the appellant came to the department's notice during the audit and there was no finding of suppression or fraud to warrant invocation of the extended period. Consequentially, the demand confirmed beyond the normal limitation period could not be sustained, and since the extended period was not attracted the equal penalty could not be imposed.

Impugned demand and penalty set aside insofar as they relied on extended period; extended period inapplicable and equal penalty not imposable.

Remand to original authority for decision within the normal period - denial of Cenvat credit - Scope and effect of adjudication in respect of Cenvat credit for the normal period. - HELD THAT: - While the Tribunal set aside the confirmation founded on application of the extended limitation, it observed that the demand for a part of the period (four months) is covered by the normal period of limitation. The Tribunal remitted the matter to the original authority for fresh adjudication limited to the normal four-month period, thereby permitting decision on admissibility of the contested Cenvat credit only within the ordinary limitation framework.

Matter remanded to the original authority to decide inadmissible Cenvat credit for the normal period of four months.

Final Conclusion: The impugned order confirming denial of Cenvat credit and imposing equal penalty was set aside insofar as it relied on the extended period of limitation; no extended period or equal penalty applies, and the matter is remanded to the original authority to decide the admissibility of Cenvat credit for the normal four-month period.

Continuity of laws upon reorganisation of States - legal fiction of territorial references - power to adapt laws for successor States - construction of pre-existing laws to facilitate application - territorial extent of laws vis-A -vis successor States - inter-state trade v. intra-state trade - primacy of reorganisation statute notwithstanding other laws - constitutional effect of creation of new State under Article 3 - restriction on State taxation of inter-state sales (Article 286)

Continuity of laws upon reorganisation of States - legal fiction of territorial references - inter-state trade v. intra-state trade - power to adapt laws for successor States - primacy of reorganisation statute notwithstanding other laws - Whether exemption or deferment of sales tax granted to industrial units in unified Madhya Pradesh before reorganisation continued to operate across the successor States as if intra-state benefit for transactions between the reorganised Madhya Pradesh and Chhattisgarh - HELD THAT: - The Court held that the Reorganisation Act creates a limited legal fiction and continuity of pre-existing laws so that laws in force immediately before the appointed day continue to apply to the successor States, but this continuity does not obliterate the political and constitutional existence of the newly formed States. Sections 78 and 79 (and related provisions) preserve the operative force of laws and permit adaptations, and courts may construe pre-existing laws to facilitate their application to the two successor States without affecting substance. However, the deeming fiction in Section 78 must be confined to the purpose for which it was created and cannot be stretched to treat transactions between the two successor States as continuing intra-state transactions. On and from the appointed day transactions between Madhya Pradesh and Chhattisgarh are inter-state for constitutional and fiscal purposes; therefore exemption or deferment tied to intra-state sales cannot be read to cover inter-state sales merely because the exemption notification pre-dated the reorganisation. The Court rejected the contrary construction adopted in paragraphs 29-30 of Swarn Rekha Cokes and Coals Pvt. Ltd., observing that continuity of laws prevents a legal vacuum but does not negate the new States' separate status or override Article 286. Adaptation orders and the power to amend or adapt laws remain available to the appropriate Governments within the statutory period. [Paras 17, 18, 23, 24, 26]

Benefit of sales-tax exemption/deferment granted before the bifurcation does not operate so as to treat inter-State transactions between the reorganised State of Madhya Pradesh and the new State of Chhattisgarh as continuing intra-State transactions; the appeals by the States are allowed and the assessees' appeals are dismissed.

Power to adapt laws for successor States - construction of pre-existing laws to facilitate application - Whether claims that inter-state transactions might nevertheless qualify for benefits under the pre-existing exemption notifications were to be adjudicated in these proceedings - HELD THAT: - The Court noted that the argument that some inter-state transactions may be entitled to benefits under the exemption clauses was raised for the first time and not pleaded earlier. The Court declined to decide that issue on the present record and left it open for determination by the appropriate statutory authorities or courts in proper proceedings. The assessees remain free to raise that contention before the taxing authorities or in statutory appeals, and the authorities may examine entitlement afresh; in appropriate cases the assessees may seek condonation or exclusion of time for prosecution of appeals, having regard to these proceedings. [Paras 25]

The contention that certain inter-state transactions might be entitled to exemption was left open for adjudication in appropriate proceedings before the competent authorities or courts; no positive finding was recorded on that point.

