TaxTMI Updates e-Newsletter
Jul 13,2022

Principles of natural justice - adjournment application and right to opportunity of hearing - assessment under Section 74 of the U.P. GST Act - rectification under Section 161 of the U.P. GST Act - quashing of orders and remittal for fresh consideration

Principles of natural justice - adjournment application and right to opportunity of hearing - assessment under Section 74 of the U.P. GST Act - Impugned assessment order dated 31.03.2022 was passed in breach of the principles of natural justice by rejecting the petitioner's first adjournment application and proceeding to assess liability for the period April 2018-March 2019 (F.Y. 2018-19). - HELD THAT: - The record shows the first notice was issued on 15.03.2022 allowing 15 days to reply in respect of the alleged unverified transaction. The petitioner filed, on 30.03.2022, its first online application for a 15 day adjournment to submit a reply. The cause shown for the adjournment was not disbelieved by the assessing officer, yet the adjournment was rejected and the assessing officer proceeded to pass the impugned order under Section 74. In these circumstances the order was passed in gross breach of the requirement to afford a reasonable opportunity of hearing and to consider a bona fide first adjournment application before making an adverse assessment. [Paras 4, 5]

Impugned assessment order dated 31.03.2022 quashed for breach of the principles of natural justice.

Rectification under Section 161 of the U.P. GST Act - quashing of orders and remittal for fresh consideration - adjournment application and right to opportunity of hearing - Rectification order dated 11.04.2022 under Section 161, which followed the impugned assessment, was also vitiated and the matter was remitted for fresh consideration after affording opportunity to the petitioner. - HELD THAT: - Because the original assessment was quashed for failure to afford the petitioner a fair opportunity to be heard, the subsequent rectification order could not stand. The court set aside both the assessment and the rectification orders and remitted the matter to the assessing authority to pass a fresh order in accordance with law, directing that the petitioner be given reasonable time to submit a reply and a reasonable opportunity of hearing before any fresh adverse adjudication is made. [Paras 3, 6]

Impugned rectification order dated 11.04.2022 quashed; matter remitted to respondent No.2 for fresh decision after giving reasonable time and opportunity to the petitioner.

Final Conclusion: Both the assessment order dated 31.03.2022 under Section 74 and the rectification order dated 11.04.2022 under Section 161 of the U.P. GST Act are quashed for breach of natural justice; the matter is remitted to the assessing authority to decide afresh for the tax period April 2018-March 2019 (F.Y. 2018-19) after affording the petitioner reasonable time to file a reply and a hearing.

Prematurity of demand notice - show cause notice - adjudication of refund claim founded on forged input tax credit - appeal pending - protection of revenue interest - recourse to Section 75 of the CGST Act and attendant rules

Prematurity of demand notice - adjudication of refund claim founded on forged input tax credit - appeal pending - recourse to Section 75 of the CGST Act and attendant rules - Impugned demand notice dated 14.06.2022 set aside as premature in view of the pending appeal against the adjudication order rejecting the refund claim. - HELD THAT: - The adjudicating authority had earlier rejected the petitioner's refund claim on the ground that it was founded on forged input tax credit; an appeal against that adjudication was pending. The demand notice impugned in this petition was issued to protect revenue interests but was issued under Section 73(5) and Rule 142(1A) while the correctness of the underlying adjudication remained under challenge on appeal. Given that the appeal could, if dismissed, permit the revenue to proceed under Section 75 and the attendant rules, the Court held that issuance of the present demand notice at this stage was premature. The Court therefore set aside the demand notice with liberty to the respondent to trigger proceedings under Section 75 and the relevant rules after the pending appeal attains finality. [Paras 7, 8]

Demand notice dated 14.06.2022 is set aside as premature; respondent may proceed under Section 75 and attendant rules after the pending appeal is adjudicated.

Final Conclusion: Writ petition disposed of by setting aside the impugned demand notice as premature, with liberty to the respondent to initiate action under Section 75 of the CGST Act and the attendant rules once the pending appeal against the adjudication order is finally disposed of.

Cancellation and revocation of GST registration - limitation and extension of period for revocation - effect of Suo Moto orders excluding limitation (COVID-19) - wrong remedy treated as application for revocation - continuing statutory liabilities despite restoration of registration - exercise of writ jurisdiction under Article 226

Cancellation and revocation of GST registration - limitation and extension of period for revocation - effect of Suo Moto orders excluding limitation (COVID-19) - wrong remedy treated as application for revocation - Whether the petitioner's appeal filed on 20.11.2021 can be treated as an application for revocation filed within time having regard to the exclusion of the limitation period by the Suo Moto orders and thereby entitle the petitioner to restoration of registration. - HELD THAT: - The Court found that registration was cancelled on 02.02.2021 and that Section 30 prescribes 30 days (with possible further 30 days extension) to apply for revocation. Applying the Suo Moto orders of the Supreme Court excluding the period from 15.03.2020 to 28.02.2022 for limitation purposes, the Court held that the limitation for filing applications under Section 30 must be read as extended so that the petitioner had time up to 28.05.2022 to file a revocation application. The petitioner had filed an appeal on 20.11.2021 challenging cancellation; the Court treated that filing as a bona fide availing of an incorrect remedy and directed that if a fresh application for revocation is filed within seven days of receipt of certified copy of the judgment, it shall be treated as one filed on 20.11.2021 and therefore within time. The Court relied on the purposive application of the exclusion of limitation and the practical difficulty caused by the pandemic to permit consideration of the petitioner's plea despite the procedural irregularity in the form of remedy initially adopted.

Petition allowed to the extent that a fresh application for revocation filed within seven days shall be treated as filed on 20.11.2021 and dealt with as within time in light of the Suo Moto exclusion of limitation.

Continuing statutory liabilities despite restoration of registration - exercise of writ jurisdiction under Article 226 - Whether restoration of registration by the Court would absolve the petitioner of statutory liabilities arising from cancellation, non-filing of returns and non-payment of tax. - HELD THAT: - The Court expressly clarified that although it directed that the revocation application be treated as within time and the registration considered for restoration, such restoration would not extinguish or nullify statutory consequences arising from the cancellation, belated filing of returns or non-payment of tax. The Court emphasised that all legal consequences under the GST Acts and Rules, including liabilities and penalties, would continue to operate notwithstanding the directions for restoration, and that the authority may proceed to determine liabilities and impose penalties in accordance with law.

Restoration, if ordered pursuant to the treated-as-within-time application, will not absolve the petitioner of any statutory liabilities; such liabilities and consequences shall continue to operate.

Final Conclusion: Writ petition allowed: petitioner permitted to file a fresh application for revocation within seven days, which shall be treated as filed on 20.11.2021 and considered as within time by reason of the Suo Moto exclusion of limitation; however, any statutory liabilities, consequences of cancellation, belated returns or tax defaults remain operative and may be enforced in accordance with law.

Principle of natural justice - opportunity of personal hearing - setting aside order for procedural infirmity - remand for fresh adjudication

Principle of natural justice - opportunity of personal hearing - setting aside order for procedural infirmity - remand for fresh adjudication - Impugned order passed without granting the petitioner an opportunity of personal hearing despite a specific request, amounting to breach of the principle of natural justice. - HELD THAT: - The Court found on the record that the petitioner had specifically requested a personal hearing in its reply dated 1st March, 2022, and that the impugned order dated 9th March, 2022 contains no indication that such a hearing was afforded or that the request was considered or rejected. The respondents did not dispute this position. In view of this procedural deficiency, the Court did not examine the merits of the underlying show-cause notice or order but held that the failure to grant the requested personal hearing constituted a violation of the principle of natural justice. The appropriate remedy, in the circumstances, is to set aside the impugned order and remit the matter to the concerned officer for fresh adjudication after giving the petitioner an opportunity of personal hearing within a stipulated timeframe.

Impugned order set aside for breach of natural justice and matter remanded to the officer concerned for fresh decision after granting a personal hearing within four weeks.

Final Conclusion: Writ petition allowed to the extent that the impugned order is quashed on procedural grounds; matter remitted for fresh adjudication after providing the petitioner an opportunity of personal hearing within four weeks, with no adjudication on merits by this Court.

Classification under SAC 9994 / Group 99943 (waste treatment and disposal services) - Pure services - Exemption under Notification No.12/2017 (SI.No.3) for activities relating to functions entrusted to a municipality under Article 243W - Governmental authority (set up by State Legislature / government control) - Functions entrusted under Article 243W (public health, sanitation and solid waste management; protection of environment) - Amendment by Notification No.16/2021 - exclusion of Governmental Authority/Government Entity from SI.No.3 w.e.f. 01.01.2022

Classification under SAC 9994 / Group 99943 (waste treatment and disposal services) - Solid Waste Management - Classification of the services provided by the applicant for processing and disposal of legacy municipal solid waste through bio-remediation and bio-mining. - HELD THAT: - On examination of the nature and scope of the applicant's activity - removal, segregation, treatment, recycling/diversion for recycling and safe disposal of residues, reclamation of landfill and handing over reclaimed land - the Authority found that the predominant character of the supply is environmental protection in the form of waste treatment and disposal. The services do not involve transfer of goods to the recipient and are accordingly service supplies. The Authority concurred with the applicant's classification that the services fall within Heading 9994 and specifically under the Group for waste treatment and disposal services (Group 99943) in the Annexure to Notification No.11/2017 (Central Tax (Rate)).

Services are classified under SAC 9994 (Group 99943 - waste treatment and disposal services).

Pure services - Exemption under Notification No.12/2017 (SI.No.3) for activities relating to functions entrusted to a municipality under Article 243W - Governmental authority (set up by State Legislature / government control) - Amendment by Notification No.16/2021 - exclusion of Governmental Authority/Government Entity from SI.No.3 w.e.f. 01.01.2022 - Whether the services provided to Tirumala Tirupati Devasthanams (TTD) are exempt under SI.No.3 of Notification No.12/2017 as amended. - HELD THAT: - The Authority addressed three constituent conditions of SI.No.3: (i) the services are "pure services" - it found no incorporation of goods in the supply and accepted the applicant's contention that the activity is purely a service; (ii) the recipient is a "Governmental authority" - having examined the statutory constitution, board appointment and control of TTD under the Andhra Pradesh Charitable & Hindu Religious Institutions and Endowments Act (1987), the Authority held that TTD is an authority set up by State legislation and subject to government control, satisfying the definition of "Governmental authority"; and (iii) the activity relates to functions entrusted to a municipality under Article 243W - the work (public health, sanitation, conservancy and solid waste management; protection of environment) falls within the Twelfth Schedule entries. However, the Authority noted that Notification No.12/2017 (SI.No.3) was amended by Notification No.16/2021 which omitted the words "or a Governmental authority or a Government Entity" from Serial No.3 w.e.f. 01.01.2022, thereby withdrawing exemption for services provided to a Governmental Authority/Entity. Applying the amended position, the Authority concluded that such supplies to a Governmental Authority would no longer be exempt from January 1, 2022 and would attract GST as per the Services Rate Notification.

The services, though pure and provided to a recipient qualifying as a Governmental Authority and relating to municipal functions, are not exempt under SI.No.3 of Notification No.12/2017 insofar as the exemption has been withdrawn for supplies to Governmental Authorities/Entities by Notification No.16/2021 effective 01.01.2022.

Final Conclusion: The Authority ruled that the applicant's bio-remediation and bio-mining services for legacy municipal solid waste are classifiable under SAC 9994 (Group 99943 - waste treatment and disposal services). Although the services are "pure services" and the recipient (TTD) qualifies as a Governmental Authority and the activity falls within municipal functions under Article 243W, the exemption under SI.No.3 of Notification No.12/2017 was amended by Notification No.16/2021 to exclude Governmental Authorities/Entities; consequently, the services are not exempt under SI.No.3 as amended.

Scope of supply - consideration - business (inclusive definition) - pure services - composite supply involving goods and services - exemption under Notification No.12/2017 (Entry 3 and 3A)

Scope of supply - consideration - business (inclusive definition) - Procurement and distribution of drugs, medicines and surgical equipment by APMSIDC on behalf of the State Government amounts to 'supply' under Section 7 of the CGST/SGST Acts. - HELD THAT: - The Authority examined whether the procurement and distribution activity by APMSIDC constitutes a supply under the inclusive definition in the Act. The Act requires (i) supply of goods or services, (ii) for a consideration, and (iii) in the course or furtherance of business. The applicant itself procures goods through tenders and invoices are required to be raised in the name of MD, APMSIDC, showing that goods are purchased and billed under GST rules. The features relied on by the applicant - no profit/no loss, absence of commercial interest, reimbursement by Government, and lack of intent to carry on business - do not exclude an activity from 'business' because the statutory definition of business is inclusive and covers activities even if not for pecuniary benefit. The concept of consideration as defined in the Act includes payments made by any person in respect of supply; accordingly the receipts linked to procurement and handling qualify as consideration. Applying these parameters to the material facts, the procurement and distribution undertaken by APMSIDC satisfy the requirements of supply under Section 7 and thus fall within the scope of the Act.

Procurement and distribution by APMSIDC is a 'supply' under Section 7.

Pure services - composite supply involving goods and services - exemption under Notification No.12/2017 (Entry 3 and 3A) - Establishment charges received by APMSIDC from the State Government are not exempt under Entry 3 or 3A of Notification No.12/2017-Central Tax (Rate). - HELD THAT: - The Authority analysed whether the establishment charges constitute 'pure services' eligible for exemption under Entry 3/3A. The applicant argued that charges are for services (handling/monitoring) and no profit on goods is earned. The Authority found, however, that the principal activity is procurement and supply of goods and the handling/monitoring is ancillary; therefore the transaction involves both goods and services and cannot be characterised as pure services. Further, Notification No.16/2021 amending the exemption notification (effective 01.01.2022) excludes supplies to governmental authority/entity from the exemption, but the Authority's determinative finding is that the transaction is not a pure service because of clear involvement of goods. Consequently the establishment charges do not qualify for exemption under Entry 3 or 3A.

Establishment charges are not eligible for exemption under Entry 3 or 3A of Notification No.12/2017.

Final Conclusion: The Authority ruled that APMSIDC's procurement and distribution activities constitute a 'supply' under Section 7 of the CGST/SGST Acts, and that the establishment charges received from the State Government are not exempt under Entry 3 or 3A of Notification No.12/2017-Central Tax (Rate).

