TaxTMI Updates e-Newsletter
Jul 19,2021

Classification of goods by common parlance - Classification by predominant ingredients - Papad, by whatever name it is known, except when served for consumption - HSN 1905 - preparations of cereals, flour or similar products (papad) - Shape and size not material to classification as papad

Classification of goods by common parlance - Classification by predominant ingredients - Papad, by whatever name it is known, except when served for consumption - Shape and size not material to classification as papad - Classification of the applicant's proposed products (Puripapad and unfried papad variants) under the HSN as papad - HELD THAT: - The Authority examined the composition and manufacturing process of the products and applied the tests of ingredient predominance and common parlance. The goods consist principally of cereal/pulse flours with customary papad ingredients (salt, oil, papadkhar, spices), are processed into thin, wafer like dough sheets which require roasting or frying before consumption, and are not served ready for immediate consumption. Notification entry No. 96 of Notification No. 02/2017 CT (Rate) describes the relevant item as "Papad by whatever name it is known, except when served for consumption", supporting a classification that embraces varieties of shape and nomenclature. Reliance was placed on precedent endorsing the common parlance and predominant ingredient tests and on decisions holding that differing shapes or ingredients do not prevent goods from being classified as papad where their characteristics, use and market identity correspond to papad. The Authority therefore concluded that products made by the described process and having the stated composition are papad for tariff purposes and not excluded by difference of shape or size. [Paras 11, 12, 13, 14, 15]

The subject goods (Puripapad and the unfried papad variants described) are classified under HSN 19059040 (Papad).

Final Conclusion: The Advance Ruling classifies the applicant's described products as papad (not served for consumption) and directs classification at HSN 19059040.

Interim restraint on investigative scope - direction to confine inquiry to specific project - stay on passing of final order - notice and interlocutory filing directions

Direction to confine inquiry to specific project - stay on passing of final order - interim restraint on investigative scope - Respondents' power to continue investigation generally and NAPA's power to pass a final order during the interim - HELD THAT: - The Court granted interlocutory relief restricting the respondents' investigative activities to the Aman Vilas project only and directed that the National Anti-Profiteering Authority shall not pass any final order until the next date of hearing. This restraint is administrative and interim in nature, imposed pending adjudication of the petitioner's broader contentions (including challenges to notices and constitutional pleas). The order confines the scope of enquiry by respondents and preserves the petitioner's position until further orders of the Court.

Respondents shall confine their inquiry to the Aman Vilas project and NAPA is directed not to pass any final order until the next date of hearing.

Notice and interlocutory filing directions - Procedural directions for service and filing of affidavits pursuant to issuance of notice - HELD THAT: - The Court issued notice on the respondents, accepted service by counsel, and directed respondents to file a counter-affidavit within four weeks with liberty for the petitioner to file a rejoinder before the next hearing. The order also granted an exemption application and directed immediate uploading and circulation of the order. These are interlocutory procedural directions to regulate the conduct of the proceedings pending final adjudication.

Notice issued; respondents to file counter-affidavit in four weeks; rejoinder, if any, to be filed before the next date; exemption application allowed subject to exceptions.

Final Conclusion: Interim order restricting the respondents' enquiry to the Aman Vilas project and restraining NAPA from passing any final order was granted; notice issued and standard interlocutory filing directions were given. The substantive challenges, including constitutionality and merits of the notices, remain pending for further hearing.

Constitutional validity of Section 2(6) of the Integrated Goods and Services Tax, 2017 (export of services) - taxability of amounts received in convertible foreign exchange for onshore and offshore services as export of services - clerical amendment to writ petition - dismissal of stay application for absence of impugned order and vague allegations

Clerical amendment to writ petition - Amendment of the writ petition to correct inadvertent clerical references to the statute and terminology. - HELD THAT: - The Court accepted that unamended text of the petition reproduced an earlier form of the provision and at times misdescribed the IGST Act as the CGST Act. As these errors were clerical and the petition was at an inception stage, the application for amendment was allowed and the amended writ petition was taken on record. Notice in respect of the amended petition was directed to be issued to the respondents.

Application for amendment allowed; amended writ petition taken on record and notice issued.

Constitutional validity of Section 2(6) of the Integrated Goods and Services Tax, 2017 (export of services) - taxability of amounts received in convertible foreign exchange for onshore and offshore services - Invocation and issuance of notice on the writ petition challenging Section 2(6) of the IGST Act and the petitioner's claim that amounts received in convertible foreign exchange constitute export of services not taxable under the IGST Act. - HELD THAT: - The petition seeks declaration that receipts in convertible foreign exchange from foreign entities for onshore and offshore activities fall within the course of export of services and are not subject to IGST. The Court issued notice to the respondents, permitted them to file counter affidavits within four weeks and directed that rejoinders, if any, be filed before the next date of hearing. The matter was listed for further hearing on the specified date.

Notice issued and pleadings directed; matter listed for further hearing.

Dismissal of stay application for absence of impugned order and vague allegations - Application for interim stay was dismissed for want of an impugned order and on account of being founded on vague and general allegations. - HELD THAT: - The Court observed that no impugned order was annexed to the writ petition and that the stay application relied on vague and general assertions. For these reasons the application for stay was dismissed and the order directed to be uploaded and emailed to counsel.

Stay application dismissed for absence of impugned order and vagueness of allegations.

Final Conclusion: The Court allowed the petitioner's clerical amendment and took the amended writ petition on record, issued notice on the constitutional challenge to Section 2(6) of the IGST Act with directions for filing of affidavits and listed the matter for further hearing, and dismissed the interim stay application for lack of an impugned order and vague allegations.

Revocation of cancelled registration - withdrawal of appeal - disposal of appeal as withdrawn - issuance of REG-22

Revocation of cancelled registration - issuance of REG-22 - withdrawal of appeal - Allowance of appellant's request to withdraw the appeal following revocation of the cancelled GST registration by issuance of REG-22. - HELD THAT: - The appellant filed the appeal against cancellation of GST registration. Subsequently the appellant's counsel informed the authority that the GST portal permitted filing of revocation applications up to 180 days and that a revocation in the present case had been approved by the competent authority by issuance of REG-22. On receipt of that communication the appellant sought permission to withdraw the appeal. The Commissioner (Appeals) noted the revocation by REG-22 and, on that basis, allowed the appellant to withdraw the appeal and dismissed the appeal as withdrawn. The order records the revocation and the consequent withdrawal as the grounds for disposal, without adjudication on the merits of the original cancellation order. [Paras 5, 6]

Appeal allowed to be withdrawn and dismissed as withdrawn in view of revocation of the cancelled GST registration by REG-22.

