TaxTMI Updates e-Newsletter
Jul 17,2019

Works contract - composite supply - principal supply - permanency test - marketability test

Works contract - permanency test - marketability test - Supply whether constitutes a works contract (i.e., transfer of property in goods in execution of contract relating to immovable property). - HELD THAT: - The Authority examined the contractual scope (design, supply, installation, testing and commissioning of VRF indoor and outdoor units, piping, stands, cabling and related works) and the statutory definition of works contract. The question turned on whether the goods supplied become immovable by reason of their installation so as to attract the definition of works contract. Applying the tests of permanency and marketability drawn from precedents relied upon by the parties, the Authority found that the contract itself delineates distinct goods and services, and that the major elements (indoor/outdoor units, piping, stands, cables etc.) can be removed and supplied as goods. The installation and commissioning activities were held to be services supplied in conjunction with the goods rather than assimilation resulting in immovable property. On that basis the transaction was not a works contract within the meaning of the GST Act. [Paras 5]

The transaction is not a works contract (answered in the negative).

Composite supply - principal supply - If not a works contract, whether the transaction is a composite supply and, if so, the rate applicable based on the principal supply. - HELD THAT: - Having held that the arrangement does not constitute a works contract, the Authority considered whether the supplies are naturally bundled and constitute a composite supply. Noting that the goods (VRF indoor/outdoor units and ancillary items) are the major part of the contract and are necessary for the provision of installation, testing and commissioning services, the Authority held that goods and services are supplied as a combination in the ordinary course of business with the supply of goods being the principal supply. Accordingly GST must be paid at the rate applicable to the principal goods. The Authority examined tariff classification and concluded that the relevant air-conditioner units fall under the tariff entry attracting the rate specified in Schedule IV (air-conditioners under the relevant notification) and therefore the composite supply is taxable at the rate applicable to those goods. [Paras 5]

The transaction is a composite supply with supply of goods (air-conditioner units) as the principal supply; tax is payable at the rate applicable to those air-conditioner units (answered in the positive).

Final Conclusion: The Authority ruled that the contract is not a works contract but is a composite supply in which the supply of air conditioner units is the principal supply; GST is therefore payable at the rate applicable to those air conditioner goods.

Supply of goods - supply of services - job work - principal-job worker relationship - consideration not wholly in money - valuation under Rule 27 of the CGST Rules - open market value

Supply of goods - job work - principal-job worker relationship - Nature of the activity of converting bare shaft/beam (including old shafts, new shafts or forged bars supplied by the customer) into ready-to-use sugar mill roller - whether it is supply of goods or supply of services. - HELD THAT: - The Authority examined the factual matrix and applicable concept of 'job work' under the GST law and relevant jurisprudence. Although the applicant received inputs (old rollers, bare shafts, beams or forged bars) from customers and performed processes, the applicant also supplied substantial own materials (shells manufactured from its raw material) and applied significant skill, labour and inputs such that the final product (ready-to-use sugar mill roller) is a different commercial commodity. Drawing on the objective of the job-work concept and the Supreme Court dicta distinguishing minor additions in job work from cases where the job worker supplies major inputs and manufactures a new commodity, the Authority held that the applicant's activity does not fall within the protective scope of job work. Accordingly, the conversion activity amounts to manufacture yielding a new good and is therefore a supply of goods under the GST Act.

The conversion activity is a supply of goods.

Consideration not wholly in money - valuation under Rule 27 of the CGST Rules - open market value - Whether the cost (declared value) of the shaft/beam supplied by the customer is includible in the value of the supply for GST purposes. - HELD THAT: - The Authority found that the consideration for the supply of the finished roller is not wholly in money because inputs with declared value are supplied by the customer. Section 15(1) (transaction value as sole consideration) therefore did not apply and valuation had to be determined under the prescribed rules. Rule 27 of the CGST Rules governs supplies where consideration is not wholly in money. In the absence of demonstrable open market value or evidence of value of like goods, sub rule (b) applies: the value is the sum of the monetary consideration plus any known amount equivalent to the non monetary consideration at the time of supply. The applicant had received shafts/beams under Rule 55 challans with declared values; hence the declared cost of those inputs is includible in the value of the supply of the ready-to-use roller.

The declared cost of the shaft/beam supplied by the customer is includible in the taxable value of the supply.

Final Conclusion: The Authority ruled that the conversion of shafts/beams into ready-to-use sugar mill rollers is a supply of goods, not a service or protected job work, and that the declared value of customer supplied shafts/beams must be included in the value of the supply for GST valuation under Rule 27.

Release of detained goods on furnishing bank guarantee - adjudication under Section 129 of the Kerala GST Act, 2017 - consideration of e-way bill clerical mistakes in adjudication - expeditious disposal of pending proceedings

Release of detained goods on furnishing bank guarantee - Release of goods detained under the impugned proceedings subject to conditions - HELD THAT: - The petition seeking quashing of the show cause notice under Section 129 was not pressed; instead the petitioner sought interim relief for release of the goods on furnishing a bank guarantee. The Court declined to entertain the writ on merits at this stage but disposed of the petition by directing release of the detained goods on the condition that the petitioner furnishes a bank guarantee for the amount to be determined by the respondents and that the bank guarantee remain alive during the pendency of the Section 129 proceedings. This direction balances the interim commercial interest of the petitioner with the respondents' revenue protection. [Paras 3]

Goods released subject to petitioner furnishing and maintaining a bank guarantee for the amount determined by the respondents.

Adjudication under Section 129 of the Kerala GST Act, 2017 - consideration of e-way bill clerical mistakes in adjudication - Proceedings under Section 129 to be adjudicated afresh with consideration of the e-way bills produced - HELD THAT: - The Court directed that the pending proceedings under Section 129 shall be disposed of expeditiously by the respondents. While the Court did not decide the legality of the notice itself, it mandated that the second respondent must consider the e-way bills produced by the petitioner (Exts.P4 and P4(a)) and the alleged clerical mistakes therein while adjudicating the matter. The order therefore requires fresh consideration of the adjudicatory question with regard to the evidentiary weight of the e-way bills and any clerical errors shown therein. [Paras 3]

Section 129 proceedings to be adjudicated with consideration of the e-way bills and clerical mistakes; fresh decision to be rendered by the respondents.

Expeditious disposal of pending proceedings - Timeframe for disposal of the Section 129 proceedings - HELD THAT: - The Court directed that the proceedings under Section 129 be disposed of as expeditiously as possible and preferably within two months from the date of receipt of a copy of the order. This is an administrative direction intended to ensure timely adjudication of the matter by the respondents given the interim release of goods on bank guarantee. [Paras 3]

Respondents directed to conclude the proceedings preferably within two months from receipt of the order.

Final Conclusion: Writ petition disposed: detained goods ordered released on furnishing and maintaining a bank guarantee for the amount to be fixed by the respondents; Section 129 proceedings to be adjudicated afresh with consideration of the e-way bills and any clerical mistakes, and to be completed expeditiously, preferably within two months.

Rejection of books of account under Section 145(3) - Estimation in a best judgment assessment - Adoption of hypothetical gross profit rate based on past years' GP - Burden on assessee to prove genuineness and verifiability of payments - Appellate enhancement of assessment and requirement of opportunity under Section 251(2) - Interference under Section 260 A limited to perverse findings of fact

Rejection of books of account under Section 145(3) - Burden on assessee to prove genuineness and verifiability of payments - Validity of invoking Section 145(3) to reject books of account on the ground of non verifiability of weaving and manufacturing expenses - HELD THAT: - The Assessing Officer found that although sales and purchases were verifiable, substantial payments for weaving, repairing and finishing charges were made in cash and many recipients lacked PAN or complete addresses, preventing cross verification of payments and consumption. The CIT(A) and the Tribunal examined the records, noted unexplained cash payments, lack of verifiable stock records and inability to establish identity of weavers, and recorded that the assessee failed to discharge the burden of proving genuineness. On these factual findings the authorities invoked Section 145(3) and rejected the books. The High Court held that these are findings of fact based on material on record, not conjecture, and therefore the invocation of Section 145(3) and rejection of book results were justified. [Paras 24, 25, 28, 35, 39]

Rejection of books under Section 145(3) sustained; assessee failed to prove genuineness and verifiability of payments.

Estimation in a best judgment assessment - Adoption of hypothetical gross profit rate based on past years' GP - Legitimacy of enhancing the gross profit rate to 23.01% by the CIT(A) and its confirmation by the Tribunal - HELD THAT: - Once the books were rejected, the Assessing Officer proceeded to estimate GP (initially 15%). The CIT(A) after considering the assessee's past GP history compared GP rates of preceding years and adopted an enhanced hypothetical GP rate of 23.01% (average of two preceding years) to estimate income. The Tribunal upheld this approach as a factual estimation justified by previous years' figures and the unexplained increase in manufacturing expenses. The High Court treated the adoption of the enhanced GP rate as a conclusion of fact supported by material and evidence on record, noting that estimation in a best judgment assessment involves some degree of guesswork but must be an honest fair estimate; such factual findings do not call for interference absent perversity. [Paras 32, 33, 39, 40, 41]

Enhancement of GP to 23.01% by CIT(A) and confirmation by Tribunal upheld as a justified best judgement estimation.

Estimation in a best judgment assessment - Interference under Section 260 A limited to perverse findings of fact - Whether the additions were based on surmise and conjecture ignoring cogent material on record - HELD THAT: - The Court examined the record and found detailed reasoning recorded by AO, CIT(A) and Tribunal about non verifiability of payments, incomplete addresses, absence of PAN in many cases, and defective stock records. The authorities applied their mind to relevant material before estimating income. Relying on precedent, the Court reiterated that best judgment assessments inevitably involve estimation but must not be arbitrary; here the estimation was factually supported. As findings of fact, the additions could not be disturbed under Section 260 A unless perverse, which was not demonstrated. [Paras 24, 25, 35, 40, 43]

Additions were not based on mere surmise or conjecture and are sustainable; no interference under Section 260 A.

Burden on assessee to prove genuineness and verifiability of payments - Appellate enhancement of assessment and requirement of opportunity under Section 251(2) - Whether the assessee's claimed fall in GP rate (14.52%) being comparable to industry absolves it from the addition and whether the CIT(A) complied with procedure before enhancement - HELD THAT: - The Court noted the assessee's explanation attributing fall in GP to increased raw material cost and lower sale price, but found these not satisfactorily substantiated by verifiable records. The CIT(A) issued a show cause and considered replies and past GP history before enhancement; thus procedural requirement of opportunity before enhancement under Section 251(2) was complied with. The Court distinguished the relied upon precedent where individual affidavits of payees were produced, observing that here the assessee produced no comparable verifiable evidence. Consequently the assessee could not escape the addition merely by asserting industry comparability. [Paras 24, 31, 36, 39, 41]

Assessee's claimed GP of 14.52% does not preclude enhancement; CIT(A) afforded opportunity and acted within authority in enhancing assessment.

Final Conclusion: The High Court dismissed the appeal; the Tribunal's and lower authorities' factual findings upholding rejection of books under Section 145(3) and the estimation of income (including enhancement of GP to 23.01%) are sustained and do not warrant interference under Section 260 A.

Disallowance under Section 14A of the Income Tax Act - appliance of Rule 8D of the Income Tax Rules - recording of satisfaction by the Assessing Officer before invoking Rule 8D - mixed funds (interest-free and interest-bearing funds) - suo motu disallowance made by the assessee - prevention of double benefit

Disallowance under Section 14A of the Income Tax Act - suo motu disallowance made by the assessee - recording of satisfaction by the Assessing Officer before invoking Rule 8D - Whether disallowance under Section 14A can be sustained where the assessee has itself made a suo motu disallowance and the Assessing Officer has not recorded dissatisfaction prior to applying Rule 8D. - HELD THAT: - The Court held that the language of Section 14A and the safeguard prescribed requires the Assessing Officer to record satisfaction, having regard to the assessee's accounts, that the assessee's suo motu apportionment or disallowance is incorrect before invoking Rule 8D. The decision in Maxopp Investment Limited does not remove the requirement in sub-rule (1) of Rule 8D that satisfaction be recorded by the Assessing Officer; hence, mere existence of mixed funds does not automatically attract Rule 8D without the Assessing Officer recording such satisfaction. The Tribunal's finding that the Assessing Officer showed no dissatisfaction with the assessee's suo motu disallowance was noted and followed. [Paras 5]

The disallowance could not be sustained in the absence of the Assessing Officer recording the requisite satisfaction; the Tribunal's deletion of the disallowance was upheld.

