TaxTMI Updates e-Newsletter
Jul 14,2023

Interest on delayed refunds under the CGST regime - Entitlement to refund of IGST on export of goods - Mandatory timeline for provisional and final refund under Section 54 - Application of Section 56 for payment of interest on delayed refunds

Application of Section 56 for payment of interest on delayed refunds - Interest on delayed refunds under the CGST regime - Petitioner is entitled to interest on delayed refund in terms of Section 56 of the Central Goods and Services Tax Act, 2017. - HELD THAT: - Section 56 prescribes payment of interest where a refund ordered under the refund provisions is not made within sixty days from receipt of the application; the rate is to be specified by notification. The Court construed Section 56 as a clear and mandatory provision entitling the applicant to interest from the day immediately after expiry of sixty days until the date of refund. Reliance on the reasoning in Ranbaxy Laboratories Ltd. (construing a comparable provision in an earlier tax statute) was noted to underline that interest becomes payable on expiry of the statutory period and that ancillary explanations concerning appellate orders do not postpone the date from which interest runs. The respondent had released most refunds during the pendency of the petition but withheld interest; the Court held that failure to pay interest is contrary to Section 56 and that the petitioner is therefore entitled to interest on the delayed refund(s). [Paras 11, 14]

Interest on the delayed refund is payable to the petitioner as per Section 56 of the CGST Act.

Entitlement to refund of IGST on export of goods - Mandatory timeline for provisional and final refund under Section 54 - Respondent authority was directed to release the remaining withheld refund relating to the specified shipping bill and to grant interest on delayed refunds as provided by law. - HELD THAT: - The petition challenged non-sanctioning and withholding of the IGST refund and tagging of the petitioner as a 'Risky Exporter'. During proceedings, all refunds except the one relating to Shipping Bill No.8723678 dated 17.02.2021 were released. Having found that the statutory regime requires refund processing within the timelines in Section 54 and interest under Section 56 where timelines are breached, the Court directed the concerned respondent authority to release the outstanding refund for the identified shipping bill and to grant interest on delayed refunds in accordance with law. The Court recorded that the pending refund was under process but nevertheless issued a specific direction for release and payment of interest. [Paras 5, 8, 15]

The respondent is directed to release the refund for the identified shipping bill and to grant interest on delayed refunds in accordance with the CGST Act.

Final Conclusion: Writ petition disposed: respondent directed to release the remaining IGST refund (Shipping Bill No.8723678 dated 17.02.2021) and to pay interest on delayed refunds as mandated by Section 56 of the Central Goods and Services Tax Act, 2017; rule made absolute to that extent.

Refund of Input Tax Credit on zero-rated supplies - implementation of Orders-in-Appeal - prohibition on post-appeal deficiency memos - circular as directory procedure for re filing - disbursement without prejudice to departmental remedies - processing of Form GST PMT-03

Refund of Input Tax Credit on zero-rated supplies - implementation of Orders-in-Appeal - Petitioner's refund claims for ITC in respect of exports under LUT were to be sanctioned to the extent allowed by the appellate authority. - HELD THAT: - The petitioner filed refund applications for zero-rated supplies for the periods specified and, after initial denial, succeeded before the appellate authority which allowed the refunds in the quantified amounts. The respondent had acknowledged receipt but failed to process the claims and, despite the appellate orders, did not disburse the sanctioned refunds. The Court held that appellate proceedings form a continuation of the original refund applications and that once the petitioner prevailed in appeal the respondent was obliged to implement the Orders-in-Appeal and sanction the refunds along with applicable interest in accordance with the CGST Act. [Paras 11, 15, 23]

Refunds as allowed by the appellate authority shall be forthwith sanctioned along with applicable interest.

Prohibition on post-appeal deficiency memos - circular as directory procedure for re filing - Respondent could not raise a fresh deficiency memo or require repeated filings or fresh undertakings after the petitioner had prevailed in appellate proceedings. - HELD THAT: - The respondent asserted that the petitioner was required to re-file an online application and furnish undertakings in terms of the circular dated 03.10.2019. The Court rejected the contention that a tax payer who has succeeded in appeal can be subjected to fresh deficiency demands or required to submit documents already filed. The circular was characterised as setting out a convenient procedure and not empowering the respondent to deny or delay implementation of appellate orders by raising new deficiencies after appeal. [Paras 17, 18, 19, 20, 21]

No fresh deficiency memos or repeated requirements for undertakings may be raised once the taxpayer has prevailed in appeal; the circular is directory and cannot be used to frustrate implementation of appellate orders.

Disbursement without prejudice to departmental remedies - The respondent could not withhold disbursement of the refund on the ground of proposed review of the Orders-in-Appeal, subject to the respondent's right to pursue remedies against those orders. - HELD THAT: - The Court held that withholding the refund merely because the respondent proposed to review the appellate orders was not permissible. However, the Court clarified that sanction and disbursement of the refund would not preclude the respondent from availing statutory remedies against the Orders-in-Appeal in accordance with law. [Paras 22]

Refund disbursement shall not be withheld on the ground of proposed review; departmental remedies remain available.

Processing of Form GST PMT-03 - The petitioner's request in Form GST PMT-03 was to be processed by the respondent in accordance with law. - HELD THAT: - Alongside directing sanction of the refunds as allowed in appeal, the Court directed that the respondent must process the petitioner's request furnished in Form GST PMT-03 in accordance with the statutory scheme and applicable rules, thereby disposing of pending applications. [Paras 24, 25]

Respondent to process the petitioner's Form GST PMT-03 request in accordance with law; all pending applications stand disposed of.

Final Conclusion: Writ petition allowed: respondent directed to forthwith sanction and disburse the refund amounts as accepted by the appellate authority with applicable interest, to process the petitioner's Form GST PMT-03, and not to raise fresh deficiency memos or withhold disbursement on the ground of procedural re-filing or proposed review, subject only to departmental remedies available in law.

Cancellation of GST registration for non-filing of returns - Service of show cause notice and consequences of non-receipt where notice issued to auditor - Benefit of administrative extension/notification and reliance on precedential discretion - Restoration of GST registration with condition of filing returns and payment of tax and penalty

Cancellation of GST registration for non-filing of returns - Service of show cause notice and consequences of non-receipt where notice issued to auditor - Validity of the cancellation of the petitioner's GST registration on the ground of non-filing of returns where the show cause notice was issued to the petitioner's chartered accountant and the petitioner contends non-receipt - HELD THAT: - The Court examined the impugned cancellation order which records that cancellation followed non-response to the show cause notice. The petitioner asserted that the notice was issued to the auditor's e-mail and he did not receive it; a reply was filed when the petitioner became aware. The Court accepted that the cancellation order is devoid of detailed reasoning and that considerations in favour of relief were pending at the time when Government subsequently issued an extension. Applying the principle that administrative relief or condonation granted in analogous cases (as reflected in Tvl. Suguna Cut Piece's batch) and having regard to the circumstances that the petitioner sought to reply on discovery of the notice, the Court found it appropriate to set aside the cancellation and restore registration. The Court therefore held the cancellation unsustainable in the facts of this case and directed restoration subject to compliance thereafter. [Paras 4, 5, 6, 7]

Impugned cancellation quashed and GST registration restored.

Benefit of administrative extension/notification and reliance on precedential discretion - Restoration of GST registration with condition of filing returns and payment of tax and penalty - Whether the petitioner is entitled to benefit of subsequent administrative extension/precedent and the consequences upon restoration - HELD THAT: - Although the Government Notification No.03/2023-Central Tax (31.03.2023) formally extended relief only to cancellations effected on or before 31.12.2022 and the petitioner's cancellation occurred on 12.01.2023, the Court observed that the matter for extension was pending and that the petitioner's case is covered by the batch decision in Tvl. Suguna Cut Piece's proceedings. In exercise of its supervisory jurisdiction the Court held that the petitioner should be placed in a position to avail relief by restoring registration. The Court imposed the clear condition that after restoration the petitioner must file outstanding returns and discharge tax and penalties according to law, thereby preserving the revenue's entitlement while granting relief against the cancellation. [Paras 6, 7, 8]

Petitioner entitled to restoration and must thereafter file returns and pay tax and penalty.

Final Conclusion: Writ petition allowed; cancellation order dated 27.01.2023 quashed and GST registration restored. Restoration is subject to the petitioner filing outstanding returns and paying tax and penalties in accordance with law.

Jurisdiction under IGST for export of services - Compartmentalization of jurisdiction between IGST and CGST/MGST - Refund of tax deposited on export of services - Transfer of tax and statutory interest to Central authority

Jurisdiction under IGST for export of services - Compartmentalization of jurisdiction between IGST and CGST/MGST - Export of service transactions lie within the jurisdiction of the Central authorities under the IGST framework and not within the jurisdiction of the State authorities under the CGST/MGST Acts. - HELD THAT: - The Division Bench decision in Dharmendra M. Jani (and A.T.E. Enterprises) was accepted as establishing that jurisdiction is compartmentalized between the IGST regime (Central authorities) and the CGST/MGST regime (State authorities). Applying that precedent, the Court held that transactions constituting export of services fall within the IGST jurisdiction and therefore the State/CGST/MGST authorities do not have competence to demand or retain tax in respect of such exports. The Court relied upon that legal position to determine the present petitions and to direct consequential relief. [Paras 3, 5]

The Court held that export of services is within the purview of the IGST Act and not the State CGST/MGST authorities; the State authorities therefore lack jurisdiction to retain tax on the export transactions in question.

Refund of tax deposited on export of services - Transfer of tax and statutory interest to Central authority - The refund rejection by the Deputy Commissioner of Sales Tax was set aside; the deposited tax (with statutory interest) is to be transferred to the Assistant Commissioner (Central Tax) and the petitioner's refund application is to be transferred for fresh decision by the Central authority. - HELD THAT: - The petitioner had deposited tax with State authorities and had applied for refund; those refund applications were rejected prior to the Division Bench decisions recognising IGST jurisdiction. In view of the accepted legal position that IGST jurisdiction applies, the Court concluded the State authorities should not retain the amounts. The order rejecting the refund application was set aside, the deposited tax together with applicable statutory interest was directed to be transferred to the Assistant Commissioner (Central Taxes) having jurisdiction, and the petitioner's refund application was restored and ordered to be transferred to that Central authority for appropriate orders. The Court specified timelines for transfer and for decision by the Assistant Commissioner, while expressly keeping other contentions on the refund application open for consideration by the Central authority. [Paras 4, 5, 6]

The Deputy Commissioner's order rejecting the refund is set aside; the tax with applicable interest shall be transferred to the Assistant Commissioner (Central Taxes) and the refund application is restored and remitted to that authority for decision within the time directed.

Final Conclusion: The Court accepted the Division Bench precedent that export of services falls under IGST jurisdiction, set aside the State authority's rejection of the refund application, directed transfer of the deposited tax with statutory interest to the designated Assistant Commissioner (Central Taxes), and remitted the refund application to that Central authority for disposal within the stipulated time; all other contentions remain open.

Jurisdiction of a proper officer - assignment of functions to Assistant Commissioners and Goods and Services Tax Officers - cancellation of GST registration - show cause notice under Section 73 of the CGST Act - parallel proceedings / investigation by different GST authorities

Jurisdiction of a proper officer - assignment of functions to Assistant Commissioners and Goods and Services Tax Officers - show cause notice under Section 73 of the CGST Act - Validity of the impugned show cause notice and the order cancelling GST registration on the ground that they were not issued by a 'proper officer'. - HELD THAT: - The Commissioner of Trade & Taxes, by notification dated 01.11.2019, assigned the functions under the CGST Act to be performed by a proper officer to all Assistant Commissioners and Goods and Services Tax Officers of the Department. The impugned show cause notice and the impugned order were issued by the Sales Tax Officer Class II, who is a Goods and Services Tax Officer. That officer therefore fell within the class of officers clothed by the notification to perform the functions of a proper officer, and was competent to issue the show cause notice under Section 73 and to pass the cancellation order. The petitioner's objection that the issuing officer was not of the rank of Assistant Commissioner was answered by the express scope of the notification vesting the functions in Goods and Services Tax Officers as well. [Paras 2, 3]

The show cause notice and the cancellation order were not invalid for want of issuance by a 'proper officer'.

Parallel proceedings / investigation by different GST authorities - show cause notice under Section 73 of the CGST Act - Whether the impugned proceedings before respondent no.1 were barred by an investigation allegedly conducted by Central GST authorities in Chandigarh. - HELD THAT: - The petitioner's case was that records were called by authorities in Chandigarh in connection with an investigation into a third party, and that respondent no.1 could not commence parallel proceedings. The Court noted that the petitioner did not contend that the Chandigarh investigation was commenced against the petitioner, and observed that the petitioner remains entitled to raise the maintainability objection before the officer concerned in response to the show cause notice. If such objection is raised, the concerned officer is to examine it. The Court therefore rejected the contention as a basis for precluding the impugned proceedings at this stage. [Paras 4, 5]

The existence of the Chandigarh investigation did not preclude the impugned proceedings; the petitioner may raise and have the objection considered by the officer in the pending proceedings.

Final Conclusion: The petition challenging the impugned show cause notice and cancellation order was dismissed; the petitioner remains free to raise objections before the concerned authority and to approach the authorities in relation to the registration issue as appropriate.

Jurisdiction of the assessing officer to initiate proceedings under Section 74 - direction to decide jurisdictional issue as a preliminary issue - stay of demand pending adjudication - joinder/connection of matters for common adjudication

Stay of demand pending adjudication - jurisdiction of the assessing officer to initiate proceedings under Section 74 - Stay of the demand made pursuant to the impugned order and adherence to earlier direction that jurisdiction be decided as a preliminary issue - HELD THAT: - The Court observed that the Assessing Officer ought to have adhered to the earlier mandate that the question of jurisdiction under Section 74 be decided as a preliminary issue. In view of the pendency of similar proceedings (Writ Tax No. 379 of 2023) in which the jurisdictional question is under scrutiny, the Court directed that the present matter be connected with Writ Tax No. 379 of 2023 for common adjudication. Until the next date of listing, the demand raised by the impugned order dated 05.06.2023 for the tax period April, 2018 to March, 2019 is stayed. The Court thereby preserved the petitioners' position pending consideration of the jurisdictional question together with the connected matter. [Paras 6, 9, 10]

Demand pursuant to the impugned order dated 05.06.2023 for April, 2018 to March, 2019 is stayed until the next date of listing; the matter is to be connected with Writ Tax No. 379 of 2023 for common adjudication of the jurisdictional issue.

