TaxTMI Updates e-Newsletter
Jul 16,2020

Classification of leasing/rental services involving non-residential property - reverse charge mechanism for renting/letting of immovable property supplied by a government authority - time of supply under reverse charge (Section 13(3) CGST Act) - exemption of upfront amount for long-term lease under Notification No. 04/2019 and Notification No.12/2017 - scope and applicability conditions of entries relating to long-term lease of land (Serial Nos. 41 and 41B of Notification No.12/2017 as amended)

Exemption of long-term lease from GST under Notification No.04/2019 / Notification No.12/2017 - classification of RLDA's supply as renting/leasing of immovable property - Whether the 99 year lease between the applicant and RLDA is exempt from GST under Notification No.04/2019 or Notification No.12/2017. - HELD THAT: - The Authority held that the service furnished by RLDA is a leasing/rental service involving immovable property and is classifiable under HSN 997212 attracting GST. RLDA, being a statutory authority of the Central Government, supplies renting/letting services to a registered recipient and therefore the tax on such supply falls on the recipient under the reverse charge mechanism. The entries relied upon by the applicant (Serial Nos. 41 and 41B of Notification No.12/2017 as amended) do not apply: Serial No.41 is confined to upfront amounts for long term lease of industrial plots or plots for development of infrastructure for financial business meeting specified ownership and recipient conditions which are not satisfied for the residential development here; Serial No.41B (amended by Notification No.04/2019) applies only to upfront amounts payable on or after 01.04.2019 and, in any event, the time of supply in this reverse charge case falls in February 2019 when the payment was made. For these reasons the lease is not exempted from GST under the invoked notifications. [Paras 11, 12, 13]

Lease agreement for 99 years is not exempt from GST under Notification No.04/2019 or Notification No.12/2017.

Characterisation of payment as lease premium versus security deposit - time of supply and point of taxation for reverse charge payments - Whether the amount of Rs. 15,86,57,105 transferred by the applicant as part of the tender/lease process is a refundable security deposit exempt from GST or an installment of lease premium liable to GST. - HELD THAT: - The Authority found the applicant's factual contention that the payment was a refundable security deposit to be untenable. The Letter of Acceptance required formation of an SPV and payment of the first installment of lease premium; bid security amounts were separately identified and deposited earlier. Consequently, the sum deposited in February 2019 constituted the first installment of lease premium paid after LoA and not merely a security deposit. Under the reverse charge rules the recipient (applicant) is liable to discharge GST on such lease consideration. The payment therefore attracts GST and is not exempt as a refundable deposit. [Paras 8, 9]

The amount paid in pursuance to the tender/lease agreement is an installment of lease premium and is not exempt from GST as a refundable security deposit.

Applicability of exemption notifications with reference to date of payment/time of supply - retroactivity and effective date of Notification No.04/2019 - Whether the amount deposited in February 2019 is exempt under Notification No.04/2019 or Notification No.12/2017. - HELD THAT: - The Authority examined temporal applicability and time of supply rules. Notification No.04/2019 (amending Serial No.41B) applies to upfront amounts payable on or after 01.04.2019. In this case the first installment was paid in February 2019 and, under Section 13(3) governing reverse charge, the time of supply (and therefore point at which tax liability arises) is February 2019. As the payment and the corresponding time of supply pre date the operative date of the exemption notification, the exemption is not available. Further, the alternative entry relied upon (Serial No.41) was also found inapplicable on its substantive conditions. [Paras 9, 13]

The amount deposited during February 2019 is not exempt under Notification No.04/2019 or Notification No.12/2017.

Final Conclusion: The Authority ruled that (i) the 99 year lease is not exempt from GST under the cited notifications; (ii) the amount paid in pursuance of the tender/lease is an installment of lease premium and not a refundable security deposit, and (iii) the payment made in February 2019 is not covered by the exemption notifications relied upon, therefore GST liability arises on the applicant under reverse charge.

Composite supply - principal supply - supplied in conjunction with - naturally bundled - classification of supply as goods or services - eligibility for concessional import benefits under Notification No. 50/2017-Customs subject to Essentiality Certificate

Composite supply - supplied in conjunction with - naturally bundled - principal supply - classification of supply as goods or services - Supply of mud engineering services together with supply of imported mud chemicals and additives provided on consumption basis under the Contract qualifies as composite supply. - HELD THAT: - The Authority examined the Contract terms and the statutory definition of composite supply, which requires supplies to be both naturally bundled and supplied in conjunction with each other, with one component being the principal supply. Although the Contract contemplates an integrated package from the recipient's perspective, the detailed clauses (including separate mobilization/demobilization provisions, separate consideration schedules, provisioning/stocking and independent procurement/delivery/replacement rights, and ability to subcontract or replace personnel) demonstrate that the various components (technical personnel, technical equipment and mud chemicals/additives) are separately available and can be procured, delivered and paid for independently. Because the second statutory requirement - that the goods and services be supplied in conjunction with each other - is not satisfied, the supplies do not form a composite supply. Consequently, the imported mud chemicals and additives are to be classified and taxed as supplies of goods under their respective tariff/HSN entries, and the other components are to be classified independently as services or goods as applicable. [Paras 9]

No; the combined supplies under the Contract do not qualify as a composite supply and the components must be classified independently as goods or services.

Classification of supply as goods or services - eligibility for concessional import benefits under Notification No. 50/2017-Customs subject to Essentiality Certificate - Whether imported mud chemicals and additives supplied on consumption basis qualify for concessional treatment under Notification No. 50/2017-Customs against an Essentiality Certificate. - HELD THAT: - Having held that the mud chemicals and additives are supplies of goods, the Authority addressed entitlement to concessional treatment under the referenced Customs Notification. The benefit is available at the time of importation for goods that satisfy the description, tariff item, list and conditions specified in the Notification and upon production of the requisite Essentiality Certificate issued by the competent authority; grant of the benefit is subject to the satisfaction of the Proper Officer. The Authority therefore confined the availability of the concessional clearance to importation-stage compliance with the Notification's terms and the Proper Officer's satisfaction. [Paras 9]

The concessional benefit under Notification No. 50/2017-Customs is available to such imported goods subject to fulfilment of the Notification's description, tariff/list conditions, production of the Essentiality Certificate and the satisfaction of the Proper Officer.

Final Conclusion: The Authority ruled that the Contract's supplies do not constitute a composite supply; components (mud chemicals/additives, personnel, equipment) are to be classified and taxed independently, and any concessional import benefit for the chemicals/additives under Notification No. 50/2017-Customs is available only at importation upon compliance with the Notification's conditions and the Proper Officer's satisfaction.

Scope of supply - supply of goods - supply of services - Section 7 (scope of supply) - Schedule II - Entry 5(e) (agreeing to tolerate an act or situation) - composite supply - works contract - HSN classification

Scope of supply - Section 7 (scope of supply) - Schedule III (activities neither supply of goods nor services) - Whether the reimbursement received towards Lost in Hole/Damage Beyond Repair equipment (LIH equipment) constitutes a 'supply' liable to GST. - HELD THAT: - The Authority examined the contractual scheme and statutory definitions. The activities sought to be ruled upon do not appear in Schedule III and therefore fall within the inclusive definition of 'supply' under Section 7(1) when made for a consideration in the course or furtherance of business. Clause 31 of the contract creates an agreed mechanism for reimbursement on loss or damage of tangible movable equipment, with specified valuation methodology. On these facts the reimbursement is a transaction for consideration in the course of business and is therefore a 'supply' under Section 7. The Authority thus ruled affirmatively that the reimbursement is taxable as a supply. [Paras 7]

Reimbursement towards LIH equipment is a 'supply' and is liable to GST.

Supply of goods - works contract - Schedule II - Entry 5(e) (agreeing to tolerate an act or situation) - composite supply - HSN classification - Whether the reimbursement is to be classified as a supply of goods or as a supply of services (including under Entry 5(e) of Schedule II or as part of a works contract/composite supply), and the consequent classification approach for GST levy. - HELD THAT: - The Authority evaluated the nature of the reimbursed item and the contractual arrangement. The applicant itself admitted there is no transfer of title contemplated when LIH occurs; the contract prescribes reimbursement calculated on the depreciated original F.O.B. price for tangible movable equipment. The contingent, accidental character of LIH distinguishes it from routine elements of the bundled services and from liquidated damages. On the basis that the payments relate to tangible movable goods and are determined by reference to the goods' original price less depreciation, the Authority found the transaction to be classifiable as a supply of goods rather than a service under Entry 5(e) or as part of a works contract/composite supply. Consequently, classification and taxability shall follow the HSN classification and applicable rules for supply of goods. [Paras 7]

Reimbursement received towards LIH equipment is classifiable as a supply of goods; classification to be determined as per HSN and applicable classification rules and GST provisions for goods.

Final Conclusion: The Authority ruled that reimbursements received for Lost in Hole/Damage Beyond Repair equipment constitute a taxable 'supply' and are to be treated as a supply of goods; their classification and applicable GST treatment shall follow the HSN classification and the GST chargeability provisions applicable to supply of goods.

Pure services - Works contract - Exemption under Notification No. 12/2017 - pure services supplied to Governmental authority in relation to functions entrusted to Panchayat under Article 243G - Governmental authority / Local Authority - Article 243G - Panchayat functions (Eleventh Schedule: roads)

Pure services - Works contract - Project Management Consultancy services rendered by the applicant do not constitute works contract or composite supplies involving supply of goods and are classifiable as pure services. - HELD THAT: - The Authority examined the contract, scope of work and invoices and found no component of transfer of property in goods; the scope comprises consultancy activities performed by professionals (review of DPRs, project management and monitoring, construction supervision and contract management, QAC, environmental safeguards and training). The invoices show reimbursement of remuneration and no supply of goods. In view of the statutory definition of "works contract" and the absence of any transfer of property in goods in the execution of the contract, the services fall within the category of supply of services without involving supply of goods and therefore constitute "pure services."

Services are pure services (not works contract/composite supplies).

Governmental authority / Local Authority - Exemption under Notification No. 12/2017 - pure services supplied to Governmental authority in relation to functions entrusted to Panchayat under Article 243G - Article 243G - Panchayat functions (Eleventh Schedule: roads) - The recipient, Andhra Pradesh Panchayat Raj Engineering Department (APPRED), qualifies as a local authority / governmental authority and the services rendered relate to a function entrusted to Panchayats under Article 243G (roads), thereby meeting the conditions of Sl. No. 3 of Notification No. 12/2017. - HELD THAT: - The Authority noted that APPRED is constituted by the State and functions under the Panchayat Raj & Rural Development Department; it is the implementing agency for the Andhra Pradesh Rural Roads Connectivity Project. The Eleventh Schedule to the Constitution expressly lists 'roads, culverts, bridges, ferries, waterways and other means of communication' within the functions of Panchayats. The PMC services relate directly to construction and maintenance of rural roads and associated project implementation, hence are in relation to a function entrusted to Panchayats under Article 243G. As the services are provided to a governmental/local authority and are in relation to an entrusted Panchayat function, the conditions of Sl. No. 3 (Chapter 99) of Notification No. 12/2017 are satisfied.

APPRED qualifies as a governmental/local authority and the services relate to Panchayat functions (roads) for purposes of the exemption entry.

Exemption under Notification No. 12/2017 - pure services supplied to Governmental authority in relation to functions entrusted to Panchayat under Article 243G - Project Management Consultancy services supplied by the applicant to APPRED are exempt from central and State GST under Sl. No. 3 (Chapter 99) of Notification No. 12/2017 (as amended). - HELD THAT: - Having concluded that the services are "pure services," that APPRED is a governmental/local authority, and that the services relate to a function entrusted to Panchayats under Article 243G (roads), the Authority applied Sl. No. 3 of Notification No. 12/2017 and its amendments to hold that the services fall within the exempted description. The Authority thus ruled that the statutory conditions for exemption are cumulatively fulfilled and the exemption applies to the intra State supply of the services in question.

The PMC services are eligible for exemption under Sl. No. 3 (Chapter 99) of Notification No. 12/2017 (as amended).

Final Conclusion: The Advance Ruling holds that the Project Management Consultancy services provided by the applicant to Andhra Pradesh Panchayat Raj Engineering Department for the Andhra Pradesh Rural Road Project are pure services, are supplied to a governmental/local authority in relation to a Panchayat function (roads) under Article 243G, and are therefore eligible for exemption under Sl. No. 3 (Chapter 99) of Notification No. 12/2017 (as amended).

Exemption of vocational training services - educational institution - approved vocational education course - Entry No.66 of Notification No.12/2017 (Central Tax (Rate)) - Entry No.64 of Notification No.12/2017 (Central Tax (Rate))

Exemption of vocational training services - approved vocational education course - Entry No.66 of Notification No.12/2017 (Central Tax (Rate)) - educational institution - Services provided under vocational training courses recognised by the National Council for Vocational Training (NCVT) and offered by the applicant whether exempt under the Notifications defining educational institution or under the entries relied upon. - HELD THAT: - The Authority recorded that the applicant is an NGO registered under Section 12A of the Income Tax Act and provides both formal trades affiliated/recognised by NCVT and informal trade courses. Notification No.12/2017 (Central Tax (Rate)) defines an "educational institution" to include "education as a part of an approved vocational education course" and further defines "approved vocational education course" to include courses run by institutes/centres affiliated to the National Council for Vocational Training. The formal trades offered by the applicant are affiliated to NCVT and therefore fall within the definition of approved vocational education courses. Consequently, such services fall within the scope of Entry No.66 of Notification No.12/2017 which contemplates educational institutions and related services and provides NIL rate treatment for approved vocational education courses. The Authority also examined Entry No.64 relied upon by the applicant and observed that it pertains to services by Central/State/Union territory/local authorities relating to assignment of rights to use natural resources and is not attracted to the applicant, which is not a Government or local authority. Applying these definitional and classificatory provisions, the Authority concluded that the NCVT-recognised vocational training services provided by the applicant are eligible for exemption under Entry No.66 (a) of Notification No.12/2017 (Central Tax (Rate)).

NCVT-recognised vocational training services provided by the applicant are exempt under Entry No.66 (a) of Notification No.12/2017 (Central Tax (Rate)); Entry No.64 is not applicable.

Final Conclusion: The Advance Ruling holds that services provided under vocational training courses recognised by NCVT, as offered by the applicant, are exempt under Entry No.66 (a) of Notification No.12/2017 (Central Tax (Rate)); the Entry No.64 relied upon by the applicant is inapplicable.