Final Conclusion: The Court construes the Reorganisation Act as preserving continuity of pre-existing laws for successor States while confining the statutory deeming fiction to its legitimate purpose; it held that transactions between the reorganised State of Madhya Pradesh and the new State of Chhattisgarh are inter-state and not intra-state for sales-tax exemption purposes, allowed the States' appeals and dismissed the assessees' appeals, but left open the separate question whether particular inter-state transactions may nevertheless qualify for exemption for decision in appropriate proceedings.

Natural justice - reassessment under KVAT Act - moratorium under Insolvency and Bankruptcy Code - representation by Interim Resolution Professional - opportunity to file objections to proposition notice

Natural justice - reassessment under KVAT Act - moratorium under Insolvency and Bankruptcy Code - representation by Interim Resolution Professional - opportunity to file objections to proposition notice - Validity of reassessment framed during the moratorium period without providing the assessee an opportunity to file objections and to place books of accounts. - HELD THAT: - The Court noted that reassessment proceedings under the Karnataka Value Added Tax Act were initiated and concluded while the company was under a moratorium under the Insolvency and Bankruptcy Code and while the board was suspended. Although books of account were represented to have been furnished by an Accounts Officer acting for the Interim Resolution Professional, the principles of natural justice require that the petitioner be given an opportunity to file objections to the proposition notice and to place its claim. In view of the concurrent insolvency proceedings before the NCLT and the appellate forum, and the peculiarity of representation by the IRP, the Court found that the reassessment could not stand without affording the petitioner that opportunity. Consequently, the impugned order was set aside and the matter remitted to the prescribed authority for re-adjudication after hearing the petitioner, with specific timelines for filing objections and completion of assessment. [Paras 4, 5, 7, 8]

Impugned reassessment order set aside; matter restored to the prescribed authority to redo the assessment after giving the petitioner opportunity to file objections and be heard, with directions on timelines.

Final Conclusion: Writ petition allowed in part: reassessment order quashed and remitted for fresh consideration after affording the petitioner an opportunity to file objections and be heard; directions issued for expeditious completion of reassessment.

Re-assessment under Section 39(1) of the KVAT Act - classification under residuary entry - interpretation of entry No.2 of Schedule III - "all kinds of bricks" - common parlance test - statutory appellate remedy - independent decision by statutory authority

Classification under residuary entry - interpretation of entry No.2 of Schedule III - "all kinds of bricks" - common parlance test - Legitimacy of concluding that paver bricks are taxable at the residuary rate (14.5%) rather than under entry No.2 of Schedule III - HELD THAT: - The Court examined the Division Bench decision in H.H. Cement Products which interpreted the phrase "all kinds of bricks" in entry No.2 of Schedule III and applied the common parlance test, noting that the phrase is followed by "the like" and that the expression could not be stretched to include paver bricks. The High Court observed that that Division Bench ruling remains a binding pronouncement of this Court and was not set aside by the Supreme Court; the Supreme Court had only permitted the assessee to withdraw and approach the statutory authorities, leaving the Division Bench's reasoning intact. Consequently, reassessment proceedings concluded by classifying paver bricks under the residuary entry were not shown to be vitiated by any order nullifying the Division Bench decision. [Paras 2, 10, 11]

Finding that, insofar as the Division Bench decision forms the basis for classifying paver bricks under the residuary entry, that decision was not nullified and the reassessments are not rendered automatically unsustainable by any order of the Supreme Court.