Joinder/connection of matters for common adjudication - direction to decide jurisdictional issue as a preliminary issue - Connection of the present petition with Writ Tax No. 379 of 2023 for adjudication of the jurisdictional issue and procedural timetable for affidavits - HELD THAT: - The Court directed joinder of the present petition with Writ Tax No. 379 of 2023 so that the question regarding the Assessing Officer's jurisdiction to initiate proceedings under Section 74 can be adjudicated together. To facilitate adjudication, the Court granted the Revenue six weeks to file a counter affidavit and allowed the petitioners two weeks thereafter to file a rejoinder. The Court treated the question of jurisdiction as the common determinative issue requiring consolidated consideration. [Paras 6, 8, 9]

The petition is connected with Writ Tax No. 379 of 2023 for common adjudication; Revenue to file counter in six weeks and petitioners to file rejoinder within two weeks thereafter.

Final Conclusion: The High Court directed that the present petition be connected with Writ Tax No. 379 of 2023 for determination of the Assessing Officer's jurisdiction to initiate proceedings under Section 74; granted a limited timetable for affidavits (six weeks for counter, two weeks for rejoinder); and stayed the demand raised by the impugned order dated 05.06.2023 for the tax period April, 2018 to March, 2019 until the next listing.

Summary order. Leave to amend paragraph 2 of the petition granted; notice issued and matter posted for final disposal on 27.07.2023.

Garnishee notice - deposit condition for preferring appeal under CGST appeal provisions - statutory requirement of deposit of disputed tax for filing appeal - stay of enforcement subject to deposit - adjudication of appeal on merits after personal hearing

Garnishee notice - deposit condition for preferring appeal under CGST appeal provisions - statutory requirement of deposit of disputed tax for filing appeal - Validity of the Single Bench's condition directing payment of 20% of the interest amount as a precondition for grant of stay of the garnishee notice. - HELD THAT: - The Court noted that under the statutory scheme the appellant is required to deposit a percentage of the disputed tax for preferring an appeal and that the appellant had in any event paid the entire tax as recorded in the order under Section 73(9) of the W.B.G.S.T. Act, 2017. Having regard to the statutory mandate which calls for deposit of 10% of the disputed tax and the factual position that the tax was already paid, the High Court found that there was no basis to impose an enhanced condition of 20% of the interest amount as a condition for staying the garnishee notice. The portion of the Single Bench order imposing the 20% interest deposit was therefore set aside. The appellate authority was directed to consider the appeal on merits and in accordance with law after affording the appellant an opportunity of personal hearing.

Set aside the condition requiring deposit of 20% of the interest; appellate authority directed to hear and decide the appeal on merits after personal hearing.

Final Conclusion: The intra-Court appeal is allowed to the extent that the Single Bench's direction to deposit 20% of the interest as a condition for stay of the garnishee notice is set aside; the appellate authority is directed to consider the appellant's appeal on merits and after affording a personal hearing. No order as to costs.

Supply of service by employer to employees - Consideration (subsidised recovery) liable to tax - Composite supply of food as service under Schedule II - Perquisites under employment contract and non-levy clarification - Cost sharing / reimbursement versus distinct supply

Supply of service by employer to employees - Composite supply of food as service under Schedule II - Consideration (subsidised recovery) liable to tax - Recovery of nominal/subsidised amount from employees for canteen food attracts GST as a supply of service by the employer to employees. - HELD THAT: - The Appellate Authority found two separate transactions on the facts: (i) the caterer supplies food to the employer (on which GST is paid by the employer); and (ii) the employer supplies food to its employees for a consideration, even if subsidised. Clause 6 of Schedule II treats supply of food or drink for consideration as a supply of service. The fact that the employer pays the caterer and recoups a part from employees, and that the caterer issues consolidated invoices to the employer, does not negate that the employer is supplying food to employees for consideration. Consequently the subsidised amount collected from employees is consideration for a taxable supply and attracts GST.

The subsidised recoveries from employees for canteen food constitute consideration for a supply of service by the employer and are taxable under GST.

Perquisites under employment contract and non-levy clarification - Cost sharing / reimbursement versus distinct supply - The Appellant cannot claim non-levy on the basis that the canteen facility is a perquisite under employment contract or a mere cost sharing arrangement between employer and employees. - HELD THAT: - The Circular relied upon by the Appellant excludes from GST perquisites provided in terms of a contractual agreement between employer and employee. The Authority found no explicit contractual provision making the subsidised canteen supply a perquisite; a generic clause in appointment letters did not suffice. Even if a contractual term existed, the non levy would extend only to consideration borne by the employer, not to amounts collected from employees. The precedents and AAR/AAAR rulings cited by the Appellant are either factually distinguishable or not binding; the Supreme Court jurisprudence on reimbursement/cost sharing (as relied upon) was held inapplicable to the present factual matrix where the employer supplies food to employees for consideration.

Benefit of non levy as a perquisite is not available on the amounts recovered from employees; the arrangement is not a mere cost sharing that negates a taxable supply.

Final Conclusion: The appeal is rejected and the Authority for Advance Ruling's decision is upheld: the subsidised amounts recovered from employees for canteen food constitute consideration for a taxable supply of service by the employer and are liable to GST.

Input tax credit - blocking of input tax credit for works contract services for construction of immovable property (other than plant and machinery) - definition of "plant and machinery" including foundation and structural supports - apportionment of ITC by reference to extent of structural support attributable to plant and machinery - exclusion of land, building or any other civil structures from "plant and machinery" - conditions in section 17(5)(c) and 17(5)(d) regarding ITC

Input tax credit - definition of "plant and machinery" including foundation and structural supports - blocking of input tax credit for works contract services for construction of immovable property (other than plant and machinery) - apportionment of ITC by reference to extent of structural support attributable to plant and machinery - exclusion of land, building or any other civil structures from "plant and machinery" - Entitlement to input tax credit on inputs and works contract service for construction of an integrated factory building claimed to be 'plant and machinery'. - HELD THAT: - The Appellate Authority examined whether the integrated factory building itself qualifies as "plant and machinery" and whether ITC paid on inputs (steel, cement, precast, rails, gantry beams etc.) is admissible. The Authority applied the Explanation to section 17 which defines "plant and machinery" as apparatus, equipment and machinery fixed to earth by foundation or structural support and expressly includes such foundation and structural supports while excluding land, building or any other civil structures. It held that the overhead crane (classified under machinery) and the structural supports exclusively erected for the overhead crane fall within the extended meaning of "plant and machinery" and therefore are not barred by the blocking provisions. However, the integrated factory building per se is a civil structure and is not to be categorized as plant and machinery. Where pillars and beams serve a dual purpose-supporting both the overhead crane and the roof/walls-the Authority directed a proportionate approach: ITC is admissible only to the extent attributable to the structural support erected in relation to the overhead crane. The prescribed method of apportionment is by reference to the ratio of the load transferred by the overhead crane, railings and gantry beams to the pillars and beams to the total load (including roof and walls) transferred to those pillars and beams. ITC relating to other civil structures such as side walls and roof remains blocked under sections 17(5)(c) and 17(5)(d). The entitlement is subject to fulfillment of the conditions stipulated in those provisions and explanation thereunder. [Paras 7, 9]

ITC is allowed proportionately for the structural support exclusively attributable to the overhead crane (including rails and gantry beams) by applying the load-based apportionment; ITC for other civil structures like side walls and roof is not admissible.

Final Conclusion: Appeal allowed in part: the AAR order is modified to permit input tax credit proportionate to the extent of structural support attributable to the overhead crane (including rails and gantry beams) subject to conditions in section 17(5)(c) and (d); ITC on other civil structures (roof, side walls) is disallowed.

Determination of value of supply - application of Rule 32(5) of the CGST Rules - margin scheme for second-hand goods - concept of second-hand goods - value of supply under Section 15(5) - input tax credit not availed

Application of Rule 32(5) of the CGST Rules - margin scheme for second-hand goods - concept of second-hand goods - input tax credit not availed - Whether the applicant dealing in purchase and resale of used/second-hand gold jewellery can determine the value of supply under sub rule (5) of Rule 32 of the CGST Rules by applying the margin scheme (selling price less purchase price) when purchases are made from unregistered persons and no input tax credit is availed. - HELD THAT: - The Authority examined whether gold jewellery qualifies as 'second hand goods' for the purpose of Rule 32(5). Rule 32(5) permits, at the supplier's option, valuation of certain used goods on the margin (difference between selling and purchase price) provided minor processing does not change the nature of the goods and no input tax credit has been availed. The Authority found that the intrinsic value of gold jewellery is determined primarily by content, carat (purity) and fineness rather than by duration or number of previous owners; gold retains or often increases in market value over time. Unlike ordinary goods whose value typically diminishes after retail sale (thereby justifying a margin scheme in the secondary market), gold does not undergo the kind of depreciation or diminution of value that sub rule (5) seeks to address. As a result, dealing in gold and gold ornaments fails the test of being 'second hand goods' in the sense contemplated by Rule 32(5). Consequently, the margin valuation under Rule 32(5) is not available to the applicant for the supplies in question, and value must be determined under the normal provisions of Section 15 and the accompanying rules. [Paras 7]

The applicant cannot determine the value of the specified supplies under sub rule (5) of Rule 32 of the CGST Rules, 2017; Rule 32(5) is inapplicable to the sale of the used/second hand gold jewellery described.

Final Conclusion: Advance ruling: the applicant dealing in purchase and resale of used/second hand gold jewellery purchased from unregistered persons is not entitled to adopt the margin scheme under sub rule (5) of Rule 32 of the CGST Rules, 2017; valuation must follow the general value provisions.

Treatment or process applied to another person's goods is a supply of services - manufacturing services on physical inputs (goods) owned by others - Service Accounting Code 9988 (motor vehicle and trailer manufacturing services) - GST rate 18% (9% CGST + 9% SGST) on manufacturing services on physical inputs owned by others - maintenance and repair of transport machinery and equipment (SAC 998714) - classification of job work and outsourced manufacturing processes

Treatment or process applied to another person's goods is a supply of services - Activity of bodybuilding of motor vehicles on chassis supplied by customers is a supply of services. - HELD THAT: - The Authority applied Para 3 of Schedule II of the CGST Act which treats any treatment or process applied to another person's goods as a supply of services. The applicant fabricates bodies on chassis that remain the property of the customer; title is not transferred at any stage and the applicant charges a lump-sum fee comprising material and labour. On these facts the activity falls within the description in Para 3 of Schedule II and is therefore a supply of services. [Paras 7]

The activity of bodybuilding on chassis supplied by the customer is a supply of services.

Manufacturing services on physical inputs (goods) owned by others - Service Accounting Code 9988 (motor vehicle and trailer manufacturing services) - GST rate 18% (9% CGST + 9% SGST) on manufacturing services on physical inputs owned by others - Classification and GST rate for the bodybuilding service performed on another's chassis. - HELD THAT: - The Scheme of Classification of Services (Annexure to Notification No. 11/2017 Central Tax (Rate)) places services performed on physical inputs owned by others under Heading 9988. The explanatory notes characterise such services as outsourced manufacturing processes where the output is not owned by the service provider and the service value is the service fee. Sub heading 998881 pertains to motor vehicle and trailer manufacturing services. Entry at SI No. 26(ic) of Notification No. 11/2017 (Rate) covers job work in relation to bus body building and attracts 18% GST. Applying these provisions and notes to the applicant's bodybuilding on customer owned chassis, the activity is classifiable under SAC 998881 and taxable at 18% (9% CGST + 9% SGST). [Paras 7]

Bodybuilding on another's chassis is classifiable under SAC 998881 (Heading 9988) and is taxable at 18% (9% CGST + 9% SGST).

Maintenance and repair of transport machinery and equipment (SAC 998714) - collision and accident repair services - Classification and GST rate for accident/ collision repair jobs charged on a lumpsum basis including materials and labour. - HELD THAT: - The explanatory notes to the Service Classification scheme include collision repair and accident repair services within Heading 998714 (maintenance and repair of transport machinery and equipment). Such repair and maintenance services, even when billed as a lumpsum including materials and labour, fall within that Heading. Entry at SI No. 25(ii) of Notification No. 11/2017 (Rate) covers maintenance and repair services and attracts 18% GST. Applying these notes, the applicant's accident repair activity on owner supplied vehicles is classifiable under SAC 998714 and taxable at 18% (9% CGST + 9% SGST). [Paras 7]

Accident repair jobs on owner supplied vehicles are classifiable under SAC 998714 and taxable at 18% (9% CGST + 9% SGST).

Final Conclusion: The Authority ruled that bodybuilding of motor vehicles on chassis supplied by customers is a supply of services, classifiable under SAC 998881 (Heading 9988) and taxable at 18% (9% CGST + 9% SGST); accident/collision repair jobs on owner supplied vehicles are classifiable under SAC 998714 and likewise taxable at 18%.

Input tax credit admissibility - consideration by book adjustment - second proviso to section 16(2) - payment within 180 days - definition of "consideration" - inclusive modes of payment - time of supply - entry in books as receipt of payment

Input tax credit admissibility - consideration by book adjustment - time of supply - entry in books as receipt of payment - Admissibility of input tax credit where consideration for supplies to outsourced vendors is settled by mutual book adjustments (sale and buy back transactions). - HELD THAT: - The Authority examined Section 16(2) provisos alongside the inclusive definition of "consideration" in Section 2(31) and the time of supply provisions in Sections 12 and 13. The second proviso to Section 16(2) conditions continued entitlement to ITC on payment of the consideration along with tax within 180 days, but does not prescribe a particular mode of payment. The definition of "consideration" expressly includes payments made "in money or otherwise" and thus covers non monetary modes such as reduction of book debts. Further, Explanation 2 to Section 12(2) and the corresponding explanations to Section 13(2) recognise the entry in the books of account of the supplier/recipient as constituting receipt of payment for GST purposes. On a combined reading, settlement of mutual debts by book adjustment qualifies as payment of consideration within the meaning of Section 16(2) proviso and the time of supply rules, subject to compliance with other statutory conditions and restrictions for availing ITC. [Paras 7, 8]

Input tax credit is admissible where consideration is discharged by book adjustment against mutual debts with outsourced vendors, subject to the other conditions and restrictions in Sections 16, 17 and 18 and the rules.

Final Conclusion: The Authority ruled that payment by adjustment of mutual debts (book adjustment) constitutes valid consideration for the purposes of availing input tax credit in sale and buy back arrangements with outsourced vendors, provided all other statutory conditions and restrictions are satisfied.