Education as a part of a curriculum for obtaining a qualification recognized by law - educational institution - exemption under Notification No.12/2017-Central Tax (Rate) entry No.66 - exemption for accommodation under entry No.14 - supply of food exemption to educational institutions - mandatory nature of training for award of statutory qualification - literal construction of fiscal statute

Education as a part of a curriculum for obtaining a qualification recognized by law - educational institution - exemption under Notification No.12/2017-Central Tax (Rate) entry No.66 - mandatory nature of training for award of statutory qualification - Whether the applicant's coaching services for CA, CMA and Intermediate courses qualify as 'education as a part of a curriculum for obtaining a qualification recognized by law' and hence are exempt under Entry No.66(a) of Notification No.12/2017-CT (Rate) dated 28.06.2017. - HELD THAT: - The Authority examined the definition of 'educational institution' and the three limbs required for exemption: (i) service related to education; (ii) education provided as part of a curriculum; and (iii) education provided for obtaining a qualification recognized by law. The Authority found that the applicant is not accredited, affiliated, authorized or otherwise integrated with the statutory bodies (ICAI/ICWAI) which themselves conduct training through their regional councils/branches and may issue course completion certificates. The applicant offers optional, varied coaching programmes (regular, crash, revision etc.) from which a student may freely discontinue and which are not mandatory parts of the statutory qualification pathway. The coaching therefore operates as facilitation of examination preparation-comparable to coaching for competitive/entrance exams-and does not ensure or itself lead to grant of the statutory qualifications. In the case of statutory qualifications such as Chartered Accountant or Cost Management Accountant, award of the recognized qualification depends on prescribed eligibility, examinations and mandatory practical training governed by the statutory institutes; mere coaching by a private centre does not satisfy those requirements. Applying the statutory definition and construing the exemption literally, the Authority held that the applicant's services do not fall within clause (ii) of the definition and hence do not attract Entry No.66(a) exemption.

The applicant is not eligible for exemption under Entry No.66(a) of Notification No.12/2017-CT(Rate) dated 28.06.2017.

Exemption for accommodation under entry No.14 - educational institution - supply of food exemption to educational institutions - Whether charges collected by the applicant for providing accommodation to students are exempt under Entry No.14 of Notification No.12/2017-CT (Rate) dated 28.06.2017 read with the relevant circulars. - HELD THAT: - Entry No.14 grants exemption for specified accommodation supplied by educational institutions subject to conditions. Because the Authority concluded that the applicant does not qualify as an 'educational institution' for the purposes of the exemption (see the determinative finding on the primary issue), the ancillary exemption for accommodation cannot apply. The Authority therefore did not apply the accommodation threshold or circular clarifications in favour of the applicant once the institution-level eligibility was negatived.

The applicant is not eligible for exemption under Entry No.14 of Notification No.12/2017-CT(Rate) dated 28.06.2017.

Supply of food exemption to educational institutions - exemption under Notification No.12/2017-Central Tax (Rate) entry No.66 - educational institution - Whether charges collected by the applicant for supplying food (catering) to students are exempt under Entry No.66(a) of Notification No.12/2017-CT (Rate) dated 28.06.2017. - HELD THAT: - Notification entry exempting catering by an educational institution applies only where the supplier qualifies as an 'educational institution' within the meaning of the Notification. Having held that the applicant does not meet the statutory definition-because its coaching does not form a mandatory part of a curriculum leading to a statutory qualification and the applicant lacks affiliation/recognition by the statutory bodies-the Authority determined that the catering exemption is not available. The circular clarifying exemption for food supplied by educational institutions is therefore inapplicable to the applicant.

The applicant is not eligible for exemption under Entry No.66(a) of Notification No.12/2017-CT(Rate) dated 28.06.2017 in respect of catering services.

Final Conclusion: The Advance Ruling holds that the applicant's coaching/training services for CA, CMA and Intermediate courses, and the accommodation and catering services supplied in that context, do not qualify for the educational exemptions in Notification No.12/2017-Central Tax (Rate) (Entries No.66 and No.14). The applicant is therefore not eligible for the claimed GST exemptions.

Distinct taxable events of import and post import supply - import completed when goods become part of the mass of goods within the country - goods sent on approval / sale on return - invoice timing under Section 31(7) - conditional exemption under notification subject to production of Directorate General of Hydrocarbons certificate - levy of IGST on import under Customs Tariff and separate levy of GST on subsequent domestic supply

Distinct taxable events of import and post import supply - import completed when goods become part of the mass of goods within the country - Whether the import of drill bits for supply to ONGC on consumption basis involves two supplies - (i) import into India and (ii) indigenous movement / supply from port of import to ONGC's location. - HELD THAT: - The Authority found as an admitted fact that the applicant acts as importer and thereafter undertakes delivery to ONGC on consignment (sale on approval) and is responsible for transportation and insurance until delivery. Reliance was placed on statutory definitions and precedents to conclude that import is a distinct event which is completed when goods become part of the mass of goods within India; until customs clearance the supply is treated as inter state/import and thereafter separate domestic provisions apply. The post import activity of transporting, making goods available at ONGC's location and invoicing on consumption falls within the inclusive definition of "supply" and is taxable under the CGST/IGST framework unless exempted by a notification. Therefore, the import and the subsequent indigenous movement/supply are separate supplies. [Paras 6, 8]

Affirmative - the transaction involves two supplies: import into India and separate indigenous movement/supply to ONGC's location.

Conditional exemption under notification subject to production of Directorate General of Hydrocarbons certificate - levy of IGST on import under Customs Tariff and separate levy of GST on subsequent domestic supply - goods sent on approval / sale on return - invoice timing under Section 31(7) - If two supplies are involved, whether separate Essentiality Certificates (EC) are required - one for concessional customs duty on import and another for concessional/reduced central tax rate for the domestic movement/supply. - HELD THAT: - The Authority examined the terms of the Customs Notification and the Central Tax (Rate) Notification and noted both grants of concessional treatment are conditional. The Customs concessional rate (serial no. 404 of Notification No. 50/2017 Customs) applies to the importer on production of a certificate from an authorized officer of the Directorate General of Hydrocarbons to the jurisdictional Customs officer. The concessional central tax treatment (Notification No. 3/2017 Central Tax (Rate)) similarly requires production of an EC to the jurisdictional Central/State Tax officer at the time of outward supply by the supplier. Since import and the subsequent domestic movement/supply are distinct taxable events, the conditions attached to each notification must be separately satisfied and the appropriate certificate produced to the respective authority to claim the respective concession. [Paras 6, 7, 8]

Separate fulfilment of conditions and production of certificates is required - the Customs EC is for the importer at import and the DG Hydrocarbons certificate required under the Central Tax notification must be produced to the jurisdictional Central/State Tax officer for the domestic supply.

Final Conclusion: The Authority ruled that the import of drill bits and the subsequent indigenous movement/supply to ONGC are two distinct taxable supplies, and accordingly the concessional benefits under the Customs notification and the Central Tax (Rate) notification are subject to their separate, conditional requirements - each concession must be availed by producing the prescribed certificate to the respective jurisdictional authority.

Export of services - intermediary services - place of supply of services - location of supplier - inter State supply and IGST liability

Export of services - payment in convertible foreign exchange - Classification of the applicant's marketing and consultancy services as export of service - HELD THAT: - The Authority examined whether the applicant's services satisfy all conditions of the definition of export of services. It was found that although the supplier is located in India and the recipient is located outside India and payment is received in convertible foreign exchange, the place of supply criterion is not satisfied. The applicant performs the marketing and consultancy functions from India and the services are rendered and carried out in India. Mere receipt of payment in convertible foreign exchange does not, by itself, qualify the transaction as an export of services where the place of supply is in India.

The services are not export of services.

Intermediary services - place of supply of services - location of supplier - inter State supply and IGST liability - Whether the applicant's services fall within the definition of intermediary and the consequent place of supply and taxability - HELD THAT: - On the facts, the applicant acts as an agent/consultant who facilitates the sale of goods of the overseas principal to customers in the Territory and does not supply the goods on its own account. This satisfies the definition of intermediary. For intermediary services, the place of supply is the location of the supplier, which in this case is in India. Consequently, such services are not treated as export; they are treated as a supply in the taxable territory and, being supplies where the supplier is located in India and the place of supply is in India but the recipient is outside India, they fall under the provisions treating such supplies as inter State supply, attracting IGST in terms of the statutory scheme.

The services qualify as intermediary services; place of supply is the applicant's location in India and the transactions attract IGST as inter State supplies.

Final Conclusion: The Authority ruled that the marketing and consultancy services rendered by the applicant are not export of services but constitute intermediary services; the place of supply is the location of the supplier in India and the transactions are liable to IGST.

Supply - Supply of services - Transfer of a going concern - Transfer of business assets - Services by way of transfer of a going concern - nil rated under Notification No.12/2017 (Chapter 99, SI.No.2) - Availability of input tax credit in special circumstances under Section 18(3) - Transfer of unutilised input tax credit by filing FORM GST ITC-02

Supply - Supply of services - Transfer of a going concern - Whether the transaction of transferring the Andhra Pradesh unit as an ongoing concern to the Karnataka unit amounts to a supply of goods, supply of services or supply of goods and services. - HELD THAT: - Although the activity is a one time transfer made for consideration and Section 7(1)(a) brings within the scope of 'supply' all forms of transfer for consideration, Schedule II(4)(c) treats transfer of goods forming part of business assets as supply of goods except where the business is transferred as a going concern. Because the transaction involves transfer of the business in its entirety (a going concern) along with capital assets, it is excluded from being characterised as a supply of goods under the Schedule. The definition of 'services' as 'anything other than goods' therefore brings a transfer of a going concern within the category of services. Applying these provisions to the facts asserted by the applicant, the Authority concluded that the transaction constitutes a supply of services.

The transfer is a supply of services.

Transfer of a going concern - Services by way of transfer of a going concern - nil rated under Notification No.12/2017 (Chapter 99, SI.No.2) - Whether the transaction falls within SI.No.2 of Notification No.12/2017 Central Tax (Rate) dated 28.6.2017 and attracts the nil rate provided thereunder. - HELD THAT: - Notification No.12/2017 (Chapter 99, SI.No.2) explicitly describes 'services by way of transfer of a going concern, as a whole or an independent part thereof' and provides nil rate treatment. Having held that the transfer is a supply of services and that it is a transfer of a going concern, the Authority applied the notification's description to the transaction and concluded that the transaction is covered by SI.No.2 of the Notification and is nil rated.

The transaction is covered by SI.No.2 of Notification No.12/2017 and is nil rated.

Availability of input tax credit in special circumstances under Section 18(3) - Transfer of unutilised input tax credit by filing FORM GST ITC-02 - Transfer of credit on sale, merger, de merger, amalgamation, lease or transfer of business (Rule 41) - Whether the applicant can file FORM GST ITC 02 and transfer unutilised input tax credit from the Vizianagaram (Andhra Pradesh) unit to the Bengaluru (Karnataka) unit. - HELD THAT: - Section 18(3) allows transfer of input tax credit where there is change in the constitution of a registered person on account of sale or transfer of business with specific provision for transfer of liabilities. Rule 41 prescribes the procedure: the transferor must furnish details in FORM GST ITC 02 and a certificate from a practising chartered accountant or cost accountant certifying that the transfer has provision for transfer of liabilities; the transferee must accept the details on the common portal for the credits to be credited to its electronic ledger; and the inputs and capital goods so transferred must be accounted for by the transferee. Applying these provisions to the facts asserted by the applicant, the Authority found that unutilised input tax credit lying in the transferor's electronic credit ledger can be transferred to the transferee by filing FORM GST ITC 02 and following the prescribed procedure.

The applicant can file FORM GST ITC 02 and transfer the unutilised input tax credit to the Bengaluru unit in accordance with Section 18(3) and Rule 41.

Final Conclusion: The Authority ruled that the transfer of the Andhra Pradesh unit as a going concern to the Karnataka unit is a supply of services, is covered by SI.No.2 of Notification No.12/2017 and is nil rated, and that the transferor may transfer unutilised input tax credit to the transferee by filing FORM GST ITC 02 and complying with the requirements of Section 18(3) and Rule 41.

Classification of services - rental services of water vessels including tugboats - time charter of vessels for transport of goods - leasing or rental services concerning machinery and equipment - Service Accounting Code 996602 - Service Accounting Code 997319 - explanatory notes to service classification - tugboat is a vessel and not machinery - applicability of concessional 5% GST rate

Rental services of water vessels including tugboats - Service Accounting Code 996602 - leasing or rental services concerning machinery and equipment - Service Accounting Code 997319 - time charter of vessels for transport of goods - explanatory notes to service classification - tugboat is a vessel and not machinery - applicability of concessional 5% GST rate - Whether the Tug Jupiter let out on charter is classifiable under Heading 9966 / SAC 996602 (time charter of vessels for transport of goods) or under SAC 997319 (leasing/rental of machinery) and the rate of IGST applicable. - HELD THAT: - The Authority examined the competing entries and the explanatory notes. The explanatory note for SAC 996602 expressly includes rental services of tugboats among self propelled freight vessels. SAC 997319 covers leasing or rental of machinery and equipment such as lifting and handling equipment used as capital goods by industry. Reliance was placed on authority holding that tugs and barges are not machinery, equipment or tools but are vessels. Applying these principles, the services of the Tug Jupiter furnished on time charter for operations connected with offshore activity fall within the description of rental/time charter of water vessels under Heading 9966/SAC 996602 rather than within leasing of machinery under SAC 997319. Consequently, the concessional rate entry applicable to time charter of vessels for transport of goods governs the classification and tax treatment.

The Tug Jupiter is classifiable under Sl. No. 10 of Heading 9966 (SAC 996602) as time charter of a vessel for transport of goods and attracts the concessional GST rate of 5%, subject to the conditions specified in the notification.

Final Conclusion: Advance Ruling: Tug Jupiter let out on charter is to be classified as rental/time charter of a water vessel under Heading 9966 (SAC 996602) and is liable to GST at 5% as per the relevant notification, subject to fulfillment of the notification's conditions.

Entitlement to make copies of seized documents - Section 67(5) of the Central Goods and Services Tax Act, 2017 - Exhaustion of statutory remedy - Prematurity of challenge where remedy not availed - Authority's duty to permit copying subject to investigation safeguard

Entitlement to make copies of seized documents - Section 67(5) of the Central Goods and Services Tax Act, 2017 - Petitioner's right to make copies of documents seized by the tax authority and the remedy under Section 67(5) of the CGST Act - HELD THAT: - The Court accepted that subsection (5) of Section 67 entitles the person from whose custody documents are seized to make copies or take extracts in the presence of an authorised officer, except where doing so would, in the opinion of the proper officer, prejudicially affect the investigation. The petitioner had not availed the procedural mechanism provided by that provision before approaching the Court. In view of the statutory entitlement, the Court directed that, if the petitioner takes steps in terms of subsection (5), respondent no. 3 must allow the petitioner to make copies of the seized documents by 13th July, 2020, subject to compliance with statutory formalities and the protective exception for the investigation.

Petitioner may avail Section 67(5) remedy; respondent no. 3 to permit making copies of seized documents by 13th July, 2020, subject to compliance and investigation safeguard.