Appliance of Rule 8D of the Income Tax Rules - mixed funds (interest-free and interest-bearing funds) - interpretation of Section 14A and Rule 8D in light of Maxopp Investment Limited - Whether Rule 8D would be automatically attracted in cases of mixed funds and whether the tribunal erred in deleting the addition made under Section 14A read with Rule 8D. - HELD THAT: - Relying on earlier precedents of this Court, it was held that Maxopp Investment Limited does not fundamentally alter the established interpretation that Rule 8D can be applied only after the Assessing Officer records satisfaction under sub-rule (1). The court rejected the submission that mixed funds alone render Rule 8D automatically applicable. Given the uncontroverted factual position that the Assessing Officer did not express dissatisfaction with the assessee's own disallowance, the Tribunal correctly deleted the addition under Section 14A read with Rule 8D. [Paras 5]

Tribunal's deletion of the addition under Section 14A read with Rule 8D is affirmed; Rule 8D is not automatically attracted merely by existence of mixed funds without the Assessing Officer's recorded satisfaction.

Final Conclusion: The Revenue's appeal is dismissed; the High Court affirms the Tribunal's deletion of the disallowance under Section 14A read with Rule 8D for A.Y 2010-11, emphasising that the Assessing Officer must record satisfaction before invoking Rule 8D and that mixed funds alone do not automatically attract Rule 8D.

Validity of notice under Section 148 issued to deceased - Jurisdictional notice - Section 159(2)(b) - proceedings against legal representative - Section 292B - curable procedural defects - Requirement to issue fresh notice to legal representative

Validity of notice under Section 148 issued to deceased - Jurisdictional notice - Section 159(2)(b) - proceedings against legal representative - Section 292B - curable procedural defects - Whether a notice under Section 148 of the Income Tax Act issued to a deceased person is a valid jurisdictional notice enabling continuation of assessment proceedings against the legal representative. - HELD THAT: - A notice under Section 148 is a jurisdictional precondition for exercise of power under Section 147. Section 159(2)(b) permits proceedings which could have been taken against the deceased, to be taken against the legal representative, but where the reopening proceeding itself was not initiated before the death, a valid notice under Section 148 must be issued to the legal representative. A notice addressed to a dead person is not in conformity with the statutory requirement that notice be issued to the assessee (or legal representative) and therefore, absent submission to jurisdiction by the legal representative, cannot sustain jurisdiction under Section 147. Section 292B, which saves proceedings from being invalidated for mere mistakes or defects, does not apply where the defect goes to the jurisdictional requirement of issuance of a valid Section 148 notice and where the legal representative has specifically objected and has not participated by filing a return in response to the impugned notice. In such circumstances the defect is not cured by Section 292B and the Assessing Officer may issue a fresh Section 148 notice to the legal representative (subject to limitation), but cannot continue proceedings on the basis of the notice addressed to the deceased. [Paras 15, 17, 18, 19]

Notice under Section 148 issued to the deceased is invalid where the legal representative has objected and not submitted to jurisdiction; proceedings based on such notice cannot be continued and a fresh notice must be issued to the legal representative if permissible.

Final Conclusion: Writ allowed. The notice dated 26.03.2019 under Section 148 and all proceedings pursuant thereto are quashed and set aside; respondent may, if permissible within limitation, issue fresh notice to the legal representative.

Cessation of liability under section 41(1) - Incriminating material seized under section 153C - Search and seizure as basis for reopening assessment - Reopening assessment without new material - Requirement of seized incriminating material to sustain additions after search

Cessation of liability under section 41(1) - Incriminating material seized under section 153C - Reopening assessment without new material - Deletion of the addition made on account of cessation of liability under section 41(1) for A.Y.2007-08. - HELD THAT: - The Tribunal found, and this Court agrees, that the Assessing Officer made the addition on the basis of an assumption that the liability had ceased without any contemporaneous material or documents recovered during the search proceedings that could be treated as incriminating material under the provisions relating to seizure. There was no record that the assessee was called upon to make payment against the alleged liability or that any seized material supported the conclusion that the liability had in fact ceased. In those circumstances treating the matter as a basis for making the addition would amount to reopening an assessment without any new or incriminating material. The Court further noted the ratio of the Apex Court in the cited authority holding that, in the absence of incriminating material seized under the search provisions, a notice or action premised on such seizure cannot be sustained. Applying that principle, the Tribunal correctly set aside the addition made under the cessation of liability head. [Paras 5, 6, 7]

The addition under the head of cessation of liability was rightly deleted; the Tribunal's order confirming deletion is lawful and sustainable.

Final Conclusion: Revenue's appeal is dismissed; no substantial question of law arises and the Tribunal's order deleting the addition on account of cessation of liability for A.Y.2007-08 is confirmed.

Disallowance under section 40A(3) - payment or aggregate of payments made to a person in a day - requirement of seized material for additions under section 153A - business expediency where payee lacks bank account - appellate authority's factual finding

Disallowance under section 40A(3) - payment or aggregate of payments made to a person in a day - appellate authority's factual finding - Deletion of addition made under section 40A(3) where payments to each payee in a single day did not exceed Rs. 20,000 - HELD THAT: - The Tribunal and the CIT(A) found as a factual matter that no single-day payment to any person exceeded the statutory limit of Rs. 20,000 prescribed by sub-section (3) to Section 40A for the Assessment Year 2011-12. The Assessing Officer's addition was based on books called for during assessment and not on incriminating seized material; furthermore, the Tribunal noted that a portion of payments were made in cash for business expediency where sellers lacked bank accounts. Given the statutory wording that disallowance applies only where payment or aggregate of payments to a person in a day exceeds the threshold, the appellate findings that the threshold was not crossed precluded any disallowance under section 40A(3). The High Court found no legal error in the Tribunal's appreciation of these facts and upheld the deletion of the addition. [Paras 4, 5]

Addition of Rs. 2,86,20,701 made under section 40A(3) was not sustainable and is deleted.

Requirement of seized material for additions under section 153A - disallowance under section 40A(3) - Relevance of seized material under section 153A to sustain additions sought under section 40A(3) - HELD THAT: - The Tribunal relied on precedent recognising that income or additions under proceedings initiated by search (section 153A) should ordinarily be founded on material found or seized during the search. In the present case, only a loose paper file was seized; the Assessing Officer's addition relied on books called for during assessment proceedings rather than on seized incriminating documents. The Tribunal observed that where additions are not based on seized material, the principle established by the cited authority supports deletion. The High Court accepted the Tribunal's reasoning and did not find error in declining to sustain the addition on that basis. [Paras 4, 5]

Addition was not justified on the basis of material seized during search and therefore could not be sustained under proceedings framed by section 153A.

Final Conclusion: The Tax Appeal is dismissed; the Tribunal's confirmation of the CIT(A)'s deletion of the disallowance under section 40A(3) for AY 2011-12 is upheld.

Admissibility of registered valuer's valuation in computing cost of acquisition - validity of reassessment proceedings without issuance of notice under section 143(2) - jurisdiction to initiate reassessment under section 147

Admissibility of registered valuer's valuation in computing cost of acquisition - Whether the assessing officer was justified in estimating the cost of acquisition of land at a rate lower than that reported by the registered valuer - HELD THAT: - The tribunal and the first appellate authority found that the assessing officer estimated the cost of land as on 01.04.1981 at Rs.30 per sq. mt. without discussing or confronting the assessee's report of the registered valuer, which had adopted Rs.99 per sq. mt., and that no reasonable basis or justification was recorded for rejecting the valuer's report. The High Court regarded this as a question of fact and found no error in the tribunal's conclusion that the AO was not justified in estimating the cost without considering or rebutting the registered valuer's report and that the CIT(A)'s direction to work out the cost adopting the valuer's figure was sustainable. [Paras 4]

Tribunal's and CIT(A)'s conclusion that the AO was not justified in estimating the cost at Rs.30 per sq. mt. without basis is affirmed; the AO's estimate set aside in favour of the valuation considered by the lower authorities.

Validity of reassessment proceedings without issuance of notice under section 143(2) - jurisdiction to initiate reassessment under section 147 - Whether the reassessment completed under section 147 read with section 143(3) is valid where no notice under section 143(2) was shown to have been issued or served - HELD THAT: - The CIT(A) examined the assessment record and found no office copy of any notice under section 143(2), no mention in the assessment order, no order-sheet entry, dispatch register entry, or server's diary entry establishing issuance or service. The CIT(A) held, applying settled precedent, that issuance and service of notice under section 143(2) is mandatory and its absence vitiates reassessment under section 147 r.w.s.143(3). The tribunal concurred, noting absence of any material to demonstrate issuance of the mandatory notice, and concluded that the AO had no jurisdiction to invoke section 147 and that the section 148 notice was invalid. The High Court found no error or perversity in these factual and legal conclusions and affirmed the view that the reassessment proceedings were invalid for want of the mandatory notice. [Paras 7]

Reassessment under section 147 r.w.s.143(3) is vitiated for failure to issue and serve the mandatory notice under section 143(2); the tribunal and CIT(A) findings to this effect are upheld.

Final Conclusion: Both questions raised by the Revenue were factual determinations upheld by the tribunal: (i) the AO was not justified in estimating the cost of acquisition without addressing the registered valuer's report, and (ii) reassessment was invalid for want of issuance/service of the mandatory notice under section 143(2). The revenue appeal is dismissed.

Allowability of R&D expenditure under Section 35(1)(iv) - current repairs treatment of replacement of dies and moulds under Section 31 - deduction of entry tax as allowable where payment is made under Section 43B - revenue v. capital characterisation of repair and replacement expenditure

Allowability of R&D expenditure under Section 35(1)(iv) - Expenditure related to advance given for R&D equipment was allowable under Section 35(1)(iv). - HELD THAT: - The Tribunal applied the precedent relied upon and, after analysing the facts, concluded that the payment in question qualified as R&D expenditure within the scope of Section 35(1)(iv). The High Court, having regard to the Tribunal's application of the earlier decision (cited in the order), found no error in that conclusion and rejected the Revenue's plea on this point. [Paras 28]

Tribunal was right to allow the R&D-related advance as deductible under Section 35(1)(iv); Revenue's challenge rejected.

Current repairs treatment of replacement of dies and moulds under Section 31 - revenue v. capital characterisation of repair and replacement expenditure - Expenditure on replacement of dies and moulds was revenue in nature and allowable as current repairs under Section 31 rather than a capital expenditure. - HELD THAT: - The Court examined the nature of dies and moulds as integral parts attached to machinery to obtain products to required specifications. Applying authoritative precedents on whether replacement expenditure is revenue or capital, the Court accepted that where replacement is to restore worn-out dies necessary for production and does not bring a new asset or new advantage, the expenditure falls within 'current repairs'. The fact that depreciation had earlier been claimed did not preclude treating the replacement as current repairs in the year under consideration. Reliance was placed on cited decisions and earlier pronouncements of this Court and the Apex Court to conclude that the Tribunal's view - treating the replacement costs as revenue expenditure under Section 31 - was correct. [Paras 29, 30, 31, 32]

Replacement of dies and moulds upheld as current repairs deductible under Section 31; Revenue's appeal on this aspect dismissed.