Sale of land treated neither supply of goods nor supply of services (Schedule III para 5) - Contractual obligation to refrain, tolerate or do an act treated as supply of services (Schedule II para 5(e)) - Value of taxable supply includes interest or late fee (Section 15(2)(d)) - Interest on credit facility as part of taxable consideration

Sale of land treated neither supply of goods nor supply of services (Schedule III para 5) - Contractual obligation to refrain, tolerate or do an act treated as supply of services (Schedule II para 5(e)) - Value of taxable supply includes interest or late fee (Section 15(2)(d)) - Interest on credit facility as part of taxable consideration - Taxability of interest receivable on the balance land cost collected in annual instalments - HELD THAT: - The Authority examined the nature of the transaction between the applicant and beneficiaries. While sale of land is included in Schedule III para 5 as neither a supply of goods nor a supply of services, the agreement between APIIC and beneficiaries was found to fall within Schedule II para 5(e) as a contract whereby the beneficiary agrees to an obligation (to pay instalments with interest). The applicant provided a credit facility by allowing payment of 75% of the consideration in instalments at 16% p.a., with moratorium and scheduled payments. Under Section 15(2)(d) the value of a taxable supply includes interest or late fee or penalty for delayed payment of any consideration for any supply. Applying this principle, the interest component arising from the credit facility and the agreed instalment payments forms part of the taxable value of the supply and is therefore liable to GST.

The interest amount receivable on the annual instalments fixed by the applicant is taxable under GST as part of the value of the supply.

Final Conclusion: The Authority rules that the interest charged on the deferred instalments of the land consideration constitutes part of the taxable consideration and is liable to GST.

Services relating to cultivation of plants and rearing of all life forms of animals - renting or leasing of vacant land - animal husbandry - lease, tenancy, licence to occupy land is a supply of services - real estate services (HSN 9972) - taxable at 18% under HSN 9972

Services relating to cultivation of plants and rearing of all life forms of animals - animal husbandry - Whether fish/prawn farming carried out on the leased wet land falls within 'rearing of all life forms of animals' under the exemption at SI.No.54 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017. - HELD THAT: - The Authority examined the scope of the entry which covers 'cultivation of plants' and 'rearing of all life forms of animals'. It held that the entry is directed to agricultural operations and animal husbandry - activities involving rearing, breeding and raising animals for commercial products such as meat, milk, eggs, fibre etc. The processes and operations listed in the notification (eg., cultivation, harvesting, tending, pruning, drying, cleaning) are not carried out on the vacant land used for fish/prawn farming. On this basis the Authority concluded that fish/prawn farming, as carried out on the leased wet land in the present case, does not fall within the agricultural operations or the listed processes and therefore does not qualify as 'rearing' under the exemption entry. [Paras 7]

Fish/prawn farming on the leased wet land is not covered by the exemption for 'rearing of all life forms of animals' under SI.No.54 of Notification No.12/2017-Central Tax (Rate).

Renting or leasing of vacant land - lease, tenancy, licence to occupy land is a supply of services - real estate services (HSN 9972) - taxable at 18% under HSN 9972 - Whether the lease of the vacant wet land qualifies for the exemption in SI.No.54(d) and, if not, the applicable classification and rate. - HELD THAT: - The Authority reviewed the lease agreement and observed that it contains no specific stipulation that the land is leased for agricultural use or for rearing of animals; it is an open-ended commercial leasing arrangement. Schedule II treats lease, tenancy or licence to occupy land as a supply of services. Given the absence of any explicit purpose in the agreement linking the lease to the agricultural/rearing activities enumerated in SI.No.54, the condition in SI.No.54(d) is unmet. Consequently the lease is not eligible for the exemption and is classifiable under real estate services (HSN 9972). The Authority ruled that the supply is taxable at the rate specified for rental/leasing services under Sl. No.16 of HSN 9972 in Notification No.11/2017-Central Tax (Rate). [Paras 7]

The lease of the vacant land is not eligible for exemption under SI.No.54 and is taxable as real estate rental/leasing service under HSN 9972 at 18%.

Final Conclusion: Advance Ruling: The lease of the wet land for fish/prawn farming is not exempt under SI.No.54 of Notification No.12/2017 and is taxable as real estate rental/leasing services under HSN 9972 at 18%.

Services relating to admission to, or conduct of, examination by an educational institution - exemption under Notification No.12/2017-CGST (Serial Number 66) - definition of "educational institution" as providing education forming part of a recognised curriculum - supply to an educational institution

Services relating to admission to, or conduct of, examination by an educational institution - exemption under Notification No.12/2017-CGST (Serial Number 66) - supply to an educational institution - Printing of pre-examination items (question papers, OMR sheets, answer booklets) supplied to educational institutions engaged in conduct of examinations is exempt as a service under Serial Number 66 of Notification No.12/2017-CGST (Rate). - HELD THAT: - The Authority examined the nature of the applicant's supplies and the text of Entry 66 which exempts services relating to admission to, or conduct of, examinations when provided to an educational institution as defined in the notification. The educational institutions for whom the applicant supplies pre-examination materials fall within the notification's definition (education as part of a curriculum for a recognised qualification). The printing of pre-examination materials is integrally connected to the conduct of examinations and, when supplied to such institutions, falls within the exemption under Serial Number 66. The Authority therefore concurs with the applicant's interpretation and treats the said activity as an exempt supply of service. [Paras 7]

Printing of pre-examination items supplied to educational institutions for conduct of examinations is exempt under Serial Number 66 of Notification No.12/2017-CGST (Rate).

Services relating to admission to, or conduct of, examination by an educational institution - exemption under Notification No.12/2017-CGST (Serial Number 66) - definition of "educational institution" as providing education forming part of a recognised curriculum - Printing of post-examination items (marks cards, grade cards, certificates) supplied to educational institutions (up to higher secondary and similar recognised institutions) after processing results is exempt under Serial Number 66 of Notification No.12/2017-CGST (Rate). - HELD THAT: - The Authority noted that printing of post-examination materials is the final leg of the examination process and constitutes a service relating to the conduct of examinations. Given that the recipient institutions qualify as "educational institution" under the notification, such supplies are captured by Entry 66(b)(iv). The fact that these activities are outsourced does not alter their character as services relating to conduct of examinations and therefore they qualify for the exemption. [Paras 7]

Printing of post-examination items supplied to qualifying educational institutions in relation to conduct of examinations is exempt under Serial Number 66 of Notification No.12/2017-CGST (Rate).

Services relating to admission to, or conduct of, examination by an educational institution - exemption under Notification No.12/2017-CGST (Serial Number 66) - supply to an educational institution - Scanning and processing of examination results supplied to educational institutions is an exempt service under Serial Number 66 of Notification No.12/2017-CGST (Rate). - HELD THAT: - The Authority held that scanning and processing of OMR sheets and result computation are services intimately connected with the conduct of examinations. When provided to educational institutions that meet the notification's definition, these activities fall within the scope of Entry 66(b)(iv) and are therefore exempt. The reasoning treats ancillary and outsourced activities that form part of the examination process as exempt when supplied to qualifying institutions. [Paras 7]

Scanning and processing of examination results supplied to qualifying educational institutions is exempt under Serial Number 66 of Notification No.12/2017-CGST (Rate).

Final Conclusion: The Authority: answered affirmatively that (i) printing of pre-examination items, (ii) printing of post-examination items (up to higher secondary) after result processing, and (iii) scanning and processing of examination results, when supplied to educational institutions falling within the notification's definition, are exempt services under Serial Number 66 of Notification No.12/2017-CGST (Rate).

Classification of goods under Chapter 15 - Fixed vegetable oils - Inedible mixtures or preparations of animal or vegetable fats or oils - Solvent-extracted residual vegetable oil - Interpretation of competing tariff headings (1515, 1516, 1517, 1518) - Applicability of SI.No.90 of Schedule I - 5% rate - Processes described in tariff entries (boiled, oxidised, dehydrated, blown or otherwise chemically modified)

Classification of goods under Chapter 15 - Fixed vegetable oils - Inedible mixtures or preparations of animal or vegetable fats or oils - Solvent-extracted residual vegetable oil - Applicability of SI.No.90 of Schedule I - 5% rate - Classification and applicable GST rate of solvent extracted spent earth oil. - HELD THAT: - The authority examined whether solvent extracted spent earth oil falls under headings 1515, 1516, 1517 or 1518 of Chapter 15. Heading 1515 (other fixed vegetable oils) was rejected because spent earth oil is not a direct extract from oilseeds or plant parts and therefore cannot be treated as a conventional fixed vegetable oil. Heading 1516 was excluded as spent earth oil is not the product of hydrogenation, inter-esterification, re-esterification or elaidinisation; it is not chemically modified in the senses described in that heading. Heading 1517 was inapplicable because the product is neither an edible mixture nor a preparation of different fats or oils. The product is residual vegetable oil recovered from spent bleaching earth by solvent extraction (hexane) and the extraction process involves steps (extraction and recovery under heat/vacuum) that bring it within the processes described in the first limb of the considerations relevant to 1518. The authority further held that the mere intended end-use (soaps, poultry feed) and the fact that the oil may be inedible does not convert it into a 'mixture or preparation' excluded from the entry relied on by the applicant. On balance, spent earth oil is not a direct fixed vegetable oil but is classifiable under Heading 1518 as falling within the scope of vegetable oils recovered/processed as envisaged by that heading. Consequently, the entry at SI.No.90 of Schedule I to Notification No. 01/2017 - which taxes the goods of Heading 1518 at 5% - applies. [Paras 8]

Solvent extracted spent earth oil is classifiable under Heading 1518 and taxable at 5% as per SI.No.90 of Schedule I to Notification No. 01/2017-Central Tax (Rate).

Final Conclusion: The Authority ruled that solvent extracted spent earth oil is to be classified under Heading 1518 and is taxable at 5% under SI.No.90 of Schedule I to Notification No. 01/2017-Central Tax (Rate).

Pure services - Exemption under Notification No.12/2017 - Central Tax (Rate) - Function entrusted to a panchayat under Article 243G of the Constitution - Local authority - Works contract

Pure services - Exemption under Notification No.12/2017 - Central Tax (Rate) - Works contract - Supply of manpower for preparation and serving of spot electricity bills to APCPDCL is not a 'Pure Service' eligible for exemption under entry 3 (Chapter 99) of Notification No.12/2017 - Central Tax (Rate). - HELD THAT: - The Authority examined the contract terms and scope of work and found that the spot billing agency is obliged to procure and maintain tangible items (hand held computers, stationary, SBMs and related equipment) and undertake activities which include supply/usage of such goods as integral to performance of the contract. 'Pure services' for the purpose of the exemption denote supplies not involving any supply of goods. The presence of procurement and provision of goods by the agency disqualifies the transaction from being a pure service and brings it outside the scope of the exemption for pure services under entry 3 of Notification No.12/2017. Given this finding, the Authority held that consideration of whether APCPDCL qualifies as a 'Local authority' or whether the services relate to functions under Article 243G is unnecessary for deciding eligibility for the said exemption. [Paras 8]

Negative - the supply is not a 'Pure Service' and therefore not eligible for exemption under entry 3 (Chapter 99) of Notification No.12/2017 - Central Tax (Rate).

Final Conclusion: The Advance Ruling records that the supply of manpower for spot bill preparation and serving to APCPDCL involves supply of goods and is not a 'Pure Service'; accordingly, the exemption under entry 3 of Notification No.12/2017 - Central Tax (Rate) is not available.

Eligibility of VAT remission for deduction under Section 80IC - subsidy/remission as operational revenue reducing cost and constituting business receipt - distinction between export incentives/duty drawback and state remission schemes - precedential application of Commissioner of Income Tax v. Meghalaya Steels Ltd. - distinguishability of sales tax rebate and VAT remission

Eligibility of VAT remission for deduction under Section 80IC - subsidy/remission as operational revenue reducing cost and constituting business receipt - distinction between export incentives/duty drawback and state remission schemes - Whether the remission of Value Added Tax granted under a State scheme to the assessee forms part of profits and gains of the eligible industrial undertaking and is deductible under Section 80IC of the Income Tax Act, 1961. - HELD THAT: - The High Court held that the VAT remission granted by the State (allowing the assessee to retain 99% of VAT collected) is a business receipt because it is retained for the growth of the business and operates to reduce operational cost, thereby enhancing profits. The court accepted the Tribunal's reliance on the Guwahati decisions and followed the Supreme Court's decision in Commissioner of Income Tax v. Meghalaya Steels Ltd., which distinguished export-linked incentives (such as DEPB/duty drawback) as one step removed from manufacturing/sales and therefore not proximate to business income. By contrast, the facts here show a remission tied to operations in a backward area, comparable to the transport subsidy in Merinoply & Chemicals Ltd., where the subsidy was held inseparably connected with the business. The court rejected the revenue's reliance on Liberty India and on authorities concerning duty drawback or sales tax rebate as inapplicable, noting that those decisions concern export incentives or rebates that are factually and legally distinguishable from an operational remission designed to support production in a backward area. The Court further relied on the principle, reflected in Sahney Steel and later decisions, that subsidies which are operational in nature and make the industry more profitable are revenue receipts and may give rise to profits eligible for deduction under provisions like Section 80IC or 80IB.

The Tribunal was right in treating the VAT remission as business income eligible for deduction under Section 80IC; the revenue's appeal is dismissed.

Final Conclusion: The High Court dismissed the revenue's appeal, answering the substantial questions of law against the revenue and upholding the Tribunal's allowance of deduction under Section 80IC in respect of the VAT remission, on the basis that the remission is an operational business receipt distinguishable from export incentives or rebates.

Limitation under Section 153(1) - reference to Transfer Pricing Officer under Section 92CA(1) - extension of time by proviso to Section 153(1) - dispute resolution under Section 144C - jurisdictional defect and nullity of proceedings - estoppel and waiver in revenue statutes - harmonious construction of conflicting provisos in a taxing statute

Reference to Transfer Pricing Officer under Section 92CA(1) - limitation under Section 153(1) - extension of time by proviso to Section 153(1) - jurisdictional defect and nullity of proceedings - Reference to the Transfer Pricing Officer made on 17.02.2009 was barred by limitation and consequent proceedings were invalid. - HELD THAT: - The Court analysed Section 153(1) and its provisos and held that the extended period (33 months) is available only where a reference under Section 92CA(1) is made during the course of assessment proceedings within the original limitation period (21 months). The word used in the proviso is "reference" (to the TPO) and not merely "approval" (by the Commissioner); therefore concurrence obtained earlier does not substitute for an actual reference to the TPO. Applying the principle that an extension of limitation must be made before the original period expires (as explained in State of Punjab v. Shreyans Industries), the Court found that a reference made after the expiry of 21 months (31.12.2008) was ineffective, rendering the TPO reference and all consequential steps time barred and void. The Court further observed that the timelines for the TPO, DRP and Assessing Officer commence only upon a valid reference, and in the present case those timelines were missed, with the DRP order itself being passed beyond permissible period. [Paras 15, 16, 17, 19, 23]

Reference made on 17.02.2009 was time barred; consequent proceedings including the TPO order and subsequent assessment steps are invalid.