Final Conclusion: The appeal has been permitted to be withdrawn and is disposed of as withdrawn because the cancelled GST registration has been revoked by issuance of REG-22.

Entertainment of appeals under Section 260A - change of case or reversal of stance before appellate forum - obligation to raise foundational facts before statutory authorities - sanction for issuance of notice under Section 148 - competency of sanctioning authority

Entertainment of appeals under Section 260A - change of case or reversal of stance before appellate forum - obligation to raise foundational facts before statutory authorities - Whether the appeals under Section 260A are maintainable where the appellant advances a foundational factual stance before this Court which is materially different from the case taken before the statutory authorities and the Tribunal. - HELD THAT: - The Court found that the appellant before this Court sought to rely on foundational facts and a legal position (that sanction was not required because initial assessments were under Section 143(1) and notices under Section 148 were issued within four years) which were not the case set up before the Commissioner (Appeals) and the ITAT, where the specific contention was that sanction had been obtained from the Commissioner instead of the Joint Commissioner. The High Court recorded that the appellant could and should have placed the newly asserted facts before the statutory authorities below by appropriate applications; having not done so, the Court was not prepared to entertain a materially different case at the Section 260A stage. In these circumstances the Court treated the appeals as not fit for admission and declined to adjudicate the merits of the sanction point (including the competence of the sanctioning authority under Section 151), observing that the change in foundational facts precluded entertaining the appeals under Section 260A. The Court therefore dismissed the appeals and pending applications without addressing the substantive correctness of the ITAT's decision quashing the reassessment notices. [Paras 6, 7, 8, 9]

Appeals under Section 260A dismissed as not fit for entertainment because the appellant altered foundational facts and failed to place those facts before the statutory authorities below.

Final Conclusion: The High Court dismissed the appeals under Section 260A and accompanying applications, refusing to entertain a materially different case before it that was not urged before the statutory authorities or the Tribunal; the merits of the ITAT's decision were not adjudicated.

Reopening assessment requires valid notice to the correct person under Section 148 - Jurisdictional bar where notice is issued to a deceased person - Alternative statutory remedy does not oust writ jurisdiction where proceedings are wholly without jurisdiction - Legal representative stepping into shoes under Section 159 - No statutory obligation on legal heirs to intimate death of assessee - Inapplicability of Section 292B to notices issued to a dead person - Section 292BB applicable to assessee and not to legal representatives

Reopening assessment requires valid notice to the correct person under Section 148 - Jurisdictional bar where notice is issued to a deceased person - Validity of the notice dated 22.03.2019 issued under Section 148 when addressed to a deceased assessee - HELD THAT: - The Court followed its earlier reasoning in Savita Kapila and held that issuance of a notice under Section 148 is the foundational act for reopening an assessment; consequently, the sine qua non for acquisition of jurisdiction is that the notice be issued to the correct person. A reopening notice issued in the name of a deceased assessee is null and void; where the notice is invalid for that reason, all consequent proceedings and orders founded on that notice are vitiated. Applying that principle to the present facts, the notice dated 22.03.2019 having been issued in the name of the deceased assessee, it was declared null and void and set aside, as were the consequential assessment order and penalty notices. [Paras 11, 12, 13]

Impugned notice dated 22.03.2019 and consequential orders, including the assessment order dated 14.11.2019 and notices dated 14.11.2019, are set aside as the Section 148 notice was issued to a dead person and therefore without jurisdiction.

Alternative statutory remedy does not oust writ jurisdiction where proceedings are wholly without jurisdiction - Whether availability of an appeal or other statutory remedy precludes maintenance of a writ challenging jurisdictional validity of the reopening notice - HELD THAT: - Relying on the earlier decision in Savita Kapila, the Court reaffirmed that the existence of an alternative statutory remedy, such as an appeal against an assessment order, does not bar a writ petition when the impugned notice or proceedings are wholly without jurisdiction. If the assumption of jurisdiction in issuing the notice is wrong, subsequent orders cannot validate the proceedings; therefore challenge to the jurisdictional validity of the notice is maintainable notwithstanding availability of an appeal. [Paras 9, 10, 11]

The petition challenging jurisdictional validity of the Section 148 notice is maintainable despite the existence of alternate statutory remedies.

Legal representative stepping into shoes under Section 159 - No statutory obligation on legal heirs to intimate death of assessee - Applicability of Section 159 and whether legal heirs are under a statutory duty to intimate the death of the assessee to the Revenue - HELD THAT: - The Court followed the prior reasoning that Section 159 applies only where proceedings were initiated or pending against the assessee while alive and the legal representative thereafter steps into the deceased's shoes. In the present factual matrix proceedings were not initiated while the assessee was alive and the legal representative did not become a party in that sense; accordingly Section 159 did not apply. The Court further held there is no statutory obligation on legal heirs to intimate the death of the assessee to the income tax department, and failure to update PAN or inform the department cannot be treated as a statutory duty of the heirs. [Paras 9, 11]

Section 159 is inapplicable to the present case and legal heirs are under no statutory obligation to intimate the death of the assessee to the Revenue.

Inapplicability of Section 292B to notices issued to a dead person - Section 292BB applicable to assessee and not to legal representatives - Whether Sections 292B and 292BB can cure or validate a reopening notice issued to a deceased person or bind legal representatives - HELD THAT: - The Court observed that issuance of notice upon a dead person and non-service does not fall within the ambit of mistakes, defects or omissions that Section 292B contemplates, and therefore Section 292B is inapplicable to such a situation. It further endorsed the view that Section 292BB operates in relation to an assessee and is not attracted to legal representatives; waiver or deemed service under Section 292BB cannot be applied to bind a legal heir who has neither cooperated in proceedings nor waived the requirement of valid notice. Consequently, neither provision validates a notice issued to a deceased person in the present circumstances. [Paras 9, 11]

Sections 292B and 292BB do not operate to validate the Section 148 notice issued to the deceased assessee, and Section 292BB is not applicable to legal representatives in this context.

Final Conclusion: The writ petition is allowed: the Section 148 notice dated 22.03.2019 issued in the name of the deceased assessee and the consequential assessment order and penalty notices dated 14.11.2019 are set aside; there shall be no order as to costs.