Deduction of entry tax as allowable where payment is made under Section 43B - Deduction of entry tax paid by the assessee was allowable without excluding it on account of subsequent set-off treatment against sales tax. - HELD THAT: - The Tribunal and the Court noted the Assessing Officer's admission that deduction for entry tax is allowable if payment is actually made. As entry tax had admittedly been paid by the assessee, the Tribunal correctly allowed the deduction; any adjustment of entry tax against sales tax liability did not negate the fact of payment. The Court endorsed the Tribunal's conclusion that the payment entitled the assessee to the deduction claimed. [Paras 33]

Tribunal correctly allowed deduction for entry tax actually paid; Revenue's challenge on verification of set-off and account treatment dismissed.

Final Conclusion: Following the Tribunal and the Court's application of precedent and factual findings, all three substantial questions raised by the Revenue were answered in favour of the assessee; the appeal is dismissed and the Tribunal's order is upheld.

Entitlement to deduction under Section 80P - Notices under Section 148 predicated on escaped income under Section 147 - Interim stay/abeyance of proceedings pending disposal of Special Leave Petitions - Limitation and procedural defences to reassessment notices

Entitlement to deduction under Section 80P - Notices under Section 148 predicated on escaped income under Section 147 - The ratio of the Division Bench holding that primary agricultural co-operative societies are entitled to the benefit of Section 80P applies to the writ petitioner and undermines the validity of the impugned Section 148 notices. - HELD THAT: - The High Court recorded that there was no dispute that the writ petitioner is covered by the earlier Division Bench decisions which interpreted Section 80P in favour of primary agricultural co-operative credit societies. Having examined the earlier orders, the Court concluded that the ratio in those Division Bench judgments would apply to the petitioner and therefore, insofar as the impugned notices seek to deny the benefit under Section 80P, they would ultimately stand defeated by the binding rationale of the Division Bench unless overturned by a higher court. The Court therefore treated the applicability of that ratio to the petitioner as settled for the purposes of the interim order. [Paras 11, 12]

The Division Bench ratio in favour of co-operative societies under Section 80P applies to the petitioner.

Interim stay/abeyance of proceedings pending disposal of Special Leave Petitions - Limitation and procedural defences to reassessment notices - Whether the impugned Section 148 notices should be kept in abeyance pending the outcome of Special Leave Petitions filed by the Revenue against the Division Bench orders. - HELD THAT: - Noting that Special Leave Petitions have been filed in the Supreme Court but that the Division Bench orders have neither been stayed nor reversed, the High Court exercised its discretion to preserve the status quo. The Court observed the Revenue's contention about limitation and the possibility that issuance of fresh notices may be time-barred if the Division Bench ratio is ultimately sustained; in light of these competing considerations, the Court directed that all impugned notices be kept in abeyance until the Special Leave Petitions are finally disposed of. The Court further provided the contingency mechanism: if the Supreme Court allows the SLPs in favour of the Revenue, the impugned notices would be revived and the assessee could raise all available objections including those relating to reasons and limitation; if the SLPs fail or are refused, the impugned notices shall stand set aside. [Paras 14, 15, 16, 18, 19]

All impugned Section 148 notices are kept in abeyance until the Special Leave Petitions filed in the Supreme Court are disposed of; revival or setting aside of the notices will follow the outcome of those SLPs.

Final Conclusion: The writ petition is disposed of by applying the Division Bench ratio on entitlement under Section 80P to the petitioner and directing that the impugned Section 148 notices be kept in abeyance pending final disposal of the Special Leave Petitions filed by the Revenue; the orders will be revived or set aside according to the outcome of those SLPs. No costs.

Reopening of assessment - failure to disclose fully and truly all material facts - change of opinion - Explanation 1 to section 147 - eligibility for deduction under section 80IB(10) - scope of Form No.10CCB and Rule 18BBB

Reopening of assessment - failure to disclose fully and truly all material facts - change of opinion - Validity of reopening assessment under section 148/147 for AY 2012-13 where the notice was issued beyond four years on the ground of alleged non-disclosure. - HELD THAT: - The Court examined whether the first proviso to section 147 is satisfied, i.e., whether income chargeable to tax had escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts. The Assessing Officer recorded reasons alleging that seven residential units were allotted to related parties or the same individual contrary to clauses (e) and (f) of section 80IB(10) and that the audit report was untrue. The Court found that the statutory audit form (Form No.10CCB under Rule 18BBB) does not require specific disclosure whether more than one residential unit in a project has been allotted to the same individual or related persons, and that no express column existed for such disclosure. Further, during original scrutiny the Assessing Officer had called for extensive details (including names, addresses, PAN, booking and payment data) which the assessee furnished; these particulars made it discernible that seven purchasers were spouses or the same individual. The Court held that all material facts necessary for assessing eligibility under section 80IB(10) were thus before the Assessing Officer during the original assessment. The Assessing Officer, despite having the material and opportunity, did not examine the claim specifically from the angle of clauses (e) and (f), and proceeded to accept the deduction. The Court treated the subsequent attempt to reopen the assessment after four years as based on a mere change of opinion by the revenue, not on any established failure of disclosure by the assessee. Reliance was placed on principles that where a scrutiny has processed a claim at length and accepted it, reopening for an angle not considered by the Assessing Officer amounts to impermissible change of opinion. Accordingly, Explanation 1 to section 147 could not be invoked to sustain the reopening where the material was on record and no deliberate concealment or falsehood by the assessee was found. [Paras 16, 17, 18, 20, 21]

Reopening of the assessment on 28.03.2018 is invalid as there was no failure by the petitioner to disclose fully and truly all material facts; the notice under section 148 is quashed.

Final Conclusion: The petition is allowed; the notice dated 28.03.2018 under section 148 reopening assessment for AY 2012-13 is quashed as the reopening amounted to a mere change of opinion and the statutory requirement for reopening beyond four years was not satisfied.

Scope and exercise of revisionary power as being 'prejudicial to the interests of Revenue' - Deduction under section 35D - amendment removing the requirement of being an 'industrial undertaking' - Treatment of exchange differences on capital assets under section 43A - Recognition of share of profits from joint ventures where such profits are separately assessed

Deduction under section 35D - amendment removing the requirement of being an 'industrial undertaking' - Entitlement of the assessee to amortisation deduction under section 35D for the residual years despite expenditure being incurred in AY 2008-09 when the assessee was not an 'industrial undertaking'. - HELD THAT: - The Finance Act, 2008 omitted the word 'industrial' w.e.f. 01/04/2009. The expenditure in question was incurred after 31 March 1970 and thus satisfies the statutory conditions for amortisation for the remaining part of the five-year period (covering AY 2008-09 to AY 2012-13). Consequently, the Assessing Officer's allowance of deduction for AY 2010-11 and 2011-12 was held to be proper and not prejudicial to the interests of Revenue; the Commissioner's exercise of revision under section 263 on this ground was unwarranted. [Paras 6]

The allowance of deduction under section 35D for AY 2010-11 and 2011-12 is upheld and the invocation of revisionary powers on this count is quashed.

Recognition of share of profits from joint ventures where such profits are separately assessed - Whether the Assessing Officer erred in accepting the assessee's exclusion of share of profits from joint ventures on the basis that such profits were separately assessed. - HELD THAT: - The Commissioner under section 263 presumed that the AO had not examined whether the JV profits were separately assessed, but did not call for information or provide the assessee an opportunity to produce evidence. The Tribunal found no basis to conclude that the AO's acceptance was mechanically prejudicial to Revenue where the assessee had stated that JV projects were separately assessed and returns were filed on that basis; the Commissioner should have sought verification rather than presumptively invoking revisionary powers. [Paras 8]

The invocation of section 263 on this issue is held to be unwarranted and is quashed.

Treatment of exchange differences on capital assets under section 43A - Validity of the Commissioner invoking revision under section 263 to disallow depreciation and to disallow notional/actual forex-related gains or losses treated by the assessee in its computation. - HELD THAT: - The assessee explained that exchange differences relating to capital assets were dealt with in accordance with section 43A, by adjusting the cost of the capital asset and by appropriate presentation in the profit and loss account; the Commissioner proceeded without verifying the submissions. The Tribunal held that the Commissioner acted hastily and that his action under section 263, without examining the assessee's explanations and records, was not justified. [Paras 10, 11]

Revision under section 263 on account of depreciation claim and notional/actual forex gains/losses is quashed for lack of proper verification.

Scope and exercise of revisionary power as being 'prejudicial to the interests of Revenue' - Whether the Commissioner was justified in invoking his powers under section 263 in the aggregate for AY 2010-11 and 2011-12. - HELD THAT: - The Tribunal examined each ground relied upon by the Commissioner and found them to be devoid of merit because the Commissioner either misconstrued the law (as to section 35D) or failed to verify facts or give the assessee an opportunity to produce records (as to JV profits and forex/depreciation issues). In the absence of demonstrable prejudice to Revenue arising from a lack of application of mind by the AO, the revisionary orders cannot be sustained. [Paras 12]

The orders passed under section 263 for AY 2010-11 and 2011-12 are quashed and the appeals are allowed.

Final Conclusion: The Tribunal quashed the Commissioner's orders passed under revisionary power for AY 2010-11 and 2011-12, upholding the Assessing Officer's allowance of deduction under section 35D for the relevant years and rejecting the invocation of section 263 in respect of joint-venture profit exclusion and treatment of forex-related depreciation/ notional gains for the two assessment years.

Unexplained sundry creditors - unexplained loan from a credit institution - application of section 69 to unrecorded investments - onus of proof for genuineness of liabilities - preponderance of probability - assessing officer's duty to verify and make enquiries using powers under the Act - estimation of net profit for trading concerns

Unexplained sundry creditors - application of section 69 to unrecorded investments - onus of proof for genuineness of liabilities - preponderance of probability - assessing officer's duty to verify and make enquiries using powers under the Act - Deletion of addition treating disclosed current liabilities of the business as undisclosed investment - HELD THAT: - The Tribunal held that amounts shown on the liability side of the balance sheet as 'Current Liabilities' are trading liabilities (labour, loading/unloading, truck freight and TDS) and not unrecorded investments within the scope of section 69. The assessee had produced schedule-wise bifurcation and ledger accounts evidencing purchases and corresponding outstanding liabilities; purchases and trading results were not disputed. The Assessing Officer applied the principle of preponderance of probability without making further enquiries or verifying the information supplied (for example, by issuing summons or seeking third party confirmations), and treated the entire balance as the assessee's own investment merely because complete books were not produced at the assessment hearing. The Tribunal found this approach to be speculative and contrary to settled law that when material is supplied and not pursued by the AO, the assessee may be deemed to have discharged its burden. Consequently, the addition on account of alleged undisclosed investment was unsustainable and deletion by the CIT(A) was upheld. [Paras 9, 10]

Addition of Rs. 1,70,73,828 shown as 'Current Liabilities' deleted; CIT(A) order upheld.

Unexplained loan from a credit institution - application of section 69 to unrecorded investments - assessing officer's duty to verify and make enquiries using powers under the Act - preponderance of probability - Deletion of addition treating disclosed secured loan from Himmatsingha Auto Finance as undisclosed investment - HELD THAT: - The Tribunal observed that the liability was to a recognized credit institution and the genuineness of transactions effected through banking channels was not impeached. The Assessing Officer disbelieved the transaction solely because bank statements were not furnished by the assessee, yet made no effort to verify the entries with the lender or to exercise available powers to make enquiries. The circumstances therefore did not fall within the ambit of section 69, which addresses unrecorded investments, and the AO's conclusion was held to be conjectural. The CIT(A)'s deletion of the addition was accordingly found to be justified. [Paras 11]

Addition of Rs. 11,00,772 shown as secured loan deleted; CIT(A) order upheld.