Classification of villas as residential apartments - applicability of concessional GST rates under Notification No. 11/2017 as amended by Notification No. 03/2019 - rate of GST 7.5% for residential apartments other than affordable residential apartments - taxable value of construction services involving transfer of land - one third deemed deduction - deemed value of land irrespective of actual land consideration - treatment of supplementary or additional works as part of the total consideration for construction services - composite supply - tax on principal supply determines rate for bundled supplies

Classification of villas as residential apartments - applicability of concessional GST rates under Notification No. 11/2017 as amended by Notification No. 03/2019 - rate of GST 7.5% for residential apartments other than affordable residential apartments - Whether the construction of villas by the applicant falls within the entry for construction of residential apartments other than affordable residential apartments and the consequent rate of GST. - HELD THAT: - On a conjoint reading of the definitions in the Notification and the Real Estate (Regulation and Development) Act, 2016, the villas constructed by the applicant qualify as 'residential apartment', the project qualifies as a 'real estate project' and the applicant is a 'promoter'. The services of construction of such villas therefore fall within Item (ia) of SI. No. 3 of Notification No. 11/2017-Central Tax (Rate) as amended by Notification No. 03/2019. Consequently, the tax rate prescribed for that entry is applicable to the applicant's supply, subject to the conditions set out in the entry. [Paras 9]

The construction services of the villas are taxable as construction of residential apartments other than affordable residential apartments and the applicant is liable to pay GST at 7.5% (3.75% CGST + 3.75% SGST) subject to the conditions of the entry.

Taxable value of construction services involving transfer of land - one third deemed deduction - deemed value of land irrespective of actual land consideration - Whether the taxable value for GST purposes is determined after deducting one third as the deemed value of land and whether the timing of execution of sale deed affects such deduction. - HELD THAT: - Paragraph 2 of Notification No. 11/2017 (as amended) provides that where the service involves transfer of land or undivided share of land, the value of such supply shall be the total amount charged less the value of such transfer, and that the value of land or undivided share of land shall be deemed to be one third of the total amount charged. This deemed one third deduction applies irrespective of the actual value of land recorded in agreements. The authority held that this valuation mechanism applies to the applicant's supplies and that the timing of the execution of the sale deed (whether before or after the construction agreement) does not affect entitlement to the deemed one third deduction. [Paras 10]

The applicant is eligible to deduct one third of the total amount charged as the deemed value of land in computing the taxable value; the timing of the sale deed execution does not affect this deduction.

Treatment of supplementary or additional works as part of the total consideration for construction services - composite supply - tax on principal supply determines rate for bundled supplies - Whether supplementary or additional works executed prior to completion of construction (structural changes, added area, interior works) form part of the total amount charged for the supply and the rate at which GST is chargeable on such works. - HELD THAT: - The explanation to Paragraph 2 defines 'total amount' to include consideration charged for the construction service and amounts charged for transfer of land. Supplementary items of work carried out before completion are naturally bundled with the principal construction service and hence fall within the total amount charged for the supply. In view of the composite supply principle and the notification's valuation provision, such supplementary charges must be included in the total consideration and are taxable at the same rate as the principal supply under Item (ia), subject to the entry's conditions. [Paras 10]

Amounts charged for supplementary or additional works carried out before completion form part of the total amount charged and are taxable at the same rate (7.5% as per Item (ia)) subject to the conditions prescribed in the notification.

Final Conclusion: The Authority rules that the applicant's villa construction services are taxable as construction of residential apartments other than affordable apartments at 7.5% (3.75% CGST + 3.75% SGST); the taxable value is determined after deducting a deemed one third as value of land irrespective of actual land consideration or timing of the sale deed; and any supplementary works carried out before completion are part of the total consideration and taxable at the same rate, subject to the conditions in the notification.

Classification of service under SAC 997337 (licensing/right to use minerals) - distinction between pure service and transfer of right to extract - consideration and identification of supplier and recipient of service - applicability of exemption for services to Government under Notification No. 12/2017 (Entry No. 3) - reverse charge liability for services supplied by Government to a business entity

Classification of service under SAC 997337 (licensing/right to use minerals) - distinction between pure service and transfer of right to extract - applicability of exemption for services to Government under Notification No. 12/2017 (Entry No. 3) - consideration and identification of supplier and recipient of service - The transaction is not an exempt "pure service" to the Government; it is a grant by the Government of the right to extract and appropriate sand and mud and is classifiable under SAC 997337 attracting GST at 18%. - HELD THAT: - On examining the contract terms and statutory definitions of "consideration", "supplier" and "recipient", the Authority found that the Government conferred on the applicant the right to extract and appropriate the sand and mud in return for a lumpsum consideration payable to the Government. Consequently the Irrigation Department is the supplier of the service and the applicant is the recipient. The right conferred is not merely permission to use but confers title on the extracted material to the applicant; applying the Scheme of Classification of Services and its Explanatory Notes, the grant falls within licensing services for the right to use minerals including exploration and evaluation and is therefore classifiable under SAC 997337. That classification carries a rate of 18% (CGST 9% + SGST 9%) as per the relevant entry. For these reasons the transaction cannot be treated as an exempt pure service under Entry No. 3 of Notification No. 12/2017. [Paras 7]

The supply is classifiable under SAC 997337 and is taxable at 18%; the exemption in Notification No. 12/2017 (Entry No. 3) does not apply.

Reverse charge liability for services supplied by Government to a business entity - consideration and identification of supplier and recipient of service - The applicant, being the recipient of the service supplied by the State Government, is liable to pay GST under the reverse charge mechanism in terms of Notification No. 13/2017 (SI No. 5). - HELD THAT: - Having determined that the Irrigation Department supplies the service and the applicant is the recipient, the Authority applied the provision of Notification No. 13/2017 which makes the business entity (recipient) liable to discharge tax on services supplied by the Central/State Government or local authority. Therefore, GST on the lumpsum consideration paid to the State Government for the grant of the right to desilt and appropriate the extracted material is payable by the applicant under reverse charge. [Paras 7]

The applicant must pay GST on reverse charge basis in respect of the services received from the State Government.

Final Conclusion: The Authority ruled that the contract grants a taxable right to extract and appropriate sand and mud, classifiable under SAC 997337 and taxable at 18%; the exemption under Notification No. 12/2017 (Entry No. 3) does not apply, and the applicant as recipient is liable to pay GST under reverse charge as per Notification No. 13/2017 (SI No. 5).

Assessment u/s 153C - incriminating documents / material - Satisfaction Note for issue of notice u/s 153C -assessment of completed assessments/unabated assessment - as per HC [2022 (9) TMI 1331 - DELHI HIGH COURT] no incriminating material had been brought on record by the AO to sustain the additions on merit - HELD THAT:- There is delay of 148 days. Delay is condoned.

As Department submitted that the issues raised in this Special Leave Petition stands covered by the judgment of this Court in PCIT vs. Abhisar Buildwell [2023 (4) TMI 1056 - SUPREME COURT]

Therefore, appropriate orders may be made in this matter. Special leave petition is dismissed.

Reopening of assessment u/s 147 - reopening beyond period of 4 years - as per HC [2022 (7) TMI 1436 - ORISSA HIGH COURT] notice u/s 148 issued beyond the period of limitation after the expiry of the relevant AY need to be set aside - HELD THAT:- We are not inclined to interfere with the impugned order and judgment of the High Court.

The special leave petition is dismissed.

Bogus accommodation entries - genuineness of suppliers versus genuineness of purchases - disallowance limited to profit element of disallowed purchases - onus on assessee to prove genuineness of transactions - evidence of consumption of purchased material and payment by account payee cheques - maintenance of books of account and audit under section 44AB

Genuineness of suppliers versus genuineness of purchases - disallowance limited to profit element of disallowed purchases - evidence of consumption of purchased material and payment by account payee cheques - maintenance of books of account and audit under section 44AB - Whether, where suppliers are held to be bogus but the assessee has maintained audited books, effected payments by account payee cheques, obtained tax invoices, and actually consumed the materials in execution of contracts, the addition can be limited to the profit element (12.5%) rather than disallowing the full purchase value. - HELD THAT: - The Court accepted the factual findings of the Tribunal and the CIT(A) that the Assessing Officer had doubted only the genuineness of the suppliers and had not held that the purchases themselves were not made. The Tribunal found that the assessee maintained audited books under section 44AB, made payments by account payee cheques, possessed tax invoices, maintained inventory and consumed the materials in executing contracts with the municipal body. Given these findings, the courts below were justified in treating the cost of materials as allowable and restricting the addition to the embedded profit element. The High Court held that when material has been actually purchased and consumed in executing the contract, the cost price must be deducted and tax cannot be levied on that cost; there was no basis to increase the profit element above 12.5% on the facts of the case. The Court therefore found no substantial question of law in the Revenue's challenge to the restriction of the addition to the profit element. [Paras 10, 11, 12, 13]

Tribunal's and CIT(A)'s restriction of addition to the profit element (12.5%) upheld; full disallowance of purchases not warranted on the material on record.

Final Conclusion: Appeal dismissed; no substantial question of law arises-additions properly confined to the profit element where purchases were evidenced, paid for by account payee cheques, recorded in audited books and consumed in execution of contracts.

Genuineness of purchases - bogus purchases - retracted statement - lack of corroborative material - verification of consumption - disallowance of purchases - addition to income - deletion of addition

Genuineness of purchases - retracted statement - lack of corroborative material - verification of consumption - disallowance of purchases - addition to income - Whether the additions made by the Assessing Officer and the partial addition sustained by the CIT(A) in respect of alleged bogus purchases of packaging material were justified - HELD THAT: - The Assessing Officer added the alleged bogus purchases to the assessee's income based on a partner's statement recorded during a survey, though that statement was subsequently retracted and no corroborative or incriminating material was found by the survey team. The AO had itself verified the availability and consumption of packaging material and confirmed that consumption matched sales. The CIT(A) found the purchases to be genuine but, without independent verification of vendors' invoices, proceeded to disallow 7% of the alleged purchases as a precaution against possible over invoicing. The Tribunal found no material to justify a 7% disallowance where the AO had accepted consumption and no further incriminating evidence existed. The High Court agreed with the Tribunal, observing that CIT(A)'s own findings acknowledged the genuineness of purchases and that there was no basis on the record to sustain the partial disallowance of purchases made by CIT(A). [Paras 6, 7]

The additions made by the Assessing Officer were deleted by the Tribunal and the High Court upheld the Tribunal's deletion of the CIT(A)'s 7% disallowance for lack of supporting material.

Final Conclusion: The appeal is dismissed. The High Court upheld the ITAT's deletion of the addition made in respect of alleged bogus purchases and found no basis to sustain the partial disallowance directed by the CIT(A).

Disallowance under Section 14A read with Rule 8D - exempt income - allowability of interest expense - appellate interference on findings of fact

Disallowance under Section 14A read with Rule 8D - exempt income - Whether the deletion by the ITAT of the disallowance under Section 14A read with Rule 8D could be called into question when no exempt income was earned by the assessee. - HELD THAT: - The High Court admitted the appeal on the narrow legal question whether the ITAT was correct in deleting the disallowance under Section 14A read with Rule 8D in circumstances where the assessee did not earn any exempt income. The Court limited its admission to that legal issue and did not undertake a determination on the merits of the correctness of the ITAT's conclusion. The judgment records that a separate factual controversy concerning allowance of interest as business expenditure was factual in nature and therefore did not raise a substantial question of law for admission. [Paras 3]

Appeal admitted on the question whether deletion of the Section 14A/Rule 8D disallowance was correct in the absence of exempt income; factual challenge regarding allowability of interest expenses not entertained as a substantial question of law.

Final Conclusion: Admission granted limited to the legal question on deletion of the Section 14A/Rule 8D disallowance where no exempt income was earned; factual findings on allowability of interest were not treated as raising a substantial question of law, and registry directions were issued for record transmission and paperbook preparation.

Reopening assessment after complete scrutiny - assessee's prior disclosure of primary facts in original assessment - absence of fresh material or information justifying reassessment - verification of source of payment during original proceedings - quashing of reassessment notice for lack of fresh nexus

Reopening assessment after complete scrutiny - assessee's prior disclosure of primary facts in original assessment - absence of fresh material or information justifying reassessment - Validity of issuance of notice under Section 148A/Section 148 when the same transaction was fully examined in the original assessment and necessary details were already furnished. - HELD THAT: - The court accepted the petitioner's contention that during the original assessment proceedings the Assessing Officer had called for and the petitioner had furnished details of property purchases including the purchase deed and the agreement specifying payment particulars, in response to the notice under Section 142(1). The Assessment Order recorded that the details filed were examined, placed on record and verified, and that the case had been selected for complete scrutiny by CASS on account of large investment in property. The subsequent notice under Section 148A relied solely on the same information about the purchase and the impugned order proceeded on the brief finding that source of payment had not been verified and relevant bank statements were not produced. The court found this finding to be incorrect because the record of the earlier assessment showed that the material was before the Assessing Officer and examined, and the petitioner in any event furnished source details in reply to the Section 148A(b) notice. In the absence of any fresh or independent material newly emerging after the original complete scrutiny to justify reopening, the reassessment proceedings lacked the requisite foundation. Applying these conclusions, the court held that there was no valid basis to issue notice under Section 148A/Section 148 in respect of the same transaction already scrutinised. [Paras 7, 8]

Show cause notice dated 23rd March 2023 under Section 148A(b), the order dated 31st March 2023 under Section 148A(d), and the notice dated 31st March 2023 under Section 148 are quashed and set aside.

Final Conclusion: Writ petition allowed; reassessment proceedings initiated by the impugned notices and order were quashed because the transaction had been fully disclosed and scrutinised in the original assessment and no fresh material justified reopening.

Arm's Length Price (ALP) - Transfer Pricing: method selection - Comparable Uncontrolled Price (CUP) method - Cost Plus Method (CPM) - Internal Rate of Return (IRR) / Internal Pricing Rate (IPR) method - consistency of benchmarking methodology across assessment years

Cost Plus Method (CPM) - Comparable Uncontrolled Price (CUP) method - consistency of benchmarking methodology across assessment years - Validity of rejecting the assessee's CPM in favour of CUP for benchmarking export sales to associated enterprises. - HELD THAT: - The Tribunal and the CIT(A) upheld the CPM applied by the assessee for export sales because the TPO's selection of CUP relied on negligible, small-quantity transactions which were not comparable to the large-volume exports to associated enterprises. The CIT(A) noted that the TPO himself had accepted CPM for the assessee in later assessment years (2008-09 to 2010-11) and made no adjustments in those years; the ITAT found no merit in the TPO's departure from CPM for the year under consideration. On these facts the courts concluded that CUP was inapt for benchmarking the export transactions and that the CPM adopted by the assessee was properly sustained. [Paras 8]

The CPM adopted by the assessee for benchmarking export sales to associated enterprises was upheld and the CUP-based adjustment was deleted.