Dispute resolution under Section 144C - extension of time by proviso to Section 153(1) - harmonious construction of conflicting provisos in a taxing statute - The scheme of Sections 92CA, 144C and the provisos to Section 153 must be read together; the extended 12 month period arises only upon a valid reference during assessment and cannot be fragmented into independent, disjointed timelines. - HELD THAT: - The Court examined the interaction between the timelines under Section 92CA (reference to TPO), the DRP process under Section 144C and the provisos to Section 153. It held that the provisos are to be harmoniously construed: the extension is a single, coherent extension to enable the TPO to act, the assessee to object and the DRP and Assessing Officer to complete directions and final assessment. The department's contention that the provisos operate independently (producing an overall disparate timeline) was rejected because such an interpretation would render provisions otiose and frustrate the statutory scheme; this conclusion is reinforced by the later statutory amendments which clarified the twelve month extension in case of a valid reference. [Paras 18, 19]

Timelines under Sections 92CA, 144C and provisos to Section 153 operate together; extension of time (12 months) is contingent on a valid reference during the course of assessment.

Estoppel and waiver in revenue statutes - jurisdictional defect and nullity of proceedings - The assessee was not estopped from raising the limitation/jurisdictional objection despite participating in earlier proceedings; a pure legal plea going to jurisdiction can be raised at any stage. - HELD THAT: - The Court reiterated that a pure question of law which goes to the root of jurisdiction may be raised at any stage and that statutory provisions which confer jurisdiction cannot be waived by conduct. Participation in proceedings before the Assessing Officer or TPO does not preclude challenging jurisdictional defects like time bar, and there is no acquiescence or estoppel in taxing statutes where conditions precedent to jurisdiction are not met. Consequently, the assessee could rightly invoke writ jurisdiction to challenge the nullity arising from a time barred reference. [Paras 10, 20, 21, 22]

No estoppel or waiver operates; the assessee may raise the jurisdictional/time bar plea at any stage, and writ relief is maintainable for such jurisdictional defects.

Final Conclusion: The intra court appeal is allowed. The High Court set aside the judgments below, held the reference to the Transfer Pricing Officer dated 17.02.2009 to be time barred under Section 153(1), declared consequent proceedings invalid, and allowed the writ petition; no costs.

Deemed consideration on parting with land under a sale cum development agreement - exclusion of pre existing land value from deemed sale consideration - valuation of incomplete or semi finished building vis a vis SRO valuation - application of SRO value under section 50C to completed building - role of plan approval and stage of completion in fixation of construction value

Deemed consideration on parting with land under a sale cum development agreement - exclusion of pre existing land value from deemed sale consideration - relevance of sale cum development agreement in computing capital gains - Whether the cost of land owned and relinquished by the assessee should be included in the deemed consideration for capital gains arising from the sale cum development agreement. - HELD THAT: - The Tribunal found that the assessee relinquished 50% of the land to the builder under a sale cum development agreement and, in return, received constructed area (including common areas) aggregating to 8,704 sq ft. The deemed consideration for the relinquished land therefore flows from the construction handed over by the builder. Since the construction itself constituted the consideration received, the pre existing cost of the land owned by the assessee should not be added again to the deemed consideration. The Tribunal accepted that the construction delivered by the builder represented the substance of the consideration and that including the land's original cost would result in double counting in computing capital gains. Accordingly, the CIT(A)'s exclusion of the land cost from the deemed sale consideration was upheld.

Land cost owned and relinquished by the assessee is not includible in the deemed consideration under the development agreement; CIT(A)'s exclusion sustained.

Valuation of incomplete or semi finished building vis a vis SRO valuation - application of SRO value under section 50C to completed building - role of plan approval and stage of completion in fixation of construction value - Whether the construction value for computing deemed consideration should be adopted at the SRO rate of Rs. 400 per sq ft for a building that was semi finished, or whether a reduced rate as adopted by the CIT(A) is appropriate. - HELD THAT: - The Tribunal noted that the building delivered to the assessee was incomplete or semi finished (with RCC roof and walls) and that the SRO/Registration & Stamps Department's value of Rs. 400 per sq ft pertains to completed buildings. Given the unfinished stage of the construction actually delivered, the Tribunal found it inappropriate to apply the full SRO rate. The CIT(A) had adopted a rate of Rs. 300 per sq ft (75% of the SRO value) to reflect the incomplete state of construction. The Tribunal agreed that the SRO value under section 50C is mandatory when it reflects the value of a completed building, but it is not appropriate to apply that full figure where the asset is only semi finished; the stage of completion and plan approval facts supported a reduced valuation. Consequently, no interference with the CIT(A)'s adoption of Rs. 300 per sq ft was called for.

Value of construction fixed at Rs. 300 per sq ft (75% of SRO value) for the semi finished building; CIT(A)'s valuation upheld.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross objection: the cost of land relinquished was correctly excluded from the deemed consideration and the reduced construction rate adopted by the CIT(A) for the semi finished building was sustained.

Unexplained investment under Section 69 of the Income tax Act - unexplained credit treated as income under Section 68 of the Income tax Act - admission of additional evidence under Rule 46A of the Income tax Rules, 1962 - failure to prosecute / non appearance before the Tribunal

Unexplained investment under Section 69 of the Income tax Act - failure to prosecute / non appearance before the Tribunal - Deletion of addition made by AO treating alleged excess payment for purchase of rice mill as unexplained investment in the hands of the assessee - HELD THAT: - The AO had treated an amount worked out as unexplained investment as on money paid over the recorded sale consideration and brought it to tax under the provision for unexplained investment. The CIT(A) deleted that addition on the basis that the sale deed in the assessee's name recorded a lower consideration and the AO had not proved that the assessee paid the larger amount. On appeal to the Tribunal the revenue urged reversal. The Tribunal noted that the assessee failed to appear before the Tribunal and repeatedly failed to comply with opportunities to substantiate its case. Having perused the record and heard the Departmental Representative, and given the assessee's non prosecution, the Tribunal allowed the revenue's appeal and thereby set aside the CIT(A)'s deletion, restoring the addition made by the AO. [Paras 6]

Reversal of CIT(A)'s deletion; appeal of the revenue allowed and the addition on account of unexplained investment restored.

Unexplained credit treated as income under Section 68 of the Income tax Act - admission of additional evidence under Rule 46A of the Income tax Rules, 1962 - failure to prosecute / non appearance before the Tribunal - Deletion by CIT(A) of addition treating unsecured loans as unexplained credits and the permissibility of the assessee's adducing of confirmations during appellate proceedings - HELD THAT: - The AO treated unsecured loans of the assessee as unexplained credits and brought them to tax under the provision dealing with unexplained credits, because the assessee had not substantiated identity, genuineness and creditworthiness of lenders. The CIT(A) deleted that addition after accepting confirmation letters and other documents produced by the assessee during appeal. On revenue appeal the Tribunal observed that the assessee repeatedly failed to substantiate its case before the Tribunal and did not appear despite opportunities. In view of the assessee's non prosecution and the material on record, the Tribunal allowed the revenue's appeal and set aside the CIT(A)'s deletion, thereby restoring the AO's addition. The Tribunal's decision turned on the procedural fact of the assessee's non appearance and non compliance rather than an independent adjudication of admissibility under Rule 46A. [Paras 11]

Reversal of CIT(A)'s deletion; appeal of the revenue allowed and the addition treating unsecured loans as unexplained credits restored.

Final Conclusion: The Tribunal allowed the revenue's appeal in respect of both the unexplained investment and unexplained credits for A.Y.2016 17, set aside the CIT(A)'s deletions and restored the additions made by the assessing officer; the assessee's cross objections were dismissed as infructuous. The outcome was reached in light of the assessee's repeated failure to comply with notices and non appearance before the Tribunal.

Deduction under section 80P(2)(a)(i)/80P(2)(d) for interest income from cooperative banks - Revisional jurisdiction under section 263 - order erroneous only if Assessing Officer's view is unsustainable - Two-views doctrine - where two reasonable views are possible AO's view cannot be held erroneous - Assessment framed under section 143(3) - requirement of AO's application of mind

Deduction under section 80P(2)(a)(i)/80P(2)(d) for interest income from cooperative banks - Revisional jurisdiction under section 263 - order erroneous only if Assessing Officer's view is unsustainable - Two-views doctrine - where two reasonable views are possible AO's view cannot be held erroneous - Whether the Principal Commissioner of Income Tax was justified in invoking revisional jurisdiction under section 263 to hold the assessment under section 143(3) as erroneous insofar as it allowed deduction of interest income from cooperative banks under section 80P(2)(a)(i)/80P(2)(d). - HELD THAT: - The Tribunal noted that the Assessing Officer had allowed deduction of interest earned on fixed deposits with cooperative banks and that conflicting decisions exist in higher fora. Reliance was placed on a coordinate Bench decision (Shree Keshav Co-operative Credit Society Ltd.) and on favourable pronouncements of the Gujarat High Court, which recognise that interest received from cooperative banks may fall within the ambit of section 80P(2)(d). Where two reasonable views are possible, the exercise of revisional power under section 263 is unwarranted unless the view adopted by the AO is unsustainable in law. The Revenue failed to demonstrate that the Tribunal decision relied upon was stayed, overruled, or distinguishable on its facts, and did not show that the AO's view was legally unsustainable. Applying these principles, the Tribunal held that there was no error in the assessment so as to justify invocation of section 263 and quashed the revisional orders. [Paras 7]

The revisional orders passed by the Principal Commissioner under section 263 are unsustainable and are quashed; the assessments under section 143(3) are upheld insofar as they allowed the deduction claimed.

Final Conclusion: All four appeals are allowed; the revisional orders under section 263 are quashed and the assessments framed under section 143(3) stand affirmed with respect to the deduction of interest from cooperative banks under the provisions relied upon by the assessee.

Agricultural income - income from other sources - burden of proof and requirement of documentary evidence to substantiate claimed income - reliance on accounting/tally entries as evidentiary support - search and seizure under section 132 of the Income-tax Act - benefit of doubt where landholding is undisputed

Agricultural income - income from other sources - burden of proof and requirement of documentary evidence to substantiate claimed income - reliance on accounting/tally entries as evidentiary support - benefit of doubt where landholding is undisputed - Whether the agricultural income declared by the assessee could be sustained or was rightly treated as income from other sources in absence of documentary evidence, and whether any benefit should be allowed given the undisputed agricultural landholding. - HELD THAT: - The Assessing Officer treated declared agricultural receipts as income from other sources because the assessee failed to produce bills, vouchers, expenditure details, yield particulars or market sale evidence, and only tally entries supported the claim. The CIT(A) upheld the disallowance after remand, noting absence of corroborative material and that mere ownership of agricultural land does not per se establish agricultural income. The Tribunal accepted that the assessee did not substantiate the claimed agricultural operations with documentary evidence but observed that ownership of 38.86 acres of agricultural land was undisputed. Balancing the absence of specific evidentiary support against the undisputed landholding and the fact that the land was rainfed, the Tribunal exercised discretion to grant a modest allowance as agricultural income for each assessment year to meet the ends of justice, directing the Assessing Officer to give specified amounts as agricultural income for the respective years. [Paras 10, 11]

The disallowance upheld by the Assessing Officer and CIT(A) is modified: agricultural income of Rs.25,000 for A.Y. 2003-04, Rs.30,000 for A.Y. 2004-05 and Rs.35,000 for A.Y. 2005-06 is directed to be allowed; the appeals are partly allowed.

Final Conclusion: The Tribunal partly allows the appeals: while the Assessing Officer/CIT(A) were right to require evidence and sustain disallowance in principle, the undisputed holding of agricultural land warranted a limited allowance of agricultural income for each of the three assessment years; the Assessing Officer is directed to give the specified benefit and the appeals are partly allowed.

Deduction under section 54 - Single residential house requirement - Capital gains reinvestment - Capital Gains Account Scheme

Deduction under section 54 - Single residential house requirement - Whether the assessee was entitled to claim deduction under section 54 in respect of reinvestment of long-term capital gain in two separate residential properties located in different buildings and areas. - HELD THAT: - The Tribunal examined Section 54, which grants exemption where capital gain from transfer of a long-term residential house is invested in the purchase or construction of a residential house within the prescribed period and contains mechanisms (including the Capital Gains Account Scheme) to safeguard revenue where reinvestment is not completed. The assessee had utilised the capital gain for purchase of Flat No. C-1103, AKME RAGGA and for repayment of a housing loan taken for acquiring a different residential property at PTS-01-0802, EMMAR PALM TERRACES. The Tribunal held that the phrase 'a residential house' in Section 54 refers to a single house for the purposes of claiming the exemption and cannot be read to permit claim of deduction in respect of more than one separate residential property situated in different buildings and locations. The Tribunal distinguished the Delhi High Court decision relied upon by the assessee (which concerned multiple units within the same building) on its facts, observing that that decision does not assist where the alleged reinvestments are in separate buildings/locations. In view of these considerations the Assessing Officer's and CIT(A)'s conclusion limiting the deduction to the investment in one property was upheld. [Paras 9, 11, 12]

Deduction under section 54 is allowable only in respect of reinvestment in a single residential house; claim for deduction in relation to two separate residential properties situated in different buildings/locations is not permissible. Appeal dismissed.

Final Conclusion: The Tribunal upheld the orders of the Assessing Officer and the Commissioner (Appeals), holding that section 54 permits exemption only for reinvestment in a single residential house and accordingly dismissed the appeal.

Addition on account of unexplained cash credits - disallowance of interest expenses and set-off against interest income - reopening of assessment under Section 148

Addition on account of unexplained cash credits - survey seizures and impounded material - books of account and audited schedule of advances - Deletion of the addition of Rs. 1,23,96,155/- made on account of alleged unaccounted cash receipts. - HELD THAT: - The Tribunal agreed with the ld. CIT(A) that the determinative question was whether the cash components shown in the impounded survey material had been included in the assessee's regular books of account and offered to tax. On scrutiny of the material placed before the ld. CIT(A) it was found that the advances in the impounded record matched the Schedule of advances in the audited final accounts prepared prior to the survey, and the Assessing Officer did not point to any entry where an advance appearing in the impounded material was absent from the regular books. The Assessing Officer's remand report shifted the locus to genuineness without producing contradictory entries or independent verification. In those circumstances there was no reasonable cause to treat the amounts as outside the books; the ld. CIT(A)'s deletion of the addition was upheld. [Paras 6, 11, 12, 13]

The addition on account of alleged unaccounted cash receipts of Rs. 1,23,96,155/- was deleted and that deletion is affirmed.

Disallowance of interest expenses and set-off against interest income - allocation of borrowing costs between WIP and income-earning funds - allowability of interest expense apportioned to earning taxable interest - Deletion of the addition of Rs. 35,72,114/- made by disallowing interest expenses purportedly not allowable against interest income. - HELD THAT: - The Tribunal affirmed the ld. CIT(A)'s finding that although borrowings from HUDCO were for project purposes, the accounts showed that a substantial portion of those borrowings had been diverted during the year to advances on which the assessee earned interest. The audited accounts and annexures indicated that proportionate interest expense attributable to earning interest income had been debited to profit and loss and the balance appropriately capitalised to work-in-progress. The ld. CIT(A) found, and the Tribunal agreed, that interest expense apportionable to interest-bearing advances used to generate taxable interest income is allowable as a set-off against that interest income; no contrary material was produced to justify sustaining the disallowance. [Paras 7, 14]

The disallowance of interest expenses of Rs. 35,72,114/- was deleted and that deletion is affirmed.