Estimation of net profit for trading concerns - Recomputation of net profit at 0.80% instead of 1% for arriving at taxable income - HELD THAT: - The Tribunal, following a Coordinate Bench decision in the assessee's own group matter for a preceding year, directed that the net profit rate for the assessee's trading business be determined at 0.80% of turnover and directed the Assessing Officer to rework the taxable net profit accordingly. The Tribunal treated the prior coordinate decision as binding for the facts and circumstances of the present case and ordered recomputation in accordance with that ratio. [Paras 15]

Cross-objection partly allowed; AO directed to determine net profit at 0.80% and recompute taxable income.

Final Conclusion: The Revenue's appeal is dismissed. The CIT(A)'s deletions of additions treating (a) disclosed current liabilities and (b) a secured loan as undisclosed investments are upheld for AY 2009-10. The assessee's cross-objection is partly allowed by directing recomputation of net profit at 0.80% of turnover and consequential recalculation of taxable income.

Addition as unexplained cash credit under section 68 - genuineness, identity and capacity tests for share application money - prospective applicability of amendment governing taxation of excess share premium

Addition as unexplained cash credit under section 68 - prospective applicability of amendment governing taxation of excess share premium - genuineness, identity and capacity tests for share application money - Whether the addition of part of the share premium to the assessee's income as unexplained credit was justified for assessment year 2011-12. - HELD THAT: - The Tribunal noted that the assessee received share application money and allotted shares on 31.3.2012 at face value with a stated premium. The Assessing Officer treated the excess over net asset value as unexplained credit and invoked the tests under section 68, also referring to provisions later introduced to address excess share premium. The Tribunal observed that the amendments and provisions directed at taxing excess share premium and prescribing fair market value were effective only from assessment year 2013-14 and therefore were not applicable to the assessment year before it. Applying the established tests of genuineness, identity and capacity of the investors, and following precedents including decisions of the Tribunal and High Courts cited (notably ACIT v. Goldmohur Design & Apparel Park Ltd. and ACIT v. Spectrum Coal and Power Ltd.), the Tribunal found that the AO had not shown that the shareholders were bogus or that the source remained unexplained for the relevant year. On that basis, and having regard to the retrospective inapplicability of the later amendment dealing with excess premium, the addition made under section 68 was held not to be in accordance with law and was deleted. [Paras 5, 7, 8]

Addition of part share premium as unexplained credit for AY 2011-12 was deleted.

Final Conclusion: Following authoritative precedents and holding that the amendment addressing excess share premium applied prospectively from AY 2013-14, the Tribunal sustained the assessee's explanation on genuineness and deleted the addition made under section 68; appeal allowed.

Validity of reassessment under section 263 - Explanation-2 to section 263 - Adequacy of inquiry in assessment proceedings - Long term capital gains exemption under section 10(38) - Permissible view by Assessing Officer and limits of review by Pr. CIT - Use of material from Investigation Wing in scrutiny selection

Validity of reassessment under section 263 - Explanation-2 to section 263 - Adequacy of inquiry in assessment proceedings - Whether the order of the Pr. CIT setting aside the assessment under section 263 as erroneous and prejudicial to the interests of the Revenue was sustainable. - HELD THAT: - The Tribunal found that the Assessing Officer had examined the claimed long term capital gains and supporting material at the assessment stage: written submissions, Demat account, broker documents, bank statements, share certificates, partnership account and cash-flow records were on the record and considered before completion under section 143(3). The case had been selected for scrutiny on the basis of information (including from the Investigation Wing) about suspicious long term capital gains, and that alone did not establish that no inquiry was made. While the assessment order itself was brief, the material on record demonstrated that enquiries had been raised and replied to, and the AO adopted a permissible view on the evidence. Explanation-2 to section 263 was therefore not attracted as there was not a case of no or inadequate enquiry rendering the assessment order erroneous and prejudicial to revenue. The Pr. CIT could not substitute her view for a plausible view taken by the AO without pointing to a demonstrable error of law or fact. [Paras 6]

Impugned order passed by the Pr. CIT under section 263 set aside and the assessment order restored.

Final Conclusion: The Tribunal allowed the assessee's appeal, set aside the Pr. CIT's order under section 263, and restored the assessment for A.Y. 2014-2015 on the ground that the Assessing Officer had made adequate inquiry and taken a permissible view; Explanation-2 to section 263 was not attracted.

Deduction of interest on sticky advances/Non Performing Assets under section 43D - Disallowance under section 14A read with Rule 8D in absence of exempt income

Deduction of interest on sticky advances/Non Performing Assets under section 43D - Binding effect of jurisdictional High Court decisions - Allowability of interest on sticky loans/NPA for a co operative bank by applying section 43D principles. - HELD THAT: - The Tribunal upheld the appellate authority's allowance of interest on sticky advances, following the rulings of the Hon'ble Bombay High Court in Commissioner of Income Tax v. Deogiri Nagari Sahakari Bank Ltd. and Principal Commissioner of Income Tax v. Solapur District Central Co op. Bank Ltd., which hold that co operative banks are eligible for deduction under section 43D in respect of interest on sticky advances/Non Performing Assets. In view of the binding law laid down by the jurisdictional High Court, the Revenue's grounds attacking the deletion were rejected. [Paras 5]

Grounds Nos. 1 to 3 dismissed; interest on sticky loans allowed in favour of the assessee.

Disallowance under section 14A read with Rule 8D in absence of exempt income - Validity of disallowance under section 14A read with Rule 8D where the assessee has not earned any exempt income in the relevant period. - HELD THAT: - The Tribunal affirmed the Commissioner (Appeals)'s deletion of the section 14A/Rule 8D disallowance on the ground that the assessee did not earn any exempt income during the relevant period. The appellate order was taken to be in consonance with the decision of the Hon'ble Delhi High Court in Cheminvest Ltd. v. CIT, which holds that no disallowance under section 14A is warranted in the absence of exempt income. Having found the facts undisputed and the legal position settled, the Tribunal declined to interfere with the deletion. [Paras 6]

Ground No. 4 dismissed; deletion of the section 14A/Rule 8D disallowance upheld.

Final Conclusion: The Revenue's appeal is dismissed and the order of the Commissioner of Income Tax (Appeals) is affirmed.

Recast of construction account - Rejection of books of account under Section 145(3) - Work-in-progress valuation and allocation of interest - Search assessments under Section 153A - Onus of proof in rejecting audited books - De novo adjudication on comparative analysis

Recast of construction account - Work-in-progress valuation and allocation of interest - Rejection of books of account under Section 145(3) - Onus of proof in rejecting audited books - Sustainability of additions made by AO by re-casting project-wise construction accounts and rejecting the assessee's audited books - HELD THAT: - The Tribunal examined the AO's re-computation of cost of sales, closing work-in-progress and allocation of interest which produced large year-to-year differences in net profit. The CIT(A) had found the AO's approach marred by erroneous assumptions, pick-and-choose adjustments and factual mistakes (including project-area and interest allocation errors) and had deleted the additions. The Tribunal observed that the dispute is essentially factual and that neither the assessment order nor the CIT(A)'s order contains a clear comparative working juxtaposing the AO's figures and the assessee's project wise computations. Given that the AO supplied detailed workings and the assessee also raised specific factual objections, the Tribunal held that the matter requires objective, fresh examination. The Tribunal therefore set aside the CIT(A)'s order and directed de novo adjudication by the CIT(A), calling for comparative analysis and relevant facts from the assessee and observing that proper opportunity must be afforded. The Tribunal also noted the general principle that rejection of audited books places a heavy onus on the assessing authority, but declined to decide that technical objection in the appeal without notice and further factual enquiry. [Paras 10, 11, 16]

Matter remanded to the file of the CIT(A) for fresh, de novo adjudication with directions to call for comparative project wise workings and give the assessee opportunity to produce relevant facts and explanations; Revenue's appeals allowed for statistical purposes.

Search assessments under Section 153A - Scope of adjudication in the cross objections challenging validity of assessments under Section 153A - HELD THAT: - The assessee raised legal objection that additions were invalid for want of incriminating material found in the search. At hearing the assessee fairly submitted that the objection to the validity of assessment under Section 153A was not sustainable for the impugned years and that ground was not pressed. The Tribunal accordingly treated the legal challenge as not pressed and dismissed the cross objection on that ground. [Paras 13, 14]

Cross objection ground challenging validity under Section 153A dismissed as not pressed (AY 2011-12).

Search assessments under Section 153A - Cross objections for AY 2012-13 on challenged additions and seized notings - HELD THAT: - For AY 2012-13 the assessee did not press the ground challenging the validity of additions under Section 153A, and also did not press the small addition based on seized notings. Both grounds were therefore treated as not pressed and dismissed. [Paras 19, 20, 21]

Cross objections in respect of AY 2012-13 dismissed as not pressed.

Final Conclusion: The Tribunal set aside the CIT(A)'s deletion of AO's additions based on re-cast construction accounts for AY 2011-12 and AY 2012-13 and remanded both matters to the CIT(A) for de novo adjudication with directions to obtain and compare project wise workings and other relevant facts and to afford the assessee an opportunity; Revenue's appeals allowed for statistical purposes and the assessee's cross objections were dismissed as not pressed.

Reliability of Chemical Examiner's test report - weight basis for determination of Fe content (Wet Metric Ton versus Dry Metric Ton) - burden on Department to rebut shipping bill declaration - admissibility and probative value of private laboratory reports - right to access test report and opportunity to cross examine (principles of natural justice) - application of CBEC circular on uniform procedure for calculating Fe content

Reliability of Chemical Examiner's test report - admissibility and probative value of private laboratory reports - burden on Department to rebut shipping bill declaration - Whether the Chemical Examiner's test report could be relied upon to deny the appellant the exemption claimed in the shipping bill, and whether the department had established that the declared Fe content was incorrect. - HELD THAT: - The Tribunal examined three competing test reports: two private laboratory reports (Load Port and Discharge Port) showing Fe content below 62% and a Chemical Examiner's report showing Fe content above 62%. The private reports, though detailed, were based on samples not drawn in the presence of Customs officers and therefore their authenticity and chain of custody were doubtful. The Chemical Examiner's report alone derived from a sample drawn in the presence of Customs officers and the exporter and thus had presumptive reliability; authority was noted that the Chemical Examiner's/Chief Chemist's report cannot be lightly brushed aside in favour of private reports. However, the Chemical Examiner's report was cryptic and omitted the methodology, moisture percentage, and whether the Fe figure was on dry or wet basis. Given the CBEC circular directing assessment on Wet Metric Ton basis and the material difference that moisture treatment produces, the Tribunal found the Chemical Examiner's report ambiguous. Because none of the three reports was free from material doubt (private reports for provenance; Government report for methodological clarity), the Department failed to conclusively establish that the appellant's declared Fe content was incorrect. [Paras 11, 12, 13]

The Chemical Examiner's report could not be relied upon conclusively and the Department did not sufficiently establish that the shipping bill declaration of Fe content was incorrect.

Right to access test report and opportunity to cross examine (principles of natural justice) - application of CBEC circular on uniform procedure for calculating Fe content - Whether denial of particulars of the Chemical Examiner's test report and failure to allow cross examination or re testing vitiated reliance on that report. - HELD THAT: - The Tribunal observed that the Chemical Examiner's report omitted critical information (methodology, moisture basis) which could have been clarified if the exporter had been furnished the report and afforded an opportunity to question the examiner or seek re testing of the spare sample. The CBEC circular requires determination on Wet Metric Ton basis or, where difficulty exists, reliance on tests that directly determine Fe content; this made methodological clarity essential. The absence of disclosure and of an opportunity to obtain clarification or re test contributed to the uncertainty surrounding the Government report and militated against treating it as determinative. [Paras 6, 11]

Denial of access to the full test particulars and opportunity for cross examination/re testing rendered reliance on the Chemical Examiner's report unsafe.

Final Conclusion: The Tribunal set aside the confirmation of differential export duty and allowed the appeal, holding that the Department failed to prove that the appellant's declared Fe content was incorrect and that none of the available test reports could be relied upon decisively; consequential benefits to the appellant were to follow.