Deduction under Section 80IA/80IB - unit-wise computation and application of Section 80IA(5) - Deduction under Section 80M - eligibility linked to distribution of dividend - Appellate interference limited where lower appellate findings of fact are unchallenged

Deduction under Section 80IA/80IB - unit-wise computation and application of Section 80IA(5) - Validity of disallowance of deduction claimed under Section 80IA/80IB by adjusting profits of profit-making units with losses of other units. - HELD THAT: - The Tribunal upheld the finding of the Commissioner (Appeals) that the assessee derived profit during the relevant period only from two eligible units and computed the deduction in accordance with Section 80IA(5). The Assessing Officer's view that losses of other units should be adjusted against the profits of these two units was not shown to be legally sustainable before the Tribunal. No error was demonstrated in the factual conclusion of the CIT(A) that the assessee's unit wise computations and progressive adjustments were in conformity with the statutory provision, and therefore the Tribunal saw no reason to interfere. [Paras 11, 12]

Disallowance of the claim under Section 80IA/80IB of Rs. 4,32,65,725/- deleted; Revenue's ground dismissed.

Deduction under Section 80M - eligibility linked to distribution of dividend - Appellate interference limited where lower appellate findings of fact are unchallenged - Whether the claim of deduction under Section 80M was rightly disallowed by the AO for alleged non distribution of dividend. - HELD THAT: - The Tribunal concurred with the CIT(A)'s factual finding that the assessee had received dividend income during the relevant period and had distributed a substantial portion to its shareholders, supported by a certificate produced before the authorities. The Assessing Officer's order did not deal with these facts, and Revenue did not point out any fallacy in the CIT(A)'s factual conclusion. In absence of any infirmity shown in the appellate fact finding, the Tribunal declined to interfere with the deletion of the disallowance. [Paras 19]

Disallowance of the claim under Section 80M of Rs. 3,97,34,475/- deleted; Revenue's ground dismissed.

Final Conclusion: Both grounds of the Revenue appeal were dismissed by the Tribunal: the disallowances under Section 80IA/80IB and under Section 80M were deleted on the findings recorded by the CIT(A), and the assessee's Rule 27 grounds were rendered academic.

Rate of commission in trade of providing accommodation entries - application of precedent in determining commission rate - unexplained cash deposits and burden under Section 68 - proof of identity, creditworthiness and genuineness of creditors - compliance with Tribunal's remand directions

Rate of commission in trade of providing accommodation entries - application of precedent in determining commission rate - compliance with Tribunal's remand directions - Validity of the Assessing Officer's determination of commission income at 2% on entries given to outside parties. - HELD THAT: - The Tribunal had earlier remanded the matter to the Assessing Officer to examine credit entries and to determine commission income on unexplained credits, applying rates as per prevailing trade precedence. On reconsideration the Assessing Officer determined commission at 2% and included commission income in the assessment; the CIT(A) upheld that determination. The assessee contended that a lower rate (0.25%) should apply on the basis of appellate and assessment orders in other cases. The Tribunal examined the assessment order, CIT(A)'s order and the material on record and found that the Assessing Officer had exercised his jurisdiction in determining commission on credits not satisfactorily explained by the assessee and that the assessee failed to establish the precedence relied upon as binding or determinative for reducing the rate. The Tribunal therefore found no merit in the assessee's contention and dismissed the appeal against the 2% determination. [Paras 7]

Appeals dismissed; commission income determined at 2% upheld.

Unexplained cash deposits and burden under Section 68 - proof of identity, creditworthiness and genuineness of creditors - restriction to peak credit - Sustenance of additions treating cash deposits as unexplained income under Section 68 and the claim for restriction to peak credit. - HELD THAT: - Revenue authorities found that cash deposits, though shown with names, were not corroborated by PAN, ITRs, confirmations or other evidence establishing identity, creditworthiness and genuineness. The assessee failed, in the second round of proceedings and before the CIT(A), to prove these three ingredients despite earlier directions of the Tribunal; the claim that cash deposits arose in the ordinary course of the accommodation-entries business and therefore should not be added was not substantiated. Similarly, the contention that any addition should be restricted to peak credit was not supported by evidence. Accordingly the CIT(A) correctly held the cash deposits unexplained under Section 68 and rejected the peak-credit restriction. [Paras 7]

Addition on account of unexplained cash deposits upheld; claim for restriction to peak credit rejected.

Final Conclusion: Both appeals for AY 2003-04 and AY 2004-05 are dismissed; the Assessing Officer's determination of commission at 2% and the additions of unexplained cash deposits under Section 68 were upheld by the Tribunal.

Treatment of undisclosed cash as income - presumption of ownership of money found on search under section 292C - requirement of corroborative evidence to rebut statutory presumption - after thought explanation and inconsistent statements - non pressed grounds and dismissal for not being pressed at hearing

Treatment of undisclosed cash as income - presumption of ownership of money found on search under section 292C - requirement of corroborative evidence to rebut statutory presumption - after thought explanation and inconsistent statements - Whether the cash of Rs. 17,20,000 found at the assessee's residence was rightly treated as unexplained income and added to the assessee's total income. - HELD THAT: - The Tribunal upheld the addition. The Assessing Officer seized the cash after the assessee failed to produce documentary evidence of its source. The assessee gave inconsistent explanations at different stages (stated at search that the cash belonged to his wife, later said it belonged to his son and ultimately relied on the cash balance of a company allegedly controlled by his son). The CIT(A) rejected the contention that the cash belonged to the company as an after thought, observing that the explanation was concocted after examining the company's cash book. The Tribunal relied on the statutory presumption applicable to articles found in the course of a search under section 292C and observed that, absent corroborative evidence to rebut that presumption, the cash is to be treated as belonging to the person in whose possession it was found. Prior favourable treatment or deletion of additions in the company's assessment did not furnish independent corroboration in the assessee's case. Having regard to the inconsistent statements and the lack of documentary evidence, the Tribunal found no infirmity in the CIT(A)'s confirmation of the addition. [Paras 6, 7]

Addition of Rs. 17,20,000 upheld as unexplained income; grounds 1 and 2 dismissed.

Non pressed grounds - dismissal for not being pressed at hearing - Whether the addition of Rs. 2,00,000 for payment for purchase of agricultural land (ground No.3) should be adjudicated. - HELD THAT: - The assessee's authorised representative did not press ground No.3 at the hearing before the Tribunal. As the ground was not pursued, the Tribunal declined to adjudicate it and treated it as not pressed. [Paras 4]

Ground No.3 dismissed as not pressed.

Final Conclusion: The appeal is dismissed; the addition of the seized cash is sustained for AY 2015-16 for want of satisfactory and corroborative explanation, and the ground relating to payment for agricultural land is dismissed as not pressed.