Re-assessment under Section 39(1) of the KVAT Act - statutory appellate remedy - independent decision by statutory authority - Availability and scope of statutory remedy following reassessment and the effect of the Supreme Court's direction to approach statutory authorities - HELD THAT: - The Court held that the petitioners retain the statutory remedy and are at liberty to approach the appellate statutory authorities and produce additional evidence. The Supreme Court's order, which permitted withdrawal with liberty to approach statutory authorities, was construed as not setting aside the High Court's Division Bench ruling but as leaving the statutory authorities free to take an independent view. Therefore, the proper course is to pursue the prescribed statutory appeal process where the authorities must consider any appeal on merits without being influenced by the Division Bench judgment. [Paras 4, 6, 12]

Petitioners must pursue the statutory appellate remedy; they are granted liberty to file an appeal and the statutory authorities are directed to decide the same independently on merits.

Statutory appellate remedy - independent decision by statutory authority - Directions and temporal limitation for filing appeal to statutory authorities - HELD THAT: - The Court exercised its supervisory jurisdiction to afford the petitioners a limited period to invoke the statutory remedy: if an appeal is filed within four weeks from receipt of certified copy of the order, the statutory authorities are to consider it on merits without being influenced by the Division Bench ruling. This is a direction to enable adjudication by the statutory appellate forum rather than a final determination on the merits by the High Court. [Paras 12]

Writ petitions disposed with direction that petitioners may file statutory appeal within four weeks and that such appeal shall be decided on merits independently by the statutory authorities.

Final Conclusion: Writ petitions dismissed with liberty to the petitioners to file statutory appeals within four weeks; the statutory authorities are directed to consider the appeals on merits and independently, and the Division Bench decision in H.H. Cement Products was not set aside by the Supreme Court and does not preclude the statutory authorities from taking their own view.

Applicability of Section 14 of the Central Sales Tax Act, 1956 - Interpretation of Entry 30 of Part II of Schedule II of the Madhya Pradesh VAT Act, 2002 - Construction of the phrase "as specified in Section 14 ... except those mentioned elsewhere in this Schedule" - Review petition filed pursuant to Supreme Court permission within prescribed period

Review petition condonation - Supreme Court direction permitting review within eight weeks - I.A. No.946/2019 for condonation of delay in filing the review petition entertained and disposed of. - HELD THAT: - The Special Leave Petition before the Supreme Court permitted the petitioners to approach the High Court by way of a review petition if filed within eight weeks from 3.1.2019 and directed that such review petition be decided on merits. The review petition was filed within the eight-week period specified by the Supreme Court and therefore the application for condonation of delay is disposed of and the review petition is entertained on merits.

I.A. No.946/2019 disposed of; review petition entertained as filed within the period permitted by the Supreme Court.

Applicability of Section 14 of the Central Sales Tax Act, 1956 - Interpretation of Entry 30 of Part II of Schedule II of the Madhya Pradesh VAT Act, 2002 - Scope of reference "as specified in Section 14 ... except those mentioned elsewhere in this Schedule" - Reference to Section 14 of the Central Sales Tax Act, 1956 in Entry 30 of Part II of Schedule II of the Madhya Pradesh VAT Act, 2002 is not an error and applies to the entirety of Entry 30. - HELD THAT: - Entry 30 contains the phrase "as specified in Section 14 of the Central Sales Tax Act, 1956 except those mentioned elsewhere in this Schedule" following the enumerated clauses (i) to (viii). The presence of a comma after clause (viii) and the grammatical construction indicate that the reference to Section 14 is disjunctive from clause (viii) and operates for the whole of Entry 30, not solely for clause (viii). This construction is further supported by the legislative chronology: clauses (i) to (viii) of Entry 30 were incorporated in Schedule II of the Madhya Pradesh VAT Act, 2002 from its inception, whereas the specific mention of LPG was inserted into Section 14 of the Central Sales Tax Act by amendment only later. On this basis the High Court's use of Section 14 as an aid to interpret Entry 30 was justified and not an error on the face of the record.

The challenge to the High Court's reliance on Section 14 is rejected; the reference to Section 14 is valid for the whole of Entry 30 and the petition fails.

Final Conclusion: The application for condonation is disposed of and the review petition was entertained as timely; on merits the High Court correctly construed Entry 30 to import Section 14 of the Central Sales Tax Act, 1956 for the entire entry, the challenge to that construction is rejected and the petition is dismissed with no costs.