Exemption to specified goods imported for 100% EOUs - Capital goods - Material handling equipments - Prior approval of the Board of Approval - Principles of natural justice - Extended period of limitation and requirement of suppression or mis-statement

Exemption to specified goods imported for 100% EOUs - Capital goods - Material handling equipments - Prior approval of the Board of Approval - Impugned order rejecting exemption claim set aside and matter remitted for fresh adjudication. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) did not adequately consider material documents and submissions relied on by the appellant, notably the procurement/movement certificate dated 29.10.2001 and subsequent communications regarding Board of Approval consideration. The notification confers duty exemption on capital goods and specified material handling equipment imported for use by 100% EOUs or with prior approval of the Board; whether the imported elevator falls within those categories and whether prior approval operated from date of import were matters which the adjudicating authority had to examine. The Tribunal also observed that the show cause notice did not allege 'suppression' or 'mis-statement' and that the extended period contention required proper consideration in that factual context. In view of these lacunae and because several cited decisions and submissions were not dealt with, the Tribunal declined to express any opinion on the merits and remanded the matter for fresh decision after addressing all submissions and authorities and following the principles of natural justice. The Tribunal directed expedition and specified that the adjudicating authority decide the matter within three months from production of certified copy of the order. [Paras 4, 5, 6]

Impugned order set aside; matter remanded to the adjudicating authority to decide afresh after considering the procurement certificate, the approvals and all submissions, with all issues kept open and decision to be rendered within three months.

Final Conclusion: The appeal is allowed by way of remand: the impugned appellate order is set aside and the matter is remitted to the adjudicating authority for fresh adjudication in accordance with law and after observing principles of natural justice; no opinion expressed on merits.

Transfer of pending company proceedings to the Tribunal - cessation of High Court jurisdiction under Section 434(1)(c) of the Companies Act, 2013 - Companies (Transfer of Pending Proceedings) Rules, 2016 - Rule 3 - transfer to the National Company Law Tribunal - disposal by transfer

Cessation of High Court jurisdiction under Section 434(1)(c) of the Companies Act, 2013 - This Court no longer retains jurisdiction to entertain the company application (CA 409 of 2009) and the application is struck off the list. - HELD THAT: - The court recorded the parties' concurrence that, by reason of the transitional provision in Section 434(1)(c) of the Companies Act, 2013, proceedings under the Companies Act, 1956 pending before High Courts stand transferred to the Tribunal. On that basis CA 409 of 2009 was struck off the list as this court no longer has jurisdiction to try and determine the company application.

CA 409 of 2009 struck off the list; High Court disclaims jurisdiction to entertain the company application.

Transfer of pending company proceedings to the Tribunal - Companies (Transfer of Pending Proceedings) Rules, 2016 - Rule 3 - transfer to the National Company Law Tribunal - disposal by transfer - Proceedings in CP 418 of 2011 with CA 33 of 2012 are to be transferred to the National Company Law Tribunal, Kolkata Bench. - HELD THAT: - Applying Section 434(1)(c) of the Companies Act, 2013 and Rule 3 of the Companies (Transfer of Pending Proceedings) Rules, 2016, the court directed the Registry to transfer CP 418 of 2011 with CA 33 of 2012 to the NCLT, Kolkata Bench. The transfer is to be effected observing all formalities within four weeks of communication of the order. The records in this court will be shown as disposed of by transfer in terms of the order.

CP 418 of 2011 with CA 33 of 2012 transferred to the National Company Law Tribunal, Kolkata Bench, to be effected by the Registry within four weeks; court records to show disposal by transfer.

Final Conclusion: The High Court declined to exercise jurisdiction over the company proceedings and ordered the transfer of the specified company petition and connected application to the National Company Law Tribunal, Kolkata Bench, with the Registry to complete the formal transfer and record disposal within four weeks.

Obligation under Section 30(2)(b) to provide minimum payment to operational creditors not less than liquidation value - Equitable treatment of similarly situated creditors - Prohibition of discriminatory distribution between financial and operational creditors - Modification and substitution of a resolution plan by the Appellate Tribunal to cure non-compliance

Obligation under Section 30(2)(b) to provide minimum payment to operational creditors not less than liquidation value - The approved resolution plan failed to satisfy the requirement of Section 30(2)(b) by providing Nil to the operational creditor, which was less than its liquidation value. - HELD THAT: - The Tribunal found that, as admitted in the record, the original resolution plan allocated no amount to the operational creditor though the liquidation value entitled the operational creditor to a minimum payment. Relying on the statutory mandate and the jurisprudence emphasising that operational creditors must not receive less than liquidation value, the Tribunal held that the approved plan contravened the obligation under Section 30(2)(b) of the I&B Code and therefore could not stand in its original form. [Paras 12]

The plan as approved was held to be in contravention of Section 30(2)(b) because it provided Nil to the operational creditor, which was below the liquidation value entitlement.

Equitable treatment of similarly situated creditors - Prohibition of discriminatory distribution between financial and operational creditors - The distribution in the approved plan that allotted 27.83% to financial creditors and Nil to the operational creditor was arbitrary and discriminatory and inconsistent with the principle of equitable treatment. - HELD THAT: - Applying the principle that similarly situated creditors must be treated equitably (as reflected in precedent and regulatory amendments), the Tribunal observed that the approved distribution gave materially different treatment to operational and financial creditors without justification. The Tribunal referred to authoritative pronouncements stressing equitable treatment and the amended regulatory framework which prioritises operational creditors' entitlements, and concluded that the original allocation was arbitrary and discriminatory. [Paras 13, 14]

The distribution was declared arbitrary and discriminatory and contrary to the requirement that operational creditors receive roughly comparable treatment to financial creditors.

Modification and substitution of a resolution plan by the Appellate Tribunal to cure non-compliance - Instead of rejecting the resolution plan, the Tribunal permitted modification/substitution of the plan in the manner proposed by the successful resolution applicant so as to cure the non-compliance and satisfy Section 30(2)(b). - HELD THAT: - Having found the original plan defective for failing to provide the operational creditor at least its liquidation value and for being discriminatory, the Tribunal accepted the revised distribution chart produced by the resolution applicant which allocated a specific sum to the operational creditor (reflecting its liquidation entitlement) and adjusted the shares of financial creditors correspondingly. The Tribunal held that modification of the approved plan to the revised distribution would meet the statutory test under Section 30(2)(b) and the equitable treatment requirement, and directed the resolution professional, committee of creditors and stakeholders to implement the modified plan. [Paras 14, 15, 16]

The Tribunal allowed substitution of the resolution plan in the revised form proposed, modified the impugned order and directed implementation of the revised distribution so as to comply with legal requirements; the appeal was allowed with no order as to costs.

Final Conclusion: The Tribunal held the originally approved resolution plan to be contrary to Section 30(2)(b) and to principles of equitable treatment because it allotted Nil to an operational creditor below its liquidation value; the plan was modified/substituted in the revised form proposed by the resolution applicant to allocate the operational creditor its due share and to cure the discriminatory distribution, and the impugned order and plan were modified accordingly.

Withdrawal of Section 7 application - withdrawal of CIRP under Section 12A - set aside of admission order - invalidity of actions pursuant to illegal admission - closure of CIRP proceedings - release of corporate debtor from moratorium

Withdrawal of Section 7 application - withdrawal of CIRP under Section 12A - set aside of admission order - Application filed under Section 7 of the I&B Code was permitted to be withdrawn and the admission order was set aside. - HELD THAT: - The Tribunal recorded that the Financial Creditor and the Corporate Debtor reached a settlement, the Committee of Creditors had been constituted and, in its third meeting, unanimously decided to move for withdrawal of the Corporate Insolvency Resolution Process and Form-FA was submitted. The Financial Creditor accepted withdrawal of the Section 7 petition. In view of the settlement and the consent to withdraw, the impugned order admitting the Section 7 petition dated 12th February, 2019 was set aside and the petition disposed of as withdrawn. The Adjudicating Authority was directed to close the proceeding accordingly. [Paras 2, 3, 4]

Section 7 application allowed to be withdrawn; admission order set aside and proceeding ordered to be closed.

Invalidity of actions pursuant to illegal admission - closure of CIRP proceedings - release of corporate debtor from moratorium - All actions taken pursuant to the admission were declared illegal and set aside; the Corporate Debtor was released from the rigour of the I&B Code and allowed to function through its Board. - HELD THAT: - Consequent to allowing withdrawal and setting aside the admission order, the Tribunal held that orders appointing any Interim Resolution Professional, declaration of moratorium and other consequential orders and actions taken pursuant to the impugned admission order (including advertisement for claims and actions by the Interim Resolution Professional) are illegal and are set aside. The Adjudicating Authority was directed to close the proceedings and the Corporate Debtor was released to function independently through its Board of Directors with immediate effect. As the Resolution Professional had already been paid his fees and incurred expenses had been met, no further directions were required. [Paras 5, 6]

Orders and actions consequent to the admission declared illegal and set aside; CIRP closed and Corporate Debtor released; no further directions as RP has been paid.

Final Conclusion: The appeal is allowed: the Section 7 petition is disposed of as withdrawn and the admission order set aside; all consequential orders and actions are declared illegal and set aside; the Adjudicating Authority shall close the proceedings and the Corporate Debtor is released to function through its Board; the Resolution Professional having been paid, no further order is required and there shall be no order as to costs.

Claim for refund of Cenvat credit - registration not mandatory for Cenvat credit/refund - SEZ units-services exempt from service tax - receipt and consumption of input services within SEZ - procedural lapse-non-mentioning of premises-can be condoned

Claim for refund of Cenvat credit - registration not mandatory for Cenvat credit/refund - procedural lapse-non-mentioning of premises-can be condoned - Denial of refund of Cenvat credit solely on ground that certain units within the SEZ premises were not registered. - HELD THAT: - The Tribunal held that rejection of the refund claim was based only on non-registration of other units though it was undisputed that all units formed part of the same SEZ premises, the input services were received and consumed for authorised operations, and service tax had been paid and the invoices evidenced such payment. Absent any provision in the Cenvat Credit Rules making registration a condition precedent to claim Cenvat credit or refund, denial on that ground is not sustainable. The decision of the Hon'ble Karnataka High Court in mPortal India Wireless Solutions (P) Ltd. (reproduced in the order) and subsequent Tribunal decisions were followed to conclude that non-mentioning of registered premises on the invoice is a procedural lapse which can be condoned and cannot defeat the substantive entitlement to refund where entitlement on merits is otherwise made out. The Tribunal also noted that services to units in an SEZ are exempt from service tax and emphasised that beneficial provisions should be interpreted liberally; therefore a mere procedural omission cannot justify denial of the refund claim. [Paras 3, 4, 5]

The impugned order dismissing the refund claim only on the ground of non-registration of certain units is set aside and the appeal is allowed; the procedural lapse is condoned and consequential relief granted.

Final Conclusion: Appeal allowed; order of Commissioner (Appeals) dated 28.03.2018 set aside and refund claim allowed with consequential relief, the non-registration/omission being a procedural lapse which does not defeat entitlement.

Demand and appropriation of service tax - interest on delayed payment of service tax - penalty for failure to deposit tax in time - penalty for delay in filing returns and late fees - penalty under tax delinquency provision - exemption as job work under Notification No. 25/2012 ST - inclusion of reimbursable expenses in taxable value - extended period of limitation by reason of suppression

Demand and appropriation of service tax - interest on delayed payment of service tax - Validity of demand and appropriation of service tax for the period April 2012 to March 2014 and entitlement to interest on delayed payment - HELD THAT: - The Tribunal found no dispute as to the admitted late payment of service tax for April 2012 to March 2014 and upheld the Commissioner's demand and appropriation of the amounts paid by the assessee. The Tribunal applied established principles that interest is chargeable on delayed payment and rejected the contention that deposit of tax before adjudication precludes interest. The decision follows precedent that self ascertainment or late deposit does not absolve liability to interest unless statute provides otherwise. [Paras 5]

Demand and appropriation of the service tax for April 2012 to March 2014 upheld and interest on the delayed payment sustained.