Deductibility of interest on delayed statutory levy as compensatory in nature - compensatory versus penal character of statutory impost - deductibility of employees' contributions deposited before filing of return under Section 36(1)(va) read with Section 43B - precedential value of coordinate Benches and jurisdictional High Court decisions

Deductibility of interest on delayed statutory levy as compensatory in nature - compensatory versus penal character of statutory impost - Whether interest paid for late deposit of service tax is allowable as a deduction - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the addition disallowing interest paid on late deposit of service tax. The CIT(A) and the Tribunal treated such interest as compensatory (not penal) in character, assimilating its character to the underlying service tax which is an allowable business expenditure. The Tribunal relied on consistent decisions of coordinate Benches, including Messee Dusseldorf India (P) Ltd. and other Tribunal orders, which hold that interest on delayed deposit of service tax is compensatory and deductible. No infirmity was found in the CIT(A)'s conclusion that the disallowance could not be sustained.

The addition disallowing interest on late payment of service tax is deleted; Revenue's ground is dismissed.

Deductibility of employees' contributions deposited before filing of return under Section 36(1)(va) read with Section 43B - precedential value of coordinate Benches and jurisdictional High Court decisions - Whether delayed deposit of employees' contributions (PF/ESI/professional tax) disallows deduction under the Income-tax Act - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the addition made for delayed payment of employees' contributions because material sums were deposited before the filing of the return under section 139(1). The CIT(A) applied the legal position that payments made before filing the return are within the 'due date' for the purposes of Section 36(1)(va) read with Section 43B, following the decision in AIMIL Ltd. and consistent Tribunal precedents. The Tribunal also noted that the jurisdictional High Court, in the assessee's own earlier proceeding, dismissed the Revenue's appeal on the identical question, reinforcing the view that the disallowance could not be sustained.

The addition on account of delayed deposit of employees' contributions is deleted in part as directed by the CIT(A); Revenue's ground is dismissed.

Final Conclusion: Both grounds raised by the Revenue were dismissed; the Tribunal upheld the CIT(A)'s deletions of the additions-interest on late payment of service tax was held compensatory and deductible, and delayed employees' contributions deposited before filing the return were held allowable under the stated statutory scheme-and the Revenue's appeal is dismissed.

Revision under Section 263 - erroneous and prejudicial to the interest of revenue - due verification / failure to make enquiry - plausible view - eligibility for deduction under Section 80IC - doctrine of merger

Revision under Section 263 - erroneous and prejudicial to the interest of revenue - due verification / failure to make enquiry - eligibility for deduction under Section 80IC - plausible view - Whether the Principal Commissioner of Income Tax was justified in exercising revisional jurisdiction under Section 263 by setting aside the assessment insofar as deduction under Section 80IC in respect of profits on sales made to vendors directly from the Parwanoo unit was allowed without requisite enquiry. - HELD THAT: - The Tribunal held that the revision under Section 263 requires satisfaction of twin conditions: the assessing officer's order must be erroneous and prejudicial to the revenue. The Assessing Officer had examined and disallowed the component of the claim relating to inter unit sales but there was no material to show that he examined the separate component relating to profits on sales made directly to vendors from the Parwanoo unit. The Tribunal relied on authority establishing that allowing a claim without due verification (including no enquiry) renders the AO's order erroneous and prejudicial, and that mere allowance or a bald statement of 'allowed' does not demonstrate examination. The onus to show that the AO examined the claim lay on the assessee, which was not discharged. In these circumstances the Principal Commissioner was entitled to conclude that the AO had not applied his mind to that component and to exercise revisional powers to direct fresh enquiry and adjudication. [Paras 8, 9, 10, 12, 13]

Revision under Section 263 was validly exercised in respect of the unexamined component of the Section 80IC claim relating to sales to vendors from the Parwanoo unit; the assessment was set aside for fresh examination.

Doctrine of merger - revision under Section 263 - Whether the pendency of an appeal before the Commissioner (Appeals) in respect of other components of the Section 80IC claim merged the assessment order and barred revision under Section 263 in respect of the unexamined component. - HELD THAT: - The Tribunal found that the appeal before the Commissioner (Appeals) related only to the claim in respect of inter unit sales and did not include the separate issue of eligibility for deduction in respect of profits on sales made directly to vendors from the Parwanoo unit. Clause (c) of Explanation 2 to sub section (1) of Section 263 was applied to conclude that the doctrine of merger did not operate to oust the revisional jurisdiction vis a vis the distinct issue which was neither considered nor decided by the Commissioner (Appeals). [Paras 13]

The pendency of appeal did not merge the assessment so as to preclude exercise of revisional jurisdiction over the distinct unappealed/unadjudicated component.

Final Conclusion: The Tribunal dismissed the assessee's appeal and upheld the Principal Commissioner's exercise of revision under Section 263, directing that the Assessing Officer examine the eligibility of the deduction under Section 80IC in respect of profits on sales made directly to vendors from the Parwanoo unit.

Disallowance of interest on deposits - addition treated as unexplained deposit under section 68 - unexplained cash credit - consequential disallowance - remand for fresh adjudication - reconstruction of record - opportunity of hearing

Disallowance of interest on deposits - consequential disallowance - unexplained cash credit - remand for fresh adjudication - opportunity of hearing - Disallowance of interest of Rs. 77,167/- on deposits consequential to earlier additions treated as unexplained cash credits - HELD THAT: - The Assessing Officer disallowed interest on deposits on the ground that those deposits were earlier treated as unexplained cash credits in A.Y. 1992-93 to 1998-99. This Tribunal had earlier set aside the addition under section 68 and the consequential disallowance of interest for those assessment years to the file of the CIT(A) for fresh adjudication, directing reconstruction and enforcement of summons where necessary. Because the disallowance in the year under appeal is consequential upon the outcome of the issues remanded for A.Y. 1992-93 to 1998-99, the Tribunal held that the disallowance cannot be finally decided in isolation and must await the outcome of the remanded proceedings. The matter is therefore restored to the CIT(A) to decide afresh after adjudication of the remanded issues, with the CIT(A) to afford the assessee an opportunity of hearing and to conclude the matter within 90 days from receipt of this order. [Paras 3]

Issue set aside to the record of the CIT(A) for fresh adjudication in view of the pending remand for earlier assessment years; CIT(A) to decide within 90 days after hearing.