Comparable Uncontrolled Price (CUP) method - Internal Rate of Return (IRR) / Internal Pricing Rate (IPR) method - consistency of benchmarking methodology across assessment years - Validity of rejecting the assessee's CUP for benchmarking commission receipts in favour of IRR/IPR method. - HELD THAT: - The CIT(A) and the ITAT sustained the assessee's application of CUP for commission receipts because the TPO's application of IRR/IPR for the assessment year was inconsistent with the TPO's own application of CUP in succeeding assessment years (2006-07 to 2010-11). The tribunals observed that there was no change in the nature of the commission receipts to justify a different method and relied on the consistent application of CUP in adjacent years. Consequently the IRR/IPR-based adjustment was found to be without merit and was set aside. [Paras 9]

The CUP method applied by the assessee for benchmarking commission receipts was upheld and the IRR/IPR-based adjustment was deleted.

Final Conclusion: The High Court found no merit in Revenue's challenge to the ITAT's acceptance of the assessee's benchmarking methodologies (CPM for export sales and CUP for commission receipts), relied upon consistency in subsequent assessment years and dismissed the appeal; no substantial question of law arose.

Penalty for furnishing inaccurate particulars of income and Explanation 1(B) to Section 271(1)(c) - bonafide mistake and voluntary revised return as defence to penalty - disallowance under Section 94(7) for dividend stripping - reasonableness of Tribunal's fact-finding and perversity standard

Penalty for furnishing inaccurate particulars of income and Explanation 1(B) to Section 271(1)(c) - bonafide mistake and voluntary revised return as defence to penalty - disallowance under Section 94(7) for dividend stripping - Whether deletion of penalty imposed under Section 271(1)(c) was sustainable where the assessee filed a voluntary revised return disclosing disallowance under Section 94(7) after discovering an alleged clerical/book-keeping error. - HELD THAT: - The Tribunal found on appreciation of records that the assessee committed an inadvertent clerical error in posting dividend entries to an incorrect date amid voluminous transactions, and that upon discovery the assessee promptly filed a revised computation and revised return on 15th December, 2017 disclosing the disallowance under Section 94(7) and subsequently paid the tax after assessment. The Tribunal accepted this as a bonafide human error and concluded that inaccurate particulars were not furnished with dishonest intent. The High Court held that this conclusion was a reasonable view based on the material placed before the Tribunal and not vitiated by perversity. The Court noted that the revised return was voluntary at the first opportunity, the assessment was not challenged, and the tax was paid, and accordingly no substantial question of law arose to sustain the Revenue's challenge to the deletion of the penalty. [Paras 10, 13, 14]

Tribunal's deletion of the penalty was upheld as a reasonable finding of bonafide error and the Revenue's appeal was dismissed.

Final Conclusion: The appeal challenging the Tribunal's order deleting the penalty under Section 271(1)(c) was dismissed; the Tribunal's finding of a bonafide clerical error and the consequent deletion of penalty was held to be a reasonable conclusion not warranting interference.

Remand where original assessment has been superseded - penalty under Section 271(1)(c) of the Income Tax Act, 1961 - effect of subsequent assessment order on earlier penalty proceedings - direction to initiate penalty proceedings

Remand where original assessment has been superseded - penalty under Section 271(1)(c) of the Income Tax Act, 1961 - Validity of the Tribunal's remand of penalty proceedings that arose from an assessment order which was subsequently set aside and replaced by a fresh assessment order. - HELD THAT: - The Court found that the Tribunal should not have remanded the matter back to the Assessing Officer in respect of the penalty order dated 18.03.2014 because the assessment on which that penalty was founded (assessment order dated 29.12.2011) was no longer in existence, having been superseded by a fresh assessment order dated 29.06.2021. In view of the supersession of the earlier assessment, the impugned remand could not stand and the court set aside the Tribunal's order. Consequently, the penalty order dated 18.03.2014 collapses insofar as it was founded on the earlier assessment now set aside. [Paras 15]

Impugned Tribunal order remanding penalty proceedings set aside; penalty order dated 18.03.2014 collapses.

Effect of subsequent assessment order on earlier penalty proceedings - direction to initiate penalty proceedings - Whether the setting aside of the Tribunal's remand prevents initiation of penalty proceedings pursuant to the fresh assessment order dated 29.06.2021. - HELD THAT: - The Court clarified that its order setting aside the remand and collapsing the earlier penalty order does not inhibit the revenue from initiating penalty proceedings afresh if such proceedings are taken pursuant to the subsequent assessment order dated 29.06.2021. The decision therefore vacates the specific earlier penalty order but leaves open the respondent's statutory power to proceed under the fresh assessment. [Paras 16]

Order does not affect any penalty proceedings that may be validly initiated pursuant to the assessment order dated 29.06.2021.

Final Conclusion: Writ petition disposed by setting aside the Tribunal's remand; the penalty order dated 18.03.2014 founded on the earlier assessment is rendered ineffective, subject to the caveat that any penalty proceedings legitimately initiated pursuant to the fresh assessment dated 29.06.2021 remain unimpaired.

Reopening of assessment - Reassessment under Section 147/148 of the Income Tax Act, 1961 - Reason to believe - Tax Evasion Petition (TEP) - Requirement of tangible material to form opinion - Insufficiency of bald allegations - Principle of assessment year independence

Reassessment under Section 147/148 of the Income Tax Act, 1961 - Reason to believe - Tax Evasion Petition (TEP) - Requirement of tangible material to form opinion - Insufficiency of bald allegations - Principle of assessment year independence - Validity of reassessment proceedings (notice dated 31.03.2018 and AO's order dated 01.10.2018) for AY 2011-2012 - HELD THAT: - The reassessment was initiated solely on the basis of a Tax Evasion Petition and reference to disallowances made by the AO in AY 2014-15. The AO had no independent tangible material on record to form the requisite reason to believe that income chargeable to tax had escaped assessment for AY 2011-2012. The disallowance in AY 2014-15 was reversed by the CIT(A) (order dated 19.02.2019) and has not been challenged by the revenue, removing that as a reliable basis for reopening. The Court reiterated the principle of assessment year independence: assessment for each year must be determined on its own facts and cannot be reopened for the impugned year merely because of disallowances in another year. Bald assertions in the TEP alleging bogus expenses, without supporting documents or material enabling the AO to form an opinion, were held to be insufficient to trigger proceedings under Section 147/148. For these reasons the notice and the AO's order were unsustainable and liable to be set aside. [Paras 15, 16, 17, 18, 19]

Impugned notice dated 31.03.2018 and AO's order dated 01.10.2018 initiating reassessment for AY 2011-2012 set aside; petition disposed.

Final Conclusion: Reassessment proceedings for AY 2011-2012, initiated on the basis of a Tax Evasion Petition and reference to disallowances in another year, were without sufficient material to form reason to believe and have been set aside; the writ petition is disposed accordingly.

Onus of proof under section 68 (unexplained credits) - Identity, genuineness and creditworthiness of creditors - Appreciation of primary documents in remand proceedings - Concurrent findings of fact and scope of interference on appeal

Onus of proof under section 68 (unexplained credits) - Identity, genuineness and creditworthiness of creditors - Appreciation of primary documents in remand proceedings - Concurrent findings of fact and scope of interference on appeal - Whether the assessee discharged the onus under section 68 and whether the deletion of the addition made on account of unsecured loans was rightly upheld. - HELD THAT: - The Tribunal and the Commissioner of Income Tax (Appeals) found on the basis of remand proceedings and material placed before the Assessing Officer - including copies of PAN, ledger accounts, confirmations, bank statements and audited books - that the identity, genuineness and creditworthiness of the creditors had been established. The Assessing Officer did not point out any deficiency in those primary documents when making the addition. The High Court held that these conclusions are findings of fact based on proper appreciation of evidence, and therefore not open to interference by this Court in exercise of jurisdiction under section 260A. The substantial question framed by the Revenue did not arise for consideration in law as the factual findings recorded by the lower authorities were upheld. [Paras 14]

Findings of the CIT(A) and the Tribunal that the assessee discharged the onus under section 68 and that the addition in respect of the unsecured loans stands deleted are upheld.

Final Conclusion: The appeal is dismissed; the concurrent factual findings that the assessee proved identity, genuineness and creditworthiness of lenders and the deletion of the addition under section 68 are sustained.

Prohibition on reassessment under Section 147 where registration granted under Section 12AA/12AB - applicability of Sections 11 and 12 from the assessment year following application and retrospective coverage by proviso to Section 12A(2) - procedure under Section 148A prior to issuance of notice under Section 148 - reopening assessment for preceding years solely on ground of non-registration

Prohibition on reassessment under Section 147 where registration granted under Section 12AA/12AB - procedure under Section 148A prior to issuance of notice under Section 148 - reopening assessment for preceding years solely on ground of non-registration - Validity of notices issued under Section 148A/Section 148 for assessment year 2015-16 in view of the 3rd proviso to Section 12A(2) after registration was granted effective from assessment year 2016-17 - HELD THAT: - The Court examined the 3rd proviso to Section 12A(2), which bars initiation of action under Section 147 in respect of any assessment year preceding the assessment year from which registration under Section 12AA has been granted, where the only ground is non-registration. The petitioner obtained registration effective from assessment year 2016-17. The impugned Section 148A(b) notice (dated 16.03.2022), the order rejecting objections under Section 148A(d) (dated 29.03.2022), and the subsequent Section 148 notice relate to assessment year 2015-16, a year preceding the assessment year for which registration was effective. The assessing authority rejected the petitioner's objections and proceeded without considering the 3rd proviso to Section 12A(2). The Court held that, following the principle embodied in the proviso and the reasoning in Karnataka State Students Welfare Fund, proceedings under Section 147 could not be initiated for the preceding year solely on the ground of non-registration once registration was granted effective from a later assessment year. In these circumstances, and because the objections under Section 148A were dismissed without addressing the statutory bar in the 3rd proviso, relegation to alternative remedies was not appropriate and the notices and consequent order were contrary to the proviso and thus liable to be set aside.

Impugned notices dated 16.03.2022 and 29.03.2022 and the order dated 29.03.2022 issued under Section 148A/Section 148 in respect of assessment year 2015-16 are set aside as contrary to the 3rd proviso to Section 12A(2).

Final Conclusion: The writ petition is allowed: reassessment proceedings (notices and the order rejecting objections) for AY 2015-16 are quashed because the 3rd proviso to Section 12A(2) bars initiation of action under Section 147 for the preceding year when registration under Section 12AA/12AB is effective from the subsequent assessment year.

Erroneous and prejudicial to the interest of revenue - revision under section 263 - failure of Assessing Officer to make enquiries / verification - unexplained cash credit / deemed income under section 68 - classification of railway siding for depreciation

Unexplained cash credit / deemed income under section 68 - failure of Assessing Officer to make enquiries / verification - erroneous and prejudicial to the interest of revenue - Whether the assessment was vitiated for not verifying outstanding unsecured loans (leading to unexplained cash credit under section 68) and therefore liable to revision under section 263 - HELD THAT: - The Tribunal upheld the revisional order on the ground that the A.O. had summarily accepted the assessee's entries relating to outstanding unsecured loans without calling for confirmation or making requisite enquiries about identity, creditworthiness and genuineness of the transactions as required when section 68 is attracted. The Principal CIT had called for revision after noting absence of verification in the assessment file and the assessee's concession that no confirmation letters were obtained. The Tribunal found that such failure to make necessary enquiries rendered the assessment order erroneous in so far as it was prejudicial to the revenue and approved the direction to the A.O. to make proper enquiries in accordance with section 68 after giving the assessee opportunity of hearing. [Paras 4, 7, 8]

Assessment set aside insofar as outstanding unsecured loans are concerned; A.O. directed to verify the liabilities in accordance with section 68 after hearing the assessee.

Classification of railway siding for depreciation - failure of Assessing Officer to make enquiries / verification - erroneous and prejudicial to the interest of revenue - Whether the claim for depreciation and additional depreciation on railway siding was accepted without proper enquiry (notably whether the track lay within factory premises) and whether the assessment is thus liable to revision under section 263 - HELD THAT: - The Tribunal agreed with the Principal CIT that the A.O. did not make any enquiry to ascertain whether the railway track/siding was within factory premises (a relevant factual determination for block classification and depreciation rates) and had accepted the assessee's claim without applying the relevant provisions of section 32. Reliance was placed on established authority that an assessment made in undue haste or without necessary enquiry is erroneous and prejudicial to the revenue. The Tribunal therefore sustained the revisional order and directed the A.O. to examine and verify the factual and legal aspects relating to classification and depreciation, affording the assessee an opportunity of being heard. [Paras 4, 7, 8]

Assessment set aside insofar as depreciation on railway siding is concerned; A.O. directed to verify factual position and apply provisions of section 32 after hearing the assessee.

Final Conclusion: The Tribunal dismissed the assessee's appeal and upheld the Principal CIT's revision under section 263, holding that the A.O.'s failure to make requisite verifications on (i) outstanding unsecured loans (section 68) and (ii) the claim of depreciation on railway siding rendered the assessment order erroneous and prejudicial to the interest of revenue; the A.O. is directed to make proper enquiries and determine the correct income after giving the assessee an opportunity of hearing.

Withdrawal of registration under Section 10(23C)(vi) - 15th proviso - authority to sub lease leased/nazul land and consensual assignment subject to lease conditions - use of leased land "Kewal Shikshan Sanstha Hetu" and permissible ancillary commercial exploitation for raising funds - accounting for rental income and effect of ongoing litigation on income recognition - inadvertent omission of interest income and bonafides - allegation of fraud or misrepresentation in obtaining approval under Section 10(23C)(vi)

Authority to sub lease leased/nazul land and consensual assignment subject to lease conditions - Whether the assessee society lacked the right to sub lease the nazul land and consequently violated law justifying withdrawal of registration. - HELD THAT: - The Tribunal examined the lease deed dated 16.07.1996 and the society's minutes and correspondence. The lease expressly contemplated assignment/alienation of the premises by the lessee subject to notice to the Collector and envisaged that, with prior permission of the Collector, trade/business/activity could be carried on or permitted on the premises subject to statutory conditions. The Registrar of Firms & Societies had granted permission for leasing subject to specified conditions. On these documents the Tribunal concluded that the society was vested with rights to sub lease within the conditional framework of the lease and that the CIT(Exemption)'s finding that the society had no right to sub lease was misconceived. [Paras 9, 10, 11]

Observation of CIT(Exemption) that society had no right to sub lease is incorrect and is set aside.