Alternate remedy - Writ jurisdiction under Article 226 - Exhaustion of statutory remedies - Strict application of alternate remedy in fiscal matters - Relegation to statutory appeal to the Tribunal - Discretionary refusal to entertain writ petition

Alternate remedy - Writ jurisdiction under Article 226 - Strict application of alternate remedy in fiscal matters - Relegation to statutory appeal to the Tribunal - Whether the High Court should exercise writ jurisdiction under Article 226 to entertain challenge to the first appellate authority's order or relegate the petitioner to the statutory appeal to TNSTAT. - HELD THAT: - The Court held that the petitioner, having a statutory remedy of appeal to the Tamil Nadu Sales Tax Appellate Tribunal (TNSTAT) under Section 58 of the TNVAT Act, must be relegated to that remedy. The availability of conditions for preferring a statutory appeal (for example, payment of any balance tax) does not by itself justify bypassing the alternate remedy. A prior dismissal by TNSTAT in respect of a different assessment year cannot be used to circumvent the statutory remedy; the petitioner could have pursued the pending Tax Case Revision and any resultant finding would bind the Tribunal. The contention that a case law relied upon before the first Appellate Authority was not considered is a matter fit for argument and examination in the regular statutory appeal, since it requires review of the appellate record. The Supreme Court decision in Steel Authority of India was found distinguishable on facts, as that case involved a concluded failure of application of mind by the first appellate authority. The Court relied on the principle in United Bank of India v. Satyawati Tondon, reiterated in K.C. Mathew, that alternate statutory remedies must be applied with greater rigour in fiscal matters, and therefore discretion to entertain a writ should be sparingly exercised. The Court expressly declined to express any opinion on the merits and left all questions open for consideration by TNSTAT if the petitioner avails the statutory appeal. [Paras 7, 8]

Writ petition dismissed and petitioner relegated to file a regular statutory appeal to TNSTAT; merits left open.

Final Conclusion: The writ petition challenging the first appellate authority's order is dismissed without expressing any view on the merits; the petitioner is relegated to the statutory appeal to TNSTAT and all questions are left open for that forum.

Principles of natural justice - opportunity of hearing - reopening of assessment under Section 25 - reassessment of escaped turnover - judicial review under Article 226 - tax levy requires authority of law (Article 265) - remand for fresh consideration

Principles of natural justice - opportunity of hearing - reopening of assessment under Section 25 - reassessment of escaped turnover - tax levy requires authority of law (Article 265) - remand for fresh consideration - Ext.P7 dated 15.01.2019 is vitiated by breach of principles of natural justice and requires interference. - HELD THAT: - The petitioner, facing reassessment under Section 25 for assessment year 2012-13, sought specific departmental details and an opportunity to be heard by replies Ext.P3 and Ext.P5. The department supplied the requested data (Ext.P4), but nevertheless finalised assessment in Ext.P7 with adverse findings on the subcontract payments and Form 20H without affording the petitioner the hearing it had repeatedly sought. The second respondent contended that the notice and the petitioner's earlier replies sufficed, but the Court held that where a party requests further opportunity to reconcile disputed data after receiving departmental details, the authorities must afford that hearing before recording final adverse findings. The onus to demonstrate adequate procedural fairness lies on the respondents; in the present case the record shows that the petitioner's requests for hearing were not accepted and findings were recorded on Form 20H without giving the petitioner a chance to be heard, thereby prejudicing its rights and rendering the assessment vitiated. The Court therefore found the denial of such opportunity to have vitiated Ext.P7 and remitted the matter for fresh consideration in accordance with law. [Paras 11, 12, 13, 14]

Ext.P7 is set aside and the matter is remitted to the second respondent for fresh consideration and disposal after affording the petitioner an opportunity of hearing; directions issued for the petitioner to appear before the second respondent on 16.07.2019 (or another intimated date) and for completion of the assessment on or before 30.07.2019.

Final Conclusion: Ext.P7 (order dated 15.01.2019) is quashed for breach of principles of natural justice; the assessment is remitted for fresh disposal after affording the petitioner the hearing it sought, in accordance with the directions given by the Court.