Exhaustion of statutory remedy - Prematurity of challenge where remedy not availed - Maintainability of the writ petition/appeal in the absence of exhaustion of the statutory procedure and without a fixed hearing date - HELD THAT: - The Court noted submissions that no hearing date had been fixed and that the petitioner had not pursued the statutory procedure before respondent no. 3 for copying the seized documents. The Court found no ambiguity, illegality or infirmity in the impugned order and observed that the petitioner had not exhausted the remedy available under Section 67(5) before seeking judicial relief. Rather than setting aside the impugned order, the Court disposed of the appeal with directions permitting the petitioner to follow the statutory process and obtain copies, thereby treating the challenge as premature to the extent the statutory remedy remained unexhausted.

No infirmity found in the impugned order; appeal disposed with directions to avail statutory remedy rather than immediate interference.

Final Conclusion: The Court found that Section 67(5) CGST Act provides the petitioner a right to make copies of seized documents but the petitioner had not availed that remedy; the Court therefore declined to set aside the impugned order, directed the petitioner to follow subsection (5) and directed respondent no. 3 to permit copying by 13th July, 2020 subject to statutory formalities and investigation safeguards, and disposed of the appeal.

Bail under Section 439 Cr.P.C. - grant of bail in economic offences involving wrongful claim of input tax credit - offences under the Central Goods and Services Act, 2017 involving fake input tax credit claims - comparative treatment of co-accused granted bail - incorporation of shell/fake firms for claiming input tax credit

Bail under Section 439 Cr.P.C. - grant of bail in economic offences involving wrongful claim of input tax credit - comparative treatment of co-accused granted bail - Bail application of the accused-petitioner in prosecution for offences under the GST enactment involving alleged fabrication of firms and wrongful input tax credit claims was allowed. - HELD THAT: - The Court considered the prosecution case that the petitioner, a Chartered Accountant, was instrumental in incorporation of fake firms to facilitate wrongful input tax credit claims. Counsel for the petitioner placed reliance on the fact that co-accused (named Vijay and Kapil) who were similarly implicated and whose firms had large input tax credit claims had earlier been enlarged on bail by a coordinate Bench. The petitioner also pointed to reductions in the quantum of alleged input tax credit presently attributed to certain firms and deposits made which lowered the claimed amount. Having considered the contentions of both sides, the Court found it proper to grant bail. The order releases the accused on furnishing a personal bond and two sureties, with the usual stipulation to appear on all subsequent dates and when called upon by the trial Court or any Court to which the matter may be transferred. [Paras 7, 8]

Bail allowed on furnishing a personal bond of Rs. 1,00,000 and two sureties of Rs. 50,000 each, with conditions to attend the trial Court and any transferee Court as required.

Final Conclusion: Bail application allowed; accused directed to be released on the stipulated bond and sureties subject to attendance conditions.

Exercise of inherent powers under Section 482 Cr.P.C. - direction for release on bail - personal bond - parity with co-accused - condition of non-misuse and cooperation with investigation - authenticity of court order on official website

Direction for release on bail - personal bond - parity with co-accused - Applicants Mohd. Shamshad and Sajjad are entitled to be released on bail in Case Crime No. 30 of 2020 on furnishing personal bond to the satisfaction of the jail authorities. - HELD THAT: - The High Court, exercising its inherent jurisdiction under Section 482 Cr.P.C., directed release of the applicants on bail because the co-accused in the same case had already been released on bail by this Court on comparable terms and the State did not dispute that fact. The court noted that the learned Magistrate had delayed implementation by ordering verification of sureties, and thus, in view of parity with the co-accused and absence of opposition from the State, ordered that the applicants be released on furnishing a personal bond to the satisfaction of the jail authorities where they are lodged. The order further prescribed the usual conditions that the liberty granted by bail shall not be misused and that the applicants shall cooperate with the police/investigating agency/trial.

Bail granted to the applicants on their furnishing personal bonds to the satisfaction of the jail authorities; usual conditions imposed.

Authenticity of court order on official website - condition of non-misuse and cooperation with investigation - The High Court declared that the order and the bail order available on the official website shall be taken as authentic and directed the Government Advocate to inform the district police authorities for necessary steps. - HELD THAT: - To ensure effective execution of the bail direction, the court provided that the order and the bail order as available on the High Court's official website would be treated as authentic. The court also directed the Office of the Government Advocate to promptly notify the S.P./S.S.P. of the district so that the jail authorities are informed and the orders may be implemented. The court imposed the condition that the applicants shall not misuse the liberty granted and shall cooperate with the investigative and trial processes.

Order declared authentic as available on the High Court website; Government Advocate to inform district police; conditions of bail reiterated.

Final Conclusion: Application under Section 482 Cr.P.C. disposed of by directing release of the applicants on bail upon furnishing personal bonds to the satisfaction of the jail authorities, subject to conditions of non-misuse and cooperation; court order declared authentic and police authorities to be notified.

Commensurate reduction in prices - benefit of reduction in rate of tax - denial of input tax credit (ITC) - Section 171 of the CGST Act, 2017 - methodology for computation of profiteering - deposit in Consumer Welfare Fund - continuing contravention

Commensurate reduction in prices - benefit of reduction in rate of tax - Section 171 of the CGST Act, 2017 - Respondent liable for not passing on commensurate benefit of GST rate reduction to recipients and thereby violating Section 171(1) of the CGST Act, 2017. - HELD THAT: - The Authority found that GST on restaurant services was reduced from 18% to 5% w.e.f. 15.11.2017 without benefit of ITC and that the statutory obligation under Section 171(1) required passing that benefit to each recipient by way of commensurate reduction in prices. Comparison of pre-rate-reduction average selling prices (derived from transaction values) with actual post-rate-reduction base prices showed that for 152 items the Respondent increased base prices by more than the percentage equivalent of ITC denial (computed as 9.19%), resulting in higher cum-tax prices to consumers despite the rate cut. The Authority rejected Respondent's contentions that discounts, promotional schemes, cost increases (royalty, delivery), MRP items or post-change commercial price revisions absolved him, holding that such factors did not permit appropriation of the tax benefit and that benefits must be passed on each supply. Consequently, the Respondent was held to have resorted to profiteering in contravention of Section 171(1). [Paras 24, 28, 29, 33, 35]

Violation of Section 171(1) established; Respondent did not pass on commensurate benefit and has resorted to profiteering.

Denial of input tax credit (ITC) - methodology for computation of profiteering - Methodology adopted by DGAP to compute profiteered amount-using ratio of ITC to net taxable turnover for pre-rate-reduction period and invoice wise comparison of commensurate prices-accepted as correct and reasonable. - HELD THAT: - The Authority accepted DGAP's approach of (a) computing ITC available in the pre-rate-reduction period (01.07.2017 to 31.10.2017) and expressing it as a percentage (9.19%) of net taxable turnover, and (b) arriving at commensurate base prices by adding the ITC impact to pre-rate base prices and comparing these with actual invoice wise post reduction base prices. This method was held to be consistent with Section 171, transaction-value principles under Section 15 and the Authority's procedural mandate; discounts recorded in invoices were excluded from transaction value; netting off negative deviations across different customers/items was rejected because the statutory duty is to pass benefit on each supply to each recipient. Challenges based on promotional schemes, later commercial price revisions, MRP considerations, royalty and delivery charges, or WTO anti-dumping principles were found not to alter the computation or justify exclusion or netting off. [Paras 26, 33, 34, 36, 38]

DGAP's computation methodology upheld as correct, reasonable and in consonance with Section 171; netting off and other alternative adjustments rejected.

15.11.2017 to 30.06.2019 - continuing contravention - Investigation period and temporal scope for computation of profiteering upheld as 15.11.2017 to 30.06.2019. - HELD THAT: - The Authority noted that the GST rate change took effect on 15.11.2017 and observed that the Respondent increased base prices w.e.f. that date and failed to take steps to pass on the benefit at any time up to 30.06.2019. Given the continuing nature of the contravention and absence of evidence that benefit was passed earlier, the DGAP's choice of the investigation window from 15.11.2017 to 30.06.2019 was held to be appropriate and reasonable; the Respondent's proposal to limit computation to a shorter period was rejected. [Paras 2, 21, 37]

Period of investigation fixed as 15.11.2017 to 30.06.2019 and accepted for computation of profiteering.

Profiteering - deposit in Consumer Welfare Fund - Amount of profiteering determined and relief directed: deposit into Consumer Welfare Funds with interest; show cause for penalty. - HELD THAT: - On the basis of DGAP's computations (Annexure 14) and the accepted methodology, the net higher sales realization (profiteered amount) for the investigation period was determined as Rs. 41,93,431/- inclusive of GST. The Authority directed the Respondent to reduce prices commensurately. As recipients were not identifiable, the Respondent was ordered to deposit the determined amount in two equal parts into the Central Consumer Welfare Fund and the Maharashtra State Consumer Welfare Fund, with interest at 18% from the dates of realisation to the date of deposit. The Authority also held that the Respondent committed an offence under Section 171(3A) and issued directions to serve a notice to explain why penalty under Section 171(3A) read with Rule 133(3)(d) should not be imposed; monitoring and compliance were entrusted to the Commissioners of CGST/SGST Maharashtra. [Paras 24, 42, 43, 44]

Profiteered amount fixed at Rs. 41,93,431/- (inclusive of GST); deposit in CWFs with 18% interest ordered; notice for penalty to be issued and compliance to be monitored.

Final Conclusion: The Authority concluded that the Respondent, a restaurant franchisee, failed to pass on the commensurate benefit of the GST rate reduction effective 15.11.2017 and thereby contravened Section 171(1) of the CGST Act; DGAP's computation methodology and the investigation period (15.11.2017 to 30.06.2019) were upheld; profiteering was quantified at Rs. 41,93,431 (inclusive of GST), the amount was directed to be deposited into the Central and Maharashtra State Consumer Welfare Funds with interest @18%, and a show cause notice was directed to be issued for imposition of penalty under the Act.

Classification of income from letting out property as Profits and Gains of Business - disallowance under Section 14A read with Rule 8D - requirement of objective satisfaction of Assessing Officer before invoking prescribed method under Section 14A - applicability of CBDT Circular No.16 of 2017 to industrial park/SEZ leasing

Disallowance under Section 14A read with Rule 8D - requirement of objective satisfaction of Assessing Officer before invoking prescribed method under Section 14A - Extent and correctness of disallowance under Section 14A read with Rule 8D in respect of exempt income. - HELD THAT: - The Tribunal and this Court held that the Assessing Officer was not justified in making an excessive disallowance; the disallowance was correctly restricted to the extent of the exempted income declared by the assessee. The Court applied the principle that Section 14A and sub-section (2) require the AO to form an objective satisfaction, having regard to the assessee's accounts, before resorting to the prescribed method; the AO cannot mechanically apply the rule without first determining that the assessee's claim about expenditure related to exempt income is incorrect. The Tribunal correctly followed the precedents cited and the legal tests laid down by the Bombay High Court concerning the proximate cause and the procedure to be followed under Section 14A, and therefore the revenue's appeal on this question fails. [Paras 4, 5, 6, 7]

Disallowance under Section 14A read with Rule 8D restricted to the extent of exempt income; substantial question of law answered against the revenue.

Classification of income from letting out property as Profits and Gains of Business - applicability of CBDT Circular No.16 of 2017 to industrial park/SEZ leasing - Whether income from letting out premises and amenities in an industrial park/SEZ is assessable as business income in the hands of the owner. - HELD THAT: - Relying on the CBDT Circular No.16 of 2017 and judicial precedent of this Court, the Court held that where an undertaking develops, operates or maintains an industrial park/SEZ and lets out premises along with other facilities and amenities, the receipts are to be taxed under the head Profits and Gains of Business. The emphasis is on the combined nature of letting out premises together with the provision of facilities/amenities in the industrial park/SEZ; such receipts are not to be treated as income from house property or other sources. The Tribunal's conclusion, following the Division Bench decision in Elnet Technologies and the CBDT guidance, was upheld. [Paras 8, 9, 10, 11, 12]

Income from letting out premises with amenities in an industrial park/SEZ is business income; substantial question of law answered against the revenue.

Final Conclusion: Tax case appeals dismissed; both substantial questions of law answered against the revenue and in favour of the assessee; no costs.

Disallowance under Section 14A - mandatory satisfaction under Section 14A(2) - application of Rule 8D - apportionment of expenditure between taxable and non-taxable income - remand for fresh consideration

Mandatory satisfaction under Section 14A(2) - application of Rule 8D - disallowance under Section 14A - Whether the Assessing Officer recorded the mandatory satisfaction under Section 14A(2) before applying Rule 8D for assessment year 2011-12. - HELD THAT: - The Assessing Officer issued a notice calling for the assessee's working under Rule 8D and considered the submissions. The Assessing Officer identified that the assessee's computation had omitted sub rule (iii) of Rule 8D and recorded that the assessee had not addressed that point in its subsequent response. On this basis the Court found that the Assessing Officer first examined the correctness of the assessee's claim and, being not satisfied, proceeded to determine the disallowance by applying the prescribed method. The Tribunal erred in treating this as a failure to follow Section 14A(2) and in directing acceptance of the assessee's self computed figure without remanding the correctness of that figure to the Assessing Officer for determination. [Paras 18, 19, 20]

The Assessing Officer complied with the requirement of Section 14A(2) for AY 2011-12; the Tribunal's allowance on that ground and its direction to accept the assessee's figure was erroneous.

Remand for fresh consideration - direction to compute expenditure component - apportionment of expenditure between taxable and non-taxable income - Whether the Tribunal's directions in respect of expenditure computation for assessment year 2012-13 were complete and the appropriate course of action. - HELD THAT: - The Tribunal directed the assessee to work out the expenditure component relating to administrative and managerial aspects so that such expenditure may be disallowed, but did not give specific directions to the Assessing Officer as to the subsequent steps after the assessee files the working sheet. The High Court held that this omission rendered the Tribunal's order incomplete and that the matter requires fresh consideration by the Assessing Officer in accordance with law. [Paras 7, 21, 22]

The Tribunal's order for AY 2012-13 is incomplete and the matter is remitted to the Assessing Officer for fresh consideration in accordance with law.

Final Conclusion: Tax Case Appeals allowed; Substantial Questions of Law answered in favour of the revenue; matters for AY 2011-12 and AY 2012-13 remitted to the Assessing Officer for fresh consideration in accordance with law.