Addition treated as unexplained deposit under section 68 - remand for fresh adjudication - reconstruction of record - opportunity of hearing - Addition of security deposit of Rs. 95,000/- from Shri Raj Bahadur treated as unexplained deposit - HELD THAT: - The assessee contended that the security deposit was an old outstanding balance relating to Financial year 1995-96 and not a fresh receipt in the year under appeal. The authorities below did not verify whether the deposit actually pertained to Financial year 1995-96, nor was the identical issue finally adjudicated for A.Y. 1992-93 to 1998-99. Given the absence of any verification and the pendency of identical questions in the remanded earlier years, the Tribunal held that the matter requires proper enquiry and verification by the CIT(A). The issue is therefore remitted to the CIT(A) for fresh adjudication after giving the assessee an opportunity of hearing and determining whether the deposit belongs to the earlier financial year; the CIT(A) is directed to decide the matter within 90 days from receipt of this order. [Paras 4]

Addition set aside to the record of the CIT(A) for verification and fresh adjudication; CIT(A) to decide within 90 days after hearing.

Final Conclusion: Both disputed additions-the disallowance of interest consequential to earlier section 68 findings and the addition of the security deposit-are remitted to the CIT(A) for fresh adjudication (with opportunity of hearing), in light of pending adjudication for A.Y. 1992-93 to 1998-99; the appeal is allowed for statistical purposes.

Transfer pricing adjustment - arm's length price - brand royalty - duplicate royalty payment - management service fees - method of benchmarking (TNMM vs CUP) - remand for redetermination of ALP - capitalization versus revenue treatment of royalty - deduction under section 37 - additional depreciation eligibility for new plant and machinery - foreign exchange fluctuation and adjustment to cost under section 43A - tax deduction at source under section 195 - disallowance under section 40(a)(i)

Transfer pricing adjustment - brand royalty - arm's length price - duplicate royalty payment - remand for redetermination of ALP - Transfer pricing adjustment in respect of brand royalty and duplicate payments - HELD THAT: - Following the Tribunal's decision in the immediately preceding assessment year, the Tribunal held that royalty paid through the automatic route is to be taken at ALP and that duplicate payments of brand royalty (for the same products/rights under two agreements) must be disallowed. As the facts for 2010-11 are similar to the preceding year, the Tribunal set aside the impugned order and remitted the matter to the file of the AO/TPO to re-determine the ALP of the royalty transaction and to verify and disallow the duplicate element of brand royalty in accordance with the directions given in the Tribunal's earlier order. [Paras 5]

Order set aside and matter remitted to AO/TPO for fresh ALP determination and disallowance of duplicate brand royalty in terms of the Tribunal's earlier directions.

Deduction under section 37 - brand royalty - technical know-how royalty - Disallowance under section 37 of the full royalty payments treated as not for business purpose - HELD THAT: - The Tribunal agreed with the CIT(A) that royalty payments made for technical know-how used in manufacturing and for use of brand/logo on products manufactured by the assessee constitute business expenditure. Therefore such payments cannot be regarded as not incurred for business purposes. The deletion of the AO's disallowance under section 37 was approved, subject to any transfer pricing adjustment. [Paras 6]

Revenue's ground dismissed; disallowance under section 37 deleted (subject to TP adjustment).

Capitalization versus revenue treatment of royalty - capitalization - deduction under section 37 - Whether royalty payments should be capitalized - HELD THAT: - Relying on the Tribunal's view in the immediately preceding assessment year and earlier years, the Tribunal held that the AO was not justified in capitalizing the royalty payments. The CIT(A)'s decision not to treat the royalty as capital expenditure was countenanced. [Paras 7]

AO's capitalization of royalty set aside; royalty not to be treated as capital expenditure.

Management service fees - method of benchmarking (TNMM vs CUP) - arm's length price - remand for redetermination of ALP - Transfer pricing treatment and benchmarking method for management service fees - HELD THAT: - The Tribunal found facts for 2010-11 similar to the preceding year where it had determined that (i) services were in fact availed from AEs, (ii) the foreign/AEs were wrongly taken as the tested party, and (iii) TNMM aggregation was inappropriate and the management fees should be benchmarked separately. Accordingly, the Tribunal set aside the impugned order and remitted the matter to AO/TPO for fresh determination of the ALP of the management services transaction, permitting the AO/TPO to adopt the most appropriate method on the facts and after giving the assessee a reasonable opportunity of hearing. [Paras 16]

Order set aside and matter remitted to AO/TPO for fresh ALP determination of management service fees in accordance with Tribunal's observations and directions.

Additional depreciation eligibility for new plant and machinery - foreign exchange fluctuation and adjustment to cost under section 43A - Claim of additional depreciation on capitalised foreign exchange loss - HELD THAT: - Section 43A requires foreign exchange fluctuation on repayment to be added to the cost of the asset. Section 32(1)(iia) permits additional depreciation only in respect of new plant and machinery acquired and installed after 31-03-2005. The assessee had loans taken in 2002 and 2007; forex loss arose on repayment in the year under consideration. The Tribunal held that additional depreciation cannot be allowed for assets acquired against the 2002 loan but may be allowable for the 2007 loan. As the record did not bifurcate the forex loss attributable to each loan, the Tribunal set aside the matter and remitted to the AO for examination, quantification and allowing additional depreciation only for the portion attributable to the 2007 loan. [Paras 18]

Matter remitted to AO to examine details and allow additional depreciation only in respect of forex loss attributable to repayment of the 2007 loan; no additional depreciation for 2002 loan-related loss.

Tax deduction at source under section 195 - disallowance under section 40(a)(i) - commission to overseas agents - Disallowance for failure to deduct tax at source on commission paid to overseas agents - HELD THAT: - Where an overseas agent is paid commission for procuring business in foreign territories, such receipts are not chargeable to tax in India. Section 195 applies only to sums chargeable under the Act. Following relevant authority, the Tribunal agreed with the CIT(A) that the assessee was not obliged to deduct tax at source on such commission and that consequent disallowance under section 40(a)(i) was not warranted. [Paras 20]

Disallowance under section 40(a)(i) deleted; no TDS obligation on commission paid to overseas agents in the facts of the case.

Initiation of penalty proceedings - interest under section 234A - interest under section 234B - Prematurity of penalty proceedings and verification of interest claims - HELD THAT: - The Tribunal observed that initiation of penalty proceedings under section 271(1)(c) was premature. Assessment of interest under section 234A required verification by the AO as the assessee claimed the return was filed in time; interest under section 234B would be consequential. These matters were left for determination/verification by the AO. [Paras 21]

Penalty proceedings noted as premature; interest under section 234A to be verified by AO; section 234B consequential.