Use of leased land "Kewal Shikshan Sanstha Hetu" and permissible ancillary commercial exploitation for raising funds - Whether sub leasing the land (or permitting ancillary commercial use) amounted to use for non educational purpose in violation of lease conditions and warranted cancellation of registration. - HELD THAT: - Although the lease described use for educational purposes, the lease provisions permitted carrying on or permitting trade/business/activity with prior permission and subject to conditions, and the society's objects included administering property and raising funds for the institution. Municipal and town planning permissions and correspondence showed sanctioned construction of shops/structures to serve the integrated residential school. The Tribunal found the exploitation (sub leasing small strips for raising funds and related sanctioned construction) to be incidental and conducive to the society's primary educational objects and not a diversion of land for unauthorised purposes. Consequently the CIT(Exemption)'s view of violation of lease for educational use did not survive. [Paras 12, 13, 14, 15]

Sub leasing and ancillary use held to be within the permissible scope of the lease and society's objects; no valid basis for cancellation on this ground.

Accounting for rental income and effect of ongoing litigation on income recognition - Whether the society failed to account for rental income from the sub lease, constituting a ground for withdrawal of registration. - HELD THAT: - The Tribunal considered the society's books, claimed receipts up to April 2008, the balance shown as receivable, the termination notice of 19.03.2008 and pending litigation for vacation of premises. Given that the society had terminated the sub lease and was engaged in litigation and that only a modest amount remained receivable and was reflected in the balance sheet, the Tribunal held that non receipt of rent for the subsequent period was explained by ongoing disputes and litigation, and the CIT(Exemption)'s adverse inference about concealment of rental income was not sustainable. [Paras 16, 17, 18, 19]

No failure to account for lease rent that would justify withdrawal of registration.

Inadvertent omission of interest income and bonafides - Whether suppression of interest income justified withdrawal of registration. - HELD THAT: - CIT(Exemption) detected a short accounting of accrued interest. The society explained non inclusion resulted from non intimation by the bank and discovered via Form 26AS; it offered to treat the amount as income and stated there would be no tax consequence for the year. The Tribunal found the omission to be bona fide and inadvertent, and that such an omission, which did not affect tax liability, could not justify drawing adverse inference sufficient to withdraw registration under Section 10(23C)(vi). [Paras 20, 21, 22]

The short accounting of interest was an inadvertent omission and not a valid ground for withdrawal of registration.

Allegation of fraud or misrepresentation in obtaining approval under Section 10(23C)(vi) - Whether the registration was obtained by fraud or misrepresentation of facts. - HELD THAT: - The Tribunal reviewed the Form 56D and annexures filed at the time of approval and the balance sheets appended thereto which disclosed deposits for sub lease. There was no material before the Tribunal to show that facts were wilfully or fraudulently concealed from the approving authority. The subsequent grant of registration by CIT(Exemption) in 2023 on the same bye laws and objects reinforced the conclusion that there was no fraudulent procurement of approval in 2008. Accordingly, the allegation of fraud or misrepresentation was not established. [Paras 23, 24, 29, 30]

No fraud or misrepresentation in obtaining the earlier approval; allegation is rejected.

Final Conclusion: The Tribunal set aside the CIT(Exemption)'s order dated 02.12.2019 withdrawing the society's registration under Section 10(23C)(vi) w.e.f. A.Y. 2016-17 and allowed the assessee's appeal.

Disallowance under section 43B - Processing of return under section 143(1) - mismatch between ITR and audit report - Rectification under section 154 - mistake apparent from record - Duty to consider response to intimation under section 143(1)(a) - Disallowance of employee contributions as income under section 36(1)(va) read with section 2(24)(x)

Duty to consider response to intimation under section 143(1)(a) - Rectification under section 154 - mistake apparent from record - Whether additions made on account of alleged delayed payments (EPF/PF and GST) could be sustained when the assessee had replied to the intimation under section 143(1)(a) within the prescribed time and the AO did not consider that response, and whether such omission was a mistake apparent from record curable under section 154. - HELD THAT: - The Tribunal examined Section 143(1)(a) which requires that no adjustment under that provision shall be made unless an intimation is given and the response, if any, shall be considered before making any adjustment. On the facts, an intimation dated 21.01.2019 was issued and the assessee responded the same day, furnishing challans and explanations that the impugned payments were made within the statutory due dates and before filing the return. The AO proceeded to crystallise the additions without considering the assessee's timely response. The Tribunal held that failure by the AO to consider the response, which was submitted within the 30 day period, amounted to a mistake apparent from record and was therefore curable under section 154. The revenue's contention that the assessee should have revised the audit report was rejected as making the provisos to section 143(1)(a) redundant; the statutory mandate to consider the response cannot be circumvented by requiring a revision of the audit report as a precondition to relief. Consequently, the Tribunal found the approach of the lower authorities - which discussed the law on delayed payments but did not examine the documentary evidence of timely payment - to be erroneous. [Paras 12, 13]

The omission to consider the assessee's timely response to the intimation was a mistake apparent from record; the matter is remitted to the AO to examine the authenticity of the documents and delete the addition if substantiated.

Processing of return under section 143(1) - mismatch between ITR and audit report - Disallowance under section 43B - Disallowance of employee contributions as income under section 36(1)(va) read with section 2(24)(x) - Whether the additions made by CPC under section 143(1) on account of mismatch between the ITR and the audit report - specifically disallowance under section 43B and as per section 36(1)(va)/2(24)(x) - were sustainable without first verifying the assessee's evidentiary submissions. - HELD THAT: - The revenue argued that mismatch processing under section 143(1)(iv) empowers CPC to disallow expenditure reflected in the audit report but not in the return and that such mismatch is curable only by filing a revised audit report. The Tribunal accepted that CPC has jurisdiction to process mismatches under section 143(1), but emphasised that the statutory scheme requires the AO to give intimation and consider any response before making adjustments. In the present case the AO did not consider the assessee's written submissions and challans asserting timely payment; the CIT(A) similarly upheld the additions by focusing on the law relating to delayed payments without assessing whether the facts showed delay. The Tribunal held that application of section 43B (and the related provisions addressing employee contributions) to disallow payments is fact sensitive and cannot be imposed where documentary evidence establishes timely payment; accordingly, the Tribunal directed the AO to verify the authenticity of the documents submitted and delete the additions if the payments are found to have been made within the prescribed time. [Paras 11, 13]

Additions sustained by the authorities below are not to be upheld without examination of the assessee's documentary proof; the AO is directed to verify documents and delete the additions if payments are substantiated.

Final Conclusion: The Tribunal partly allowed the appeal for statistical purposes: finding that the AO and the CIT(A) erred by not considering the assessee's timely response to the intimation, it remitted the matter to the AO to verify the authenticity of the challans and other documents supporting that EPF/PF and GST payments were made within the prescribed time and directed deletion of the additions if substantiated.

Classification of Flexible Intermediate Bulk Containers - classification under Harmonized System of Nomenclature - preference for specific tariff heading over general heading - textile versus plastic classification - application of chapter and section notes (Section XI, Chapters 39, 54, 59, 60, 63) - remand for fresh consideration

Classification of Flexible Intermediate Bulk Containers - textile versus plastic classification - application of chapter and section notes (Section XI, Chapters 39, 54, 59, 60, 63) - remand for fresh consideration - Reconsideration of classification of the exported goods declared as Flexible Intermediate Bulk Containers (FIBC). - HELD THAT: - The Tribunal found that the appellate authority had not given a final answer on classification on the materials and statutory notes now required to be examined in detail. The Tribunal held that the Gujarat High Court decision in M/s CTM Technical Textiles Ltd distinguished Raj Pack Well Ltd and treated woven fabric as textile; on the present facts a relook was warranted. The matter is remitted to the Commissioner (Appeals) to reconsider classification afresh in the light of the CBEC circulars and trade notices (including CBEC Circular No. 8/92 and Trade Notice No. 78/94), the relevant chapter and section notes (notably Section XI and chapter notes to Chapters 39, 54, 59, 60 and 63), and to determine the precise nature of the product (including whether it is woven from strips of up to 15 mm or more) and whether differential treatment is required for coated/uncoated varieties. The EDI entries, the laboratory report and any analogous central excise classifications should be taken into account while reassessing the claim.

Remanded to the Commissioner (Appeals) for fresh consideration of classification and related issues as indicated, with directions to examine the specified chapter/section notes, circulars and product-identification parameters.

Classification under Harmonized System of Nomenclature - preference for specific tariff heading over general heading - textile versus plastic classification - Whether woven fabric, when produced by weaving any material, qualifies as 'textile' for classification purposes. - HELD THAT: - The Tribunal accepted the reasoning of the Gujarat High Court in M/s CTM Technical Textiles Ltd that woven fabric, irrespective of the material or technique used for weaving, may qualify as textile where the statutory notes and facts support such characterization. The Tribunal distinguished Raj Pack Well Ltd to the extent that in that case the material was HDPE strips/tapes and the issue concerned the intermediate nature of the input; here the fact of weaving can, subject to the prescribed notes and factual verification, qualify the finished product as textile. That legal position is to be applied by the appellate authority while reassessing classification, but the Tribunal did not itself finalize the classification on merits.

Accepted that woven fabric can qualify as 'textile' for tariff classification where supported by chapter/section notes and factual determination; appellate authority to apply this principle on remand.

Final Conclusion: Appeal allowed by way of remand. The matter is remitted to the Commissioner (Appeals), Jamnagar for fresh consideration of classification of the Flexible Intermediate Bulk Containers in accordance with the directions and parameters stated; cross-objection disposed of.

Exemption from Basic Customs Duty under Notification No. 98/2009-Cus - transferable DFIA endorsed post-discharge of export obligation - Standard Input Output Norms (SION) governing permitted import items - absence of an actual-user/actual-use condition for post-transferable DFIA - application of Para 4.12 of the Foreign Trade Policy to generic versus specific input entries - revalidation and issuance of certificate under Para 2.13.1 of the Handbook

Exemption from Basic Customs Duty under Notification No. 98/2009-Cus - transferable DFIA endorsed post-discharge of export obligation - Standard Input Output Norms (SION) governing permitted import items - Entitlement to claim duty-free import benefit under Notification No. 98/2009-Cus for Titanium Dioxide (Rutile) against a transferable DFIA issued for export of glass bottles under SION A-3627. - HELD THAT: - The Tribunal found that the DFIA before it was endorsed with transferability and issued post discharge of the export obligation, and that the DFIA was governed by the FTP (2009-14) and the notified SION A-3627 for glass bottles. The DFIA expressly listed 'Rutile' as an input under the description 'Glass Formers' and recorded the ITC (HS) Code 32061900 corresponding to Titanium Dioxide. Applying the SION and the terms of the DFIA, the Tribunal held that the imported Titanium Dioxide falls within the description and coverage of the DFIA and is therefore eligible for exemption under Notification No. 98/2009-Cus. The Tribunal relied on precedents of this Tribunal and higher courts construing post-transferable DFIAs and SION correspondence, and set aside the order denying exemption. [Paras 5, 6]

The appellant is entitled to claim DFIA benefit under Notification No. 98 of 2009 for import of Titanium Dioxide (Rutile) as a glass former against the export of glass bottles under the DFIA scheme; the impugned order is set aside.

Absence of an actual-user/actual-use condition for post-transferable DFIA - application of Para 4.12 of the Foreign Trade Policy to generic versus specific input entries - Whether Para 4.12 of the FTP and any 'actual use' or proportionality requirement prevents grant of DFIA benefit to a transferee-importer where the DFIA/SION specifically identifies the input 'Rutile'. - HELD THAT: - The Tribunal rejected the revenue's contention that Para 4.12 (i) and (ii) (relating to groups of inputs and proportional allocation) applied to deny benefit, observing that 'Rutile' (Titanium Dioxide) is a specific entry in the DFIA/SION rather than a generic grouped input. The Tribunal further held, following binding decisions of higher courts and this Tribunal, that where a DFIA is endorsed transferable after discharge of export obligation, there is no requirement of establishing actual use or exact quantity consumed in the exported product by the transferee; it is sufficient that the imported item corresponds to the description, value and quantity set out in the DFIA/SION. On that basis, the demand based on alleged non-compliance with Para 4.12 and the absence of information about input utilization was unsustainable. [Paras 5]

Para 4.12 and the claimed 'actual use' requirement do not bar grant of DFIA benefit in the present post-transferable DFIA where the input 'Rutile' is a specific SION entry; the revenue's contention is rejected.

Revalidation and issuance of certificate under Para 2.13.1 of the Handbook - Whether the lower authorities should be directed to issue a certificate for revalidation under Para 2.13.1 of the Handbook if requested by the appellant. - HELD THAT: - The Tribunal directed that, in consequence of allowing the appeal, the lower authorities should issue the certificate contemplated by Para 2.13.1 of the Handbook for purposes of revalidation, if the appellant files such a request. This direction follows from the finding that DFIA benefit is allowable and the DFIA is transferable and post-export. [Paras 6]

Lower authorities are directed to issue certificate as per Para 2.13.1 of the Handbook for revalidation if so requested by the appellant.

Final Conclusion: The appeal is allowed: the impugned order denying DFIA benefit is set aside and the appellant is entitled to claim exemption under Notification No. 98 of 2009 for import of Titanium Dioxide (Rutile) against the transferable DFIA issued for export of glass bottles; the revenue's reliance on Para 4.12 and an 'actual use' requirement is rejected, and the authorities are directed to issue a revalidation certificate under Para 2.13.1 of the Handbook upon request.

Natural justice - remand for fresh adjudication - rejection of declared value and re-determination under Customs Valuation - presumption under Section 139 of the Customs Act, 1962 - evidentiary value of documents forwarded through consulate

Natural justice - remand for fresh adjudication - Whether the adjudication should be set aside and remanded for fresh consideration for failure to consider the appellant's submissions and for breach of principles of natural justice. - HELD THAT: - The Tribunal found that both the Adjudicating Authority and the Commissioner (Appeals) proceeded on the basis of the impugned order without adequately considering the detailed documents and submissions produced by the appellant and that the appellant had specifically pleaded that their submissions were mechanically ignored. The lower authorities relied on findings that questioned the credibility of declared quantities and accepted documents obtained through the exporting country's channels (paras 12 and 13). Given the appellant's grievance of non-consideration of their defence and evidence, the Tribunal concluded that the principles of natural justice were not observed. In consequence, the Tribunal did not decide the merits of the valuation dispute but held that the matter must be fresh-decided after affording the appellant an opportunity to present all details and evidence and after proper consideration by the Adjudicating Authority. [Paras 12, 13]

Impugned order set aside and matter remanded to the Adjudicating Authority to pass a fresh order after observing principles of natural justice and considering the appellant's submissions and evidence.

Final Conclusion: The appeal is allowed by way of remand; the impugned order is set aside and the matter is remitted to the Adjudicating Authority for fresh adjudication after giving the appellant an opportunity to be heard and after due consideration of the documents and submissions.