Stay of demand - interim stay application - disposal of interim application within a reasonable time - deposit as condition for grant of interim relief - suspension of revenue recovery proceedings - speaking and reasoned order

Interim stay application - disposal of interim application within a reasonable time - speaking and reasoned order - The appellate authority was directed to decide the pending interim stay application, after hearing the petitioner, within two months from receipt of the judgment by passing a speaking and reasoned order. - HELD THAT: - The petitioner had filed an appeal and an interim stay application against the assessment order for the assessment year 2017-18, and the matter remained undecided during the Covid-19 lockdown. Taking into account the pendency and the disruption caused by the pandemic, the High Court exercised its supervisory jurisdiction to require the 2nd respondent to take a prompt decision on the stay application. The court mandated that the authority afford the petitioner an opportunity of hearing and record reasons when passing the order, and fixed a two-month timeline from receipt of this judgment for disposal of the interim application.

2nd respondent to decide the interim stay application after hearing the petitioner and pass a speaking and reasoned order within two months from receipt of the judgment.

Stay of demand - deposit as condition for grant of interim relief - suspension of revenue recovery proceedings - Revenue recovery proceedings were stayed temporarily on condition of a deposit by the petitioner. - HELD THAT: - Pending the appellate authority's decision on the interim application, the court kept revenue recovery proceedings based on the demand in abeyance. This interim relief was made conditional upon the petitioner depositing 10% of the demanded amount within one month. The condition balanced the revenue's interest with the petitioner's plight during the lockdown and provided provisional protection from recovery measures until the stay application is decided.

Revenue recovery proceedings stayed until the appellate authority decides the interim application, subject to the petitioner depositing 10% of the demand within one month.

Final Conclusion: Writ petition disposed by directing the appellate authority to decide the pending interim stay application with a speaking and reasoned order within two months after hearing the petitioner; meanwhile revenue recovery proceedings are kept in abeyance subject to deposit of 10% of the demand within one month.

Immunity under Explanation 5, Clause 2 to Section 271(1)(c) for income disclosed in return filed under section 153A - Levy of penalty for concealment of income versus for furnishing inaccurate particulars of income - Requirement of clear satisfaction and specification of the limb of offence in penalty proceedings - Consequences of non-application of mind by Assessing Officer in framing penalty

Immunity under Explanation 5, Clause 2 to Section 271(1)(c) for income disclosed in return filed under section 153A - Whether penalty under Explanation-5 to Section 271(1)(c) is leviable in respect of undisclosed income found in search but duly disclosed in the return filed under section 153A and taxes paid thereon. - HELD THAT: - The Tribunal found that the assessee had made a declaration under section 132(4), duly substantiated the manner in which the undisclosed income reflected in dairies was derived, included those amounts in the returns filed pursuant to notices under section 153A and paid tax thereon. These three conditions correspond to Clause 2 of Explanation-5 to Section 271(1)(c) which grants immunity from levy of penalty. Consequentially, sums representing income disclosed in the returns filed under section 153A could not attract penalty under Explanation-5. Applying that statutory exemption, the Tribunal concluded that the penalties levied on the amounts representing income disclosed in returns (aggregating as recorded in the order) were not sustainable. [Paras 3, 6]

Penalty under Explanation-5 to Section 271(1)(c) deleted insofar as it related to income disclosed in returns filed under section 153A for the assessment years in question.

Requirement of clear satisfaction and specification of the limb of offence in penalty proceedings - Levy of penalty for concealment of income versus for furnishing inaccurate particulars of income - Consequences of non-application of mind by Assessing Officer in framing penalty - Whether penalties on additions made during assessments under section 153A are sustainable where the Assessing Officer failed to consistently specify the particular offence (concealment or furnishing inaccurate particulars) and took divergent stands between assessment and penalty order. - HELD THAT: - The Tribunal examined the assessment and penalty orders and found inconsistent and divergent recordings by the Assessing Officer: initial satisfaction entries referred to initiation of penalty for different limbs, the penalty notice did not clearly specify the offence, and the final penalty order alternately described the basis as furnishing inaccurate particulars and as concealment. This showed non-application of mind and an inability to identify the specific limb of liability. Relying on the applicable ratio of the jurisdictional High Court (as applied in Samson Perinchery) and distinguishing the Ventura Textiles decision on its facts, the Tribunal held that penalties founded on such improper or confused satisfaction cannot be sustained. Consequently, penalties levied on the specific additions made in the section 153A assessments for the identified years were deleted. [Paras 3, 4, 5]

Penalties on additions made during section 153A assessments deleted for the years where the Assessing Officer failed to specify or consistently record the particular offence and showed non-application of mind.

Final Conclusion: All appeals of the assessee are allowed: penalties aggregating to the sums set out in the order are deleted-those attributable to income disclosed in returns filed under section 153A are deleted under Explanation-5, Clause-2 to Section 271(1)(c), and the penalties relating to additions in specified assessment years are deleted for defective and inconsistent satisfaction by the Assessing Officer.

Disallowance under Section 40(a)(ia) - tax deduction at source (TDS) - second proviso to Section 40(a)(ia) read with Section 201(1) - Section 194C - contract for work including advertising - bonafide belief defence to TDS liability - retrospective operation of statutory proviso

Disallowance under Section 40(a)(ia) - second proviso to Section 40(a)(ia) read with Section 201(1) - retrospective operation of statutory proviso - Whether disallowance under Section 40(a)(ia) could be sustained in respect of exhibition expenses paid to Idea House Pvt. Ltd. where the payee had disclosed the receipts and furnished a certificate under the first proviso to Section 201(1). - HELD THAT: - The Tribunal found the entire payment to Idea House Pvt. Ltd. was disclosed by the payee in its return for A.Y.2010-11 and supported by a Chartered Accountant's certificate under the first proviso to Section 201(1). Relying on the view of the Hon'ble Delhi High Court that the second proviso to Section 40(a)(ia) r.w.s. 201(1) operates retrospectively, the Tribunal held that where the payee has duly included the receipts in its return, the payer cannot be treated as an assessee in default and no disallowance under Section 40(a)(ia) can be made in the hands of the payer. The alternative contention based on a longstanding bonafide practice was rejected as making the provision redundant and distinguishable from earlier judicial decisions confined to their factual context.

Disallowance in respect of exhibition expenses of the payer deleted.

Disallowance under Section 40(a)(ia) - Section 194C - contract for work including advertising - tax deduction at source (TDS) - Whether payment made to a franchisee (Harsha Agencies) for newspaper advertising is liable to deduction of tax at source and consequent disallowance under Section 40(a)(ia). - HELD THAT: - The Tribunal observed that the payment to Harsha Agencies, a franchisee of the newspaper, for insertion of advertisement constituted a contract for carrying out 'work' as defined in the Explanation to Section 194C, which expressly includes advertising. On that basis the ingredients of Section 194C were attracted and the payer was obliged to deduct TDS. The assessee's factual contention that the payment was one time and not under contract was not accepted because handing over advertisement material to the franchisee amounted to a contract. The appellate authority was therefore held justified in confirming the disallowance under Section 40(a)(ia).

Disallowance in respect of advertisement expenses upheld.

Disallowance under Section 40(a)(ia) - second proviso to Section 40(a)(ia) read with Section 201(1) - tax deduction at source (TDS) - Whether disallowance under Section 40(a)(ia) in respect of payments to transporters should be sustained where the assessee produced PANs and contended that the transporters had included the receipts in their returns. - HELD THAT: - The Tribunal noted that the assessee relied on PANs obtained and orally asserted that the transporters had included the receipts in their returns, invoking the second proviso to Section 40(a)(ia) r.w.s. 201(1). As the CIT(A) had not dealt with this submission and the assessee failed to produce documentary proof before the Tribunal, the Tribunal found it appropriate in the interests of justice to remit the matter to the AO for limited verification of whether the respective payees had included the receipts in their income tax returns for A.Y.2010 11. If the payees had included the amounts, the disallowance was to be deleted; if not, the disallowance would stand.

Issue remanded to the AO for verification of payees' returns; disallowance to be deleted if receipts are reflected in payees' returns, otherwise sustain disallowance.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes: disallowance relating to exhibition expenses deleted under the second proviso to Section 40(a)(ia) read with Section 201(1); disallowance for advertisement expenses upheld as Section 194C applied; disallowance for transport expenses remanded to the AO for verification of the payees' returns and to be decided in accordance with the directions above.

Application of provisions of section 68 and section 69A regarding unexplained credits - burden on assessee to prove source by producing confirmations, DD numbers and bank details as directed by the Tribunal - relevance of PAN and income tax assessment of third parties to establish capacity to issue demand drafts - compliance with specific directions given by the Tribunal on verification of confirmations and supporting bank records

Application of provisions of section 68 and section 69A regarding unexplained credits - burden on assessee to prove source by producing confirmations, DD numbers and bank details as directed by the Tribunal - relevance of PAN and income tax assessment of third parties to establish capacity to issue demand drafts - Validity of additions confirmed by the lower authorities in respect of demand drafts (DDs) allegedly obtained from specified third parties and treated as unexplained, having regard to confirmations, PAN details and tax assessment records produced by the assessee pursuant to ITAT directions. - HELD THAT: - The Tribunal earlier remitted the matter to the AO with a clear direction that if the assessee produced confirmations, DD numbers matching the AO's list and details of the bank accounts from which the DDs were drawn, the additions under the provisions attracted by unexplained credits would not stand. On examination of the confirmations placed on record, the authorities and this Bench applied the legal test under section 68/69A: whether the assessee discharged the onus of proving the genuineness and source of the sums. In respect of M/s Sangameshwara Enterprises the confirmation identified the DD, the issuing bank branch and the firm is a taxable entity - consequently the addition was not sustainable. For Shri N.R. Veerappa the confirmation included PAN and an averment that the DD was returned after bidding; these particulars satisfied the Tribunal's criteria and the addition was deleted. By contrast, confirmations from Shri Nagaraj and Shri U.G. Rohit did not furnish PAN or evidence of the parties' tax assessment or other material to establish their capacity to issue the DDs; the assessee conceded that Shri U.G. Rohit was not assessed. On these facts the AO and CIT(A) were justified in treating those amounts as unexplained and in making additions. As to Shri V.B. Manik Rao, the assessee produced affidavit and details showing that the DD was funded by a bank loan from a person who was assessed to tax; mere absence of PAN in the confirmation was not a ground to sustain an addition once the source and tax assessment of the ultimate payer were placed on record, and the addition was directed to be deleted. [Paras 6]

Additions in respect of demand drafts from M/s Sangameshwara Enterprises, Shri N.R. Veerappa and Shri V.B. Manik Rao are deleted; additions in respect of demand drafts from Shri Nagaraj and Shri U.G. Rohit are confirmed.

Final Conclusion: The appeal is partly allowed: of the additions of Rs. 22.00 lakhs sustained by the CIT(A), Rs. 15.00 lakhs (relating to M/s Sangameshwara Enterprises, Shri N.R. Veerappa and Shri V.B. Manik Rao) are deleted and Rs. 7.00 lakhs (relating to Shri Nagaraj and Shri U.G. Rohit) are confirmed.

Disallowance under section 14A read with Rule 8D(2) - exempt dividend limited to amount of exempt income - genuine business loss in trading in derivatives - SEBI interim order as prima facie evidence but not conclusive - reliance on borrowed satisfaction - test of human probabilities - burden of proof and shift upon assessee - reliance on subsequently vacated regulatory directions

Disallowance under section 14A read with Rule 8D(2) - exempt dividend limited to amount of exempt income - Extent of disallowance under section 14A read with Rule 8D(2) in relation to dividend income claimed exempt under section 10(34). - HELD THAT: - The Tribunal noted that the assessee received dividend income of Rs. 1,80,717 which was claimed as exempt under section 10(34). Applying the principle in the decision of the Hon'ble Delhi High Court (Joint Investment Pvt. Ltd.), the Tribunal held that disallowance under section 14A cannot exceed the amount of exempt income. In view of that ratio, the additions under section 14A read with Rule 8D should be restricted to the quantum of exempt dividend actually earned by the assessee. [Paras 7]

Addition under section 14A read with Rule 8D restricted to Rs. 1,80,717 (the dividend income).

Genuine business loss in trading in derivatives - SEBI interim order as prima facie evidence but not conclusive - reliance on subsequently vacated regulatory directions - reliance on borrowed satisfaction - test of human probabilities - burden of proof and shift upon assessee - Allowability of the loss claimed on trading in stock options and whether the loss is to be disallowed on the basis of SEBI's interim findings and related material. - HELD THAT: - The Tribunal examined the material placed on record by the assessee (contract notes, bank statements showing margin payments, trade data supplied by SEBI, analysis of counterparties and prices) and the sequence of regulatory orders. It noted that the Assessing Officer and the CIT(A) primarily relied on SEBI's ad interim/confirmatory orders which alleged non genuine reversal trades. The Tribunal observed that (a) SEBI's interim directions were subsequently disposed of/vacated by SEBI itself and adjudication was to proceed on merits; (b) interim/ex parte regulatory findings may raise suspicion but cannot substitute for legal proof before the tax authorities; (c) the assessee produced contemporaneous documentary evidence and explained trading practices in screen based electronic trading where counterparty identity is not known at the time of order entry; and (d) authorities below did not undertake independent investigation or demonstrate, on the balance of evidence, that the losses were not genuinely incurred. Applying the principles that suspicion alone cannot be the basis for addition and that the burden shifts back to Revenue once the assessee furnishes cogent documentary evidence, the Tribunal concluded that the additions based solely on SEBI's interim findings and without independent corroboration were not sustainable. [Paras 14]

Addition of Rs. 15,28,20,110 disallowing loss on stock option trading deleted; loss allowed as genuine business loss.

Final Conclusion: The appeal is partly allowed: the section 14A disallowance is restricted to the exempt dividend of Rs. 1,80,717, and the addition disallowing the loss on stock option trading is deleted on the facts and documentary record; the authorities below had relied on regulatory interim findings that were vacated and insufficient to substitute for independent proof before the tax authorities.

Classification of income as business income vs capital gains - application of section 50C where land is held as stock-in-trade - assessment of unexplained opening capital balance - treatment of bank receipts as account-payee cheque receipts versus unexplained cash deposits - penalty under section 271(1)(c) where additions do not survive - remand for fresh adjudication and verification

Classification of income as business income vs capital gains - application of section 50C where land is held as stock-in-trade - Sale of the land is to be treated as income from business (stock-in-trade) and not as short term capital gain; section 50C valuation cannot be mechanically applied where land is held as business stock. - HELD THAT: - The Tribunal accepted the assessee's contemporaneous explanation and supporting material that the land was purchased with a profit motive for plotting and resale and thus constituted business stock. The Assessing Officer's presumption based on the assessee's engagement in liasoning work was held not to be a valid basis to reject the claim of business character. Applying the legal test of 'business' under section 28, and consistent with authority that real-estate dealings can constitute business activity, the Tribunal directed the Assessing Officer to treat the transaction under income from business and to recompute tax accordingly; section 50C valuation cannot be applied to convert such transaction into capital gains where the land is held as stock-in-trade. [Paras 8, 9]

Transaction to be taxed as business income; AO directed to compute income from business after receiving necessary details.