Final Conclusion: The Tribunal partly allowed the cross appeals for statistical purposes: it remitted for fresh ALP determinations the transfer pricing adjustments in respect of brand royalty (directing disallowance of duplicate payments in line with the Tribunal's earlier order) and management service fees; it upheld deletion of the AO's full disallowance under section 37 and declined to treat royalty as capital expenditure; it remitted the additional depreciation claim for quantification to allow benefit only for forex loss attributable to the 2007 loan; and it upheld deletion of the disallowance for failure to deduct TDS on commissions paid to overseas agents. Penalty and certain interest issues were left for verification by the assessing officer.

Addition under Section 68 for unexplained cash credits - identity, creditworthiness and genuineness of creditors - onus on assessee to produce ledger accounts to explain sundry credits - requirement to quote PAN in transactions - electronic recharge payment system transactions and trade deposits - remand for verification of subsequent accounting to avoid double addition

Addition under Section 68 for unexplained cash credits - identity, creditworthiness and genuineness of creditors - onus on assessee to produce ledger accounts to explain sundry credits - electronic recharge payment system transactions and trade deposits - remand for verification of subsequent accounting to avoid double addition - Addition of Rs. 26,88,147 made under Section 68 was set aside and remitted to the Assessing Officer for verification whether the sundry credits were subsequently accounted as sales, and for fresh adjudication after affording opportunity to the assessee. - HELD THAT: - The Tribunal recorded that the credits arose in the context of the assessee's electronic recharge payment system business where distributors/dealers (small trade partners) deposited amounts and the assessee credited distributor accounts. The Assessing Officer and the CIT(A) treated certain deposits as unexplained cash credits because the assessee did not produce PANs, addresses and ledger accounts for several small parties. The Tribunal observed that the parties appear to be trade creditors (including guesthouses and service outlets) and that if the assessee had subsequently accounted for sales against those sundry credits in later years, making the addition would produce double taxation. Given the assessee's failure to produce ledger accounts before the CIT(A), the Tribunal considered it appropriate in the interest of justice to remit the matter to the Assessing Officer with a direction to examine the books and verify, by production of ledger accounts and accounting records, whether sales were recorded in subsequent periods against the credits. If the Assessing Officer finds that sales have been accounted for out of those sundry credits, the corresponding addition under Section 68 should be deleted. The Tribunal further directed that the Assessing Officer decide the issue afresh in accordance with law after granting the assessee a proper opportunity of hearing. [Paras 7, 8]

Set aside the addition of Rs. 26,88,147 and remitted the issue to the Assessing Officer for verification of ledger accounts and subsequent accounting; appeal allowed with directions and restored grounds to the file of the Assessing Officer for fresh decision after hearing.

Final Conclusion: The appeal is allowed for statistical purposes: the Tribunal set aside the confirmed addition under Section 68 and remitted the matter to the Assessing Officer to verify ledger accounts and whether sales were accounted in subsequent years, directing fresh adjudication after affording the assessee an opportunity of hearing.

Protective assessment - substantive assessment - functus officio - reassumption of jurisdiction - order giving effect to Settlement Commission - appealability under section 246A - remand report - principles of natural justice

Protective assessment - substantive assessment - functus officio - reassumption of jurisdiction - Validity of the Assessing Officer's order dated 15.09.2017 converting a protective addition into a substantive addition in the assessee's hands. - HELD THAT: - The Tribunal upheld the finding that the AO converted a protective addition into a substantive addition after completion of the original assessment without any direction from the Income Tax Settlement Commission and without invoking any statutory provision to reassume jurisdiction. The AO himself acknowledged that the Settlement Commission's order in the case of Indian Medical Trust did not discuss the impugned investment in the assessee's case and that the assessee was not an applicant before the Settlement Commission. The Tribunal agreed with the CIT(A)'s reasoning that once an assessment is framed the AO is functus officio and may modify it only after validly reassuming jurisdiction under statutory provisions such as section 154 or section 147, or by giving effect to directions contained in orders under sections 250/254/263/264. The AO had neither invoked section 154 or 147 nor relied on any direction in an appeal/revision order to justify the modification; instead the AO acted on a change of opinion based on the absence of discussion in the ITSC order. That action lacked the requisite legal sanction and was therefore without jurisdiction. [Paras 16, 19, 21]

The impugned order of the AO dated 15.09.2017 converting the protective addition into a substantive addition was without jurisdiction and the addition was set aside.

Order giving effect to Settlement Commission - appealability under section 246A - jurisdiction of appellate authority - Whether the CIT(A) rightly admitted and adjudicated the assessee's appeal against the AO's order dated 15.09.2017. - HELD THAT: - The Tribunal held that the AO's order, which raised a demand and initiated recovery by converting a protective addition into a substantive addition, was an order against which the assessee could appeal under section 246A as it contested her liability to be assessed. The additional legal grounds raised by the Revenue challenging the jurisdiction of the CIT(A) to admit the appeal were held to be admissible for the first time, but on merits the Tribunal agreed with the CIT(A) that adjudication was proper. Having found the AO's order to be without jurisdiction and not founded on any direction of the Settlement Commission, the Tribunal confirmed the CIT(A)'s decision to allow the appeal and dismissed the Revenue's additional grounds and original ground no. 3. [Paras 13, 22]

The CIT(A) properly entertained and decided the appeal; the Revenue's grounds challenging that jurisdiction are dismissed and the order of the AO is set aside.

Remand report - principles of natural justice - Whether the appellate process complied with the requirements of natural justice, including calling for a remand report from the AO before adjudication. - HELD THAT: - The Tribunal noted that the CIT(A) forwarded additional grounds to the AO and obtained the remand report, which was placed on record and provided to the assessee for rejoinder. The Revenue's contention that the CIT(A) adjudicated without a remand report or without providing adequate opportunity was negatived by reference to the appellate record showing communication with the AO, receipt of the remand report and opportunity given to the assessee to file rejoinder submissions. The Tribunal therefore found no breach of natural justice in the appellate proceedings. [Paras 10, 11]

No violation of natural justice; remand report was obtained and parties were given opportunity to be heard.

Final Conclusion: The Tribunal upheld the CIT(A)'s deletion of the substantive conversion of the protective addition: the AO's order dated 15.09.2017 was without jurisdiction and without requisite statutory sanction and is set aside; the Revenue's appeal and the assessee's cross-objection are disposed of accordingly.