Compulsory Registration Order applicability to imports - Bureau of Indian Standards Act, 1986 and Rules, 1987 - retroactivity of statutory amendment - confiscation and penalty under Customs Act for non-compliance with BIS requirements

Compulsory Registration Order applicability to imports - Bureau of Indian Standards Act, 1986 and Rules, 1987 - retroactivity of statutory amendment - Whether the Electronics and Information Technology Goods (Requirements for Compulsory Registration) Order, 2012 and BIS registration requirements under the BIS Act/Rules applied to the goods imported by the appellant - HELD THAT: - The Tribunal restricted its examination to the applicability of the BIS Act, 1986 and the BIS Rules, 1987 and the 2012 Compulsory Registration Order (CRO) to the imported goods. It accepted the appellant's contention that, for imports made prior to later amendments which expanded definitions and registration obligations (introduced by amendment w.e.f. 12.10.2017), the un-amended Act and Rules govern. The Tribunal found force in the view that the CRO, issued under the 1986 Act read with 1987 Rules, could not lawfully impose import restrictions going beyond the statutory scheme in force at the relevant time, and relied on a coordinate bench decision holding that the CRO 2012 does not regulate imports by exceeding the Act and Rules. Applying that reasoning, the Tribunal concluded the CRO and the later registration requirements could not be imposed on the appellant's imported goods which pre-dated the expanded statutory provisions. [Paras 6, 7]

The CRO 2012 and the registration requirements under the un-amended BIS Act/Rules did not apply so as to justify imposing the later registration obligation on the appellant's imported goods.

Confiscation and penalty under Customs Act for non-compliance with BIS requirements - Compulsory Registration Order applicability to imports - Whether confiscation of the goods and imposition of penalty and redemption fine under the Customs Act were justified in the absence of applicable BIS registration requirements - HELD THAT: - Having held that the CRO 2012 and the subsequently introduced registration obligations could not be applied to the subject importation, the Tribunal concluded there was no legal basis for the original authority's order of confiscation and penalties that rested on non-compliance with those BIS requirements. The Tribunal therefore found no merit in upholding the confiscation and penal consequences and set aside the impugned appellate order insofar as it affirmed confiscation and penalties. [Paras 7]

The order upholding confiscation and imposition of penalty is set aside; the appeal is allowed in favour of the appellant.

Final Conclusion: The Tribunal held that the 2012 Compulsory Registration Order and later-expanded BIS registration requirements could not be applied to the appellant's imports made prior to the statutory amendments expanding those obligations; accordingly, the confiscation and penalties imposed for alleged non-compliance with BIS registration were not sustainable and the impugned order was set aside.

Confessional statement - corroboration of co-accused statement - principles of natural justice - burden of proof shifting after prima facie evidence - verification of documentary evidence - confiscation and penalty

Confessional statement - corroboration of co-accused statement - Sufficiency of the Department's reliance on the Appellant's recorded/confessional statement in absence of independent corroborative evidence. - HELD THAT: - The Tribunal found that the Department relied predominantly on the Appellant's purported confessional statement to conclude that the gold was of foreign origin. No independent corroborative evidence was placed on record: the Assam Hallmarking Centre test report relied upon was not supplied to the Appellant, and no follow-up investigation or statements were obtained from the other noticee although the confessional statement purportedly implicated him. Citing authority that statements of co-accused cannot be relied upon without independent corroboration, the Tribunal held that reliance solely on the confession, without corroboration, rendered the Department's allegation legally unsustainable. [Paras 5, 6, 7]

The confessional statement alone is insufficient; the findings based solely thereon are untenable.

Principles of natural justice - verification of documentary evidence - burden of proof shifting after prima facie evidence - Whether failure to supply relied-upon documents and failure to verify invoices and carry out follow-up investigation violated principles of natural justice and affected the burden of proof. - HELD THAT: - The Tribunal recorded that the Appellant repeatedly sought copies of Panchnama, Indigo staff report, recorded statement, verification report of the other noticee and the hallmarking test report, but these were not furnished. The Appellating Authority also failed to verify the invoices produced by the Appellant or to pursue follow-up investigations requested from the jurisdictional Commissionerate. The Tribunal applied the principle that while initial proof of legitimacy lies with the Appellant, once he produces evidence the onus shifts to the Department to disprove it; here the Department did not discharge that obligation. These procedural lapses and non-supply of documents amounted to a gross violation of natural justice and undermined the adjudication. [Paras 5]

Non-supply of documents and failure to verify the Appellant's documentary evidence constituted a breach of natural justice and vitiated the impugned order.

Final Conclusion: The impugned adjudication order of absolute confiscation and penalty is set aside and the appeal is allowed for the reasons that the Department relied solely on an uncorroborated confessional statement and failed to supply relied-upon documents or to verify the Appellant's documentary evidence, thereby violating principles of natural justice.

Irrevocable De-Registration and Export Request Authorisation (IDERA) - Rule 30(7) of the Aircraft Rules - ministerial act - mandamus - Cape Town Convention - moratorium under Section 14 of the IBC - assets owned by a third party excluded under Explanation (a) to Section 18 of the IBC - writ jurisdiction under Article 226

Rule 30(7) of the Aircraft Rules - IDERA - ministerial act - mandamus - Cape Town Convention - writ jurisdiction under Article 226 - Whether, notwithstanding initiation of CIRP and imposition of moratorium, the lessors have a prima facie entitlement to relief under the Aircraft Rules (including deregistration on presentation of IDERA) and to seek writ relief in the High Court to enforce the DGCA's statutory duty. - HELD THAT: - The Court accepted that Rule 30(7) and the IDERA regime under the Cape Town Convention create a documentary, largely ministerial, entitlement to deregistration once the prescribed ingredients are satisfied. The Court observed that the Petitioners had terminated leases and had filed deregistration applications prior to the NCLT moratorium and that, prima facie, the Petitioners established a strong case and suffered irreparable loss because the aircraft require regular maintenance. The Court held that the NCLT/NCLAT's jurisdiction under the IBC does not oust the High Court's writ jurisdiction to compel a statutory authority (DGCA) to perform its duty where the relief sought is enforcement of an administrative obligation under the Aircraft Act/Rules; exhaustion of IBC remedies is not an absolute bar to entertaining such a writ where the nature of controversy warrants exercise of Article 226 powers. The Court also treated the deregistration process under Rule 30(7) as mandatory upon fulfillment of its conditions and noted precedent treating deregistration as ministerial under the Aircraft Rules and the Convention. [Paras 11, 15, 16, 19]

Prima facie entitlement to relief under the Aircraft Rules was recognised; the Petitioners had made out a strong prima facie case and the High Court could exercise writ jurisdiction to enforce DGCA's statutory duty despite parallel IBC proceedings.

Moratorium under Section 14 of the IBC - assets owned by a third party excluded under Explanation (a) to Section 18 of the IBC - possession/occupation - Whether the moratorium under Section 14 of the IBC prevented DGCA from acting on deregistration applications and whether the aircraft were assets of the corporate debtor for purposes of the CIRP. - HELD THAT: - The Court examined the temporal sequence and factual matrix and distinguished precedents relied upon by respondents where termination occurred after the commencement of CIRP. The Court noted that the Petitioners had terminated leases and taken constructive possession of the aircraft prior to the NCLT order. The Court further observed that Explanation (a) to Section 18 excludes assets owned by third parties held under contractual arrangements from the IRP's duties prima facie. On that basis, the contention that the moratorium automatically precluded DGCA from actioning deregistration applications was not accepted as an absolute bar at the interim stage; the Court found that, prima facie, the IRP was not required to take control of third-party aircraft under the IBC. [Paras 16, 17]

On the prima facie record, the moratorium did not ipso facto prevent consideration of the lessors' statutory rights; Explanation (a) to Section 18 indicates that the aircraft are prima facie third party assets not to be taken over by the IRP.

Interim preservation and maintenance - access to aircraft - restraint on removal of parts and documents - What interim directions, if any, should be granted to preserve the aircraft pending disposal of the writ petitions? - HELD THAT: - Balancing the prima facie right of the lessors, the risk of irreparable loss from lack of maintenance, and the public interest considerations, the Court granted limited interim relief solely for preservation. The Court recognised that aircraft are sophisticated assets requiring periodic maintenance and that documents, parts and accessories must be secured. Accordingly, the Court authorised lessors and their representatives to inspect and to perform preservation and maintenance activities at specified frequency, restrained the corporate debtor/RP/agents from removing parts or records without lessor consent, and granted specific temporary permission for mandatory maintenance/engine runs in respect of one identified aircraft until deregistration. The Court emphasised that these directions are interim and without prejudice to the merits of the writ petitions. [Paras 19, 20, 21, 22]

Interim relief granted: lessors and authorised representatives to access and inspect aircraft within 3 days; permitted to carry out maintenance at least twice monthly; respondents restrained from removing parts, manuals or records without lessor consent; specific interim permission granted for maintenance/engine runs of aircraft MSN 6072; interim applications disposed of.

Final Conclusion: Interim applications allowed in part: court found a strong prima facie case for the lessors' statutory rights under Rule 30(7)/IDERA and, without deciding final entitlement to deregistration, granted focused interim directions to permit access, inspection and periodic maintenance of the 30 aircraft and restrained respondents from removing parts or records; these directions are without prejudice to the final adjudication of the writ petitions.

Exclusion of period under Section 22(5) of SICA - abatement of SICA proceedings and its effect on computation of limitation - acknowledgement of liability under Section 18 of the Limitation Act, 1963 - entries in audited balance sheets as potential acknowledgements of debt - relevance of settlement communications and 'without prejudice' correspondence as acknowledgements - admissibility of prior proceedings (DRT/ RDB Act) and decrees on merits of limitation - maintainability of a Section 7 application where limitation is extended by statutory exclusion or acknowledgment

Exclusion of period under Section 22(5) of SICA - abatement of SICA proceedings and its effect on computation of limitation - maintainability of a Section 7 application where limitation is extended by statutory exclusion or acknowledgment - Whether the Section 7 application was barred by limitation. - HELD THAT: - The Tribunal held that the period during which reference/appeal under SICA remained pending and was subsequently abated by AAIFR falls within the exclusion envisaged by Section 22(5) of SICA and therefore ought to be excluded while computing limitation. The adjudicatory approach in the impugned order, which treated the limitation as having run from the date of NPA and refused exclusion, was incorrect. The Tribunal relied on the legal principle that where a remedy was suspended by statutory operation of SICA, the suspension period is excludable; further, the Tribunal applied the reasoning in Sabarmati Gas (2023) that the Adjudicating Authority must consider exclusion/condonation when limitation appears to have run. Applying those principles to the facts, the Tribunal concluded that the period up to AAIFR's order of abatement (22.05.2013) should be excluded and, after exclusion, the Section 7 petition dated 27.11.2018 could not be dismissed as time barred on the ground relied upon by the Adjudicating Authority.

The Adjudicating Authority erred in rejecting the Section 7 application as barred by limitation; the impugned order on limitation is set aside and the matter is remanded for adjudication on merits.

Acknowledgement of liability under Section 18 of the Limitation Act, 1963 - entries in audited balance sheets as potential acknowledgements of debt - entries in balance sheet as acknowledgment of debt - Whether entries in the corporate debtor's balance sheets amounted to acknowledgements extending limitation. - HELD THAT: - The Tribunal examined the series of audited financial statements and accompanying directors' and auditors' notes from 2006 07 to 2018 19. Applying the Supreme Court's analysis in Bishal Jaiswal and related authorities, it held that an entry in the balance sheet may amount to an acknowledgement of liability under Section 18 of the Limitation Act, but that such a conclusion depends on the factual matrix including any caveats in the directors' report or auditors' notes. On the facts, while some annual reports contained statements of dispute, the overall pattern showed recurring recognition of the loan liability and references to negotiations/settlement with ARCIL; only a limited number of years contained explicit dispute language. Considering the cumulative record rather than isolated caveats, the Tribunal concluded that the balance sheet entries constituted acknowledgements sufficient to extend the period of limitation.

Acknowledgements in the balance sheets and related records extended limitation; they operate to refresh the limitation period in favour of the appellant.

Relevance of settlement communications and 'without prejudice' correspondence as acknowledgements - entries in audited balance sheets as potential acknowledgements of debt - Whether the letter dated 11.11.2016 (and subsequent settlement communications) from the corporate debtor could be relied upon as admissions/acknowledgements extending limitation. - HELD THAT: - The Tribunal reviewed the one time settlement correspondence (including the 19.09.2016 OTS, the 11.11.2016 acknowledgment, and later communications and part payments) and the appellant's revocation of the settlement. It found that the communications specified company wise settlement amounts and included acknowledgements of liability (including an admission that the corporate debtor was liable for a specified sum). The Tribunal treated the distinction between a group settlement and company wise settlement as a technicality that did not preclude treating these communications as acknowledgements. The fact that the appellant later revoked the settlement did not negate the acknowledgement effect of those communications for the purpose of extending limitation.

The 11.11.2016 letter and related settlement communications amounted to acknowledgements of debt and operate to extend the limitation period.

Final Conclusion: The appeal is allowed insofar as the Adjudicating Authority's dismissal of the Section 7 petition on the ground of limitation is set aside. The Tribunal held that the period of SICA proceedings up to AAIFR abatement is excludable and that balance sheet entries and settlement communications amounted to acknowledgements extending limitation. The matter is remanded to the Adjudicating Authority for fresh adjudication on merits in accordance with law; no opinion is expressed on the merits of the claim.

Composite works contract - non-vivisectible between labour and material - service tax liability from date - works contract service - commercial or industrial construction service

Composite works contract - non-vivisectible between labour and material - service tax liability from date - Classification of the appellant's contracts as indivisible composite works contracts and the period from which service tax is chargeable. - HELD THAT: - The Tribunal found that the contracts between the appellant and M/s SIDCUL involved supply of material in addition to works and were not severable into labour and material components. Applying the ratio in Larsen & Tubro, the contracts qualify as composite works contracts and fall within the definition of works contract service as classified under Section 65(105)(zzzza). Consequently, service tax liability does not attach for the entire period from January 2005; the demand for the period up to 01.06.2007 was set aside as chargeability arises only from the date identified by the controlling precedent. [Paras 6]

The contracts are composite and not vivisectible; demand for the period January 2005 to 01.06.2007 is set aside and service tax is chargeable only from 01.06.2007.

Commercial or industrial construction service - works contract service - Sustainability of the demand after 01.06.2007 which was raised and confirmed under Commercial or Industrial Construction Service instead of Works Contract Service. - HELD THAT: - The Tribunal held that, having classified the appellants' contracts as works contracts, a demand framed and confirmed under the category of Commercial or Industrial Construction Service is not sustainable where the demand was not raised under Works Contract Service. Because the foundational classification and charging provision were not correctly applied for the post-01.06.2007 period, the impugned demand could not be upheld. In view of this failure, ancillary contentions (such as whether the works were public utilities, limitation, or penalty issues) were rendered irrelevant to the outcome. [Paras 6]

The demand for the period after 01.06.2007, having been raised under the wrong service category, cannot be sustained; consequently the entire demand is set aside.