Assessment of unexplained opening capital balance - remand for fresh adjudication and verification - Addition on account of opening capital balance is not adjudicated finally and is remitted to the Assessing Officer for fresh examination. - HELD THAT: - The assessee produced balance sheets and returns for the relevant years showing proprietor's capital, and explained that the figure did not appear in the income-tax return format. The Tribunal found that the AO's conclusion (that capital was nil in the preceding year) required re-examination of the balance sheets vis-a -vis the returns. Consequently the matter was remitted to the AO with directions to examine the returns, balance sheet and profit & loss account and adjudicate in accordance with law; for statistical purposes the ground is treated as allowed. [Paras 10]

Issue remitted to the Assessing Officer for fresh examination; treated as allowed for statistical purposes.

Treatment of bank receipts as account-payee cheque receipts versus unexplained cash deposits - remand for fresh adjudication and verification - Amounts deposited in the bank were by account payee cheques for sale proceeds and not unexplained cash deposits; issue remitted to the Assessing Officer for verification. - HELD THAT: - On perusal of bank statements, the Tribunal observed that the specified sums were credited by account payee cheques and not as cash, contrary to the AO's finding. In view of the purpose of taxing income in the correct year and in the hands of the right person, the Tribunal remitted the matter to the AO to examine the bank statements and adjudicate in accordance with law; for statistical purposes the ground is treated as allowed. [Paras 11]

Remitted to the Assessing Officer for verification of bank entries; treated as allowed for statistical purposes.

Penalty under section 271(1)(c) where additions do not survive - Penalty under section 271(1)(c) is cancelled as it does not survive the deletion/remand of additions. - HELD THAT: - Because the Tribunal has deleted certain additions and remitted others to the AO for fresh adjudication, the quantum on which penalty was imposed no longer stands as determined; accordingly the Tribunal held that the penalty cannot survive and set aside the penalty levied under section 271(1)(c). [Paras 13]

Penalty under section 271(1)(c) cancelled.

Final Conclusion: For A.Y. 2009-10 the Tribunal held that the sale of land is taxable as business income and directed recomputation by the AO; the addition for opening capital and the bank deposit issue were remitted to the AO for fresh examination and adjudication; consequentially the penalty under section 271(1)(c) is cancelled.

Jurisdiction under section 263 - erroneous and prejudicial to the interest of revenue - twin conditions in Malabar Industries - finality in assessment proceedings - power of rectification under section 154 as alternative remedy - distinction between review and reassessment - scope of inquiry by Assessing Officer and adequacy of enquiry

Jurisdiction under section 263 - erroneous and prejudicial to the interest of revenue - twin conditions in Malabar Industries - finality in assessment proceedings - scope of inquiry by Assessing Officer and adequacy of enquiry - power of rectification under section 154 as alternative remedy - distinction between review and reassessment - Validity of the Principal Commissioner's second order under section 263 cancelling the assessment dated 28.12.2016 - HELD THAT: - The Tribunal examined whether the AO's original assessment dated 28.12.2016 was 'erroneous and prejudicial to the interest of the revenue' so as to warrant revision under section 263. Applying the twin conditions in Malabar Industries, the Bench held that an order is amenable to revision under section 263 only if it is shown to be erroneous (for example by incorrect assumption of fact, wrong application of law, lack of enquiry or want of application of mind) and that such error prejudices revenue; mere difference of opinion between the Commissioner and the AO or the existence of another permissible view does not suffice. The records showed that during the original assessment and again pursuant to the first 263 direction the AO issued detailed notices under section 142(1), obtained and examined books, ledgers, confirmations and other documents and applied his mind to issues such as 'incentive on sales', 'loss and damage', 'mines development' and admitted disclosures. The PCIT's second 263 order sought again to re-examine items that had already been inquired into and decided by the AO twice, effectively attempting a re-assessment or re-opening of concluded enquiries rather than correcting an order shown to be legally erroneous. Where an apparent arithmetical/typographical mistake exists (misstated aggregate of estimated additions), the remedy under section 154 is available and that alone negates necessity of invoking section 263. The Tribunal further emphasised the principle of finality in assessment proceedings and held that allowing repeated invocation of section 263 to re-try issues already addressed would negate finality and amount to impermissible review of the Commissioner's own earlier direction. On the facts, the AO had conducted enquiries and reached one of the possible conclusions on the materials; the Commissioner's disagreement with that view did not make the AO's order erroneous and prejudicial to revenue. Applying these principles, the Tribunal found the second 263 order unsustainable and liable to be quashed. [Paras 18, 19, 20, 21, 23]

Second 263 order dated 28.03.2019 cancelling the assessment dated 28.12.2016 is quashed and the appeal is allowed.

Final Conclusion: The Tribunal quashed the Principal Commissioner's second revision order under section 263 in respect of A.Y. 2012-13 on the ground that the AO had carried out requisite enquiries and taken one of the permissible views on the same materials, the errors alleged were not of a kind to invoke section 263 (and a typographical/arithmetic discrepancy was rectifiable under section 154), and repeated re-examination would negate finality of assessment proceedings.

Allowability of employer/employee contributions to Provident Fund and ESI if deposited before return filing date notwithstanding delayed deposit under Sec.36(1)(va) read with Sec.43B - determination of arm's length price under the Transactional Net Margin Method (TNMM) - treatment of foreign exchange loss as part of operating expenditure for PLI computation - comparability analysis and exclusion of non-comparable entities in transfer pricing benchmarking - application of Related Party Transaction (RPT) filter in selection of comparables - working capital adjustments to comparable margins under Rule 10B and OECD comparability guidance

Allowability of employer/employee contributions to Provident Fund and ESI if deposited before return filing date notwithstanding delayed deposit under Sec.36(1)(va) read with Sec.43B - Deductibility under Sec.36(1)(va) of employees' contribution to EPF/ESI where deposit to authorities was after statutory due date but before the due date for filing return. - HELD THAT: - The Tribunal accepted the Karnataka High Court precedent in CIT v. Sabari Enterprises that contributions to PF and ESI, though deposited after the statutory due date under Sec.36(1)(va), are allowable if paid on or before the due date for furnishing the return under Sec.139(1), in view of the non-obstante character of Sec.43B. The issue being purely legal and determinable on existing record, the ground was allowed and the addition disallowing employees' contribution was set aside. [Paras 3]

Addition under Sec.36(1)(va) disallowing employees' contribution to PF/ESI is not sustainable where payment was made before the due date for filing return; ground allowed.

Determination of arm's length price under the Transactional Net Margin Method (TNMM) - treatment of foreign exchange loss as part of operating expenditure for PLI computation - Appropriateness of TNMM with OP/OC as PLI and inclusion of foreign exchange loss within operating expenditure for computing tested party's margin. - HELD THAT: - It was not in dispute that TNMM was the most appropriate method and that OP/OC was the PLI. The TPO's revision of the assessee's reported PLI (from 15.83% to 12.15%) by treating foreign exchange loss as part of operating expenditure was upheld. The Tribunal found the TPO/DRP treatment of foreign exchange loss as operating expenditure to be correct and declined interference on this aspect. [Paras 4]

TPO/DRP decision to treat foreign exchange loss as operating expenditure and to apply TNMM with OP/OC as PLI is upheld.

Comparability analysis and exclusion of non-comparable entities in transfer pricing benchmarking - Whether Persistent Systems Ltd. is a comparable for the assessee's software development services benchmarking. - HELD THAT: - Relying on precedents including ITAT Hyderabad for AY 2013-14, the Tribunal concluded that Persistent Systems Ltd., being engaged in software products and software solutions without segmental detail, is functionally different and its margin is not comparable with the assessee's software development services. Persistent Systems was therefore excluded from the comparable set. [Paras 12]

Persistent Systems Ltd. excluded from comparables; its inclusion in the comparable set is not sustainable.

Application of Related Party Transaction (RPT) filter in selection of comparables - Whether Tech Mahindra Ltd. should be excluded by application of the RPT filter and the matter to be remanded for consideration. - HELD THAT: - The Tribunal observed that Tech Mahindra's related party transactions exceed the RPT threshold applied by the TPO and that the assessee's contention on this point requires factual verification. Rather than deciding the issue on the record, the Tribunal set aside the DRP's conclusion on this aspect and remanded the matter to the AO/TPO to consider the assessee's contention regarding exclusion by application of the RPT filter. [Paras 13, 14]

Issue remanded to AO/TPO for reconsideration of Tech Mahindra Ltd. under the RPT filter; DRP's order set aside on this point.

Working capital adjustments to comparable margins under Rule 10B and OECD comparability guidance - Entitlement to working capital adjustment to the comparables' margins and correctness of DRP denial of such adjustment. - HELD THAT: - Applying Rule 10B and OECD guidance, the Tribunal held that net profit margins of comparables should be adjusted to account for material differences such as working capital. The Tribunal reviewed authorities and accepted that practical limitations do not preclude reasonable working capital adjustments (opening/closing or appropriate measures) and that denial by the DRP was not justified where TPO's computation was not shown to be defective. Consequently, the Tribunal directed the TPO to allow the working capital adjustment as computed by the TPO. [Paras 15, 16]

DRP's denial of working capital adjustment set aside; TPO is directed to allow the working capital adjustment as computed.

Effect of appellate relief on consideration of other comparable companies - Whether further challenges to inclusion/exclusion of certain comparables required separate adjudication given the relief granted on working capital adjustment. - HELD THAT: - The Tribunal declined to examine afresh the inclusion/exclusion of Larsen & Toubro Infotech Ltd., ICRA Techno Analytics Ltd., and Mindteck (India) Ltd., reasoning that the working capital adjustment to be allowed would bring the assessee's margin within the arm's length range; hence detailed consideration of those comparables was unnecessary for the outcome. [Paras 17]

No separate adjudication of inclusion/exclusion of the mentioned comparables was undertaken because the working capital adjustment relief renders those issues academic.

Final Conclusion: The appeal is partly allowed: the disallowance under Sec.36(1)(va) relating to employees' contribution to PF/ESI is set aside; the TPO/DRP's treatment of foreign exchange loss as operating expenditure under TNMM is upheld; Persistent Systems Ltd. is excluded as a comparable; the question of Tech Mahindra Ltd. is remanded to the AO/TPO for RPT-filter consideration; and the Tribunal directs allowance of the working capital adjustment as computed by the TPO, resulting in a partly successful appeal for the assessee.

Assessment passed in the name of a non-existent entity - amalgamation - cessation of entity - void ab initio assessment - quash assessment for want of jurisdiction - order under section 263 unsustainable where assessment is non-est - Tribunal's jurisdiction to examine question of law arising from facts - participation in assessment proceedings does not estop challenge to jurisdiction

Tribunal's jurisdiction to examine question of law arising from facts - participation in assessment proceedings does not estop challenge to jurisdiction - Admission of the additional ground of appeal challenging validity of the assessment framed in the name of a non-existent entity for A.Y. 2010-11. - HELD THAT: - The Tribunal held that the additional ground raised by the assessee required adjudication of a legal issue based on facts already on record and did not call for fresh factual enquiry. Relying on controlling precedents that the appellate forum can consider questions of law arising from recorded facts and that participation in proceedings cannot operate as an estoppel against law, the Tribunal admitted the additional ground. Consequently the ground was entertained for adjudication. [Paras 2]

Additional ground of appeal for A.Y. 2010-11 admitted.

Assessment passed in the name of a non-existent entity - amalgamation - cessation of entity - void ab initio assessment - quash assessment for want of jurisdiction - Validity of the assessment order dated 5-1-2015 (A.Y. 2010-11) framed in the name of M/s Satyam Computers Services Ltd., an entity which had ceased to exist on amalgamation. - HELD THAT: - The Tribunal found on the record that the assessing officer was aware that Satyam Computers Services Ltd. had merged with Tech Mahindra Ltd. w.e.f. 1-4-2011 yet framed the assessment in the name of the amalgamating company and recorded its PAN. Applying settled law that an amalgamating company ceases to exist on an approved scheme of amalgamation, and following the Supreme Court's decision in Maruti Suzuki and related precedents, the Tribunal concluded that an assessment passed in the name of a non-existent entity is void ab initio and cannot be sustained. As the assessment was quashed for want of jurisdiction, the Tribunal refrained from deciding merits which had become academic. [Paras 8, 9, 10, 11]

Assessment order for A.Y. 2010-11 passed in the name of the non-existent entity is quashed; appeal of the assessee allowed and revenue's appeal dismissed.

Assessment passed in the name of a non-existent entity - order under section 263 unsustainable where assessment is non-est - void ab initio assessment - Validity of the assessment order dated 25-5-2015 (A.Y. 2011-12) and the consequent order under section 263 dated 24-10-2017, where both were framed in the name of M/s Satyam Computers Services Ltd. which had ceased to exist. - HELD THAT: - A coordinate bench of the Tribunal had previously held that the assessment for A.Y. 2011-12 was framed in the name of the amalgamating company despite knowledge of its merger, and that such assessment was non-est. The present Bench agreed that the assessment order was void ab initio for being in the name of a non-existent entity. Further, the Tribunal held that a revisional order under section 263 premised on such a non-est assessment could not be sustained, since a void assessment provides no foundation for valid revision. On that basis the revisional order was also quashed and the Tribunal declined to examine merits. [Paras 17, 18, 19]

Assessment for A.Y. 2011-12 quashed as void ab initio; consequential section 263 order also vacated; assessee's appeal allowed and revenue's appeal dismissed.

Final Conclusion: The Tribunal admitted the additional ground challenging framing of assessments in the name of the amalgamating company and, applying settled authorities, held that assessments passed in the name of a company that had ceased to exist on amalgamation are void ab initio. Accordingly, the assessments for A.Y. 2010-11 and A.Y. 2011-12 (and the related revision under section 263) were quashed for want of jurisdiction; merits were left open as academic.

Addition under section 69 on account of unexplained investment - short term capital gain - power of appellate authority to enhance income under section 251 - requirement of prior notice and opportunity before enhancement by the appellate authority - ex-parte assessment under section 144 - duty to examine evidence and give reasonable opportunity of hearing

Addition under section 69 on account of unexplained investment - power of appellate authority to enhance income under section 251 - requirement of prior notice and opportunity before enhancement by the appellate authority - duty to examine evidence and give reasonable opportunity of hearing - Enhancement by the first appellate authority of income by treating the assessee's share as unexplained investment without prior notice to the assessee and without giving the Assessing Officer an opportunity to examine the evidence. - HELD THAT: - The Tribunal found that the Assessing Officer had conducted an ex-parte assessment under section 144 and made an addition only on account of short term capital gain. The first appellate authority, while accepting additional evidence on short term capital gain, proceeded to make a fresh addition under the head of unexplained investment without issuing a separate notice of enhancement or affording a meaningful opportunity to the Assessing Officer to examine the evidence. The appellate order does not show that enhancement notice was issued or that the assessee was afforded an adequate opportunity to explain the source; the material filed before the first appellate authority was not tested by the Assessing Officer. In these circumstances the Tribunal held that the proper course was to remit the matter to the first appellate authority to examine the evidences relating to source of investment, give reasonable opportunity of hearing to the assessee, and, if not satisfied, issue notice of enhancement and proceed after considering relevant decisions of the High Courts relied upon by the parties. [Paras 11, 12, 13]

Issue remanded to the first appellate authority for fresh examination of the source of investment, with directions to afford opportunity of hearing and to proceed in accordance with law before making any enhancement.