Final Conclusion: Both additions made by the Assessing Officer-one for alleged unexplained cash receipts and the other by disallowing interest expense-were deleted by the ld. CIT(A) and those deletions are affirmed by the Tribunal; the revenue's appeal is dismissed for AY 2008-09.

Charitable purpose as defined in Section 2(15) - proviso to Section 2(15) - activities in the nature of trade, commerce or business - predominant object / profit motive test for business - incidental commercial receipts and Infrastructure Development Fund (IDRF) - registration under Section 12A / 12AA and its effect on exemption under Section 11 - section 13(8) and retrospective denial of benefit where proviso to Section 2(15) applies

Charitable purpose as defined in Section 2(15) - proviso to Section 2(15) - activities in the nature of trade, commerce or business - predominant object / profit motive test for business - Whether Varanasi Development Authority's activities were hit by the proviso to Section 2(15) and thus not charitable for the assessment years 2011-12 to 2014-15. - HELD THAT: - The Tribunal examined the statutory scheme of the Uttar Pradesh Urban Planning and Development Act, 1973 and the nature, constitution and functions of the Authority. Applying the test of predominant object and profit motive, the Tribunal held that an entity established under the 1973 Act has as its pith and substance the planned development and provision of public amenities and not profit making. Mere receipt of sale consideration, interest or levying of betterment charges does not by itself convert the Authority into a commercial enterprise if such receipts are used for the statutory objects and funds are applied for infrastructure and development. Relying on the reasoning in Lucknow Development Authority and other High Court/Tribunal decisions post amendment of Section 2(15), the Tribunal found that the assessee's predominant object remained advancement of an object of general public utility and that profit making was not the driving object of its activities. Consequently the proviso to Section 2(15) did not apply to the Authority for the assessment years in question.

The proviso to Section 2(15) did not apply; Varanasi Development Authority retained charitable character and was eligible for exemption under Section 11 for AYs 2011-12 to 2014-15.

Incidental commercial receipts and Infrastructure Development Fund (IDRF) - predominant object / profit motive test for business - Whether the character of receipts (interest on bank deposits, interest from allottees, receipts from allotments, betterment charges, auction sales and other service charges) converted the Authority's activities into commercial/business activities. - HELD THAT: - The Tribunal reviewed the audited accounts and the composition of receipts and noted that large items were transferred to a designated Infrastructure Development Fund and expended on development schemes. Section 20(2) of the State Act requires application of funds for administration of the Act and Section 35 authorises levy of betterment charges in respect of value accretion due to development. The Tribunal accepted that placing surplus funds in bank deposits and earning interest is a prudent means of meeting future statutory expenditure and that receipts earned in discharge of statutory powers (plan/map fees, compounding, development charges, etc.) are connected with carrying out the Authority's statutory functions. On the facts, the receipts were incidental to and applied for the statutory objects rather than reflecting a dominant profit motive; therefore such receipts did not render the activities commercial for the purpose of the proviso to Section 2(15).

Receipts examined did not convert the Authority's activities into commercial/business activities; receipts were incidental and applied to statutory objects and thus did not attract the proviso.

Registration under Section 12A / 12AA and its effect on exemption under Section 11 - section 13(8) and retrospective denial of benefit where proviso to Section 2(15) applies - Whether the assessee's registration under Section 12A/12AA and consequences under Section 13(8) affect entitlement to exemption under Section 11 for the assessment years before the Tribunal. - HELD THAT: - The Tribunal observed that registration under Section 12A is a relevant indicium but does not confer an absolute, unreviewable right to exemption; assessing authorities may examine facts of each year. However, where the assessee is found not to be hit by the proviso to Section 2(15) (as on the facts here), registration supports the claim to exemption. The Tribunal also noted the operation of Section 13(8) (as discussed by lower authorities) which prevents the benefit of sections 11/12 where the proviso to Section 2(15) applies, but since the Tribunal held the proviso inapplicable on the facts, Section 13(8) did not operate to deny exemption for the years under appeal.

Registration under Section 12A/12AA does not automatically guarantee exemption, but on the facts registration and the absence of applicability of the proviso entitled the Authority to exemption under Section 11; Section 13(8) did not deny relief as proviso to Section 2(15) was not attracted.

Precedent weight of Lucknow Development Authority and post amendment jurisprudence - predominant object / profit motive test for business - Whether the assessee was similarly placed to Lucknow Development Authority and other post 2009 decisions relied upon by the assessee so as to merit the same treatment. - HELD THAT: - The Tribunal compared the statutory constitution, control by State Government, functional responsibilities, funding and use of funds of the Varanasi Development Authority with Lucknow Development Authority. Noting that the authorities are constituted under the same Uttar Pradesh statute and perform like functions, the Tribunal found the facts and legal position sufficiently parallel. The Tribunal also surveyed post amendment decisions (including Lucknow tribunal's later decisions and various High Court rulings) and concluded that, on comparable facts, those authorities were held to be engaged in advancement of objects of general public utility notwithstanding earn outs incidental to statutory activity. On that basis the Tribunal applied the same approach and reached the same result.

Assessee found similarly placed to Lucknow Development Authority and other post amendment authorities; those precedents supported allowance of exemption under Section 11.

Final Conclusion: Appeals of the assessee for AYs 2011-12 to 2014-15 allowed. The Tribunal held that Varanasi Development Authority is a statutory authority predominantly engaged in advancement of objects of general public utility under the Uttar Pradesh Urban Planning and Development Act, 1973; its receipts and use of an Infrastructure Development Fund, the statutory scheme, and absence of a dominant profit motive meant the proviso to Section 2(15) did not apply, and the Authority was entitled to exemption under Section 11 for the years in dispute.

Arm's Length Price - Transaction Net Margin Method (TNMM) - Resale Price Method (RPM) - most appropriate method (MAM) - comparability and selection of comparable companies - adjustments under Rule 10B(3) for differences in economic factors (working capital adjustment) - characterisation of routine distributor and preference for RPM where no value addition - depreciation on computer software - deductibility of provision for warranty based on scientific/empirical basis

Arm's Length Price - comparability and selection of comparable companies - Determination of comparables in the SWD services segment; inclusion/exclusion and remand of specific comparables; requirement to grant working capital adjustment - HELD THAT: - The Tribunal held that several companies identified by the TPO/DRP were functionally dissimilar to the assessee and must be excluded from the final comparable set for the SWD services segment. Infosys Ltd., Larsen & Toubro Infotech Ltd., Persistent Systems Ltd. and Thirdware Solutions Ltd. were excluded because their product led, diversified operations, significant intangibles, R&D and lack of segmental disclosure made them functionally non comparable to the assessee's routine SWD services. Conversely, the comparability of Akshay Software Technologies Ltd. and Maveric Systems Ltd. was remanded to the AO/TPO for fresh consideration (comparability to be examined afresh). Separately, the Tribunal directed that differences in working capital be adjusted in accordance with law and instructed the TPO/AO to give the assessee the benefit of a working capital adjustment when determining ALP in the SWD services segment, after affording an opportunity of hearing. [Paras 23, 24, 25, 26, 27]

Excluded Infosys, L&T Infotech, Persistent and Thirdware from comparables; remanded Akshay and Maveric to AO/TPO for fresh determination; directed TPO/AO to grant working capital adjustment and determine ALP accordingly.

Most appropriate method (MAM) - Resale Price Method (RPM) - Transaction Net Margin Method (TNMM) - characterisation of routine distributor and preference for RPM where no value addition - Proper MAM for the trading segment and remand of ALP determination - HELD THAT: - On the facts, the Tribunal concluded that the assessee performed routine distributor functions without value addition to imported goods sold to third party customers (pricing from published price lists, inventory management, bearing inventory/credit/price/market risk but not adding product value). The TPO's conclusion that the assessee was a full risk bearing distributor was rejected as contrary to material on record. Applying established jurisprudence, the Tribunal held that where a tested party is a routine distributor that does not perform value adding services, RPM is the preferred MAM and should be adopted in preference to TNMM. The Tribunal therefore remanded the determination of ALP in the trading segment to the AO/TPO for fresh consideration applying RPM; other issues under TNMM were rendered academic and left undecided accordingly. [Paras 35, 36, 37, 38, 39]

Assessee characterised as a routine distributor; TNMM rejected and RPM held to be MAM; matter remanded to AO/TPO to determine ALP under RPM.

Depreciation on computer software - Allowability of depreciation on computer software at 60% - HELD THAT: - The Tribunal examined the definition of 'computer software' in Appendix 1 (Note 7) and followed precedent holding that 'computer including computer software' entitles such software to depreciation at the higher rate specified for computers. Relying on analogous Tribunal decisions, the Tribunal held that software licences and server/software items claimed by the assessee qualify for depreciation at 60% and set aside the restriction imposed by the lower authorities which had limited depreciation to 25%. [Paras 40, 41, 42, 43]

Depreciation on computer software allowed at 60%.

Deductibility of provision for warranty based on scientific/empirical basis - Disallowance of warranty provision reversed and provision allowed - HELD THAT: - The Tribunal reviewed the warranty provisioning method adopted by the assessee (provision created at specified percentages of sales based on past trends and historical evidence across differing warranty periods of products). It held that the Revenue's comparison of provision created in a single year with utilisation in that year overlooked that provisions cover the entire warranty period (which may span several years) and that utilization must be considered across the relevant warranty periods. Applying the tests of scientific and empirical basis as laid down by precedent, the Tribunal concluded the provision was based on historical trends and evidence and therefore allowable; the disallowance by AO/DRP was set aside. [Paras 44, 45, 46, 47, 48]

Disallowance of provision for warranty deleted; warranty provision allowed.

Final Conclusion: Appeal partly allowed. For Assessment Year 2014 15 the Tribunal (i) refined the comparable set for the SWD services segment (excluding certain large product/IPP led companies), remanded two comparables for fresh examination and directed grant of working capital adjustment and fresh ALP computation; (ii) held the assessee to be a routine distributor for the trading segment, directed that RPM be adopted as MAM and remanded ALP determination to the AO/TPO; (iii) allowed depreciation on computer software at 60%; and (iv) deleted the disallowance of the warranty provision.

Allowability of employees' contribution to provident fund and ESIC where paid before filing of return - application of section 43B read with section 36(1)(va) - effect of amendment to section 36(1)(va) not retrospective - precedential effect of jurisdictional High Court decision

Allowability of employees' contribution to provident fund and ESIC where paid before filing of return - application of section 43B read with section 36(1)(va) - precedential effect of jurisdictional High Court decision - Deductibility of employees' PF and ESIC contributions paid after statutory due date but before filing of return for A.Y. 2017-18 and correctness of disallowance made under section 2(24)(x) read with section 36(1)(va) r.w.s. 43B. - HELD THAT: - The Tribunal found on the facts that employees' contributions to PF and ESIC were deposited after the statutory due dates but admittedly before the date of filing the return. It noted binding and persuasive precedents of the jurisdictional High Court and Supreme Court, as applied by coordinate benches of the Tribunal, holding that where such contributions are made before the due date of filing the return the deduction is allowable. The Tribunal further observed that the amended scheme under section 43B read with section 36(1)(va), which would alter the treatment, is not applicable to the assessment year under consideration because the amendment takes effect from A.Y. 2021-22. For these reasons the Assessing Officer and the CIT(A) erred in disallowing the claimed amount; the disallowance could not be sustained for A.Y. 2017-18. [Paras 7, 8, 9, 10, 11]

Disallowance under section 2(24)(x) read with section 36(1)(va) r.w.s. 43B in respect of employees' PF and ESIC contributions for A.Y. 2017-18 set aside; deduction allowed.

Final Conclusion: Appeal allowed; impugned disallowance of employees' PF and ESIC contributions for A.Y. 2017-18 set aside as the payments were made before filing of the return and the later amendment to section 36(1)(va) is not applicable to the year under consideration.

Transfer pricing adjustment on advertisement, marketing and promotion expenses (AMP) - primary and secondary transfer pricing adjustments - remand to Assessing Officer for verification of additional evidence - deductibility of provisions under mercantile system of accounting and AS-29 - depreciation on goodwill as an intangible asset

Transfer pricing adjustment on advertisement, marketing and promotion expenses (AMP) - primary and secondary transfer pricing adjustments - Deletion of primary and secondary transfer pricing adjustments made in respect of AMP expenses - HELD THAT: - The Tribunal followed consistent decisions of coordinate Benches in the assessee's own case for earlier years where identical AMP-related TP adjustments were vacated because the revenue failed to prove any 'understanding', 'arrangement' or 'action in concert' obligating the assessee to incur AMP for its AE. The Tribunal observed that the TPO had not applied any determinative method under Chapter X and that facts for the year under consideration did not differ from earlier years. Consequently, the Tribunal directed deletion of the primary TP adjustment and the secondary adjustment made in relation thereto for the years under appeal. [Paras 7, 12]

Primary TP adjustment in respect of AMP expenses and the secondary adjustment are deleted for the years under appeal.

Remand to Assessing Officer for verification of additional evidence - Remand of alternate/related TP adjustments (packaging, design, training to salon customers, promotional goods) for fresh consideration by AO/TPO - HELD THAT: - The Tribunal admitted additional evidence filed by the assessee which related directly to the alternate TP adjustments. Noting precedent that the TPO should not apply a 'benefit' test and that benchmarking methods under section 92C must be followed, the Tribunal held that where additional evidence has direct relevance and requires verification, the matter should be remitted to the AO/TPO for fresh consideration and verification, with opportunity to the assessee, following earlier orders in the assessee's own case. [Paras 16]

Issue remitted to the file of the AO/TPO for consideration and decision afresh with directions to follow Tribunal's earlier order and to grant the assessee opportunity of hearing.

Depreciation on goodwill as an intangible asset - Remand of claim for depreciation on goodwill to the Assessing Officer for fresh examination - HELD THAT: - The Tribunal noted that in the immediately preceding year the issue of depreciation on goodwill was remitted to the AO and that the factual matrix in the present year is linked to that earlier determination. Citing authorities recognising goodwill as an intangible asset eligible for depreciation, the Tribunal found that AO and DRP had not considered certain submissions and evidence placed before them and therefore restored the matter to the AO to examine afresh in accordance with the decision in the preceding year and applicable judicial precedents, granting the assessee opportunity of hearing. [Paras 10]

Claim for depreciation on goodwill restored to the file of the AO for fresh examination in accordance with the decision in the immediately preceding year.