Final Conclusion: Appeal allowed: the Tribunal held the contracts to be indivisible composite works contracts chargeable as works contract service only from 01.06.2007; the demand for the earlier period was set aside and the post-01.06.2007 demand failed because it was framed under Commercial or Industrial Construction Service, resulting in the entire demand being quashed.

Manpower recruitment or supply agency - consideration includes any amount payable for the taxable services provided or to be provided - extended period of limitation triggered by suppression of facts/intent to evade

Manpower recruitment or supply agency - Sharing of corporate staff with group companies falls within the definition of 'manpower recruitment or supply agency'. - HELD THAT: - The definition of 'manpower recruitment or supply agency' is broad and requires a person to provide, directly or indirectly, in any manner, recruitment or supply of manpower to any other person, temporarily or otherwise. The respondent, being a distinct legal entity and providing its corporate staff to other companies of the group for their use, satisfies the statutory elements. Legislative amendments prior to and during the relevant period broadened the scope of the definition; construed in that context the respondent's activity of deploying staff to group companies is captured by the definition and is exigible as manpower supply service. The Tribunal found no merit in treating the activity as outside the statutory ambit. [Paras 6]

Respondent's staff-sharing is taxable as 'manpower recruitment or supply agency' service.

Consideration includes any amount payable for the taxable services provided or to be provided - Amounts received from group companies, even if labelled 'reimbursement' and computed without mark-up, constitute 'consideration' for the purpose of valuation under Section 67 and are exigible to service tax. - HELD THAT: - Section 67 (and its Explanation) defines 'consideration' to include any amount payable for taxable services. The character of a payment cannot be determined by nomenclature alone; the true test is the nexus between the payment and the service provided. Here the payments were for the use of respondent's staff by group companies and therefore fall within 'any amount' payable for taxable services. The Intercontinental decision (striking down Rule 5(1) as it applied to reimbursements) was distinguished: that case dealt with reimbursement of incidental out-of-pocket expenses in addition to the service value, whereas the present payments are directly for the use of staff and do not seek to exceed the gross amount chargeable for the service. The Tribunal also noted contemporaneous executive exposition supporting that motive or absence of profit does not affect taxability. The respondent's failure to place agreements or terms before the authority militated against treating the receipts as non-taxable reimbursements. [Paras 7]

Payments received from group companies are 'consideration' and taxable; they cannot be treated as non-taxable reimbursements in the facts of this case.

Extended period of limitation triggered by suppression of facts/intent to evade - Show Cause Notice issued under the extended limitation period is valid because the respondent deliberately suppressed material facts with intent to evade payment of service tax. - HELD THAT: - The extended period under the proviso to Section 73(1) applies where there is fraud, collusion, wilful misstatement or suppression of facts with intent to evade tax. The respondent did not disclose the staff-sharing activity in returns or seek departmental clarification, failed to produce agreements or terms evidencing a bona fide non-taxable arrangement, and the activity came to light only on departmental audit. Given the respondent's status as a company with specialised tax/legal functionaries, the Tribunal accepted the original authority's inference of deliberate suppression based on surrounding circumstances. The Tribunal held that the two Supreme Court decisions relied upon by the respondent did not negate the inference of suppression on these facts and that audit visits do not necessarily absolve a taxpayer unless the specific data was placed before auditors. Accordingly, the extended period invocation was upheld. [Paras 9]

Show Cause Notice is not time-barred; extended period properly invoked on finding of suppression.

Final Conclusion: Appeal allowed: impugned order set aside on merits; activity held taxable as manpower supply and receipts to be treated as consideration. Show Cause Notice validly issued within extended period. Matter remanded to the lower authority to quantify tax, interest and impose penalty from 16.5.2008 (excluding any small portion prior to the change in definition), and to pass consequential orders.

Refund of service tax - construction of complex - residential complex - taxable service - exemption notification dated 20.06.2012 - reverse charge mechanism - unjust enrichment - CENVAT credit

Construction of complex - residential complex - taxable service - Whether the constructions carried out by the appellants fell within the definition of 'construction of complex'/'residential complex' and were therefore taxable. - HELD THAT: - The Tribunal examined the statutory definitions of 'construction of complex' and 'residential complex' and held that a 'residential complex' means a building or buildings having more than twelve residential units. Independent/individual residential houses, each being a separate residential unit with separate approach and services and where a single building did not have more than twelve units, do not fall within the definition of a 'residential complex'. Prior to 01.07.2012 such independent residential units were not intended to be taxed under the 'construction of complex' service; and the exemption notification effective 20.06.2012 continued to exempt original works relating to a single residential unit otherwise than as part of a residential complex. The Tribunal relied on earlier Bench decisions to support that construction of individual residential units is not chargeable as construction of a complex. [Paras 16, 17, 18, 23, 24]

The constructions were not covered by the 'construction of complex'/'residential complex' levy and the appellants are entitled to the benefit of the Exemption Notification.

Refund of service tax - reverse charge mechanism - unjust enrichment - Whether the refund claim is barred by the principle of unjust enrichment having regard to the contractual allocation of service tax and the reverse charge deduction effected by the Rajasthan Housing Board. - HELD THAT: - The Tribunal noted that the work orders provided service tax was to be borne by the contractor and found as a fact that the appellants had borne the incidence of tax. Further, in terms of the Exemption Notification and the reverse charge provisions the Housing Board had deducted fifty percent of the tax to be paid under reverse charge from amounts payable to the contractor. Relying on authorities recognizing that a person who has borne the incidence of tax can claim refund, the Tribunal held that the Commissioner (Appeals) was not justified in rejecting the refund on the ground of unjust enrichment. [Paras 5, 6, 7, 25]

Refund cannot be denied on the ground of unjust enrichment; the appellants are entitled to claim refund.

CENVAT credit - refund of service tax - Whether the Commissioner (Appeals) could refuse refund on the basis that the service receiver may have availed and utilized CENVAT credit. - HELD THAT: - The Tribunal observed that this supposed ground was not raised in the show cause notice and that the Commissioner (Appeals) merely speculated that the Housing Board 'may have' taken CENVAT credit and utilized it for output services. The denial of refund cannot be founded on conjecture; a refund cannot be refused on an unpleaded and unproved inference that the service receiver availed credit. [Paras 26, 27]

Refund cannot be denied on the speculative ground of alleged CENVAT credit availed by the service receiver.

Final Conclusion: The appellate order dated 16.02.2016 was set aside; all four appeals allowed and the appellants entitled to the refund claimed for the periods in question, the impugned denial on the grounds of levy, unjust enrichment and speculative CENVAT utilisation being reversed.

Trade in cargo space not a taxable service - principal-to-principal transaction - freight forwarder acting as principal not intermediary - Business Auxiliary Services not attracted to mark-up on sale of space - C.B.E. & C. circular on freight forwarders

Trade in cargo space not a taxable service - principal-to-principal transaction - freight forwarder acting as principal not intermediary - Whether the markup/ margin retained by the appellant on purchase and resale of cargo space is taxable as consideration for a service under the category of business auxiliary/support services or is non-taxable trading activity. - HELD THAT: - The appellant purchased cargo space from shipping lines/airlines and resold that space to exporters/importers at a higher price, retaining the difference as a mark-up. The Tribunal applied the C.B.E. & C. circular distinguishing two modes of freight-forwarding: (i) acting as an intermediary/agent where the forwarder merely facilitates transportation and bears no liability, and (ii) acting as a principal who undertakes legal responsibility and risk for transportation and thereby supplies the transportation service on his own account. Relying on earlier Division Bench decisions including Marinetrans India and Bhatia Shipping, the Tribunal found that where the forwarder deals on a principal-to-principal basis (buying space and reselling it on his own account), the activity constitutes trading in space rather than rendering a service. Consequently, the mark-up retained on such transactions does not attract service tax as business auxiliary/support services, and the Commissioner's demand confirming service tax, interest and penalty on the mark-up was unsustainable.

The mark-up retained by the appellant on purchase and resale of cargo space is not taxable as a service; the demand confirmed by the Commissioner is set aside.

Final Conclusion: The appeal is allowed and the order confirming demand of service tax, interest and penalty on the mark-up retained by the appellant for sale of cargo space is set aside.

Summary order. Appeal dismissed; delay condoned; Supreme Court declined to interfere with the impugned order of the High Court. Pending applications, if any, disposed of.

Remand for fresh consideration - Judicial non-interference with remand - Adjudicating authority to decide classification afresh without being influenced by tribunal observations - Condonation of delay

Remand for fresh consideration - Judicial non-interference with remand - The Court declined to interfere with the Tribunal's order remanding the matter to the Adjudicating Authority and upheld the remand. - HELD THAT: - The Supreme Court recorded that it was not inclined to interfere because the Tribunal had remanded the matter to the Adjudicating Authority for fresh consideration. By refusing to disturb the remand, the Court left the substantive controversies for fresh adjudication by the Adjudicating Authority as directed by the Tribunal. The Court therefore exercised judicial restraint and permitted the remand process to take its course without substituting its own view for the remand direction.

Remand by the Tribunal to the Adjudicating Authority for fresh consideration is not interfered with and is accordingly sustained.

Adjudicating authority to decide classification afresh without being influenced by tribunal observations - The Adjudicating Authority was directed to consider the matter afresh and not be influenced by any observations of the Tribunal regarding classification of the product. - HELD THAT: - While the remand was upheld, the Court expressly left all contentions on both sides open. The Adjudicating Authority was instructed to conduct a fresh consideration of the issues, and specifically was not to be influenced by any classificatory observations made by the Tribunal. The direction preserves the parties' rights to present their contentions anew and requires independent adjudication of classification on merits by the Adjudicating Authority.

Adjudicating Authority to reconsider classification and other contentions afresh, uninfluenced by the Tribunal's observations.

Final Conclusion: Delay in filing condoned; the appeal is disposed of by refusing to interfere with the Tribunal's remand and by directing fresh consideration by the Adjudicating Authority, which must decide classification and related contentions afresh without being influenced by the Tribunal's observations.

Summary order. Civil Appeal dismissed; delay condoned.

Unjust enrichment - refund of duty paid - incidence of duty passed on to customers - invoice under Section 12A of the Central Excise Act, 1944 as evidence - burden of proof to show duty not passed on - Chartered Accountant's certificate as evidentiary material - refund under Section 27 of the Customs Act, 1962

Unjust enrichment - incidence of duty passed on to customers - invoice under Section 12A of the Central Excise Act, 1944 as evidence - Chartered Accountant's certificate as evidentiary material - burden of proof to show duty not passed on - Whether the appellants' refund claim of duty paid on software is barred by the doctrine of unjust enrichment because the incidence of duty was passed on to their customers - HELD THAT: - The Tribunal examined whether the appellants discharged the burden of proving that the incidence of duty was not passed on to MTNL/BSNL. The First Appellate Authority had rejected the CA certificate as not explaining how the duty paid was accounted for in the books of account or charged to profit and loss to demonstrate non-passing of incidence. The invoices issued by the appellants showed duty separately and therefore, in the view of the Tribunal and consistent with the precedent relied upon, such presentation in statutory invoices permits an inference that the duty incidence was passed on to the customers. The appellants produced no additional contemporaneous record demonstrating that the duty element, though shown, was not recovered from the buyers or was borne by the appellants; the CA certificate alone, being silent on accounting treatment, was insufficient to rebut the inference. The Tribunal applied the reasoning in Interarch Building Products (P) Limited to hold that showing the duty separately in invoices indicates that the appellants passed on the duty and thus the refund is barred by unjust enrichment.

The appellants failed to establish that the incidence of duty was not passed on; the refund claim is barred by unjust enrichment and is liable to be rejected.

Final Conclusion: The appeal is dismissed: the appellants did not satisfactorily prove that the incidence of duty on software was not passed on to the customers, and the refund claim is therefore barred by unjust enrichment.

Marketability test for excise levy - captively consumed intermediate product - classification under tariff sub-heading 1702 90 90 - burden of proof for chemical composition in classification - proviso to Notification granting exemption to intermediate products used in manufacture of exempted final products

Marketability test for excise levy - captively consumed intermediate product - Whether the sugar syrup prepared and captively consumed in the manufacture of biscuits is exigible to excise duty - HELD THAT: - The Tribunal held that for an intermediate product to attract Central Excise duty it must be shown to be marketable in the condition in which it emerges from the factory. The department produced no evidence to establish that the sugar syrup manufactured by the appellant was marketable in the form in which it was produced. Following the reasoning in earlier Tribunal decisions, the question of marketability cannot be presumed from the sale of dissimilar products made by other manufacturers; chemical identity and marketability must be established by evidence. In absence of any test or proof by the department that the appellant's sugar syrup was marketable, the demand could not be sustained. [Paras 8]

Demand set aside: sugar syrup not shown to be marketable; therefore not exigible to duty as an intermediate product

Classification under tariff sub-heading 1702 90 90 - burden of proof for chemical composition in classification - proviso to Notification granting exemption to intermediate products used in manufacture of exempted final products - Whether the product is classifiable under sub-heading 1702 90 90 and whether exemption under the proviso to Notification No.67/95-CE could be denied - HELD THAT: - The Tribunal noted that classification under sub-heading 1702 90 90 requires the product to contain specified fructose content in the dry stage, and that the department produced no chemical tests to establish that the appellant's syrup met that specification. The decision in cited precedents was applied to hold that mere past classification or lists filed by a party does not substitute for positive evidence by the department. The Tribunal also observed that the proviso to Notification No.67/95-CE applies in particular factual scenarios (use of common Cenvat-credit inputs for both dutiable and exempted final products with compliance of Rule 6), which was not shown to be applicable on the material before it. For these reasons the classification and denial of exemption were not sustained. [Paras 8]

Classification under 1702 90 90 and denial of exemption not established by department; impugned demand cannot be sustained on these grounds

Final Conclusion: The appeals are allowed; the demand of excise duty, interest and penalties in relation to the sugar syrup produced and captively consumed by the appellant for the period 01.04.2007 to 11.09.2007 is set aside for want of evidence of marketability and of required classification/composition; consequential relief, if any, to follow as per law.