Short term capital gain - ex-parte assessment under section 144 - Computation and acceptance of short term capital gain in respect of the assessee's share of sale proceeds. - HELD THAT: - On remand the Assessing Officer accepted in the remand report that the short term capital gain worked out to a specified smaller amount and the first appellate authority accepted the short term capital gain computed at the reduced figure attributable to the assessee. The Tribunal noted this acceptance by both authorities and treated the short term capital gain computation as accepted, while distinguishing it from the separate question of unexplained investment which remained unexamined. [Paras 6, 7]

The short term capital gain as computed (accepted by the Assessing Officer and the first appellate authority) stands confirmed.

Final Conclusion: The appeal is allowed for statistical purposes; the short term capital gain computed in favour of the assessee is accepted, but the question of unexplained investment/addition under section 69 is remitted to the first appellate authority for fresh consideration after examination of the evidences, affording the assessee reasonable opportunity of hearing and acting in accordance with law.

Long-term capital gain - indexed cost of acquisition - fair market value as on 01.04.1981 - valuation by Departmental Valuation Officer - reopening of assessment under section 148 - opportunity of being heard - remand for fresh adjudication

Fair market value as on 01.04.1981 - valuation by Departmental Valuation Officer - indexed cost of acquisition - long-term capital gain - opportunity of being heard - remand for fresh adjudication - Whether the assessment and appellate orders confirming long-term capital gain by adopting the DVO-determined valuation and rejecting the assessee's claimed indexed cost should be upheld or the matter should be remitted for fresh consideration. - HELD THAT: - The Tribunal examined the dispute centred on determination of the indexed cost of acquisition of the assessee's share of immovable property and the consequent computation of long-term capital gain. The Assessing Officer relied upon a valuation by the Departmental Valuation Officer (DVO) to fix the fair market value as on 01.04.1981 and rejected the assessee's comparable sale instance; the DVO report was not supplied to the assessee and the objections of the assessee were not properly entertained by the authorities below. The Tribunal noted that a co-owner's identical issue had been remitted for fresh adjudication by the Tribunal in earlier proceedings. In these circumstances the Tribunal found it appropriate to set aside the impugned order of the Commissioner (Appeals) and remit the matter for fresh decision, directing that the assessee be given proper and sufficient opportunity of being heard and that the objections and the outcome of the co-owner's case be taken into consideration by the adjudicating authority.

Impugned appellate order set aside and the matter remitted to the Commissioner (Appeals) for fresh adjudication after affording the assessee adequate opportunity of hearing and considering the objections and the outcome of the co-owner's case.

Final Conclusion: The appeal is allowed for statistical purposes; the appellate order confirming the addition on account of long-term capital gain is set aside and the matter is remitted to the Commissioner (Appeals) to decide afresh after giving the assessee proper opportunity to be heard and taking into account the objections and the decision in the co-owner's case.

Provisional release - bank guarantee as security for provisional release - bond for value of goods - discretion under Board Circular No. 35/2017-Cus to increase or decrease security - prima facie undervaluation - detention certificate and liability for CFS charges

Provisional release - bank guarantee as security for provisional release - bond for value of goods - prima facie undervaluation - discretion under Board Circular No. 35/2017-Cus to increase or decrease security - Appropriateness of the terms and amount of bank guarantee and bond demanded for provisional release of seized imported goods - HELD THAT: - The Tribunal found that the goods were seized on a prima facie case of undervaluation and that a detailed investigation was pending; it therefore refrained from expressing any view on the legality of the alleged enhancement of value. The Tribunal accepted that the Board Circular gives the competent authority discretion to increase or decrease the security required for provisional release, but held that discretion does not preclude judicial scrutiny of whether the security demanded is excessive in the facts of a case. Having considered the competing authorities and the facts before it, the Tribunal concluded that the amount of bank guarantee fixed by the Principal Commissioner (Rs. 1.6 Crore) was excessive relative to the differential duty prima facie involved. In exercise of its appellate power and on the facts of the present case, the Tribunal directed that the appellant may execute a bond for 100% of the value of the goods and furnish a bank guarantee for 100% of the differential duty amount for provisional release.

Appellate direction that provisional release be subject to bond for 100% value of the goods and bank guarantee for 100% of the differential duty amount; the higher bank guarantee previously fixed is reduced accordingly.

Early hearing - perishable or live consignment - Application for early hearing of the appeal - HELD THAT: - The Tribunal found that the goods were a live consignment lying seized and that the circumstances justified expeditious disposal. In view of those facts and because the appeal concerned only the limited issue of the terms and amount of security for provisional release, the Tribunal allowed the application for early hearing and proceeded to decide the appeal on merits.

Early hearing application allowed and appeal taken up for final disposal.

Detention certificate and liability for CFS charges - Prayer for direction to Customs to issue a detention certificate to avoid payment of CFS charges - HELD THAT: - The Tribunal observed that the request for a detention certificate to relieve the appellant of CFS demurrage and detention charges did not arise from the impugned order under appeal. Accordingly, the Tribunal declined to entertain or decide that relief in the present proceedings.

Request for issuance of detention certificate not considered as it did not arise from the impugned order.

Final Conclusion: Appeal allowed in part: early hearing granted; terms for provisional release modified so that the appellant must execute a bond for 100% of the goods' value and furnish a bank guarantee for 100% of the differential duty; prayer for detention certificate not entertained.

Classification of natural gums as Gum Arabic versus other natural gums - entitlement to exemption under Notification No. 96/2008 - Customs - reliance on chemical examination report for determination of true nature of import consignments - provisional assessment subject to chemical test - penalty under Section 112(b) - knowledge or reason to believe in respect of goods liable to confiscation

Classification of natural gums as Gum Arabic versus other natural gums - entitlement to exemption under Notification No. 96/2008 - Customs - reliance on chemical examination report for determination of true nature of import consignments - provisional assessment subject to chemical test - Imported consignments are other natural gums and not Gum Arabic, and hence not entitled to exemption under Notification No. 96/2008 - Customs; consignments are classifiable under CTH 13019019. - HELD THAT: - The Tribunal examined the import documents, provisional assessment procedure and the chemical examination report. The bills of entry, bills of lading and invoices generally described the goods only as 'Natural Gum' and in most instances did not specifically record 'Gum Arabic'. The consignments were provisionally assessed under Section 17 subject to confirmation by chemical test. The chemical examiner's report and supporting technical literature distinguished Gum Arabic from other natural gums and observed that not all natural gums are Gum Arabic; Combretum-type gums may be different and commonly sold under other names or mixed as adulterants. The Tribunal accepted the Adjudicating Authority's finding that, absent any specific contractual or invoice description identifying the consignments as Gum Arabic and in view of the chemical report indicating the consignments did not meet the IS 6795-2007 food-grade parameters and pointing to characteristics of other natural gums, the consignments must be held as other natural gums. Because Notification No. 96/2008 exempts only Gum Arabic (CTH 13012000), the consignments properly classify under CTH 13019019 and are not eligible for the exemption. The Tribunal found no infirmity in the Commissioner (Appeals) order denying the exemption. [Paras 16, 18, 19, 21, 26]

Classification under CTH 13019019 upheld and exemption under Notification No. 96/2008 denied; appeal by the importer dismissed.

Penalty under Section 112(b) - knowledge or reason to believe in respect of goods liable to confiscation - provisional assessment subject to chemical test - Penalty imposed on the Custom House Agent and its Director under Section 112(b) is not sustainable as there is no evidence they had knowledge or reason to believe the goods were liable to confiscation. - HELD THAT: - The Tribunal reviewed the role of the CHA firm and its Director and the documentary record. The clearing agent prepared bills of entry using the descriptions provided in the bills of lading and invoices and the consignments were provisionally assessed by customs subject to chemical testing. The proceedings do not establish that the CHA or its Director knowingly or deliberately mis-declared the goods or colluded to evade duty. In the absence of evidence demonstrating knowledge or reason to believe that the goods were liable to confiscation, the statutory requirements for imposing penalty under Section 112(b) are not satisfied. Accordingly, the penalties imposed on the CHA and its Director were set aside. [Paras 22, 23, 25, 26]

Penalties on M/s Bharti Freight Forwarders Pvt. Ltd. and its Director Anil Kumar Tiwari under Section 112(b) set aside; their appeals allowed.

Final Conclusion: The appeal of the importer M/s B.L. Goyal is dismissed as the consignments are held to be other natural gums classifiable under CTH 13019019 and not entitled to exemption under Notification No. 96/2008; appeals of the Custom House Agent and its Director are allowed and the penalties imposed on them under Section 112(b) are set aside.

Disgorgement - wrongful gain / unjust enrichment - market manipulation - connection and concerted trading - Regulation 11 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 - causation by false media report - delay in prosecution and prejudice

Disgorgement - wrongful gain / unjust enrichment - Regulation 11 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 - connection and concerted trading - Validity of the WTM's disgorgement order holding the appellants liable for wrongful gain for trading in PSTL between December 17-22, 2008 in alleged collusion with Nirmal Kotecha. - HELD THAT: - The Tribunal upheld the WTM's finding that the appellants, together with deceased noticees, accumulated sizable quantities of PSTL shares between December 17-19, 2008 and off loaded those holdings on December 22, 2008 before 10:30 a.m., producing a pattern inconsistent with their prior trading in the scrip. The record admitted close commercial and personal connections between the appellants and Nirmal Kotecha (including transfers/advances and frequent telephonic contact), and the WTM took those connections plus the concentrated accumulation and timely sale, in the factual matrix of a contemporaneous false media report, as constituting concerted action leading to wrongful gain. Applying Regulation 11 of the PFUTP Regulations, the WTM concluded that the trading pattern and association with the source of false information justified disgorgement as remedy for unjust enrichment. The Tribunal found no reason to interfere with these findings on facts and law, noting that related proceedings against Kotecha were finally decided against him and that the material before the WTM supported the inference of collusion and resulting wrongful gain. [Paras 4, 5, 6, 9, 10]

The WTM's disgorgement order under Regulation 11 was sustained; the appellants were held liable for the wrongful gain arising from the specified trading.

Delay in prosecution and prejudice - Whether the delay in SEBI issuing the show cause notice or in finalising proceedings vitiated the impugned order. - HELD THAT: - The Tribunal examined the chronology and the appellants' conduct before the WTM and found that the appellants themselves had sought and sought additional documents and filed replies belatedly, contributing to the extended timeline. Although prolonged continuation of a temporary prohibitory order is undesirable, the interim order was ultimately revoked and the Tribunal held that the delay did not cause such prejudice as to invalidate the WTM's findings. Prior decisions cited by the appellants where delay caused prejudice were held inapplicable on the facts of this case. [Paras 7, 8]

Delay in the proceedings did not vitiate the impugned order; the objection was rejected.

Final Conclusion: The appeal is dismissed; the WTM's disgorgement order is upheld and the appellants' challenge on merits and on grounds of delay is rejected.

Admissibility of Section 9 petition under Insolvency and Bankruptcy Code, 2016 - limitation / time-bar for operational debt (delay beyond three years) - requirement of proof of debt: invoices, signatures and acknowledgement - existence of plausible dispute as bar to admission - minimum threshold default amount for initiation under Section 9 - absence of formal contract or agreement as a factor in admissibility

Admissibility of Section 9 petition under Insolvency and Bankruptcy Code, 2016 - limitation / time-bar for operational debt (delay beyond three years) - requirement of proof of debt: invoices, signatures and acknowledgement - existence of plausible dispute as bar to admission - minimum threshold default amount for initiation under Section 9 - absence of formal contract or agreement as a factor in admissibility - Whether the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of CIRP against the corporate debtor is fit for admission. - HELD THAT: - The Adjudicating Authority examined the documentary record and pleadings and was not satisfied to admit the Section 9 petition. Eight of the ten invoices relied upon are dated between 30/05/2014 and 23/03/2015, with due dates more than three years prior to filing of the petition on 26/11/2018, raising a limitation/time-bar concern. Of the two invoices within three years, one (dated 22/03/2016) lacks the signature of the operational creditor and the other (dated 28/05/2016) relates to an amount below the minimum default threshold required for admission under Section 9. There is no formal contract between the parties on record and no acknowledgement of debt in writing from the corporate debtor. The respondent has raised specific factual contentions disputing the genuineness of invoices, asserting non-supply or different nature of transactions (job-work versus supply), and asserting payments made which are not reflected in the petitioner's account. On these materials the Authority found a plausible dispute and deficiencies in proof of debt (including unsigned invoice and inconsistent records) such that it could not be satisfied to admit the petition and initiate CIRP. [Paras 14, 15]

The Section 9 petition is rejected (dismissed) as not maintainable and not admitted; application rejected as to no cost.

Final Conclusion: On the grounds of delay in filing beyond three years for majority of invoices, defects in the supporting invoices (including an unsigned invoice), one invoice being below the statutory default threshold, absence of a contract or written acknowledgement, and existence of disputed factual contentions, the Adjudicating Authority declined to admit the Section 9 petition and rejected the application as to no costs.

Duty of resolution professional to prepare an accurate information memorandum - professional diligence and standard of care expected of an insolvency professional - appointment of a third valuer under Regulation 35(1)(b) - liquidator's fee and its determination under Regulation 4(3) of the Liquidation Process Regulations - separation of roles and non encroachment between the resolution professional and the committee of creditors - duty to represent and act on behalf of the corporate debtor in judicial or arbitration proceedings - remand for further investigation and production of additional financial records

Duty of resolution professional to prepare an accurate information memorandum - professional diligence and standard of care expected of an insolvency professional - Typographical error in the Information Memorandum regarding admission of an operational creditor's claim and whether it amounted to contravention attracting liability. - HELD THAT: - The DC noted that the Information Memorandum (IM) incorrectly stated the admitted claim amount for an operational creditor due to a typing error, but the correct figures were reflected in the 5th Progress Report submitted to the Adjudicating Authority and claims would be re proved on liquidation commencement. While an IP is required to exercise a high degree of professional care and to furnish accurate information in the IM, a typographical error corrected in subsequent filings and in the context of claims being re proved on liquidation was not sufficient to impose strict liability for contravention. The DC therefore accepted that there was negligence in preparation of the IM but declined to hold the IP strictly liable for the inadvertent typographical mistake.

Typographical error found and negligence noted, but no contravention established warranting penalty; no liability imposed for that error.