Deemed rental income / annual letting value (ALV) - vacancy allowance under section 23(1)(c) - municipal rateable value as benchmark for ALV - reopening of assessment under section 148 - binding precedent and requirement to follow higher court decisions

Deemed rental income / annual letting value (ALV) - reopening of assessment under section 148 - Addition of deemed rental income in respect of the Navi Mumbai flat where the purchase agreement was cancelled - HELD THAT: - The assessee informed the assessing officer that the assignment agreement for the Navi Mumbai flat was cancelled in May 2011 and furnished a cancellation deed in correspondence placed on record. The Tribunal found that the cancellation of the agreement meant the assessee was not in possession of the property and therefore no notional rent could be computed. The authorities below had confirmed the addition on the basis that documentary proof was not produced during earlier proceedings, but the record before the Tribunal (including the cancellation deed in the paper book) satisfied the Tribunal that the agreement was cancelled and the flat was not in the assessee's possession. The addition relating to notional rent was therefore unsustainable and was directed to be deleted. [Paras 9]

Addition of deemed rental income for the Navi Mumbai flat deleted.

Deemed rental income / annual letting value (ALV) - vacancy allowance under section 23(1)(c) - Imposition of notional rent / ALV on the Yashodeep flat alleged to be ruinous and unfit for occupation - HELD THAT: - The assessee produced municipal certificates, photographs and a structural engineer's report to show that the Yashodeep flat was in a severely hazardous and ruinous condition and therefore could not be let out. The Tribunal found that the CIT(A) failed to apply his mind to the ITAT precedents relied upon and did not explain why notional rent could be imposed on a property demonstrated to be uninhabitable. Having applied the material on record and the applicable legal principle that a property unfit to be let out cannot attract deemed rental income, the Tribunal set aside the CIT(A)'s order and directed deletion of the notional rent addition in respect of the Yashodeep flat. [Paras 12]

Notional rent addition in respect of the Yashodeep flat deleted.

Deemed rental income / annual letting value (ALV) - municipal rateable value as benchmark for ALV - binding precedent and requirement to follow higher court decisions - Whether ALV for the assessee's flats for Assessment Year 2015-16 should be restricted to municipal rateable value - HELD THAT: - The assessing officer had estimated ALV as a percentage of cost, and the CIT(A) reduced that estimate but refrained from adopting municipal rateable value in the specific instance despite referring to the Bombay High Court decision in Tip Top Typography which held that municipal rateable value is the accepted norm unless the assessing officer demonstrates manipulation. The Tribunal held that the CIT(A) exhibited insufficient regard for the binding High Court precedent and directed that, following the Bombay High Court's view, the rental value for the flats in question should be limited to the municipal rateable value. [Paras 15]

ALV for the flats in Assessment Year 2015-16 to be restricted to the municipal rateable value.

Final Conclusion: The appeals are partly allowed: the notional rent addition for the Navi Mumbai flat and for the Yashodeep flat is deleted, and for Assessment Year 2015-16 the annual letting value of the flats is to be restricted to the municipal rateable value.

Assessment under Section 153A linked to search under Section 132 - Requirement of incriminating / seized material for reopening completed assessments - Scope of assessment powers under Section 153A where original assessments had attained finality - Abatement and reassessment of pending assessments under Section 153A

Requirement of incriminating / seized material for reopening completed assessments - Assessment under Section 153A linked to search under Section 132 - Whether additions made by the Assessing Officer in completed assessment years consequent to proceedings under Section 153A are sustainable where no incriminating material was found or relied upon during the search - HELD THAT: - The Tribunal found as an admitted fact that for AYs 2009-10 to 2012-13 the original assessments had attained finality at the time of search and that the additions impugned were not based on any incriminating material or documents seized during the search (see para. 5). Applying the settled legal proposition - that Section 153A operates in the context of search under Section 132 and that completed assessments can be reopened under Section 153A only on the basis of incriminating material unearthed in the search or related post-search material - the Tribunal held that additions not founded on seized/incriminating material are beyond the scope of Section 153A (see paras. 11-12, 18-19). The Tribunal relied on and followed the reasoning in authorities including Kabul Chawla , Pr. CIT v. Meeta Gutgutia , and other decisions cited in the order, which collectively explain that while Section 153A empowers reassessment for six years, interference with completed assessments under that provision requires nexus with material discovered in the search; absent such nexus the completed assessment may be reiterated but cannot be validly disturbed by arbitrary additions under Section 153A (see paras. 12, 14-19). The Revenue's contention that issuance of notice under Section 153A(3) confers unrestricted power to reassess total income irrespective of seized material was considered and rejected on the facts, since no incriminating material was found and the additions were based solely on assessment records (paras. 9-11). [Paras 5, 11, 12, 20, 21]

Additions made in the completed assessment years in the absence of incriminating or seized material are beyond the scope of Section 153A and cannot be sustained; revenue appeals dismissed.

Final Conclusion: On the admitted facts that the original assessments for AYs 2009-10 to 2012-13 had attained finality and no incriminating material was found or relied upon in the search, the additions made by the Assessing Officer could not be sustained under Section 153A; the revenue appeals were dismissed.

Reopening of assessments under Section 153A limited to incriminating material discovered on search - Requirement of relevance or nexus between additions and seized material - Completed assessments cannot be disturbed under Section 153A in absence of incriminating material - Assessments abated and reassessed under Section 153A where supported by seized material

Reopening of assessments under Section 153A limited to incriminating material discovered on search - Requirement of relevance or nexus between additions and seized material - Completed assessments cannot be disturbed under Section 153A in absence of incriminating material - Whether additions made by the Assessing Officer under proceedings triggered by a search could be sustained where no incriminating material relating to the assessment years was seized. - HELD THAT: - On the admitted facts the additions for the years in issue were not based on any incriminating material or documents found during the course of the search. The Tribunal applied the legal principle reiterated by the Delhi High Court in Kabul Chawla and by this Court in Pr. CIT v. Meeta Gutgutia that, while Section 153A empowers the AO to assess or reassess the total income for the six years covered by a search, completed assessments can be interfered with under Section 153A only on the basis of incriminating material unearthed during the search or other post-search material having a nexus with the seized material. In absence of any such incriminating material, the additions made to disturb completed assessments fall outside the scope of Section 153A and cannot be sustained. The Revenue did not dispute the absence of seized incriminating material and the Tribunal relied on the cited authorities to conclude that the additions were beyond the ambit of Section 153A.

The additions made by the Assessing Officer under the Section 153A proceedings were held to be unsustainable in the absence of incriminating material found during the search; the appeals are allowed.

Final Conclusion: The Tribunal allowed the appeals and set aside the additions made under the 153A proceedings for the assessment years specified, on the ground that no incriminating material was found during the search to justify interference with the completed assessments.