Exemption as job work under Notification No. 25/2012 ST - demand and appropriation of service tax - Whether services rendered to M/s Sigma qualify as job work exempt under Notification No. 25/2012 ST, and consequent demand for the period specified - HELD THAT: - The Tribunal examined the contract terms and the statutory scheme including the Contract Labour (Regulation & Abolition) Act, 1970. On the facts it held the agreement was a contract labour arrangement (contractor supplying and managing his personnel, responsibility for wages/ESI/PF, records, muster rolls etc.) and not a job work contract within the meaning of the exemption entry. The Tribunal rejected the authorities relied upon by the assessee as inapplicable to the post 1 July 2012 regime or to contract labour arrangements. Consequently the demand of service tax attributable to supplies to M/s Sigma was upheld subject to adjustment on a limited point of valuation. [Paras 5]

Demand in respect of services to M/s Sigma is upheld; however the computation is to be revisited for valuation adjustment as directed separately.

Inclusion of reimbursable expenses in taxable value - Whether canteen charges recovered from the assessee's own employees form part of taxable value of the service - HELD THAT: - The Tribunal accepted the assessee's submission that the canteen charges were recovered from the assessee's own employees and not recovered from the service recipient; thus such amounts are not consideration for the taxable service and cannot be added under Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006. The Commissioner's addition of canteen charges was therefore held to lack merit and the Tribunal directed that the taxable value be recomputed excluding those amounts. [Paras 5]

Canteen charges recovered from the assessee's employees are not to be included in the taxable value; demand to be recomputed accordingly (remand limited to recomputation).

Extended period of limitation by reason of suppression - Validity of invocation of the extended period of limitation for the demand - HELD THAT: - Having considered the conduct of the assessee and the fact that non payment in respect of supplies to M/s Sigma and related facts were not disclosed to the department until investigation, the Tribunal held that the extended period under the proviso to Section 73(1) was rightly invoked. The Tribunal relied on authorities establishing that when material facts are not disclosed and the department is unaware, invocation of extended limitation is justified. [Paras 5]

Invocation of the extended period of limitation upheld.

Penalty for failure to deposit tax in time - penalty for delay in filing returns and late fees - penalty under tax delinquency provision - Whether penalties under Sections 76, 77 and 78 and late fees under Section 70 are sustainable - HELD THAT: - The Tribunal treated the penalty regime as remedial and not requiring proof of mens rea for Sections 76 and 77. On the facts it upheld imposition of penalty under Section 76 for failure to deposit tax in time. However, having found that the ST 3 returns were filed within the extended dates communicated by the Board, the Tribunal set aside penalty under Section 77(2) and the late fees under Section 70(1). Further, because Section 78 expressly bars simultaneous application of Section 76 where Section 78 penalty is payable, and the Tribunal sustained Section 76 penalties, the penalties imposed under Section 78 were set aside. [Paras 5]

Penalty under Section 76 upheld; penalty under Section 77(2) and late fees under Section 70(1) set aside; penalty under Section 78 set aside because Section 76 penalty is upheld.

Final Conclusion: The appeal is partly allowed and partly dismissed: the Commissioner's demands for service tax and interest for April 2012 to March 2014 are upheld; the demand relating to supplies to M/s Sigma is upheld but remanded for recomputation after excluding canteen charges recovered from the assessee's employees; penalty under Section 76 is sustained while penalties under Section 77(2), Section 78 and late fees under Section 70(1) are set aside.

Waiver of penalty under Section 80 of the Finance Act, 1994 - Penalty under Section 77 and Section 78 of the Finance Act, 1994 - Reasonable cause for default - Bonafides and bona fide belief arising from pending litigation - Liability to service tax and interest upheld

Waiver of penalty under Section 80 of the Finance Act, 1994 - Reasonable cause for default - Bonafides and bona fide belief arising from pending litigation - Penalty under Section 77 and Section 78 of the Finance Act, 1994 - Whether the Commissioner was justified in waiving penalties under Section 80 in view of litigation before the High Court concerning levy of service tax on builders - HELD THAT: - The Tribunal accepted the Commissioner's finding that the respondent was a member of an association which had challenged the constitutional validity of the levy of service tax on builders before the Bombay High Court and that an interim order had restrained coercive steps. The respondent obtained registration and paid the major portion of the service tax with interest promptly after the High Court dismissed the writ petition, demonstrating bonafide conduct and absence of mala fide intention to evade tax. Given the prevailing bona fide doubt on the interpretation and validity of the levy during the relevant period, the Tribunal held that a reasonable cause existed for non-payment earlier and that the Commissioner was entitled to exercise discretion under Section 80 to waive penalties. The Tribunal did not disturb the confirmation of service tax liability and interest; its conclusion on waiver turned on the existence of genuine litigation-induced doubt and prompt compliance thereafter. [Paras 3, 5]

The Commissioner was justified in waiving the penalties under Section 80; the service tax demand and interest were upheld and the revenue's appeal is dismissed.

Final Conclusion: Appeal dismissed; the Commissioner's waiver of penalties under Section 80 was upheld by the Tribunal while the service tax demand and interest as confirmed below were maintained.

Treatment of waste or scrap as goods manufactured - application of Explanation (1) to Rule 6(1) of Cenvat Credit Rules, 2004 - maintenance of separate accounts for inputs used in manufacture of dutiable and exempted goods - imposition of 6% composition under Rule 6(3) for non-excisable/exempted goods cleared for consideration

Treatment of waste or scrap as goods manufactured - application of Explanation (1) to Rule 6(1) of Cenvat Credit Rules, 2004 - imposition of 6% composition under Rule 6(3) for non-excisable/exempted goods cleared for consideration - maintenance of separate accounts for inputs used in manufacture of dutiable and exempted goods - Whether zinc scrap arising as waste in the manufacturing process is to be treated as 'exempted goods manufactured' so as to attract the 6% composition demand under Rule 6 and the obligation to maintain separate accounts. - HELD THAT: - The Tribunal held that Explanation (1) inserted w.e.f. 01.03.2015, which deems non-excisable goods cleared for consideration to be treated as exempted goods, does not effect a corresponding amendment in sub rule (1) of Rule 6 so as to convert goods which merely emerge as waste in the manufacturing process into goods 'manufactured' by the assessee. Applying the settled principle that items not consciously manufactured but arising as process waste are not goods manufactured by the manufacturer, the Tribunal accepted the appellant's contention that zinc scrap, being waste arising incidentally in production of galvanised tubes and sheets, cannot be regarded as exempted goods manufactured by the appellant. The Tribunal further relied on precedent decisions of co ordinate Benches (including the decision in M/s. Bajaj Hindusthan Sugar Ltd.) which reached the same conclusion in analogous facts. On that basis the statutory obligation to maintain separate accounts and the resultant recovery at the fixed percentage under Rule 6(3) could not be sustained in respect of the zinc scrap cleared by the appellant.

Demand under Rule 6 (6% of value), and the consequential interest and penalties insofar as based on the same demand, cannot be sustained in respect of zinc scrap arising as process waste; the impugned orders are set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that zinc scrap being waste arising in the manufacturing process is not 'exempted goods manufactured' by the appellant and therefore the recovery under Rule 6 (including the 6% composition), and the consequential interest and penalties based thereon, cannot be sustained; the impugned orders are set aside with consequential relief as per law.

Clandestine removal - positive and sufficient evidence - confiscation and redemption fine - penalty imposition requires evidence against the specific unit

Clandestine removal - positive and sufficient evidence - penalty imposition requires evidence against the specific unit - Whether the duty demand, interest and penalties confirmed against the Ghaziabad unit for alleged clandestine removal were supported by admissible and sufficient evidence - HELD THAT: - The Tribunal found that the demand and penalties confirmed against the Ghaziabad unit were founded primarily on documents and statements collected at the Roorkee unit and on statements of the Managing Director and four employees of the Roorkee unit. No statements of employees of the Ghaziabad unit were recorded, no stock-taking at the Ghaziabad premises showed any discrepancy, and no independent corroborative evidence (such as transporter statements or examination of buyers) was produced by the Revenue to link the alleged clandestine clearances to the Ghaziabad unit. Documentary material (GR numbers, road permits and customer confirmations) was produced by the appellants to show dispatches from Roorkee, and the Revenue did not verify these facts with transporters or customers. The Tribunal reiterated the settled principle that clandestine removal must be established by positive and sufficient evidence and that penalties or duty demands cannot be sustained against a particular manufacturing unit in the absence of evidence specifically implicating that unit. Applying these principles to the facts, the Tribunal concluded there was no iota of evidence indicating that the clearances were effected from the Ghaziabad unit. [Paras 8, 9, 10, 11, 12]

The duty demand, interest and penalties confirmed against the Ghaziabad unit for alleged clandestine removal were set aside for want of positive and sufficient evidence; the appeals are allowed.

Final Conclusion: The impugned order confirming duty, interest and penalties against the Ghaziabad unit for clandestine removal (and related penalties/confiscation consequences) is set aside and the appeals are allowed.

Eligibility of input tax credit on outward transportation of goods up to the buyer's premises - place of removal - FOR sale basis and inclusion of freight in assessable value - proof of place of removal by purchase orders and buyer certificates - application of Roofit Industries principle on place of removal

Eligibility of input tax credit on outward transportation of goods up to the buyer's premises - place of removal - FOR sale basis and inclusion of freight in assessable value - proof of place of removal by purchase orders and buyer certificates - Whether the appellant is entitled to credit of service tax paid on outward transportation of goods up to the buyer's premises where sales were on FOR basis and freight was included in the assessable value. - HELD THAT: - The Tribunal examined the contractual documents and ancillary evidence and found that the purchase orders recorded sales on FOR basis and that certificates from buyers confirmed absence of separate freight payments. The authorities below had required a separate contract and held there was no evidence that freight and insurance were borne by the appellant; the Tribunal rejected that approach, observing that the terms of sale may be concluded in purchase orders and become a binding contract when accepted. Applying the principle in Commissioner of Cus. & C.Ex., Aurangabad v. M/s. Roofit Industries Ltd., the Tribunal held that where freight and insurance are borne by the seller and included in the assessable value, the place of removal is the buyer's premises. Consequently, the Tribunal applied the consistent line of decisions (including the Tribunal's decision in M/s. Ultratech Cement Ltd. and subsequent Tribunal authorities) that input credit of service tax on outward transportation is permissible only up to the place of removal; since the place of removal here is the buyer's premises, credit for outward transportation to the buyer's premises is allowable. The Tribunal therefore concluded that the disallowance of credit by the authorities below was without factual basis and unjustified. [Paras 6, 7, 8]

Disallowance of credit set aside; appellant entitled to credit of service tax on outward transportation up to the buyer's premises and the appeal is allowed with consequential reliefs.

Final Conclusion: On the facts and evidence (purchase orders showing FOR sale and buyer certificates denying separate freight), the Tribunal held the place of removal to be the buyer's premises and allowed the claimed credit of service tax on outward transportation up to the buyer's premises, setting aside the orders below.

Penalty under Rule 26 of the Central Excise Rules, 2002 - Admissibility of statements of co-noticee and third party under Section 9-D of the Central Excise Act - Corroboration requirement for oral statements - Exculpatory statements recorded under Section 14 of the Central Excise Act - Requirement of positive, tangible and sufficient evidence for imposition of penalty

Admissibility of statements of co-noticee and third party under Section 9-D of the Central Excise Act - Corroboration requirement for oral statements - Statements of co-noticee (Shri Sanjay Rathore) and supplier (M/s. Kanti Chemical) were inadmissible as evidence where those deponents were not examined by the Commissioner under Section 9-D, and oral statements require documentary corroboration. - HELD THAT: - The Tribunal found that the Revenue's case rested primarily on the statements of the co-noticee and the supplier. Those deponents were not examined by the adjudicating authority in terms of Section 9-D of the Central Excise Act, rendering their statements inadmissible as evidence. Further, the Court emphasised the settled principle that oral statements, standing alone, cannot be relied upon unless supported by documentary corroboration. With those statements excluded, the material said to implicate the appellant failed to survive evidentiary scrutiny. [Paras 9]

The statements of Shri Sanjay Rathore and M/s. Kanti Chemical could not be admitted or relied upon in the absence of examination under Section 9-D and documentary corroboration.