Duty of resolution professional to prepare an accurate information memorandum - professional diligence and standard of care expected of an insolvency professional - Alleged non inclusion of two assets in the Information Memorandum and whether the RP failed to disclose assets. - HELD THAT: - On review of documents including the Individual Technical Report and sale deed, the DC found that the assets in question were identified in the IM under descriptive entries ('Worker Colony' and 'Building Flat') and were reflected as collateral security of a financial creditor. ICICI Bank, a CoC member and the secured creditor, had not raised omission. The available records demonstrated that the assets were disclosed and valued. Given these materials, the DC concluded that the RP had provided adequate disclosure of those assets in the IM.

No contravention in relation to non inclusion of the two assets; RP not liable on this ground.

Appointment of a third valuer under Regulation 35(1)(b) - separation of roles and non encroachment between the resolution professional and the committee of creditors - Whether the RP's appointment of a third valuer at the behest of the CoC, despite the RP's opinion that the two valuations were not significantly different, amounted to abdication of authority and contravention of Regulation 35(1)(b) and related provisions. - HELD THAT: - Regulation 35(1)(b) permits appointment of a third valuer only if, in the opinion of the RP, the two estimates are significantly different. The DC observed a material divergence between the two original valuations (about 20% of liquidation value and significant in absolute terms). Nevertheless, the RP had himself stated he did not consider the difference significant and conceded that the third valuation was carried out at the desire of the CoC. The RP thereby permitted the CoC to usurp a function vested in him and compromised his independence. The third valuation added cost to the corporate debtor without demonstrable benefit. The conduct was held to be inconsistent with the RP's statutory duties and independence and contravened Section 208(2)(a) and (e) of the Code, Regulation 35(1)(b) of the CIRP Regulations and provisions of the IP Regulations and Code of Conduct.

RP found to have abdicated authority by acceding to CoC's desire for a third valuation and held to have contravened the specified statutory and regulatory provisions.

Liquidator's fee and its determination under Regulation 4(3) of the Liquidation Process Regulations - professional diligence and standard of care expected of an insolvency professional - Whether the RP, on becoming liquidator, acted in contravention of Regulation 4(3) by continuing to draw the same remuneration as was paid while he acted as RP and by drawing amounts from the liquidation estate without authorization. - HELD THAT: - Regulation 4(2) and (3) prescribe the mechanism for liquidator's fee where CoC has not fixed the fee; the prescribed schedule governs remuneration as a percentage of realizations and distributions. The DC found that the liquidator continued to draw remuneration equivalent to RP fees during liquidation and withdrew trust property from the liquidation estate without requisite authorization and documentation. Such unilateral appropriation and disregard of the statutory fee structure undermined the regulatory scheme designed to incentivize timely realization and constituted a breach of the liquidator's obligations. The DC concluded that these actions amounted to contraventions of Regulation 4(3), Section 208(2)(a) and (e) of the Code and the IP Regulations and Code of Conduct.

RP directed to deposit the amount drawn without authorization into the liquidation estate; continued drawing of RP fees during liquidation held to be contrary to law and actionable; restriction placed on accepting new assignments until deposit is made.

Duty to represent and act on behalf of the corporate debtor in judicial or arbitration proceedings - remand for further investigation and production of additional financial records - Allegation that an insurance claim sum was settled and handed over to a director during CIRP and whether the RP failed to protect the corporate debtor's interest by not preventing or detecting that transaction. - HELD THAT: - The DC observed that the matter involves examination of financial transactions and documentary records (bank statements, payment details, audited accounts and related documents). The available material on record was insufficient for the DC to form a final view. While the RP had taken certain remedial steps after discovery, the DC considered that further investigation and production of specified additional documents were necessary to determine whether there was a breach of duties under section 25(2)(b) and related provisions. Consequently, this aspect was not finally adjudicated on merits but referred back for re examination by the Board with directions to obtain and examine the listed documents.

Matter remanded for further investigation; Board to re examine the insurance claim related transactions after obtaining specified additional records.

Contents of notice for committee of creditors meeting and duty to supply agenda and relevant documents - professional diligence and standard of care expected of an insolvency professional - Whether the RP failed to furnish agendas and relevant documents along with notices for various CoC meetings in contravention of Regulation 21(3). - HELD THAT: - Regulation 21(3) requires the notice to contain the meeting agenda, list of matters to be discussed, issues to be voted upon and copies of relevant documents. The RP produced emails and physical delivery records showing that notices and agendas were circulated to CoC members prior to the meetings; meetings were attended by members representing an overwhelming voting share and material for agenda items (including resolution plans) was brought to the meetings as required. The DC found the documentary record satisfactory and concluded that the RP had furnished the agenda and documents in compliance with Regulation 21(3).

No contravention established; RP not liable for failure to furnish notices/agenda for the CoC meetings identified.

Final Conclusion: The Disciplinary Committee found certain lapses by the IP: (i) appointment of a third valuer at the CoC's insistence despite his own view that it was unnecessary, constituting abdication of authority and contravention of applicable provisions; and (ii) continuation of RP fees during liquidation and unauthorized withdrawals from the liquidation estate, contrary to the statutory fee regime - for which directions including deposit of amounts and suspension from accepting new assignments until compliance were issued. Other allegations (typographical error in the IM; non inclusion of assets; failure to furnish CoC agendas) were examined and not held to attract liability. The insurance claim transactions require further investigation and have been remanded to the Board for re examination upon production of specified financial records.

Refund of Cenvat credit under Rule 5 of CCR Rules, 2004 - registration of premises as prerequisite for refund - binding effect of High Court decisions on Revenue

Refund of Cenvat credit under Rule 5 of CCR Rules, 2004 - registration of premises as prerequisite for refund - binding effect of High Court decisions on Revenue - Refund of Cenvat credit under Rule 5 of CCR Rules, 2004 cannot be denied solely because the premises from which services were exported were not registered with the Revenue Department. - HELD THAT: - The Tribunal correctly followed earlier Division Bench decisions of this Court holding that Rule 5 of the CCR Rules, 2004 does not make registration of premises a necessary pre requisite for claiming a refund of Cenvat credit. The High Court observed that those coordinate bench precedents were binding on the Revenue unless set aside by a higher court or superseded by a subsequent legislative amendment, neither of which was shown. The assessees had in any event applied for registration, which was granted subsequently on 01.06.2009, and the present dispute related to the period prior to that date. The Revenue's contention that non acceptance of the earlier Division Bench judgments by the Department or failure to file appeals in the Supreme Court disentitled the Revenue to raise the same point was rejected, the Court emphasising the binding nature of its precedents and the absence of any change in law. [Paras 7, 8, 9, 10]

Appeal dismissed; refund cannot be refused merely for non registration of premises.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's order affirming that non registration of premises did not disentitle the assessee to refund of Cenvat credit under Rule 5 of the CCR Rules, 2004 is confirmed, having regard to binding Division Bench precedents and absence of any change in law.

Banking and other financial services - merchant banking services - reverse charge liability under Section 66A of the Finance Act, 1994 - invocation of extended period of limitation for fraud, collusion, wilful misstatement or suppression of facts - CENVAT credit and revenue neutrality - penalty under Section 78 of the Finance Act, 1994

Banking and other financial services - merchant banking services - reverse charge liability under Section 66A of the Finance Act, 1994 - Whether the services procured from foreign entities for placing Foreign Currency Convertible Bonds (FCCBs) fall within banking and other financial services/merchant banking services and attract reverse charge liability. - HELD THAT: - The Tribunal found that the services availed from overseas firms were in relation to floating FCCBs and, having regard to the SEBI definition of a merchant banker and the items enumerated under banking and other financial services, the services fall within merchant banking services and hence within the definition of banking and other financial services. Applying Section 66A read with the Service Tax Rules, the recipient (the appellant) was therefore liable to discharge service tax under the reverse charge mechanism. The Tribunal accepted the factual finding that the appellant had availed such services and that the amounts paid related to arrangement and issue-management activities connected with FCCBs, bringing them squarely within the taxable category. [Paras 10, 11]

Demand of service tax on the services for placing FCCBs under reverse charge is upheld on merits.

Invocation of extended period of limitation for fraud, collusion, wilful misstatement or suppression of facts - CENVAT credit and revenue neutrality - penalty under Section 78 of the Finance Act, 1994 - Whether the extended period of limitation and penalty could be invoked on the ground of suppression, and whether interest and penalty are sustainable. - HELD THAT: - The Tribunal examined the appellant's conduct and found no evidence of active suppression, fraud, collusion or wilful misstatement. It noted that had the appellant paid service tax earlier they could have taken CENVAT credit, so the delayed payment did not produce an evident advantage and was not motivated by an intention to evade tax. In view of the absence of intent to evade, the requirements for invoking the extended period of limitation were not satisfied. Consequently, demands falling beyond the normal limitation period, the interest claimed for the extended period and the penalty imposed under Section 78 were set aside. The Tribunal distinguished the facts from decisions where repeated notices and continued non-compliance supported invocation of extended limitation. [Paras 12, 13]

Invocation of extended limitation, the interest for the extended period and the penalty under Section 78 are not sustainable and are set aside.

Final Conclusion: The appeal is allowed: service tax liability on the services for placing FCCBs under reverse charge is affirmed on merits, but the demand insofar as it extends beyond the normal limitation period, together with the related interest and penalty under Section 78, is set aside for lack of evidence of suppression or intent to evade.

CENVAT credit on outward transportation of goods - place of removal - FOR destination sale (sale on FOR basis) - definition of input service - no CENVAT credit admissible for transport of goods to buyer's premises

CENVAT credit on outward transportation of goods - place of removal - FOR destination sale (sale on FOR basis) - definition of input service - Whether CENVAT credit is admissible on outward transportation of goods from the assessee's premises to the buyer's premises where the sale is on FOR destination basis. - HELD THAT: - The Tribunal rejected the appellant's contention that sale on FOR destination basis shifts the place of removal to the buyer's premises and thereby entitles the assessee to CENVAT credit on outward transportation up to the buyer's premises. The question was held to be no longer res integra and was decided in light of the Supreme Court's decision in CCE & ST v. Ultra Tech Cement, which held that CENVAT credit on goods transport agency services for transport from the place of removal to the buyer's premises is not admissible. The Tribunal noted the evolution of the definition of "input service" and the statutory meaning of "place of removal," but concluded that the Board's circular and the earlier approaches of lower authorities (allowing credit) are not tenable in view of the authoritative ruling of the Supreme Court. Respectfully following that precedent, the Tribunal held that even where ownership transfers at the buyer's premises under FOR sales, no CENVAT credit is allowable for outward transportation to the buyer's premises. [Paras 4, 6, 7, 8]

No CENVAT credit is admissible on outward transportation to the buyer's premises for sales made on FOR destination basis; the appeal is rejected.

Final Conclusion: Following the binding Supreme Court precedent in Ultra Tech Cement, the Tribunal held that outward transportation to the buyer's premises does not qualify for CENVAT credit even where sale is on FOR destination basis and dismissed the appeal.

Place of removal - transaction value - inclusion of transportation and transit insurance in assessable value - FOR/FADS sale and transfer of property on delivery - interpretation of 'place of removal' under Section 4(3)(c)(iii) of the Central Excise Act

Place of removal - inclusion of transportation and transit insurance in assessable value - FOR/FADS sale and transfer of property on delivery - Whether, for goods sold on FADS/FOR destination terms, the "place of removal" shifts to the buyer's premises and transportation and transit insurance charges from factory to buyer's premises are includible in the assessable value. - HELD THAT: - The Tribunal examined competing Supreme Court precedents and the statutory scheme governing valuation under Section 4. Roofit Industries took the view that where goods are sold on FOR destination basis, property and thus "place of removal" shifts to the buyer's premises. However, the subsequent decision in Commissioner of Customs & Central Excise, Nagpur v. Ispat Industries Ltd. clarified that the "place of removal" must be the seller's premises or a place relatable to the seller and that the buyer's premises cannot be treated as the place of removal. The Tribunal held that Ispat Industries is determinative and that the legal position prior to the intermediate period has been restored by statutory amendments; accordingly the cost of transportation and transit insurance from the seller's factory to the buyer's premises is not includible in the assessable transaction value where the place of removal remains the seller's premises. The Tribunal also noted that the amounts for freight and insurance were separately quantified and not in dispute, but that quantification did not alter the legal conclusion on valuation. [Paras 4, 5]

The buyer's premises cannot be treated as the place of removal; transportation and transit insurance charges from the factory to buyer's premises are not includible in the assessable value on the facts, and the appeal is allowed.

Final Conclusion: The Tribunal, following the Supreme Court's decision in Ispat Industries, allowed the appeal, held that the place of removal is the seller's premises (or a place relatable to it) and not the buyer's premises, and set aside the impugned order holding that freight and transit insurance to the buyer's premises are not includible in the assessable value.

Exemption for goods fabricated at site for use in construction work - pre-fabricated canopy supplied in CKD/SKD condition and on-site erection - fabrication at factory versus fabrication at site - reversal of Cenvat credit under Rule 6(3) of the Cenvat Credit Rules, 2004 - classification under Central Excise Tariff Heading 73089010 / 73089070

Exemption for goods fabricated at site for use in construction work - pre-fabricated canopy supplied in CKD/SKD condition and on-site erection - fabrication at factory versus fabrication at site - classification under Central Excise Tariff Heading 73089010 / 73089070 - Whether appellant's pre-fabricated canopies manufactured at its factory and cleared in knocked down condition for assembly/erection at petrol pump sites are entitled to exemption under Notification No. 3/2005-C.E. and Notification No.12/2012-C.E. - HELD THAT: - The Tribunal examined the nature of the appellant's operations and the scope of the exemption notifications which apply to goods fabricated at the site of construction work for use in such construction. The appellant's primary activity was found to be manufacturing and fabrication in its independent factory, with completed pre-fabricated structures taken in CKD/SKD condition to customers' sites only for assembly, erection and commissioning. The notifications were held to be intended for construction activities primarily undertaken at site (for example roads, flyovers, bridges) where only some components may be manufactured off-site, and not for cases where the principal work is factory manufacture followed by on-site erection. Applying that legal distinction, the Tribunal concluded that the factual matrix of the appellant's work does not fall within the relief envisaged by the site-fabrication notifications and therefore the exemption could not be extended to the appellant's supplies of pre-fabricated canopies. The Tribunal accordingly upheld the adjudicating authority's confirmation of central excise duty for the relevant periods. [Paras 12, 13]

Benefit of Notification No.3/2005-C.E. and Notification No.12/2012-C.E. denied; central excise duty confirmed on the pre-fabricated canopies for the specified periods.