Reversal of CENVAT credit on inputs/capital goods written off before being put to use - Applicability of Rule 3(5B) of the Cenvat Credit Rules - Effect of amendment w.e.f. 1.3.2011 introducing 'partially written off' - Entitlement to re credit where items subsequently used in manufacture - Requirement of documentary evidence to substantiate write back/usage - Remand for fresh adjudication where primary evidence was not produced

Applicability of Rule 3(5B) of the Cenvat Credit Rules - Effect of amendment w.e.f. 1.3.2011 introducing 'partially written off' - Entitlement to re credit where items subsequently used in manufacture - Scope and application of Rule 3(5B) in relation to write off of inputs/capital goods and consequent reversal or re credit of CENVAT credit. - HELD THAT: - The Tribunal interpreted Rule 3(5B) to cover situations where the value of inputs or capital goods on which CENVAT credit has been taken is written off before being put to use. Prior to the amendment effective 1.3.2011 the rule applied only where the value was written off fully; the amendment expressly extended liability to cases of partial write off. The rule contains a proviso entitling re credit if the said input or capital goods are subsequently used in manufacture of final products subject to other provisions. Thus, reversal is required only where the goods are written off (fully, and after 1.3.2011, even partially) before being put to use; subsequent actual use permits re credit as provided in the rule. The Tribunal also noted that earlier authority relied upon by the appellant (Ingersoll Rand) concerned different facts and an earlier statutory regime and does not displace the statutory mandate in Rule 3(5B). [Paras 4, 5]

Rule 3(5B) requires reversal where inputs/capital goods are written off before being put to use; the 1.3.2011 amendment brought partially written off items within the scope, and subsequent use permits re credit under the proviso.

Requirement of documentary evidence to substantiate write back/usage - Remand for fresh adjudication where primary evidence was not produced - Whether the appellant had proved that the provision for obsolescence was written back and the items were subsequently used, and the consequence of failure to produce primary documentary evidence. - HELD THAT: - The Tribunal recorded that the core controversy turns on factual verification whether the obsolete/slow moving inventory for which provisions were created was subsequently written back and actually used in manufacture or sold on payment of duty. The appellant had earlier admitted before the Tribunal that no primary evidence was produced before the adjudicating authority. Thereafter the appellant produced only Chartered Accountant certificates and SAP entries before the lower authorities. The Tribunal emphasised that a Chartered Accountant's certificate is not a substitute for primary documentary proof and that the specific remand order earlier issued required production of records showing actual use/write back. In view of the absence of primary documentary evidence before the adjudicating authority, the Tribunal considered it appropriate in the interest of justice to afford the appellant another opportunity to place documentary evidence before the lower authority for fresh adjudication in accordance with principles of natural justice. [Paras 7, 8, 10, 11]

Impugned orders set aside to the extent challenged and the matters remanded to the Commissioner (Appeals) for fresh decision after giving the appellant opportunity to produce primary documentary evidence; all contentions, including on interest, are left open.

Final Conclusion: The Tribunal set aside the impugned appellate orders to the extent challenged and remanded the appeals to the Commissioner (Appeals) for fresh adjudication after affording the appellant a fair opportunity to produce primary documentary evidence regarding write back and subsequent use of the inventory; statutory interpretation of Rule 3(5B) was clarified (full write off pre 1.3.2011; full or partial write off post 1.3.2011; re credit permitted if subsequently used) and all other contentions, including on interest, were left open for reconsideration by the lower authority.

Chargeability of Central Excise duty vis-a -vis declaration/representation to customers - requirement of proof of manufacture within the meaning of Section 2(f) - insufficiency of suspicion as substitute for evidence - treatment of job-work transactions on principal-to-principal basis - set-off/negation of demand by duty-paid purchases - invocation of extended period and imposition of penalty where suppression is not proved - personal penalty on an authorised representative

Chargeability of Central Excise duty vis-a -vis declaration/representation to customers - requirement of proof of manufacture within the meaning of Section 2(f) - insufficiency of suspicion as substitute for evidence - Whether demands of Central Excise duty could be sustained solely on the basis of representations/declarations made by the noticee to its customers without proof that the noticee was a manufacturer. - HELD THAT: - The Tribunal held that the legal controversy was narrow: a noticee cannot be charged with excise duty merely because it represented to customers that it was a manufacturer; the Department must prove that the noticee carried out "manufacture" as defined in Section 2(f). The first show cause notice relied primarily on such representations and on tender stipulations, but contemporaneous material (inventory of factory premises, Chartered Engineer's certificate, test reports, invoices and transport documents) supported the appellants' consistent plea of trading. The authorities had relied on suspicion and declarations while disregarding contrary evidence; such suspicion cannot replace proof. On this basis the Tribunal found the adjudicating authorities' findings unsustainable and set aside demands founded only on the aforesaid representations. [Paras 8, 9, 10, 11]

Demands based solely on declarations/representations that the noticee was a manufacturer could not be sustained; confirmation of duty on that basis set aside.

Co-relatable purchase and sale documents - set-off/negation of demand by duty-paid purchases - Whether the purchase and sale records and evidence of duty-paid purchases negate or reduce the demand of Central Excise duty. - HELD THAT: - On examination of specimen records the Tribunal found that voluminous purchase and sale invoices, challans and related documents demonstrated co-relatable trading transactions. The appellants had produced evidence showing payment of central excise duty on a substantial part of purchases; to that extent no excise demand could survive. The adjudicating authorities had failed to appreciate these documents and therefore erred in confirming the demands. [Paras 13, 15]

Where purchases on which duty was already paid were shown by records, corresponding demand of excise duty could not be sustained.

Treatment of job-work transactions on principal-to-principal basis - insufficiency of evidence of clandestine manufacture through job-workers - Whether the appellant could be made liable to excise duty for job-work activities undertaken by job workers on a principal-to-principal basis and whether evidence established clandestine manufacture through job-workers. - HELD THAT: - The Tribunal accepted that some goods were obtained through job work but found the quantum of such job-work sales small relative to overall trading sales and that the Department had not produced incriminating evidence (undisclosed raw material supply, undisclosed receipt of finished goods, or adverse statements from job-workers) to demonstrate clandestine manufacture. Even if procedural requirements for job work were not strictly followed, liability could not be fastened on the appellant for job-work activities undertaken by job-workers on a principal-to-principal basis without concrete proof. [Paras 12, 13]

No excise liability could be imposed on the appellant for job-work activities carried out by job-workers on a principal-to-principal basis in absence of concrete evidence of clandestine manufacture.

Non-traceability or non-existence of suppliers - requirement of cogent evidence before treating supplier transactions as sham - Whether the Department was justified in disbelieving purchase transactions on the ground that certain suppliers were untraceable or had discontinued business. - HELD THAT: - The Tribunal noted that investigations had covered a broad period and dispute was raised only as to four suppliers. The appellants provided clarifications and payment through banking channels for purchases. The Department's adverse observations that suppliers proved non-existent or that the suppliers' list constituted an afterthought were not supported by cogent evidence; discontinuation of a supplier's business or lapse of municipal enlistment at the time of investigation did not suffice to declare earlier transactions sham. [Paras 13]

Findings disbelieving transactions on the basis of non-traceability of certain suppliers were unjustified and liable to be set aside.

Testing at third party premises - insufficiency of inspection-only findings at factory premises - Whether physical inspection at the appellant's premises and tests conducted at third party laboratories supported the adjudicating authorities' findings of manufacture. - HELD THAT: - The Tribunal observed that only visual/physical inspection took place at the appellants' premises while substantive tests (galvanization, mechanical, slip-load) were conducted by third party laboratories; these test reports and the appellant's explanations were not challenged by the Department. The adjudicating authorities' reliance on inspection and embossing was therefore inadequate to establish manufacturing activity. [Paras 12, 13]

Observations based on mere physical inspection and third party tests, without adverse rebuttal, did not justify upholding findings of manufacture.

Invocation of extended period and imposition of penalty where suppression is not proved - personal penalty on an authorised representative - Whether the extended period and penalties (including personal penalty on the authorised representative) could be invoked where there was no proof of suppression or manufacture. - HELD THAT: - The Tribunal held that because the activities did not amount to manufacture, demands in the normal period were unsustainable and consequently invocation of the extended period could not be justified. In the absence of suppression or concealment proved by the Department, imposition of penalty on the appellant and on the authorised representative could not stand. The Tribunal therefore set aside the penalties and confirmed that extended period was inapplicable. [Paras 14, 15]

Extended period and penalties (including personal penalty on the authorised representative) were not sustainable where manufacture/suppression was not established; personal penalties were set aside.

Final Conclusion: The Tribunal allowed the appeals, set aside the impugned Orders in Original dated 29.02.2012, 21.03.2012, 22.09.2017 and 01.05.2018, held that demands of duty, interest and penalty could not be sustained for the stated periods, and quashed the confirmation of personal penalties against the authorised representative.

Entitlement to amnesty scheme despite prior payment - credit for tax paid prior to assessment - remission of interest and penalty under an amnesty scheme - quashing of attachment for recovery as being without jurisdiction - prohibition of discriminatory denial of scheme benefits contrary to Article 14

Credit for tax paid prior to assessment - entitlement to amnesty scheme despite prior payment - Whether the petitioner, having paid the tax amount prior to the assessment and prior to announcement of the amnesty scheme, was entitled to benefit of the amnesty scheme and remission of interest and penalty. - HELD THAT: - The Court found on the materials that the petitioner deposited the tax amount prior to the assessment proceedings but the Assessing Officer did not give credit for that payment in the assessment order and consequently the assessment recorded a higher tax, interest and penalty. The petitioner had specifically taken this ground in the first appeal and the appellate authority had granted an interim stay considering the payment. The petitioner thereafter applied under the amnesty scheme pointing out the prior payment, but the application was rejected. Applying the reasoning in Safal Developers (paras 10 and 13) - which the Court noted had been left intact by the Supreme Court - the Court held that a scheme provision requiring payment during the operation of the scheme does not exclude applicants who had already paid taxes before the scheme and that denying such applicants the scheme benefit would be arbitrary and discriminatory. On these grounds the respondents were found to have erred in rejecting the petitioner's application for remission of interest and penalty under the scheme where the tax had already been paid prior to assessment and prior to the scheme. [Paras 10, 11, 15, 16]

The petitioner is entitled to benefit under the amnesty scheme; the rejection of the application is quashed insofar as it denies remission of interest and penalty where tax was already paid.

Quashing of attachment for recovery - Whether the bank attachment order made for recovery of the alleged dues, issued without giving effect to the tax payment and without allowing scheme benefit, was liable to be quashed. - HELD THAT: - The Court recorded that the bank attachment dated 20.06.2022 was issued notwithstanding the petitioner's prior payment and the pendency of appeal/stay earlier granted by the appellate authority. As the Court concluded that the petitioner was entitled to the benefit of the amnesty scheme and remission of interest and penalty because the tax had been paid, the consequent attachment - made in aid of recovery of the disputed dues without crediting the payment or granting scheme relief - was held to be without jurisdiction and illegal. The impugned attachment was therefore set aside and the authority was directed to grant the scheme benefit. [Paras 11, 15, 16]

The bank attachment is quashed and set aside; respondents are directed to grant the amnesty scheme benefit and remission, and the attachment is vacated.

Final Conclusion: The petition is allowed: the communication rejecting the petitioner's amnesty application and the bank attachment order are quashed and set aside; respondent No.3 is directed to grant the benefit of the amnesty scheme including remission of interest and penalty to the petitioner.

Validity of legislative amendments enabling incremental extensions of tenure of Director of Enforcement and Director of CBI - Nullification of judicial mandamus by subsequent legislation - Scope and limits of judicial review of legislative action (legislative competence and conformity with Part III rights) - Insulation of investigative agencies through fixed minimum tenure

Validity of legislative amendments enabling incremental extensions of tenure of Director of Enforcement and Director of CBI - Scope and limits of judicial review of legislative action (legislative competence and conformity with Part III rights) - Insulation of investigative agencies through fixed minimum tenure - Central Vigilance Commission (Amendment) Act, 2021, Delhi Special Police Establishment (Amendment) Act, 2021 and Fundamental (Amendment) Rules, 2021 are not unconstitutional and are not liable to be set aside. - HELD THAT: - The Court examined whether the amendments, which permit one-year extensions up to a cumulative maximum period (five years) and the corresponding change to the Fundamental Rules, offended the constitutional limits on legislative power or undermined the rule that Directors of CBI/ED have a minimum tenure to ensure insulation. It applied settled principles that legislation may be struck down only for lack of legislative competence or violation of constitutional (Part III) rights, with a presumption in favour of constitutionality. The amendments were held to leave intact the minimum two-year tenure required by earlier law and to permit extensions only upon recommendation of the statutorily constituted Committees and for reasons recorded in writing. The composition of those Committees and the stringent safeguards for appointment and removal of members (Central Vigilance Commissioner/Vigilance Commissioners and high-level committee for CBI) were held to provide insulation against extraneous pressures. Given these features, and in the absence of any demonstrated violation of legislative competence or constitutional provision, the Court rejected the challenge to the Amendments and the Fundamental (Amendment) Rules, finding that the impugned statutory provisions clarified and regulated-rather than nullified-the earlier framework. [Paras 91, 92, 93, 94, 98]

Challenge to Central Vigilance Commission (Amendment) Act, 2021, Delhi Special Police Establishment (Amendment) Act, 2021 and Fundamental (Amendment) Rules, 2021 is rejected.

Nullification of judicial mandamus by subsequent legislation - Validity of executive orders granting extensions in breach of Court's direction - Office Orders dated 17th November 2021 and 17th November 2022 extending the tenure of the respondent (Sanjay Kumar Mishra) for one year each are illegal and set aside, but the respondent is permitted to continue in office until 31 July 2023. - HELD THAT: - The Court recalled its earlier order in Common Cause (2021) which expressly directed that no further extension be granted to the second respondent; the Union of India and the respondent were parties to that proceeding and thus bound by the mandamus. While legislation can, in certain circumstances, change the legal basis on which a judgment was rendered, the Court distinguished that power from an impermissible attempt to nullify an individual inter partes mandamus. The Court found that neither the subsequent statutory amendments nor executive action could lawfully be used to circumvent the specific judicial mandamus issued in Common Cause (2021). Consequently, the impugned Office Orders purporting to grant further extension were held illegal. Taking note of public interest concerns (including FATF review) and administrative transition, the Court granted a limited prospective accommodation permitting the respondent to remain in office until 31 July 2023 to ensure a smooth handover. [Paras 114, 115, 116, 119, 121]

Orders dated 17th November 2021 and 17th November 2022 are illegal and set aside; respondent allowed to continue until 31 July 2023.

Final Conclusion: The challenges to the statutory amendments and to the Fundamental (Amendment) Rules fail and are dismissed; however, the specific executive orders dated 17 November 2021 and 17 November 2022 extending the tenure of the respondent are declared illegal and set aside, with a limited directive permitting the respondent to remain in office until 31 July 2023 to facilitate an orderly transition.