Deductibility of provisions under mercantile system of accounting and AS-29 - Allowability of deduction for provision for outstanding expenses (accrued liability) disallowed by AO as 'unascertained liability' - HELD THAT: - The Tribunal accepted that the assessee follows mercantile accounting and that, under AS-29, a provision is to be made where there is (a) a present obligation from a past event, (b) probable outflow of resources, and (c) a reliable estimate. The Tribunal held that the liabilities in question had accrued though bills were not received, distinguishing 'accrued liability' from 'liability to pay'. Noting that the provisions were verified by statutory auditors and accepted in earlier years, the Tribunal concluded that the amounts were ascertained liabilities eligible for deduction and directed deletion of the disallowance. [Paras 13]

Disallowance of provision for outstanding expenses is deleted; the provision is an ascertained liability deductible in computing income.

Time-barred assessment and academic issues - Declination to decide time-bar objection for A.Y. 2017-18 as academic - HELD THAT: - Having granted substantive relief by deleting the AMP-related TP adjustment (the only contested issue on merits), the Tribunal observed that the contention regarding limitation for assessment became academic. The Tribunal therefore left the question open without adjudicating it. [Paras 16]

Time-bar issue for A.Y. 2017-18 left open as academic and not decided.

Final Conclusion: The Tribunal deleted the primary and secondary transfer pricing adjustments in respect of AMP expenses for A.Y. 2016-17 and A.Y. 2017-18; remitted certain alternate TP adjustment issues to the Assessing Officer/TPO for fresh consideration on admitted additional evidence; restored the claim for depreciation on goodwill to the AO for fresh examination in line with the preceding year; and directed deletion of the disallowance of provision for outstanding expenses. The time-bar contention for A.Y. 2017-18 was left open as academic.

Unexplained cash deposits - Explanation of cash credits under Section 68 - Peak credit theory - Telescoping and double addition - Group disclosure of additional income - Precedent of coordinate bench - Assessment under Section 153A-grounds not pressed

Unexplained cash deposits - Explanation of cash credits under Section 68 - Peak credit theory - Telescoping and double addition - Group disclosure of additional income - Precedent of coordinate bench - Deletion of additions treated as unexplained cash credits made by applying peak credit theory and charged to income under Section 68 for the A.Ys 2014-15 to 2018-19. - HELD THAT: - The Assessing Officer applied the peak credit theory and treated certain cash deposits as unexplained credits, making additions under Section 68. The Tribunal examined the material showing that the assessee's group had disclosed substantial additional income in the course of search assessments to cover possible errors/omissions, and that confirmations and sources in the hands of group members were on record. The Tribunal relied on a coordinate-bench decision in respect of a brother of the assessee where, on identical facts, the addition under Section 68 was deleted after noting that the disclosed additional income of the group would cover the disputed amounts and that confirmations were accepted by the AO. Applying the same reasoning to the present appeals, the Tribunal found that sustaining the additions would amount to double addition and, therefore, set aside the orders of the CIT(A) and directed deletion of the additions made under Section 68 for the relevant assessment years. [Paras 6, 7, 8, 10]

The additions under Section 68 based on peak credit theory for A.Ys 2014-15 to 2018-19 are deleted.

Assessment under Section 153A-grounds not pressed - Challenges to the validity of assessments framed under Section 153A were not pursued by the assessee. - HELD THAT: - The assessee did not press grounds challenging the validity of the assessments under Section 153A before the Tribunal. The Tribunal therefore recorded those grounds as dismissed for non-pressing and did not decide them on merits. [Paras 8, 10]

Grounds challenging validity of assessment proceedings under Section 153A are dismissed as not pressed.

Final Conclusion: Following the reasoning in a coordinate-bench decision and having regard to the group's disclosed additional income and accepted confirmations, the Tribunal deleted the additions made under Section 68 for A.Ys 2014-15 to 2018-19; grounds on the validity of assessments under Section 153A were dismissed as not pressed. All appeals are accordingly partly allowed.

Disallowance under section 14A - Rule 8D apportionment theory - applicability of section 14A where no exempt income is earned - binding effect of jurisdictional High Court decisions - role of CBDT circulars vis-a -vis statutory provision

Disallowance under section 14A - applicability of section 14A where no exempt income is earned - Rule 8D apportionment theory - binding effect of jurisdictional High Court decisions - role of CBDT circulars vis-a -vis statutory provision - Whether the disallowance computed by the Assessing Officer under section 14A read with Rule 8D was sustainable where the assessee had not earned any exempt income during the relevant year and the AO had not established nexus or recorded satisfaction for invoking section 14A. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) recorded that the assessee had not earned any exempt income in the year and that the AO had mechanically applied Rule 8D on the basis of investments without establishing any nexus between asserted exempt receipts and expenditures or recording satisfaction to reject the assessee's computation. The CIT(A) relied on binding decisions of the jurisdictional High Court which hold that section 14A is not automatically attracted merely because investments exist or dividends may be exempt; the AO must first be satisfied that the assessee's voluntary computation is unreasonable and must demonstrate nexus between expenditure and exempt income. The Revenue relied on CBDT Circular No. 5/2014 and Supreme Court pronouncements (including Maxopp) concerning the scope of section 14A and the apportionment theory under Rule 8D. The Tribunal observed, however, that the cited jurisdictional High Court precedent (Cheminvest and similar decisions) interprets section 14A to require actual receipt of exempt income in the relevant year for disallowance and holds that a CBDT circular cannot override the clear statutory scheme. On the record, Revenue did not place material showing that the CIT(A)'s factual finding (no exempt income) was incorrect nor produced a contrary binding decision of the same jurisdiction. In these circumstances the Tribunal found no reason to interfere with the deletion of the disallowance, accepting that the AO had not complied with the legal prerequisites for invoking section 14A/Rule 8D in the facts of this case. [Paras 6, 10]

The disallowance under section 14A read with Rule 8D, as computed by the AO, was deleted by the CIT(A) and the Tribunal upheld that deletion for Assessment Year 2014-15.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s deletion of the section 14A/Rule 8D disallowance for Assessment Year 2014-15, finding that the AO had not fulfilled the statutory preconditions or demonstrated nexus to justify the disallowance and that the CIT(A)'s finding of no exempt income was not shown to be incorrect by Revenue.

Validity of reassessment/revision under Section 263 - Whether assessment order is prima facie erroneous in law and prejudicial to the interests of Revenue - Disallowance of interest on interest-free advances vis-a -vis application of interest-bearing funds - One-to-one matching of interest-free advances and interest-bearing funds

Validity of reassessment/revision under Section 263 - Whether assessment order is prima facie erroneous in law and prejudicial to the interests of Revenue - Disallowance of interest on interest-free advances vis-a -vis application of interest-bearing funds - One-to-one matching of interest-free advances and interest-bearing funds - Whether the order passed by the Assessing Officer under section 143(3), insofar as it disallowed interest of Rs. 96,616 on net interest-free advances and applied the principle of matching, was prima facie erroneous in law and prejudicial to the interests of the Revenue so as to justify exercise of powers under section 263 by the Pr. CIT directing disallowance of a larger proportionate interest. - HELD THAT: - The Tribunal examined the statement and submissions of the assessee which showed interest-free loans and advances taken and given during the year. The assessee's case was that interest-free advances were utilized in the business and thereby reduced the overall cost of interest on interest-bearing funds, and that there is no requirement of strict one-to-one matching between specific interest-free advances given and interest-bearing funds applied. The AO computed and disallowed interest of Rs. 96,616 @12% on the net difference of interest-free advances of Rs. 8,05,137 and thereby applied his mind to the issue. The Pr. CIT, invoking section 263, directed disallowance of a larger proportionate interest treating the assessment as completed without verification. On review of records and submissions the Tribunal found merit in the assessee's contentions regarding utilization from the assessee's own pool of funds and that the AO had considered and disallowed interest on the net difference. Consequently, the Tribunal held that the AO's order was not shown to be prima facie erroneous in law or prejudicial to the Revenue so as to sustain the revision under section 263, and therefore the Pr. CIT's order setting aside the assessment was unjustified and liable to be quashed. [Paras 7, 8]

The order passed by the Pr. CIT under section 263 was quashed and the appeal of the assessee was allowed.

Final Conclusion: The Tribunal held that the Assessing Officer had applied his mind in disallowing interest on the net excess of interest-free advances and that the Pr. CIT's revision under section 263 was not justified; accordingly the section 263 order was quashed and the appeal allowed.

Classification under the Harmonized System - General Rules of Interpretation (GRI) 1 and 3 - Explanatory Notes to Headings - Interpretation of "edible" for tariff classification - Heading 0813 - Dried fruit - Heading 1209 - Seeds of a kind used for sowing - Common parlance test in taxation - Onus on the Revenue to prove alternate classification

Heading 0813 - Dried fruit - Heading 1209 - Seeds of a kind used for sowing - Interpretation of "edible" for tariff classification - General Rules of Interpretation (GRI) 1 and 3 - Common parlance test in taxation - Onus on the Revenue to prove alternate classification - Explanatory Notes to Headings - Classification of imported dried pomegranate seeds (anardana) under Heading 0813 or Heading 1209. - HELD THAT: - The Court examined the HSN framework, the relevant Chapter and Explanatory Notes to Chapters 8 and 12, and the applicable GRIs, applying GRI 1 to consider Headings and Notes first and GRI 3 (specific description/essential character) and GRI 4 where applicable. The Chapter 8 Notes confine that Chapter to edible fruits; the meaning of "edible" is to be determined by common parlance in the trade where no special statutory definition exists. The CESTAT's factual finding - supported by independent literature and a certificate from Dr. Y.S. Parmar University - that "anardana" is prepared from a wild/daru pomegranate not consumed as a fresh fruit, and that the product is the dried seeds/arils of that wild variety used principally as an acidulant/condiment and in Ayurvedic preparations, was accepted. Chapter Note 3 to Chapter 12 and the Explanatory Notes to Heading 1209 treat seeds of fruit-trees for the purposes of that Heading as "seeds of a kind used for sowing" (a classificatory fiction), and the Explanatory Notes expressly exclude "fruit of Chapter 8" from Heading 1209. Given the accepted factual distinction between the wild pomegranate (source of anardana) and the edible fresh pomegranate listed in the Explanatory Notes to Heading 0810, the Court held that the classification under Chapter/Heading 12 (sub-heading 1209.99) was appropriate. The Court further noted the policy condition in the Import Policy specifying that "import of pomegranate seeds will be free" (correlating to sub heading 1209.99), and reiterated the burden on the Revenue to adduce evidence to displace the importers' classification. Absent persuasive evidence that the product fell within dried fruits of Headings 08.07-08.10, the Revenue's claim for classification under 0813.40.90 failed. [Paras 19, 21, 25, 28]

The CESTAT's classification of anardana under Heading 1209 (sub-heading 1209.99) is upheld; the appeals by the Revenue are dismissed.

Final Conclusion: On the accepted factual finding that anardana is the dried seeds/arils of a wild pomegranate not consumed as a fresh fruit, and applying the HSN Explanatory Notes and GRIs with the common parlance test, the product is not classifiable as dried fruit under Heading 0813 but falls within Heading 1209; the Revenue's appeals are dismissed.

Relegation to alternative remedy of appeal before the Customs Excise and Service Tax Appellate Tribunal - stay of administrative order revoking customs broker licence pending decision on stay application before the Tribunal - exclusion of period of pendency of writ petition from limitation for filing statutory appeal

Relegation to alternative remedy of appeal before the Customs Excise and Service Tax Appellate Tribunal - The petitioner is to be relegated to the alternative remedy of appeal before the Customs Excise and Service Tax Appellate Tribunal. - HELD THAT: - The High Court held that the appropriate forum for adjudication of the grievance arising from cancellation of the customs broker licence is the Customs Excise and Service Tax Appellate Tribunal and accordingly directed that the petitioner be relegated to that alternative remedy. The court observed that the petitioner should be afforded an opportunity to ventilate the grievance before the Tribunal and therefore disposed of the writ by directing invocation of the statutory appellate remedy, subject to the subsidiary directions issued by the Court. [Paras 4]

Petitioner relegated to file an appeal before the Customs Excise and Service Tax Appellate Tribunal.

Stay of administrative order revoking customs broker licence pending decision on stay application before the Tribunal - Operation of the order revoking the petitioner's customs broker licence (Ext.P6) is stayed until the Tribunal decides the petitioner's stay application. - HELD THAT: - The Court found that cancellation of the licence caused serious prejudice to the petitioner by preventing him from carrying on business and therefore granted interim protection limited to the period during which the petitioner's stay application to the Tribunal remains pending. The stay is conditional upon the petitioner instituting the appeal along with the stay petition within the period specified by the Court, and the Tribunal is free to decide the stay application and appeal on merits without being influenced by observations in this judgment. [Paras 4]

Operation of Ext.P6 suspended pending disposal of the stay application filed before the Tribunal.

Exclusion of period of pendency of writ petition from limitation for filing statutory appeal - The period during which the writ petition was pending (from 03.06.2022 till the date of the order) is excluded for computing limitation for filing the appeal to the Tribunal; the petitioner must file the appeal with the stay petition within ten days. - HELD THAT: - Recognising the practical prejudice caused by the pendency of the writ petition and the need to preserve the petitioner's right to invoke the statutory appellate remedy, the Court directed that the period of pendency be excluded for limitation purposes. The Court imposed a timeline - the appeal together with the stay petition must be filed within ten days - and conditioned continuation of interim relief on compliance with that timeline. [Paras 4]

Period from 03.06.2022 till date excluded from limitation; appeal with stay petition to be filed within ten days.

Final Conclusion: Writ petition disposed by relegating the petitioner to the statutory appeal before the Customs Excise and Service Tax Appellate Tribunal; operation of the licence-revocation order (Ext.P6) is stayed until the Tribunal decides the petitioner's stay application, subject to filing the appeal and stay petition within ten days and exclusion of the writ-pendency period from limitation.

Principles of natural justice - audi alteram partem - penal action requiring hearing - alleged violation of Regulation 10(o) of Customs Brokers Licensing Regulation, 2018 - requirement under Regulation 17 to issue notice within ninety days - remand for fresh consideration after hearing

Principles of natural justice - audi alteram partem - penal action requiring hearing - alleged violation of Regulation 10(o) of Customs Brokers Licensing Regulation, 2018 - Validity of the penalty imposed on the customs broker without giving an opportunity of hearing. - HELD THAT: - The Court held that the impugned order imposing a monetary penalty upon the petitioner, being adverse and penal in nature, could not stand without affording the petitioner an opportunity of hearing. Applying the settled doctrine that when an order is penal or adversely affects an individual's rights the rules of natural justice, including audi alteram partem, must be observed, the Court found the procedure adopted deficient. Although the Commissioner of Customs had recorded the penalty, the order was not communicated to the petitioner and no opportunity of hearing was provided. For these reasons the impugned order was held unsustainable and liable to be set aside.

Impugned penalty order set aside for violation of principles of natural justice; matter remanded for fresh decision after giving opportunity of hearing.