Penalty under Rule 26 of the Central Excise Rules, 2002 - Exculpatory statements recorded under Section 14 of the Central Excise Act - Requirement of positive, tangible and sufficient evidence for imposition of penalty - Imposition of penalty on the appellant under Rule 26 was set aside for lack of positive, tangible and sufficient evidence, given the appellant's exculpatory statements and absence of reliable incriminating material. - HELD THAT: - The adjudicating authority did not treat the appellant as the manufacturer and based the penalty on the inadmissible statements noted above. The appellant's statements recorded during investigation under Section 14 were exculpatory and were not rejected or discredited by the Commissioner. In the absence of any positive, tangible and sufficient evidence linking the appellant to the manufacturing or supply of the impugned product, the Tribunal found no justification to uphold the penalty imposed under Rule 26. [Paras 9, 10]

Penalty imposed under Rule 26 on the appellant was set aside for lack of admissible and sufficient evidence.

Final Conclusion: The appeal was allowed; the penalty imposed on the appellant under Rule 26 of the Central Excise Rules, 2002 was quashed for want of admissible and sufficient evidence, with consequential relief.

Validity of C-forms relied upon for inter-state sales - finality of assessment under the Central Sales Tax regime - exercise of suo motu review power under Section 74B(5) of the Delhi Value Added Tax Act, 2004 without issuance of show cause notice - entitlement to refund and interest where refund was directed by court subject to production of C-forms

Validity of C-forms relied upon for inter-state sales - finality of assessment under the Central Sales Tax regime - Whether subsequent cancellation of 'C' forms by the issuing authority, after verification and completion of assessment, justified reopening or review of the earlier nil assessment under CST and creation of demand against the assessee. - HELD THAT: - The Court found that the only ground for the impugned demand was the later cancellation by the Haryana authority of certain 'C' forms which had earlier been produced and verified by the AVATO and on which the nil assessment was finalised. The cancellation post-dated the assessment and was not shown to have invalidated the earlier verification or to have arisen from any defect attributable to the petitioner. It is unreasonable to saddle the petitioner with additional tax liability for no fault of its own. Once the 'C' forms were validly issued and verified and the assessment under the CST Act was finalised, the assessment could not be lawfully reviewed on the basis of the subsequent cancellation of those forms. [Paras 8]

Subsequent cancellation of the 'C' forms did not justify review of the earlier finalised CST assessment and consequent demand against the petitioner.

Exercise of suo motu review power under Section 74B(5) of the Delhi Value Added Tax Act, 2004 without issuance of show cause notice - Whether the AVATO could exercise the powers under Section 74B(5) DVAT Act to review the earlier order suo motu without issuing a show cause notice to the petitioner. - HELD THAT: - The Court observed that the AVATO purported to review the assessment order dated 5th July 2017 by invoking Section 74B(5) DVAT Act but did so suo motu and without issuing any show cause notice to the petitioner. Such an exercise, lacking procedural fairness and contrary to the principles upheld by this Court in earlier precedent, was unlawful. The Court treated the attempt to reopen the assessment without issuing a show cause notice as impermissible and therefore invalidated the reassessment and the demand created on that basis. [Paras 9]

The AVATO's suo motu review under Section 74B(5) DVAT Act without issuing a show cause notice was unlawful and could not sustain the demand.

Final Conclusion: The impugned order dated 15th December 2017 raising a demand against the petitioner is set aside; the refund due to the petitioner together with interest shall be credited to the petitioner's account within four weeks, and the writ petition is allowed.

Judicial review versus appellate jurisdiction - perversity - stay pending appeal - maintain status quo - limitation for preferring appeal

Perversity - judicial review versus appellate jurisdiction - Whether the writ petition could be entertained on the ground of perversity in the orders Exts.P6 and P6(a) instead of pursuing the statutory appellate remedy. - HELD THAT: - The High Court considered the petitioner's contention that Exts.P6 and P6(a) were vitiated by perversity in disallowing input tax credit and rejecting the refund claim. The Court observed that examining the merits on the materials before it would risk encroaching upon the appellate function, because the contentions raised fall squarely within the scope of the statutory appeal. While acknowledging that an arguable case exists, the Court declined to adjudicate the merits on writ jurisdiction and emphasised that judicial review must not substitute for the appellate process where disputed facts and legal conclusions require rehearing by the appellate authority. In view of these considerations the Court disposed of the writ petition without deciding the substantive controversy and directed the petitioner to invoke the appellate remedy. The Court, however, recognised the need to protect the petitioner's interest by permitting an interlocutory arrangement to preserve the status quo pending prompt appellate consideration.

Writ petition not decided on merits; petitioner granted liberty to prefer an appeal and directed to seek stay before the appellate authority rather than pursuing substantive relief by writ.

Stay pending appeal - maintain status quo - limitation for preferring appeal - Interim relief to be afforded while the petitioner prosecutes the statutory appeal. - HELD THAT: - As an exceptional protective measure, the Court permitted the petitioner to file an appeal within the period of limitation and to move the appellate authority for a stay of Ext.P6. The Court ordered that, for effective consideration of any stay application filed with the appeal, the parties shall maintain the status quo as on the date of this order in respect of Ext.P6 for a period of two months. The appellate authority was directed to dispose of any stay application before the expiry of the two month period so that the matter receives prompt adjudication by the competent forum.

Petitioner granted liberty to file appeal within the prescribed limitation and to seek stay; parties to maintain status quo for two months; appellate authority to decide the stay application before the two month period expires.

Final Conclusion: Writ petition disposed without adjudication on merits; petitioner permitted to prefer statutory appeal within the limitation period and to apply for stay, with a two month status quo directed and the appellate authority required to decide any stay application promptly.

Tax Deducted at Source - pre-assessment notice and duty to respond - TNVAT Rules - Rule 9 (Tax deduction at source) - availability of appellate remedy under Section 51 of TNVAT Act - exercise of writ jurisdiction in fiscal matters - relegation to alternate remedy - condonation of delay and Section 14 of the Limitation Act

Availability of appellate remedy under Section 51 of TNVAT Act - exercise of writ jurisdiction in fiscal matters - relegation to alternate remedy - Maintainability of the writ petitions in view of the availability of an alternate statutory remedy by way of appeal to the Appellate Deputy Commissioner under Section 51 of the TNVAT Act. - HELD THAT: - The Court applied the established discretionary rule that writ jurisdiction under Article 226 ought to be exercised with greater rigour in fiscal matters and where statutory remedial schemes exist. Having regard to the long line of authorities emphasising that alternate statutory remedies should ordinarily be exhausted in cases involving recovery of public dues, and noting that the factual controversies in these matters turn on documents and evidence which the assessing authority and the Appellate Authority are better placed to examine, the Court declined to interfere with the impugned assessment and attachment orders. The Court distinguished G.V. Cotton Mills on the basis that that decision involved documented objections actually considered by the enforcement wing, whereas in these petitions the petitioner largely failed to respond to pre-assessment notices. For these reasons the petitions were relegated to the appellate remedy under Section 51 of the TNVAT Act and the Court refused to set aside the impugned orders. [Paras 24, 25, 26, 27, 28]

Writ petitions not entertained; matters relegated to file appeals before the Appellate Deputy Commissioner under Section 51 of the TNVAT Act and impugned orders left undisturbed.

Pre-assessment notice and duty to respond - TNVAT Rules - Rule 9 (Tax deduction at source) - condonation of delay and Section 14 of the Limitation Act - Scope of relief as to filing of appeals, consideration of additional documents and applications for condonation of delay before the Appellate Authority. - HELD THAT: - The Court directed that if the petitioner files appeals under Section 51, the Appellate Authority shall apply the statutory conditions governing appeals. Any application for condonation of delay or for exclusion of time (including time spent in the present writ petitions) under the Limitation Act shall be considered by the Appellate Authority on merits. The Court observed that the Appellate Authority, being empowered to decide facts, may permit the petitioner to place additional documents (including proof of TDS compliance and other material under Rule 9) which were not before the original assessing authority and decide afresh in accordance with law. [Paras 28, 29]

If appeals are filed, the Appellate Authority to decide conditions, any condonation applications and admissibility of additional documents on their merits; original assessment orders to remain undisturbed in the meantime.

Final Conclusion: The writ petitions are dismissed on the ground of alternate remedy; the petitioner is relegated to file appeals to the Appellate Deputy Commissioner under Section 51 of the TNVAT Act, with liberty to seek condonation of delay and to place additional documents before the Appellate Authority, and the original impugned orders are not interfered with.

Input Tax Credit - deemed assessment - inspection by Enforcement Wing - mismatch in invoice numerical values - JKM Graphics Solutions principle - statutory appeal under Section 51 of the TNVAT Act as alternate remedy - writ jurisdiction in fiscal matters and rule of exhaustion of statutory remedies

Input Tax Credit - mismatch in invoice numerical values - JKM Graphics Solutions principle - Whether the impugned assessment order violated the JKM Graphics Solutions principle or otherwise warranted interference in writ jurisdiction on the ground that the dealer was wrongfully mulcted with tax on account of mismatches - HELD THAT: - The Court found that the Enforcement Wing had demonstrated the TNVAT site to the dealer and highlighted defective aspects relevant to eligibility for Input Tax Credit, and that the Assessing Officer applied his mind before passing the impugned order. The proposal for tax was reduced after that exercise, which demonstrates deliberation by the authority. The contention that numerical mismatches alone should have led the Assessing Officer to proceed against the sellers rather than the dealer was held to be a factual contention turning on evidence and comparison exercises already undertaken by the authority. Given these facts, the Court concluded that there was no shown violation of the JKM Graphics Solutions principle sufficient to justify interference in writ jurisdiction. [Paras 6, 10, 15, 17]

No violation of the JKM Graphics Solutions principle is found; the assessment decision stands open to challenge in the statutory appeal.

Statutory appeal under Section 51 of the TNVAT Act as alternate remedy - writ jurisdiction in fiscal matters and rule of exhaustion of statutory remedies - Whether the writ petitioner should be relegated to the alternate statutory remedy of appeal rather than being granted relief in writ jurisdiction - HELD THAT: - Applying the settled principle that writ jurisdiction in fiscal matters is to be exercised with restraint where an effective statutory remedy exists, and relying on the rigor required by precedents cited in the judgment, the Court held that the availability of an appeal under Section 51 of the TNVAT Act militates against exercise of extraordinary relief under Article 226. The Court observed that disputed factual questions and the adequacy of the assessing authority's comparison are matters fit for the appellate forum. The petitioner was informed that any delay in filing the appeal would have to be sought to be condoned before the Appellate Authority with reliance, if necessary, on the Limitation Act. [Paras 16, 18, 19]

The writ petition is dismissed and the petitioner is relegated to the statutory appeal under Section 51 of the TNVAT Act; all questions are left open for the Appellate Authority.

Final Conclusion: The High Court declined to interfere in writ jurisdiction, finding no breach of the JKM Graphics Solutions principle and relegating the petitioner to the statutory appeal under Section 51 of the TNVAT Act for resolution of factual and comparative issues; the writ petition is dismissed and all questions are left open to be raised before the Appellate Authority.