Reversal of Cenvat credit under Rule 6(3) of the Cenvat Credit Rules, 2004 - maintenance of separate accounts for inputs used in dutiable and non-dutiable clearances - Whether the adjudicating authority was correct in dropping the demand for reversal of Cenvat credit under Rule 6(3) on the ground that the assessee maintained separate records/accounts for inputs used in manufacture of non-taxable goods/services. - HELD THAT: - The Tribunal reviewed the adjudicating authority's detailed examination of the assessee's financial statements and trial balance and noted that the authority, after meticulous perusal, concluded that separate records were maintained for inputs used in manufacture of non-taxable goods/services. The Department failed to produce concrete evidence to rebut the adjudicating authority's factual finding. Given the absence of contrary material and the reasoned conclusion recorded by the adjudicating authority, the Tribunal found no error in dropping the demand for reversal of Cenvat credit and dismissed the Department's appeal on this point. [Paras 15, 16]

Demand for reversal of Cenvat credit under Rule 6(3) dropped; Department's appeal against that finding dismissed.

Final Conclusion: Both appeals are dismissed: the appellant is not entitled to the site-fabrication exemption for pre-fabricated canopies manufactured in its factory and duty was confirmed for the stated periods; the adjudicating authority's finding that separate records were maintained (and consequent dropping of the Rule 6(3) Cenvat reversal demand) is upheld and the Department's challenge to that finding is dismissed.

Confiscation - appropriation consequential to seizure - property of confiscated goods vests with the Central Government - adjustment of tax/duty liability - confiscation under Rule 25 of Central Excise Rules, 2002 - duty demand under Section 11A/11AA/11AC of Central Excise Act, 1944 - separate show cause notices for distinct offences - double jeopardy

Confiscation - appropriation consequential to seizure - property of confiscated goods vests with the Central Government - adjustment of tax/duty liability - confiscation under Rule 25 of Central Excise Rules, 2002 - The confiscated cash amounting to Rs. 4,10,000/- cannot be adjusted towards the appellant's duty liability and must be treated as appropriated by the Government upon confiscation. - HELD THAT: - The Tribunal accepted the Commissioner (Appeals)'s exposition that confiscation effects appropriation consequential to seizure so that the property of the confiscated goods vests in the Central Government. Once confiscated, possession and ownership rest with the Government and the adjudicating authority cannot treat the confiscated cash as the appellant's property for adjustment against duty liabilities. The adjudication under the show cause notice for confiscation proceeded under Rule 25 of the Central Excise Rules, 2002; the consequence of confiscation is not conversion into a fund available to the assessee to meet demand. The Tribunal found no error in the impugned order rejecting the appellant's plea for adjustment of the confiscated amount against the already confirmed duty liability. [Paras 7, 8]

Confiscated cash is not available for adjustment against the appellant's duty liability; the order upholding confiscation is affirmed.

Separate show cause notices for distinct offences - duty demand under Section 11A/11AA/11AC of Central Excise Act, 1944 - double jeopardy - Confirmation of penalty and demand under the separate show cause notice for duty, alongside confirmation of confiscation under a different notice, does not amount to double jeopardy. - HELD THAT: - The Tribunal noted that two distinct show cause notices alleged different offences and invoked different legal provisions: confiscation under Rule 25 and recovery of duty with interest/penalty under provisions of the Central Excise Act. Even though both arise from the same transaction or acts, penalties or consequences flowing from separate statutory provisions and separate notices do not constitute double jeopardy. The Commissioner (Appeals)'s finding in this respect was endorsed. [Paras 7]

The imposition of consequences under both notices is not barred by double jeopardy; the findings upholding separate actions were sustained.

Final Conclusion: The Tribunal dismissed the appeal, upholding the Commissioner (Appeals) that the confiscated cash vests with the Government and cannot be adjusted against the appellant's duty liability, and that confirmation of confiscation alongside a separate duty/penalty demand does not constitute double jeopardy.

Clandestine removal - onus on Revenue - cogent evidence - eye estimation - job work documentation - afterthought - extended period of limitation - suppression of facts - willful suppression

Clandestine removal - onus on Revenue - cogent evidence - eye estimation - Demand for duty based on alleged clandestine removal founded on stock verification by eye estimation and statements cannot be sustained without cogent corroborative evidence and proof by the Revenue. - HELD THAT: - The Tribunal found that the adjudicating authority relied primarily on stock verification by eye estimation and on statements recorded during investigation to confirm clandestine removals. The Court reiterated that the burden to prove clandestine removal lies on the Revenue and such a serious charge must be established by strong, sufficient and positive evidence rather than presumptions or mere estimations. Decisions of coordinate benches were applied to hold that shortages determined solely by eye estimation, or by average weights without corroborative material, do not justify confirmation of demand. The Court also noted absence of evidence regarding procurement or consumption of raw materials, receipts of sale proceeds, excess production details, power consumption or other indicia which ought to have been investigated to substantiate clandestine manufacture and removal. [Paras 9, 10, 11, 12, 15]

Demand confirmed on the basis of presumed clandestine removal and eye estimation is unsustainable and is set aside.

Job work documentation - afterthought - Documents produced by the appellant showing that goods were sent to a job worker cannot be disregarded as mere 'afterthought' absent cogent proof that they were fabricated later. - HELD THAT: - The Tribunal observed that documents of prior dates, which the appellant submitted to explain the apparent shortage by showing dispatches to Sona Wires for job work, were on record and not denied as having been received. A mere assertion by the Department that such documents are an afterthought is insufficient; documentary evidence predating the investigation cannot be treated as fabricated without contrary cogent evidence. The material on file, including delivery challans in the name of the job worker and challans produced by the appellant, if co-related, falsified the Revenue's presumption of clandestine removal. [Paras 7, 8]

Documents explaining dispatch to job worker cannot be dismissed as afterthoughts in absence of cogent contrary evidence; reliance on them precludes confirmation of demand.

Extended period of limitation - suppression of facts - willful suppression - Extended period of limitation cannot be invoked on the basis of mere omission to declare job work; invocation requires willful suppression of facts, which was not established. - HELD THAT: - The Tribunal noted that the assessee had been filing monthly returns and that relevant facts were within the Department's knowledge. Apart from omission to file a specific declaration regarding job work, there was no material showing deliberate withholding of information. Relying on settled precedent, the Court held that mere failure to declare does not amount to willful suppression; there must be a positive act of concealment. Given that the appellant provided necessary details at the earliest opportunity in replies to the show cause notice, the Department was not justified in invoking the extended period of limitation. [Paras 13, 14, 15]

Invocation of extended limitation on grounds of suppression is not sustainable; demand confirmed beyond normal period cannot stand.

Final Conclusion: The adjudication confirming demand (including extended period invocation) was founded on presumptions, eye estimation and misinterpretation of statements while ignoring documentary explanations; the order under challenge is set aside and the appeal is allowed.

Service of show-cause notice - right to personal hearing - assessment passed without issuance of show-cause - remand for fresh consideration - classification of branch transfers and inter-State sales

Service of show-cause notice - right to personal hearing - assessment passed without issuance of show-cause - Validity of the assessment order passed without personal service of a show-cause notice and without affording personal hearing - HELD THAT: - The Court found that the impugned Assessment Order No.37296 dated 27.03.2020 does not show that any show-cause notice was served on the petitioner nor does it record particulars such as reference number or date; in these circumstances the 1st respondent could not lawfully pass the assessment order. Given that the assessment relates to April, 2015 to March, 2016 and the order was passed nearly four years after the expiry of that period, denial of personal hearing and absence of personal service were held to be impermissible procedural defects warranting quashing of the order. The High Court therefore set aside the assessment and directed fresh procedure to be followed: personal service of a show-cause notice (in person or by RPAD), a four-week period to file explanations with supporting material and an opportunity for personal hearing, after which the assessing authority must pass a reasoned order in accordance with law and communicate it to the petitioner. [Paras 6, 9, 10]

Impugned assessment order is set aside; 1st respondent directed to serve show-cause notice in person or by RPAD, grant four weeks to the petitioner to reply, afford personal hearing and thereafter pass a reasoned order.

Classification of branch transfers and inter-State sales - remand for fresh consideration - Treatment of branch transfers and inter State sales and consideration of documentary evidence (F Forms and C Forms) by the assessing authority - HELD THAT: - The petitioner asserted that branch transfers and inter State sales were incorrectly taxed as local sales and that documentary evidence in the form of F Forms and C Forms available on the online portal was not taken into account. On instructions, the State acknowledged procedural deficiencies in the assessment and did not contest the need for fresh consideration. The High Court did not adjudicate the merits of classification or the evidentiary weight of the portal generated forms; instead the Court remitted the matter to the 1st respondent for fresh consideration in the exercise of the reassessment/assessment process, with directions to serve notice, receive the petitioner's explanations and evidence, afford personal hearing and pass a reasoned order. [Paras 7, 8, 10]

Issue remitted to the 1st respondent for fresh consideration of classification and documentary evidence after compliance with the directions to serve notice, allow filing of explanations and supporting material, and afford personal hearing.

Final Conclusion: Writ petition allowed; assessment order dated 27.03.2020 set aside and matter remitted to the assessing authority with directions to serve show-cause notice in person or by RPAD, permit four weeks' reply with supporting material, afford personal hearing and thereafter pass a reasoned order in accordance with law.

Input Tax Credit - notice requirement for assessment - opportunity of personal hearing - natural justice - remand for fresh consideration - restoration of registration certificate

Input Tax Credit - notice requirement for assessment - opportunity of personal hearing - natural justice - remand for fresh consideration - Validity of the respondent's reversal of the petitioner's Input Tax Credit claims for the assessment years 2010-11 to 2014-15 where no separate notice or opportunity was given and reliance was placed on a notice for 2013-14 concerning a single claim. - HELD THAT: - The Court found that the respondent reversed the entire claim of Input Tax Credit for the assessment years 2010-11 to 2014-15 by relying on a notice dated 06.08.2014 which related only to reversal of one particular claim for assessment year 2013-14. The impugned proceedings were set aside because the petitioner was not afforded the requisite notice and opportunity, including details of cancellation of earlier sellers, cross-examination of earlier sellers and a personal hearing, as would be required by principles of natural justice before such reversal. In view of these defects, the Court concluded that the matter requires fresh adjudication rather than an upholding of the impugned orders. The Court directed that fresh notices be issued for all the assessment years in question, that the petitioner be allowed to file objections and be afforded personal hearings, and that the respondent thereafter decide the claims on merits based on materials and objections filed, within eight weeks from receipt of the order. [Paras 4, 5]

Impugned proceedings set aside; matter remitted to respondent to issue fresh notices for the stated assessment years, grant opportunity to file objections and personal hearing, and pass fresh orders on merits within eight weeks.

Final Conclusion: Writ petitions allowed to the extent that the impugned orders reversing Input Tax Credit claims for AYs 2010-11 to 2014-15 are quashed and the matter is remitted for fresh consideration after issuing fresh notices and affording opportunities of objection and personal hearing; petitions disposed of, no costs.

Evidentiary value of statements recorded under Section 67 of the NDPS Act - relevancy and conditions of Section 53A of the NDPS Act - requirement of independent corroboration for confessional statements/co-accused statements - unsafe to convict solely on uncorroborated confessional or office-recorded statements - duty to conduct meaningful investigation and secure documentary and electronic evidence - chain of custody and identity of sample sent to laboratory - discrepancy in sample weight as ground to doubt identity of sample

Evidentiary value of statements recorded under Section 67 of the NDPS Act - relevancy and conditions of Section 53A of the NDPS Act - requirement of independent corroboration for confessional statements/co-accused statements - Whether the conviction could safely be based on the accuseds' statements recorded under Section 67 of the NDPS Act and whether those statements, even if admissible, were sufficiently corroborated to sustain conviction. - HELD THAT: - The Court examined the legal position that confessional/incriminating statements recorded under Section 67 (and the limited relevancy scheme under Section 53A) are weak evidence and can only be acted upon after independent evidence is marshalled. The judgment applies established precedents requiring the court to first test the prosecution case excluding the confession and thereafter, if necessary, use the confession to lend assurance to other evidence. The Trial Court had convicted the appellants primarily on the basis of statements of the accused (notably Nitesh Patel) and treated those statements as corroborated by the statements of PW8 (Sagar Iyer) and PW18 (Mushahid Ali). The High Court found the statements doubtful on voluntariness (retractions, circumstances of recording, presence of interested third parties during recording) and noted inconsistencies between multiple statements of the same witnesses and between those statements and tangible material on record. The Court held that it was unsafe to convict solely on such office-recorded, uncorroborated, and self-serving statements and that the Trial Court erred in treating them as adequate corroboration. [Paras 92, 93, 112, 113, 114]

Statements recorded under Section 67 could not, in the facts of this case, be treated as voluntary and adequately corroborated; conviction could not safely rest on those statements.

Duty to conduct meaningful investigation and secure documentary and electronic evidence - unsafe to accept self-serving statements in absence of hard corroborative material - Whether the NCB carried out adequate investigation and whether gaps in investigation and failure to produce documentary/electronic evidence vitiated the prosecution's case. - HELD THAT: - The Court reviewed the investigative steps (or lack thereof) taken by NCB: limited enquiries, absence of follow-up with Mumbai and Chennai units despite having addresses and phone numbers, failure to obtain call records, non-production of documents allegedly seized by Chennai unit, non-examination of several relevant persons and employees, and failure to verify the provenance and handling of the parcel while it was detained by Fedex. These lacunae were held to be material because they left the prosecution's narrative unsupported by hard evidence and made the office-recorded statements intrinsically weak. The Court observed that where tangible evidence capable of corroborating statements exists but is not produced, it is unsafe to accept unsubstantiated statements as establishing the chain of events alleged by prosecution. [Paras 62, 80, 112, 118, 119]

Investigation was inadequate and failure to collect and produce material documentary/electronic evidence rendered the prosecution's case unsafe.

Chain of custody and identity of sample sent to laboratory - discrepancy in sample weight as ground to doubt identity of sample - Whether the sample tested by the Central Revenue Control Laboratory was conclusively shown to be the same as the seized substance, having regard to discrepancies in the recorded weights and handling. - HELD THAT: - The Court noted a material inconsistency between the weight of the sample as drawn by the seizing officer (two samples of 5 grams each) and the net weight noted in the laboratory test memo (5.5 grams). The seizing officer had not filled the weight column properly in the test memo and there was overwriting in one copy. Given the importance of continuity and identity of sample in NDPS prosecutions, the discrepancy raised doubt about whether the sample tested was the same as that seized. The Court treated this as an additional factor undermining the prosecution case. [Paras 31, 32, 112, 116, 117]

Discrepancy in sample weight and defects in documentation cast doubt on identity/continuity of the sample sent to the laboratory and undermined reliance on the laboratory report.

Final Conclusion: The Trial Court's conviction and sentence based principally on the accuseds' statements and weak, unverified corroboration could not be sustained; the appeals are allowed, the impugned conviction and sentence are set aside, and the appellants are acquitted and to be released forthwith if not required in any other case.