Requirement under Regulation 17 to issue notice within ninety days - remand for fresh consideration after hearing - Procedure to be followed on remand and timeline for fresh adjudication. - HELD THAT: - The Court directed that on remand the respondent Customs Authority shall pass a fresh order after giving the petitioner or its authorised representative an opportunity of hearing. The authority is to consider the matter in the light of the observations made in the petition and the applicable regulations, including the contention regarding the notice period under Regulation 17. The fresh decision is to be rendered within four weeks from communication of this order.

Matter remanded to respondent Customs Authority to decide afresh after hearing the petitioner, within four weeks from communication of this order.

Final Conclusion: The penalty order imposed on the petitioner is set aside for breach of natural justice; the matter is remitted to the Customs Authority to decide afresh after giving the petitioner an opportunity of hearing, to be completed within four weeks of communication.

Applicability of departmental circular to Customs matters - monetary limits for filing appeals before CESTAT - legacy Central Excise and Service Tax matters - rectification of mistake in a final order - restoration of appeal for disposal on merits - credit to the Consumer Welfare Fund under Section 27 of the Customs Act, 1962

Applicability of departmental circular to Customs matters - legacy Central Excise and Service Tax matters - Instruction/Circular dated 22.08.2019 (F.No. 390/Misc./116/2017-JC) does not apply to Customs matters and is confined to legacy Central Excise and Service Tax cases. - HELD THAT: - The Tribunal perused the subject and text of the Circular dated 22.08.2019, which expressly describes its purpose as concerning "legacy Central Excise and Service Tax" and contains a specific provision stating the instruction applies only to such legacy issues and pending cases thereof. Having regard to the wording of the Circular and its stated scope, the Tribunal held that the Circular's monetary limits are not applicable to Customs matters. The dismissal of a Customs appeal by reference to that Circular therefore constituted an error apparent on the face of the impugned final order. [Paras 4, 5]

The 22.08.2019 Circular is inapplicable to Customs matters and cannot be the basis for dismissing the present Customs appeal.

Monetary limits for filing appeals before CESTAT - rectification of mistake in a final order - restoration of appeal for disposal on merits - credit to the Consumer Welfare Fund under Section 27 of the Customs Act, 1962 - The impugned final order was rectified and the appeal restored because the correct departmental instruction fixing the monetary limit for Customs appeals (F. No. 390/Misc./163/2010-JC dated 17.12.2015) applied, and the amount in dispute exceeded that limit. - HELD THAT: - The Tribunal noted an earlier CBIC instruction fixing the monetary limit for filing an appeal before CESTAT in Customs matters at Rs.10.00 lakhs. The adjudicating authority had ordered the disputed amount to be credited to the Consumer Welfare Fund under Section 27 of the Customs Act, 1962, and the amount in the present appeal exceeded the Customs monetary limit fixed by the Department. Since the impugned final order dismissed the Customs appeal by reference to an inapplicable monetary threshold (the 22.08.2019 Circular applicable only to legacy Central Excise and Service Tax), the dismissal was an error apparent. Consequently, the Tribunal allowed the rectification application, recalled the dismissal, and restored the appeal to its original number for adjudication on merits. [Paras 6]

The impugned order dismissing the Customs appeal on the basis of the 22.08.2019 Circular is recalled; the rectification application is allowed and the appeal is restored for disposal on merits.

Final Conclusion: Application for rectification is allowed; the order dismissing the Customs appeal as withdrawn on the basis of a Circular limited to legacy Central Excise and Service Tax is recalled, and the appeal is restored for adjudication on merits.

Reliability of expert report - switching of samples - burden on Revenue to prove switching - preservation of samples - confiscation and demand of duty and penalties - norms and conditions under Public Notice for finished leather

Reliability of expert report - switching of samples - burden on Revenue to prove switching - preservation of samples - confiscation and demand of duty and penalties - norms and conditions under Public Notice for finished leather - Whether the Revenue proved that samples were switched or tampered with and, consequently, whether the adverse CLRI report and the confiscation, duty and penalty demands could be sustained. - HELD THAT: - The Tribunal applied the reasoning in M/s. Karpaga Leathers and others where the first CLRI test report dated 07.10.2016 certified that the samples satisfied the Public Notice norms whereas a later report did not. The earlier decision observed that the Mahazar dated 14.10.2016 did not record witnessing of sample-drawing, the Revenue did not explain what was actually sent to the CLRI, nor did it account for preservation of samples during the intervening period; these lacunae raised substantial doubts about the allegation of sample-switching. The Tribunal found no material distinction in facts and held that, in absence of an explanation as to source, custody and preservation of the samples and without proof of where and how switching occurred, the second adverse report could not reliably dislodge the first CLRI report. Since the case for switching remained unestablished, the foundation for confiscation and for demanding duty, redemption fine and penalties failed.

Impugned order confirming demands set aside; confiscation, duty and penalties based on the adverse report cannot be sustained; appeal allowed.

Final Conclusion: Applying the Tribunal's earlier reasoning in M/s. Karpaga Leathers and others, the Revenue failed to prove switching or improper custody of samples and therefore the CLRI's favourable earlier report stands; the orders confirming confiscation, duty and penalties are set aside and the appeal is allowed.

Consent to enhanced valuation - transaction value - rejection of declared value - Rule 12 procedure - Rule 3 determination of transaction value - section 17(5) speaking order - estoppel in taxation - use of contemporaneous (NIDB) data

Consent to enhanced valuation - section 17(5) speaking order - estoppel in taxation - Effect of a written acceptance by importers of an enhanced value on the requirement to issue a speaking order and on the ability to challenge the enhanced assessment. - HELD THAT: - The Tribunal held that where importers, after being shown contemporaneous data, expressly and in writing agreed to enhancement of the declared value and expressly waived their rights to issue of a show cause notice or personal hearing and to a speaking order, the statutory requirement under section 17(5) to pass a speaking order does not apply. Such written acceptance operates to render unnecessary further exercise under the Valuation Rules because the importers have not insisted on the procedural protections; the acceptance in writing effectively becomes the declared transaction value for the purposes of assessment and relieves the proper officer of the obligation to pass a speaking order. The Commissioner (Appeals) therefore erred in holding that a speaking order was mandatory despite the importers' unequivocal written waiver of those rights. The Tribunal relied upon the statutory text of section 17(5), the mechanism in rule 12 and earlier precedents applying the same principle that acceptance of enhanced valuation by the importer dispenses with the need for further justification by Revenue. [Paras 13, 15, 22]

The finding of the Commissioner (Appeals) that a speaking order was required despite the importers' written acceptance was set aside; the importers' written consent dispensed with the requirement of a speaking order and fixed the valuation accepted.

Transaction value - rejection of declared value - Rule 12 procedure - Rule 3 determination of transaction value - use of contemporaneous (NIDB) data - Whether the assessing officer was obliged to reject the declared transaction value and determine value afresh under Rules 4 to 9 merely on the basis of contemporaneous/NIDB data when importers had not resisted enhancement. - HELD THAT: - The Tribunal observed that rule 12 furnishes a procedure for rejection of declared value when the proper officer has reasonable doubt; it contemplates asking for further information and, on request by the importer, communicating grounds in writing and providing hearing. However, Explanation to rule 12 and rule 3 show that sequential valuation under rules 4 to 9 becomes necessary only when the declared value is rejected after following rule 12. Where the importer accepts enhancement in writing, the declared value effectively stands replaced by the accepted value, and there is no requirement to proceed sequentially through rules 4 to 9. The Tribunal also noted that general criticisms about uniform reliance on NIDB data were misplaced on the facts of these appeals because the assessments were founded on the importers' written acceptance of enhanced values rather than unilateral action by the assessing officer. Consequently, the Commissioner (Appeals)'s general observations that NIDB alone cannot form basis for enhancement were inapposite given the factual position of consent. [Paras 17, 18, 22, 33, 34]

The Commissioner (Appeals) was incorrect to set aside assessments on the ground that Revenue had not discharged a burden to reject transaction value or that NIDB alone had been relied upon, because the assessments were based on the importers' written acceptance and thus did not require valuation under rules 4 to 9.

Final Conclusion: The Commissioner (Appeals) erred in setting aside the re-assessments because the importers had, in writing, accepted enhancement of the declared values and waived procedural rights; the appeals filed by the Department are allowed and the order dated 23.05.2019 is set aside.

Non-compliance with remand directions - Right to retest and admissibility of laboratory report - Determination of antiquity under the Antiquities and Art Treasures Act, 1972 - Non-speaking adjudication - Return of detained goods / direction to allow export

Non-compliance with remand directions - Right to retest and admissibility of laboratory report - Whether the adjudicating authority complied with this Tribunal's remand direction to obtain a retest from a recognized Gems and Jewellery Laboratory before deciding whether the goods are antiquities. - HELD THAT: - The Tribunal had previously remanded the matter with a direction to obtain a retest from a recognized Gem and Jewellery Laboratory and to determine classification of the goods afresh. On remand the appellant produced an ISO-certified test report from an International Testing Laboratory (Jaipur), samples, and video of the manufacturing process and requested inspection of the workshop by ASI personnel. Despite these materials and the Tribunal's direction, the adjudicating authority did not follow the retest process as directed but treated the earlier ASI opinion as final. The impugned order therefore failed to apply its mind to the remand direction and to the evidence tendered by the appellant, including the laboratory report and manufacturing evidence, before reaching a conclusion on antiquity. [Paras 4, 5, 8]

The adjudicating authority did not comply with the Tribunal's remand direction to obtain a retest and ignored the appellant's proffered evidence; that failure vitiated the adjudication.

Determination of antiquity under the Antiquities and Art Treasures Act, 1972 - Non-speaking adjudication - Return of detained goods / direction to allow export - Whether the adjudication ordering absolute confiscation and penalties could be sustained where the order was non-speaking and passed without following the remand directions. - HELD THAT: - The adjudicating authority endorsed the earlier ASI determination and imposed confiscation and penalties without conducting the retest or otherwise engaging with the evidence produced on remand. The Tribunal found the order to be non-speaking and arbitrary and that the authority failed to exercise its adjudicatory function in accordance with the remand. In consequence, the Tribunal set aside the impugned order and directed return of the goods or allowance of export within a specified period. [Paras 6, 8, 9]

Impugned adjudication set aside as non-speaking and arbitrary; goods to be returned or export allowed within 45 days.

Final Conclusion: The appeal is allowed. The adjudication ordering confiscation and penalties is set aside for failure to comply with the Tribunal's remand direction and for being non-speaking; the Department is directed to return the goods to the appellant or permit their export within 45 days.

Approval of Resolution Plan under Section 30(6) of the I&B Code, 2016 - commercial wisdom of the Committee of Creditors - judicial interference in commercial decisions under the IBC - compliance with RFRP and Regulation 39(4) of the CIRP Regulations - compliance certificate in Form-H - treatment of operational creditors' claims in a resolution plan

Approval of Resolution Plan under Section 30(6) of the I&B Code, 2016 - commercial wisdom of the Committee of Creditors - treatment of operational creditors' claims in a resolution plan - compliance certificate in Form-H - Validity of the NCLT order approving the Resolution Plan and whether the Tribunal should interfere with the Committee of Creditors' commercial decision in view of alleged inadequate payment to operational creditors. - HELD THAT: - The Tribunal found that the Resolution Plan was placed before and approved by the Committee of Creditors after deliberation, obtaining the requisite majority (approximately 70%) and that the plan complied with the technical and commercial requirements of the RFRP and the Code; the Resolution Applicant furnished the compliance certificate in Form H and the CoC had found the plan feasible and viable in accordance with Section 30(4) and Regulation 39(4). The Adjudicating Authority recorded the distribution of votes and the payment structure including the aggregated provision for operational creditors. Absent any demonstrated illegality, infirmity or violation of statutory provisions, the Tribunal declined to disturb the CoC's commercial wisdom, following the settled principle that judicial interference in commercial decisions under the IBC must be minimal. The Tribunal noted that subsequent applications for revision of the plan were dealt with separately but that the appellants' grievance about the quantum payable to them did not disclose a legal ground to set aside the approval order. On these conclusions the appeals were held to be without merit. [Paras 9, 10, 12, 13, 14]

Appeals dismissed; no interference with the NCLT order approving the Resolution Plan; parties to bear their own costs.

Final Conclusion: The Tribunal upheld the NCLT's approval of the Resolution Plan, finding it compliant with the Code and CIRP Regulations and that there was no legal basis to interfere with the commercial decision of the CoC; both appeals are dismissed.

Access of Stakeholders' Consultation Committee to relevant records and information - obligation of Liquidator to share valuation reports with SCC members - purposive interpretation of regulatory provisions to advance legislative object - confidentiality safeguards and non-disclosure undertaking by SCC members

Access of Stakeholders' Consultation Committee to relevant records and information - obligation of Liquidator to share valuation reports with SCC members - confidentiality safeguards and non-disclosure undertaking by SCC members - Liquidator is required to provide a copy of the valuation reports to the applicant as a member of the Stakeholders' Consultation Committee. - HELD THAT: - The Bench construed Regulation 31-A(1) and 31-A(5) of the IBBI (Liquidation Process) Regulations, 2016 purposively to give effect to the object of enabling the SCC to advise the Liquidator on matters relating to sale, including fixing of reserve price and manner of sale. The Bench held that valuation reports are critical records for advising on sale and reserve price and that denial of access to such reports would defeat the statutory purpose. The reasoning relied on the principle of purposive interpretation as articulated by the Supreme Court in MSR Leathers and the view of the Coordinate Bench in Hemant Shantilal Shah that ex-management/SCC members should be allowed to view valuation reports so they can point out shortfalls and assist in maximisation of value. The Bench distinguished the authorities relied upon by the Liquidator as factually different and not addressing the interpretation of Regulation 31-A. To address confidentiality concerns, the Bench directed that the Liquidator may obtain an undertaking or non-disclosure agreement from the SCC member and may seek indemnity under the powers available to insolvency professionals, thus permitting disclosure subject to appropriate safeguards. [Paras 9, 10, 11]

IA No.46/2022 is allowed and the Liquidator is directed to supply the copy of the valuation reports to the applicant, subject to execution of an undertaking/non-disclosure arrangement to protect confidentiality.

Final Conclusion: Application allowed; the Liquidator must furnish the valuation reports to the applicant as a member of the Stakeholders' Consultation Committee, with confidentiality safeguarded by an undertaking or non-disclosure agreement.