Alternate remedy rule - exercise of writ jurisdiction in fiscal matters - exceptions to alternate remedy (lack of jurisdiction, breach of natural justice, ineffective remedy) - Suresh Trading Company principle (purchases from registration-cancelled dealers) - M/s. JKM Graphics Solutions principle (mismatch) - statutory appeal under Section 51 of the TNVAT Act - condonation of delay and exclusion of time under Section 14 of the Limitation Act

Alternate remedy rule - exercise of writ jurisdiction in fiscal matters - exceptions to alternate remedy (lack of jurisdiction, breach of natural justice, ineffective remedy) - Whether writ petitions should be entertained despite availability of statutory appeal under the TNVAT Act - HELD THAT: - The Court applied the well established discretionary principle that availability of an alternate statutory remedy ordinarily militates against exercise of writ jurisdiction, with strict application required in fiscal matters. The Court reviewed the recognized exceptions permitting writ relief-lack of jurisdiction, violation of principles of natural justice, and where the alternate remedy is illusory or ineffective. On the material before it, the Court concluded that the respondent had proceeded by reference to the legal principles identified in higher authorities and that the petitioner's grievances, though alleging errors in the exercise, did not satisfy any of the exceptions warranting bypass of the statutory appeal. Consequently, the Court exercised its discretion to relegate the petitioner to the alternate remedy of appeal to the Appellate Deputy Commissioner under Section 51 of the TNVAT Act. The Court further observed that applications for condonation of delay and for exclusion of time under Section 14 of the Limitation Act may be urged before the appellate authority and will be decided on their merits, and that the appeal will be entertained subject to such applications where necessary. [Paras 11, 12, 14, 15, 16]

Writ petitions relegated to the statutory appeal under Section 51 of the TNVAT Act; directions that condonation and time exclusion pleas, if any, be considered by the Appellate Authority on merits; no costs.

Final Conclusion: The writ petitions are dismissed by relegation to the statutory appeal route to the jurisdictional Appellate Deputy Commissioner for assessment years 2014-2015 and 2015-2016; applications for condonation of delay or exclusion of time may be made and will be decided by the Appellate Authority on their merits.

Exemption for imported goods under inter state sale and privity of contract affecting liability under Section 5(2) of the Central Sales Tax Act - valuation of turnover in works contracts and minimum valuation rule under Rule 9(2A)(a) of the KVAT Rules - allowance of input tax credit and effect of invoices issued in Form 8B under Rule 58(10)

Exemption for imported goods under inter state sale and privity of contract affecting liability under Section 5(2) of the Central Sales Tax Act - Whether the turnover relating to equipments and consumables imported from abroad is to be exempted on the basis that the imports were in pursuance of an inter state/overseas supply contracted by the awarder and fall under Section 5(2) of the CST Act - HELD THAT: - The Tribunal had allowed exemption concluding there was privity of contract between the foreign supplier and the awarder (M/s KRL), and that movement of goods was pursuant to M/s KRL's purchase order; the assessing authority had reached the opposite conclusion, noting clearance by the assessee and denial of ownership by M/s KRL and absence of reimbursement of customs duty. The High Court found contradictions in the factual findings on reimbursement and observed that the assessing authority had not examined contracts, purchase orders and import documents; consequently the material on record requires re evaluation to determine (a) whether the imports were pursuant to a contract or purchase order of the awarder, (b) whether goods were transmitted and cleared in the awarder's name, and (c) whether customs duty was reimbursed by the awarder. For these reasons the Court set aside the Tribunal's acceptance of exemption and directed fresh consideration of the factual and legal aspects by the Tribunal after affording opportunity to both parties. [Paras 10]

Tribunal's finding of exemption in respect of imported equipments set aside and remitted to the Tribunal for fresh consideration and finding on the evidentiary questions identified.

Valuation of turnover in works contracts and minimum valuation rule under Rule 9(2A)(a) of the KVAT Rules - Whether the assessing authority rightly estimated turnover by applying Rule 9(2A)(a) of the KVAT Rules so that value of goods incorporated in works contracts is not less than purchase value including incidental charges - HELD THAT: - The assessing authority estimated turnover adopting Rule 9(2A)(a) (as inserted by SRO 385/2007) and the first appellate authority upheld that approach; the Tribunal, however, rejected the applicability of that Rule. Because the Court has remitted the question of whether imported goods are exempt to the Tribunal for re examination, it directed the Tribunal to also consider afresh the applicability of the relevant sub rule of Rule 9 (specifically the version applicable to the period and whether minimum valuation under Rule 9(2A)(a) is attracted) and decide the estimation issue on the correct legal provision and factual matrix. [Paras 11]

Estimation under Rule 9(2A)(a) set aside for fresh adjudication by the Tribunal; Tribunal to apply the relevant Rule afresh after rehearing.

Allowance of input tax credit and effect of invoices issued in Form 8B under Rule 58(10) - Whether input tax credit claimed by the assessee can be denied solely because the purchase invoices were in Form 8B (invoices intended where input tax credit is not required) and not in Form 8 - HELD THAT: - The assessing authority disallowed input tax credit on the ground that purchase bills were in Form 8B, which the Rules indicate is for transactions where input tax credit is not claimed; the Tribunal allowed the credit holding that valid evidence supporting the claim precludes denial. Given that the other disputed issues (import exemption and valuation) have been remitted for fresh consideration, the High Court left the input tax credit question open for the Tribunal to decide afresh in the context of the re examined factual and legal findings and after affording opportunity to the parties. [Paras 12]

Denial of input tax credit set aside for fresh decision by the Tribunal; the issue to be considered and decided afresh.

Final Conclusion: Revision petition allowed insofar as the three specified issues (exemption of imported equipments, applicability of Rule 9(2A)(a) for valuation/estimation of turnover, and denial of input tax credit on the ground of invoices in Form 8B) are concerned; the Tribunal's order is set aside on those points, the appeal is restored for fresh disposal after hearing both parties, and all other findings of the Tribunal are confirmed.

Enforcement of arbitral awards under Section 36 - Discretion to grant stay subject to conditions - Having due regard to provisions for stay of money decree - Applicability of Order XXVII Rule 8A CPC - Power to direct deposit of decretal amount under Order XLI Rule 5 - Equal treatment of parties under Section 18

Enforcement of arbitral awards under Section 36 - Applicability of Order XXVII Rule 8A CPC - Equal treatment of parties under Section 18 - Whether Order XXVII Rule 8A CPC operates so as to require unconditional stay of an arbitral award against the Government upon filing of an objection under Section 34, thereby rendering Section 36 ineffective in cases involving the State. - HELD THAT: - The Court held that the amended Section 36 of the Arbitration and Conciliation Act confers discretion to grant stay of an award 'subject to such conditions as it may deem fit' while requiring the Court to 'have due regard to' provisions for stay of a money decree under the CPC. The phrase 'have due regard to' is directory and does not import mandatory application of CPC provisions in a manner that would nullify the discretionary and self-contained scheme of Section 36. Order XXVII Rule 8A, inserted in 1937, exempts the Government from furnishing the specific security mentioned in Order XLI Rules 5 and 6 but does not oust the Court's power to impose conditions, including equitable measures, when granting stay under Section 36. The Arbitration Act, read with Section 18, mandates equal treatment of parties and does not provide special treatment to the Government in stay applications; reliance on an archaic rule framed for the Crown cannot override the object and scheme of the Arbitration Act. Consequently, Rule 8A cannot be read to produce an automatic or unconditional stay of an arbitral award merely because the award debtor is the State. [Paras 16, 17, 18, 24, 26]

Order XXVII Rule 8A CPC does not entitle the Government to an automatic or unconditional stay of an arbitral award; Section 36 governs and requires discretionary consideration consistent with equal treatment of parties.

Power to direct deposit of decretal amount under Order XLI Rule 5 - Applicability of Order XXVII Rule 8A CPC - Whether the Court, notwithstanding Order XXVII Rule 8A's exemption from furnishing security, may direct deposit of the decretal/awarded amount or part thereof as a condition for granting stay under Section 36. - HELD THAT: - The Court agreed with the Full Bench of the Calcutta High Court that Rule 8A only exempts the Government from furnishing the specific security required by Rules 5 and 6 of Order XLI and does not preclude the Appellate Court from exercising equitable discretion to direct full or part deposit of the decretal amount under Order XLI Rule 5(5). Historical and textual analysis shows Rule 8A predates insertion of Rule 5(5) (1977) which empowered courts to require deposit; there was no subsequent amendment to Rule 8A to exempt governments from such deposits. Thus, even if Rule 8A is assumed applicable, it does not bar the Court from directing deposit as an equitable condition for stay and does not mandate unconditional stay in favour of the Government. [Paras 19, 20, 21, 27]

The Court may direct deposit (full or part) of the decretal/awarded amount as a condition for granting stay; Rule 8A does not disable the Court from imposing such a condition.

Discretion to grant stay subject to conditions - Having due regard to provisions for stay of money decree - Whether the unconditional stay of the award granted by the Calcutta High Court is sustainable. - HELD THAT: - Applying the foregoing principles, the Supreme Court found that the Calcutta High Court's order of unconditional stay could not be sustained because Section 36 requires that stay, if granted, be subject to such conditions as the Court may deem fit and with reasons to be recorded, having due regard to CPC provisions. An unconditional stay in the facts of this case amounted to effectively restoring the pre-amendment regime that produced automatic suspension upon filing of Section 34 objections, contrary to the object of the 2016 amendment and the Law Commission's recommendations. The Court therefore quashed the unconditional stay and restored the executing court's order which had attached the awarded amount, leaving it open for the award-holder to pray for release in accordance with that order. [Paras 15, 16, 18, 24, 28]

The unconditional stay granted by the High Court is quashed; the executing court's order attaching the awarded amount is restored and the award-holder may seek release in accordance with that order.

Final Conclusion: The Supreme Court held that Section 36 of the Arbitration Act governs enforcement and grants the Court discretion to stay an award 'subject to such conditions as it may deem fit' while only 'having due regard to' CPC provisions; Order XXVII Rule 8A CPC does not entitle the Government to an automatic or unconditional stay nor preclude the Court from directing deposit of the awarded amount. The Calcutta High Court's unconditional stay was quashed and the executing court's attachment order restored.

Leave to appeal against acquittal - Section 138 of the Negotiable Instruments Act - Admission regarding handing over of cheque - Prior complaint evidencing blank-signed cheques - Concurrent findings of trial court

Leave to appeal against acquittal - Concurrent findings of trial court - Leave to appeal against the trial Court's judgment of acquittal under Section 138 of the Negotiable Instruments Act was refused. - HELD THAT: - The High Court declined to grant leave to appeal after recording that the trial Court had positively found material contradictions and admissions adverse to the appellant. The trial Court's findings included the appellant's admission that the cheque in question was handed over to him on 14/15.07.2016, whereas the earlier complaint between the parties bore the date 30.03.2016, and that a report in the prior litigation (Ex.D1) averred that various blank-signed cheques of the complainant were in possession of the accused and others. Those concurrent findings - relating to the timing of handing over the cheque and the contents of Ex.D1 - were treated as significant and dispositive by the High Court, which found no ground to interfere with the acquittal or to grant leave for further appeal.

Leave to appeal dismissed.

Admission regarding handing over of cheque - Prior complaint evidencing blank-signed cheques - The trial Court's factual findings about the sequence of events and the existence of a prior complaint/report showing blank-signed cheques were accepted by the High Court as determinative. - HELD THAT: - The High Court relied on the trial Court's positive findings that (a) the appellant admitted receipt of the cheque on dates subsequent to the earlier complaint, and (b) Ex.D1 in prior proceedings contained averments that the complainant's blank-signed cheques were with the accused. These factual findings were held to undermine the appellant's case and persuaded the High Court that there was no arguable ground warranting grant of leave to appeal against the acquittal under Section 138.

Findings of fact recorded by the trial Court accepted; no leave to appeal.

Final Conclusion: The High Court dismissed the petition for leave to appeal against the acquittal under Section 138 NI Act, accepting the trial Court's concurrent findings regarding the appellant's admission on handing over the cheque and the prior complaint's averments about blank-signed cheques, and found no ground to grant leave.