Powers and duties of liquidator to protect and preserve assets - Liquidation estate comprising all assets of the corporate debtor - Updation of revenue records and demarcation of immovable property - Duty of revenue authorities to assist in demarcation on request - Application under Section 60(5) of the IBC, 2016

Powers and duties of liquidator to protect and preserve assets - Updation of revenue records and demarcation of immovable property - Duty of revenue authorities to assist in demarcation on request - Whether the liquidator is entitled to a direction to local revenue authorities to update revenue records and carry out demarcation of the corporate debtor's land and whether such direction is supported by the liquidator's duties under the IBC. - HELD THAT: - The Tribunal found that the liquidator had taken steps to ascertain the exact land holdings, including instructing a title search and sending requests to the local revenue officers for demarcation, but received no response. Physical inspection suggested the identified plot was considerably smaller than the area recorded in the corporate debtor's records, creating uncertainty that impeded sale and release of the property. Relying on the statutory duties and powers of the liquidator - including custody and control of assets, evaluation and preservation of assets, and the power to apply to the Adjudicating Authority for orders or directions - the Tribunal held that proper demarcation and updation of revenue records are necessary measures to protect and preserve the liquidation estate and to ascertain the assets over which the corporate debtor has ownership rights. In the circumstances, and having regard to the liquidator's statutory role under the IBC, the respondents (local revenue officers) were directed to update the revenue records and carry out demarcation of the subject property in accordance with law. The order also directed service of the decision on the Deputy Commissioner and Sub Divisional Magistrate for compliance. [Paras 8, 9, 10]

Direction issued to the Naib Tehsildar and Patwari to update revenue records and demarcate the corporate debtor's land at Village Jugiana, Ludhiana; order to be served on the Deputy Commissioner and Sub Divisional Magistrate; IA No.152/2021 allowed and disposed of.

Final Conclusion: The application under Section 60(5) IBC was allowed: having regard to the liquidator's duties to protect and preserve the liquidation estate and the failure of local revenue officials to respond, the Tribunal directed updation of revenue records and demarcation of the corporate debtor's land and ordered service of the order on appropriate district authorities for compliance.

Liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - Appointment of Liquidator - Committee of Creditors' decision to liquidate as trigger for adjudicating authority's order - Limitation of CIRP costs to the statutory CIRP period - Exclusion of lockdown period from CIRP timeline - No allowance of costs incurred after filing liquidation application - Vesting of management powers in the Liquidator and commencement of fresh moratorium

Liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - Committee of Creditors' decision to liquidate as trigger for adjudicating authority's order - Corporate Debtor to be liquidated following the Committee of Creditors' resolution and in accordance with Section 33(2) of the Code. - HELD THAT: - The Tribunal noted that the Committee of Creditors in its fourth meeting dated 06.01.2021 resolved to liquidate the Corporate Debtor and to appoint the Resolution Professional as liquidator. The statutory scheme in Section 33(2) requires the Adjudicating Authority to pass a liquidation order where the Resolution Professional intimates the decision of the CoC to liquidate (approved by the requisite voting share) at any time during CIRP before confirmation of a resolution plan. Records, including the CoC resolution and the consent of the Resolution Professional to act as liquidator, satisfy the conditions of Section 33(2). Accordingly, the Tribunal directed liquidation to commence with immediate effect and set out ancillary directions under Chapter III, including vesting of powers in the liquidator and commencement of the fresh moratorium under Section 33(5). [Paras 10, 12, 17, 18]

The Corporate Debtor is ordered to be liquidated with immediate effect and the Resolution Professional is appointed as Liquidator.

Appointment of Liquidator - Consent of Resolution Professional - Vesting of management powers in the Liquidator and commencement of fresh moratorium - The Resolution Professional, Mr. Naresh Kumar Goel, is appointed as Liquidator and vested with powers to take custody of assets and act under the Code. - HELD THAT: - The Tribunal recorded that Mr. Naresh Kumar Goel had been approved by the CoC and had filed his consent to act as liquidator. In exercise of power under Section 33(2), the Tribunal appointed him as Liquidator, directed him to take custody and control of assets, make the public announcement as required by the Liquidation Regulations, and stated that the provisions of Section 33(5) to (7) shall apply, including the commencement of a fresh moratorium and the cessation of powers of the board and officers. [Paras 12, 18]

Mr. Naresh Kumar Goel is appointed as Liquidator and shall take custody of assets, effect the public announcement and exercise the powers provided under Chapter III of the Code.

Limitation of CIRP costs to the statutory CIRP period - No allowance of costs incurred after filing liquidation application - Exclusion of lockdown period from CIRP timeline - Claimed CIRP costs are limited to the maximum statutory CIRP period and specified amounts are allowed; costs incurred after filing the liquidation application are disallowed; lockdown period exclusion was previously allowed. - HELD THAT: - The Tribunal observed that the Corporate Debtor had limited assets and that the workload was light, making the claimed expenses and fees excessive. The CoC had earlier approved a remuneration of Rs.50,000 per month for the Resolution Professional. Applying the maximum statutory CIRP period of 180 days, the Tribunal limited the consolidated CIRP cost to the RP to the equivalent of Rs.50,000 per month (totaling the amount for 180 days), granted an additional Rs.50,000 to account for the excluded lockdown period (as little work was done then), and allowed Rs.40,000 as out of pocket expenses. The Tribunal expressly disallowed any claim for expenses incurred after the filing of the liquidation application. The Tribunal further recorded that the prayer to exclude the lockdown period (22.03.2020 to 15.11.2020) from the CIRP timeline had been allowed by a prior order of the Bench dated 05.01.2022. [Paras 16]

The Resolution Professional's fee claim is limited to the CIRP period equivalent at the approved rate, plus specified additional amounts for the lockdown period and out of pocket expenses; no expenses after filing the liquidation application are allowed.

Committee of Creditors' decision to liquidate as trigger for adjudicating authority's order - The CoC's resolution taken during the CIRP, before confirmation of any resolution plan, lawfully empowered the Adjudicating Authority to pass the liquidation order under Section 33(2). - HELD THAT: - The Tribunal reiterated the statutory position that Section 33(2) permits the CoC to decide liquidation at any time after its constitution and before confirmation of a resolution plan, and that such decision, when intimated by the Resolution Professional, mandates the Adjudicating Authority to pass a liquidation order. The CoC had validly passed the resolution in its meeting of 06.01.2021 with the requisite voting, and the Resolution Professional complied by filing the liquidation application, prompting the Tribunal to pass the liquidation order. [Paras 8, 9, 10, 14]

The CoC's decision to liquidate, communicated during the CIRP and before confirmation of any plan, justified the Tribunal's liquidation order under Section 33(2).

Final Conclusion: IA No. 229/2021 is allowed: the Corporate Debtor is ordered to be liquidated under Section 33(2) of the Code; Mr. Naresh Kumar Goel is appointed Liquidator; CIRP costs of the Resolution Professional are limited as specified and costs after filing the liquidation application are disallowed; consequential directions concerning custody of assets, public announcement, moratorium and reporting are issued.

Liquidation under Section 33 of the IBC - Appointment of liquidator under Section 34(1) of the IBC - Liquidation costs contribution under Regulation 2A of the Liquidation Regulations - Sale of corporate debtor as a going concern - Ceasing of moratorium upon liquidation - Vesting of management powers in the liquidator - Restriction on suits and legal proceedings subject to liquidator's approval

Liquidation under Section 33 of the IBC - Liquidation upon rejection of resolution plans - Order of liquidation of the corporate debtor following rejection of all resolution plans by the CoC. - HELD THAT: - The Adjudicating Authority found that the sole member of the Committee of Creditors considered the received resolution plans and, by 100% votes, rejected all plans and resolved to liquidate the corporate debtor. Given the CoC's resolution to liquidate and in view of Section 33(2) of the IBC, the Authority concluded there was no option but to pass an order of liquidation. The court noted that sufficient efforts were made to solicit and evaluate resolution plans, and the statutory condition for liquidation upon CoC's decision was satisfied. [Paras 5, 6]

Liquidation of M/s Bajrang Cotgin Pvt. Ltd. ordered; IA No. 188 of 2022 allowed; liquidation effective from the date of the order.

Appointment of liquidator under Section 34(1) of the IBC - Appointment of the Resolution Professional as Liquidator. - HELD THAT: - Pursuant to the CoC resolution to liquidate and its recommendation to appoint the applicant as liquidator, and having regard to the applicant's written consent and absence of disciplinary proceedings, the Authority, under Section 34(1), appointed Mr. Premraj Ramratan Laddha as Liquidator to complete the liquidation process in accordance with the Code and the Liquidation Regulations. [Paras 5, 7]

The Resolution Professional, Mr. Premraj Ramratan Laddha, is appointed as Liquidator and directed to conduct liquidation in accordance with law.

Sale of corporate debtor as a going concern - Sale under Regulation 39C of the CIRP Regulations and Regulation 32(e) of the Liquidation Regulations - Direction to the liquidator to first endeavour to sell the corporate debtor as a going concern. - HELD THAT: - The CoC had resolved that the liquidator should first explore selling the corporate debtor as a going concern under the cited regulations. The Authority recorded and endorsed that resolution and directed the appointed liquidator to endeavour to effect such a sale in accordance with the resolution and applicable regulations. [Paras 5, 7]

Liquidator shall first explore and endeavour to sell the corporate debtor as a going concern as per the CoC resolution and applicable regulations.

Liquidation costs contribution under Regulation 2A of the Liquidation Regulations - Approval of CoC resolution for contribution towards estimated liquidation costs. - HELD THAT: - The CoC (sole member) passed a resolution under Regulation 39B of the CIRP Regulations read with Regulation 2A of the Liquidation Regulations to contribute the estimated liquidation cost for six months. The applicant filed compliance and produced the CoC resolution approving the contribution, which the Authority recorded and accepted for the liquidation process. [Paras 4, 5]

CoC's resolution to contribute estimated liquidation costs under Regulation 2A is noted and recorded; liquidation to proceed accordingly.

Ceasing of moratorium upon liquidation - Restriction on suits and legal proceedings subject to liquidator's approval - Vesting of management powers in the liquidator - Incidental consequences of liquidation: cessation of moratorium, vesting of management powers in liquidator, and bar on suits except by liquidator with Authority's approval. - HELD THAT: - The Authority declared that the moratorium earlier imposed shall cease upon liquidation. It further provided that all powers of the board and key managerial persons cease and vest in the liquidator. Subject to Section 52 of the IBC, no suit or legal proceeding shall be instituted by or against the corporate debtor except that the liquidator may institute proceedings on behalf of the corporate debtor with prior approval of the Adjudicating Authority, as contemplated by the Code. [Paras 7]

Moratorium ceases; management powers vest in the liquidator; suits and proceedings are barred except as permitted with the Adjudicating Authority's approval.

Liquidator's fees and cooperative obligations - Liquidator to charge fees in proportion as set out by the CoC and corporate personnel to cooperate. - HELD THAT: - The CoC's meeting recorded the basis for the liquidator's fees and the Authority directed that the Liquidator will charge fees in proportion as set out in the 9th CoC meeting. The Authority also directed personnel of the corporate debtor to extend necessary cooperation to the Liquidator and required the Liquidator to cooperate with government agencies in ongoing or future investigations. [Paras 7]

Liquidator's fees to be charged as per CoC's stipulation; corporate personnel must cooperate with the Liquidator and relevant authorities.

Registry compliance and communication of order - Directions to the Registry to upload and communicate the liquidation order. - HELD THAT: - The Authority directed the Registry to upload the liquidation order on the official website within two working days and to send authenticated copies by speed-post to the Financial Creditor, Corporate Debtor, Registrar of Companies, Resolution Professional, and Liquidator within one week. [Paras 7]

Registry to upload order and dispatch authenticated copies to specified parties within prescribed timelines.

Final Conclusion: The Tribunal allowed the application and ordered liquidation of M/s Bajrang Cotgin Pvt. Ltd. effective from the date of the order; the Resolution Professional was appointed as Liquidator, directed to endeavour to sell the corporate debtor as a going concern, the moratorium ceased, management powers vested in the Liquidator, costs contribution and fee arrangement as per CoC were recorded, and procedural directions were issued for cooperation and communication of the order.

Corporate insolvency resolution process - operational creditor - corporate debtor - admission of debt and settlement - acknowledgement of debt by conduct and communications - dismissal for absence of outstanding operational debt

Admission of debt and settlement - acknowledgement of debt by conduct and communications - operational creditor - corporate debtor - Whether any outstanding operational debt remained payable by the Corporate Debtor after the payments made and the acknowledgements communicated by the parties - HELD THAT: - The Tribunal examined the payments made by the Corporate Debtor and the contemporaneous electronic communications exchanged between the parties, including a WhatsApp message from the Operational Creditor dated 9 February 2021 which acknowledged receipt of Rs. 2,73,26,052.68 and expressly confirmed waiver of the interest claimed. The Corporate Debtor produced bank statements and ledger entries showing receipt by the Operational Creditor of the agreed principal amount and adjustments from prior advances. The Operational Creditor denied the existence of any executed settlement agreement and contested waiver of interest; however, save for specific denial of the 9 February 2021 message, the Operational Creditor did not deny other messages sent from the same number nor the receipts. The Tribunal treated the Operational Creditor's contemporaneous acknowledgement in communications as establishing that the principal amount agreed between the parties had been paid and that no balance remained due, and found the subsequent denial to be inconsistent with the Operational Creditor's conduct. On that basis the Tribunal concluded there was no outstanding operational debt that could sustain initiation of the corporate insolvency resolution process. [Paras 26, 27, 28]

No outstanding operational debt remained after payment and acknowledgement; petition cannot be sustained and is dismissed.

Final Conclusion: The petition under Section 9 of the Insolvency and Bankruptcy Code for initiation of the corporate insolvency resolution process was dismissed because the Operational Creditor had received and acknowledged the agreed payment from the Corporate Debtor and no debt remained outstanding.

Interest on amounts paid pending investigation - refund consequent to appellate relief - re examination of allegedly erroneous refund and recovery - liability for works contract service tax from 1.6.2007 - appropriation of amounts paid during investigation

Interest on amounts paid pending investigation - appropriation of amounts paid during investigation - Entitlement of the petitioner to interest on amounts deposited by it pending investigation and prior to issuance of the show cause notice. - HELD THAT: - The Court found that the petitioner had deposited amounts during the investigation prior to issuance of the show cause notice and that no separate interest had been paid thereon. The liability for service tax was only for the period from 1.6.2007 onwards and part of the proposed demand would have been accordingly dropped. Having regard to these facts and the appellate relief granted to the petitioner by the Tribunal, the Court held that the petitioner is entitled to interest at the rate of 6% on the amounts deposited pending investigation. The Court identified the specific deposited sums as the basis for computation of interest and directed re examination and payment/adjustment of interest by the second respondent. [Paras 11, 12, 13, 15]

The petitioner is entitled to interest at 6% on the amount deposited pending investigation (Rs.57,03,608/- as recorded in the order) and the second respondent is directed to pay/adjust such interest.

Refund consequent to appellate relief - re examination of allegedly erroneous refund and recovery - Whether the refund sanctioned by Order in Original No.8/2019 is correct and whether any part of that refund that relates to taxed periods ought to be recovered. - HELD THAT: - The Court noted that the second respondent had sanctioned a refund of Rs.98,27,018/- pursuant to the Tribunal's order but that the record did not clearly explain why an amount larger than the sums deposited pending investigation was refunded, and that amounts corresponding to taxable periods after 1.6.2007 could not have been refundable. In view of this inconsistency and absence of clear examination in the refund order, the Court did not finally adjudicate the correctness of the refund on merits but remitted the matter to the second respondent for fresh examination. The second respondent was directed to issue a proper show cause notice to the petitioner, determine whether an erroneous refund was made in respect of tax paid for periods after 31.10.2008, and take appropriate steps for recovery if an erroneous refund is found. [Paras 8, 11, 16, 17, 18]

The question of correctness of the refund is remitted to the second respondent for re examination; if an erroneous refund is found for amounts relating to periods after 31.10.2008, the respondents are directed to recover the same after issuing a show cause notice.

Final Conclusion: Writ petition disposed by directing the second respondent to re examine the refund order, to pay or adjust interest at 6% on the amounts deposited pending investigation, and, if an erroneous refund of tax for periods after 31.10.2008 is found, to recover that amount after issuing a proper show cause notice within six months; no costs.

Reverse charge mechanism for insurance auxiliary services - Service tax collected from persons to be deposited with Central Government (Section 73A) - Contractual recovery of indirect tax from another party - Valuation of taxable services - exclusion of expenditure not charged by service provider - Inclusion of reimbursable expenditure in 'consideration' under amended Section 67 (w.e.f. 14.05.2015) - Vires of Rule 5 of Service Tax (Determination of Value) Rules

Service tax collected from persons to be deposited with Central Government (Section 73A) - Reverse charge mechanism for insurance auxiliary services - Contractual recovery of indirect tax from another party - Whether amounts representing service tax (and TDS) deducted by the appellants from commissions payable to insurance agents are recoverable from the appellants under Section 73A(2)/(3). - HELD THAT: - The Tribunal held that Section 73A(2) and (3) apply to amounts collected as representing service tax which have not been paid to the Government. Where the appellants have paid the service tax (they having discharged tax under the reverse charge) and, under contractual arrangements, recover that tax element from agents by adjusting commission, such contractual recovery does not amount to unlawful collection attracting Section 73A. The Tribunal relied on the principle that service tax is an indirect tax which can be passed on by contract (Rashtriya Ispat Nigam Ltd.), and on earlier Tribunal decisions with identical facts which held that contractual reimbursement or adjustment of tax already paid does not constitute collection warranting invocation of Section 73A. The Revenue did not allege non-payment of the underlying tax to the Government, and therefore the demand under Section 73A could not be sustained; consequential interest and penalty also did not arise. [Paras 16, 17, 18, 19]

Amounts representing service tax recovered by appellants from agents (after the appellants had discharged tax under reverse charge) are not recoverable from the appellants under Section 73A(2)/(3); demand and consequential interest/penalty set aside.

Valuation of taxable services - exclusion of expenditure not charged by service provider - Inclusion of reimbursable expenditure in 'consideration' under amended Section 67 (w.e.f. 14.05.2015) - Vires of Rule 5 of Service Tax (Determination of Value) Rules - Whether various expenses incurred by the appellants (pre-recruitment training, refresher/post-license training, sales/ business promotion expenses) are includible in the taxable value of commission paid to insurance agents under Rule 5/6 and Section 67. - HELD THAT: - The Tribunal held that prior to the amendment of Section 67 effective 14.05.2015, value of taxable service is the 'gross amount charged by the service provider for such service', and amounts not charged by the service provider (including expenditures incurred by the service recipient) cannot be included. Rule 5(1) of the Valuation Rules (which sought to include reimbursable expenses) has been held ultra vires Section 67 by higher courts; consequently, expenses incurred by the appellants themselves for training, recruitment and promotion cannot be included in the value of commission paid to agents for the relevant pre-amendment period. With respect to the post-14.05.2015 position, the amended explanation to Section 67 includes reimbursable expenditure incurred by the service provider and charged to the recipient; it does not provide for inclusion of expenditures incurred by the recipient on its own account. In the present facts the appellants, as service recipients, incurred the expenditure and did not show that the agents (service providers) had incurred and charged these costs. Therefore the demands based on inclusion of such expenses in the value of commission are unsustainable; consequential penalties are also not sustainable. [Paras 20, 21, 22, 23, 24]

Expenses incurred by the appellants for training, recruitment and business promotion are not includible in the taxable value of commission paid to agents for the relevant periods; demands and penalties sustained on that basis set aside.

Final Conclusion: The impugned order confirming demands on (i) amounts representing service tax recovered from agents and (ii) various training and business-promotion expenses is set aside; the appeals are allowed with consequential relief as per law.

Permission to withdraw writ petition - Dismissal of petition as withdrawn - Maintainability of writ petition in presence of alternate statutory remedy - Appropriate forum for challenge to orders under Central Excise law

Permission to withdraw writ petition - Dismissal of petition as withdrawn - Prayer for permission to withdraw the writ petitions and consequent disposal of the petitions. - HELD THAT: - The petitioners sought leave to withdraw the writ petitions in view of corporate insolvency proceedings and an approved resolution plan before the NCLT. Having permitted withdrawal, the Court disposed of the petitions by recording the withdrawal and dismissed the writ petitions as withdrawn. The Court did not impose costs and closed connected miscellaneous petitions. [Paras 5]

Writ petitions dismissed as withdrawn; no costs; connected miscellaneous petitions closed.

Maintainability of writ petition in presence of alternate statutory remedy - Appropriate forum for challenge to orders under Central Excise law - Observation that the petitioners had not approached the appropriate appellate authority under the Act prior to filing writ petitions in this Court. - HELD THAT: - The respondent urged that the petitioners bypassed the statutory appellate forum (CESTAT) and directly invoked the writ jurisdiction of the High Court, contending non-maintainability. The Court recorded that the petitioners, instead of approaching the CESTAT, directly approached the High Court without valid reason and noted that such conduct was improper. The Court nevertheless proceeded to allow withdrawal and did not decide the merits of maintainability or the merits of the impugned original order. [Paras 4, 5]

Court observed the petitions were filed without first availing the statutory appellate remedy but did not adjudicate the maintainability, having permitted dismissal as withdrawn.

Final Conclusion: The writ petitions were permitted to be withdrawn and are dismissed as withdrawn; no costs were awarded and connected miscellaneous petitions were closed; the Court noted (without deciding) that the statutory appellate remedy before CESTAT had not been availed.

Availment of Cenvat credit on photocopies of invoices - Denial of credit for non-production of original invoices - Procedural lapse versus substantive compliance - Proof of receipt and use of goods

Availment of Cenvat credit on photocopies of invoices - Procedural lapse versus substantive compliance - Proof of receipt and use of goods - Whether Cenvat credit legitimately availed on the basis of photocopies of purchase invoices can be denied solely because original invoices were not produced. - HELD THAT: - The Tribunal found that the denial of credit rested only on the appellant's failure to produce original invoices. There was no dispute about the purchase of goods, their entry in purchase accounts, receipt, or use in manufacture of final products. The Tribunal treated non-production of original invoices as a procedural lapse and held that such a lapse, without evidence that goods were not received or used, cannot form a sustainable basis for disallowing Cenvat credit. Reliance placed on decisions both for and against the proposition was considered, and the determinative principle adopted is that substantive proof of purchase, receipt and utilisation prevails over mere procedural non-compliance in supporting entitlement to credit.

Denial of Cenvat credit solely for non-production of original invoices is unsustainable; the impugned order is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that absence of original invoices is only a procedural lapse and cannot justify denial of Cenvat credit where purchase, receipt and use of goods are otherwise proved.

Interpretation of limitation for audit assessment under Section 42(6) - Power of the Commissioner to grant extension under the proviso to Section 42(6) - Principle that expiry of limitation vests a valuable right in the assessee - Applicability of Shreyans Industries principle on extinguishment of the Department's right after prescribed period - Reference to a Three-Judge Bench for authoritative determination

Interpretation of limitation for audit assessment under Section 42(6) - Power of the Commissioner to grant extension under the proviso to Section 42(6) - Applicability of Shreyans Industries principle on extinguishment of the Department's right after prescribed period - Whether the principle in Shreyans Industries applies to Section 42(6) of the Orissa VAT Act and whether the Commissioner may validly grant an extension of time after the initial six month period has expired. - HELD THAT: - The Court examined the ratio in Shreyans Industries (three Judge Bench) which held that, upon lapse of the statutory period allowed to the assessing officer, the right of the Revenue to assess gets extinguished and a valuable right vests in the assessee, precluding post expiry extension. Petitioners urged that Shreyans is distinguishable on textual and contextual grounds inasmuch as Section 42(6) and its proviso: (i) involve distinct offices (Assessing Authority and Commissioner); (ii) prescribe a one year outer limit by combined reading of the sub section and proviso; (iii) differ from the statute considered in Shreyans in terms of original limitation, outer limit and requirement to record reasons; and (iv) concern audit assessments detecting escapement or suppression. The Court found these distinctions not decisive to displace the broad principle in Shreyans and observed additional interpretative and administrative law perspectives (including comparisons with income tax precedent and concerns of executive flexibility versus certainty). Given the constitutional and precedent weight of Shreyans and the presence of competing interpretative arguments, the Court concluded that the question requires authoritative resolution by a Bench of equal strength. [Paras 16, 17, 18]

The question is referred to a three Judge Bench for consideration of the applicability of Shreyans Industries and the proper interpretation of Section 42(6) and its proviso.

Final Conclusion: The petitions are not decided on the merits. In view of the importance and precedential questions raised about the applicability of the three Judge Bench decision in Shreyans Industries to Section 42(6) of the Orissa VAT Act, the matters are referred to a three Judge Bench for authoritative determination.

Rectification of mistake apparent on record - scope of Section 22 of the U.P. Trade Tax Act, 1948 - debatable or doubtful issues not permissible in rectification proceedings - taxability where purchases are made from unregistered dealers - application of Section 3(AAAA) of the U.P. Trade Tax Act

Rectification of mistake apparent on record - taxability where purchases are made from unregistered dealers - application of Section 3(AAAA) of the U.P. Trade Tax Act - Whether imposition of tax under Section 22 by treating purchases of leather from unregistered dealers as taxable could be sustained as a rectification of a mistake apparent on the record. - HELD THAT: - The Court applied the established principle that proceedings under Section 22 are confined to correcting mistakes which are apparent on the face of the record and do not permit re opening debatable or doubtful issues requiring deliberation on merits. The assessing officer found, from the assessee's own books examined at assessment, disclosed purchases of leather from unregistered dealers. That disclosure formed part of the assessment record; no explanation was offered to rebut the factual disclosure. The provisions embodied in Section 3(AAAA) operate when purchases are from unregistered dealers. Because the omission to tax such turnover arose from an oversight in the assessment order and the factual position was not controverted by the assessee, the rectification was limited to correcting that apparent mistake. The Tribunal and revenue authorities therefore rightly invoked Section 22 to impose tax on the leather purchases and their conclusion cannot be faulted.

Rectification under Section 22 sustaining tax on purchases of leather from unregistered dealers upheld.

Rectification of mistake apparent on record - debatable or doubtful issues not permissible in rectification proceedings - taxability where purchases are made from unregistered dealers - Whether imposition of tax under Section 22 on purchases of cotton thread could be sustained as correction of a mistake apparent on record. - HELD THAT: - The assessee had disclosed purchases of cotton thread in its books but contended that such entries were wrongly shown in the trading account and not reflective of manufacture. No invoices or other documents were produced to substantiate the asserted alternate characterization. The Court held that where the assessee's own disclosure shows purchase from unregistered sources and no cogent documentary evidence is produced to contradict that disclosure, the assessing authority could treat the matter as an oversight in the assessment order and rectify it under Section 22. Because no genuine or substantiated explanation rendered the issue debatable, the rectification in respect of cotton thread was permissible.

Rectification under Section 22 sustaining tax on purchases of cotton thread from unregistered dealers upheld.

Rectification of mistake apparent on record - debatable or doubtful issues not permissible in rectification proceedings - Whether the addition made by invoking Section 22 in respect of purchases of cotton (where the assessee explained the unregistered seller had himself purchased from a registered dealer) was sustainable as rectification or required fresh consideration. - HELD THAT: - The assessee furnished a specific explanation that the cotton, though shown as purchased from an unregistered dealer, had been bought by that unregistered dealer from a registered dealer. The Court observed that such an explanation was not shown to be patently false or bogus on the record and thus transformed the matter into a debatable issue. Established law precludes resolving debatable questions by way of rectification proceedings; evidence and adjudication on merits would be necessary before negating the explanation. Reliance on Deva Metal Powders Pvt. Ltd. (reported) was held appropriate to the extent it bars converting a substantive, contestable issue into a rectification exercise. Consequently, the addition in respect of cotton could not be sustained via Section 22 and required reconsideration by appropriate proceedings.

Addition in respect of cotton purchases set aside insofar as it was imposed by way of rectification; issue requires fresh consideration and cannot be decided by Section 22 rectification.

Final Conclusion: The revision is allowed in part: the Tribunal's confirmation of rectification and tax in respect of purchases of leather and cotton thread from unregistered dealers is sustained, but the addition relating to cotton purchases-where a non frivolous explanation was furnished-could not be imposed by way of rectification under Section 22 and must be reconsidered by appropriate proceedings; no order as to costs.

Falsely represents - mens rea - burden of proof in penalty proceedings - penalty under Section 10A read with Section 10(b) of the Central Sales Tax Act, 1956

Falsely represents - mens rea - burden of proof in penalty proceedings - penalty under Section 10A read with Section 10(b) of the Central Sales Tax Act, 1956 - Whether penalty under Section 10A read with Section 10(b) could be sustained in absence of proof by the revenue that the dealer made a false representation (i.e., acted with mens rea) in issuing declarations against Form C. - HELD THAT: - The Court held that the phrase "falsely represents" connotes deliberate, knowing conduct and that a finding of mens rea is a condition precedent to imposing penalty under Section 10(b) read with Section 10-A. The burden to prove that a declaration was false rests on the revenue; mere wrong or incorrect declarations arising from inadvertence or bona fide belief do not attract the penalty. In the present case the revenue led no evidence to establish that the assessee knowingly misrepresented goods as covered by its registration; consequently the assessee's explanation, though secondary, could not be supplanted by an absence of proof by the revenue. On these grounds the Tribunal's conclusion sustaining the penalty was erroneous and could not be upheld. [Paras 8, 9, 10, 11, 12]

Revision allowed; order of the Tribunal set aside and the question of law answered in favour of the assessee and against the revenue.

Final Conclusion: Penalty under Section 10A read with Section 10(b) is sustainable only if the revenue proves a false representation involving mens rea; absent such proof the Tribunal's order sustaining the penalty is set aside (A.Y. 1991-92 (Central)).