Exemption under section 54F - Interpretation of the expression "a residential house" - Prospective operation of legislative amendment to section 54 - Cash credits and addition under section 68 - Burden of proof and evidentiary value of affidavits/confirmations - Non-invocation of section 68 on account of alleged contravention of section 269SS - Penalty proceedings under section 271D as distinct from assessment additions

Exemption under section 54F - Interpretation of the expression "a residential house" - Prospective operation of legislative amendment to section 54 - Assessee entitled to deduction under section 54F for A.Y.2013-2014 - HELD THAT: - The Tribunal held that the denial of exemption under section 54F was based solely on the conclusion that the assessee had constructed multiple residential units rather than a single unit. Prior to the Finance (No.2) Act, 2014 amendment (effective 01.04.2015), courts in the jurisdiction had interpreted the expression "a residential house" to permit plural acquisition when read in context with words such as "buildings" and "lands" and by application of the General Clauses Act; consequently the amendment substituting "one residential house" was prospective and applies from assessment year 2015-16 onwards. Reliance was placed on the jurisdictional High Court's decision in Arun K. Thiagarajan v. CIT which accepted this interpretive approach and held the amendment to be prospective. Applying that settled interpretation, the Tribunal found that for A.Y.2013-2014 the assessee was entitled to the benefit of section 54F and the denial by the Assessing Officer and the CIT(A) could not be sustained. [Paras 7]

Allowance of claim under section 54F restored for the relevant year.

Cash credits and addition under section 68 - Burden of proof and evidentiary value of affidavits/confirmations - Non-invocation of section 68 on account of alleged contravention of section 269SS - Penalty proceedings under section 271D as distinct from assessment additions - Addition under section 68 of Rs.17,00,000 deleted - HELD THAT: - The Tribunal examined the unexplained cash deposits disallowed by the Assessing Officer and partly sustained by the CIT(A). For the disputed Rs.17 lakh, the assessee produced confirmation letters/affidavits showing repayment of a loan and cash receipts from identified persons. The Tribunal applied the principle that affidavits or confirmations should not be rejected without giving the assessee opportunity to have the deponents examined or produce documentary rebuttal, citing the Supreme Court precedent noted in the record. The AO's remand report did not form an opinion on the genuineness of the receipts but only pointed to alleged contravention of section 269SS; the Tribunal held that an alleged breach of section 269SS would attract penalty proceedings under section 271D and cannot, by itself, justify charging the amounts as income under section 68. In the circumstances, the Tribunal found the additions unsustainable and deleted the disputed addition under section 68. [Paras 12]

Deletion of addition of Rs.17,00,000 made under section 68.

Final Conclusion: The appeal is allowed: the deduction claimed under section 54F is granted for A.Y.2013-2014; the addition of Rs.17,00,000 under section 68 is deleted.

Provisional release under Section 110A of the Customs Act, 1962 - valuation for import control under Notification No.21/2015-20 (black pepper CIF value threshold) - prima facie material required to justify continued detention - balance of convenience and protective bond/duty remittance pending investigation - waiver of demurrage and container detention charges

Provisional release under Section 110A of the Customs Act, 1962 - valuation for import control under Notification No.21/2015-20 (black pepper CIF value threshold) - prima facie material required to justify continued detention - balance of convenience and protective bond/duty remittance pending investigation - Whether the seized consignments of black pepper should be provisionally released pending completion of the DRI investigation. - HELD THAT: - The DRI initially expressed investigative concerns about alleged over-valuation but subsequently communicated that it had no objection to provisional release of the goods. The Court found that, on the material placed on record, there were apprehensions but no detailed incriminating material establishing that the goods had been deliberately inflated for import; outstanding payment disputes with overseas suppliers do not, by themselves, determine valuation. The commodity is perishable and, if not released, risks being compromised. Balancing the interests, the Court concluded that provisional release subject to protective conditions would best preserve both departmental interests and the petitioner's commercial interest. Accordingly, the impugned refusal for provisional release was set aside; the Deputy Commissioner was directed to quantify duty and bond amounts, communicate them to the petitioner, and release the goods within one week of remittance, while expressly permitting the authorities to continue and conclude their independent investigation. [Paras 7, 11, 13, 14]

Impugned order refusing provisional release set aside; Deputy Commissioner to quantify duty and bond, communicate amounts, and release consignments within one week of remittance, without prejudice to the ongoing investigation.

Waiver of demurrage and container detention charges - Whether demurrage and container detention charges should be waived. - HELD THAT: - The Court declined to decide the claim for waiver of demurrage and container detention charges and left the matter open for the petitioner to pursue before the appropriate authorities in accordance with applicable rules and regulations. [Paras 15]

Claim for waiver of demurrage and container detention charges left open to be pursued before the authorities in light of applicable Rules and Regulations.

Final Conclusion: The petition succeeds in part: the order refusing provisional release is set aside and the consignments are to be released upon remittance of quantified duty and furnishing of bond, within the timeline directed; the departmental investigation may continue; the claim for waiver of demurrage/container detention charges is left to the authorities to decide.

Provisional release under Section 110A of the Customs Act - exercise of adjudicatory discretion in granting provisional release - guidelines in Board Circular dated 16.08.2017 for bond and security - transaction value under Customs Valuation Rules and re determination of value - prima facie valuation for provisional release - security to cover duty, fines and penalties - right to be heard before imposition of conditions for provisional release

Provisional release under Section 110A of the Customs Act - exercise of adjudicatory discretion in granting provisional release - guidelines in Board Circular dated 16.08.2017 for bond and security - right to be heard before imposition of conditions for provisional release - Whether the adjudicating authority lawfully exercised its discretion under Section 110A and the Circular dated 16.08.2017 in fixing the bond and security for provisional release, and whether the matter required remand for fresh consideration. - HELD THAT: - The Tribunal found that the adjudicating authority had a discretion under Section 110A to fix bond, security and conditions, but such discretion must be exercised fairly, reasonably and on relevant considerations and an opportunity to be heard ought to be provided. The impugned orders reproduced paragraphs 2.1 and 2.2 of the Board Circular and computed the bond and security in a mechanical manner without examining the appellants' factual contentions or exercising discretion called for by paragraph 2.3 of the Circular. However, because the High Court had earlier directed a reasoned order and the Commissioner had passed the provisional release orders consequentially, the Tribunal considered it inappropriate to remit the matter back for fresh adjudication; instead, it proceeded to exercise a prima facie determination for the limited purpose of setting appropriate conditions for provisional release. The Tribunal therefore modified the provisional release conditions rather than remanding the issue to the adjudicating authority. [Paras 24, 31, 32]

The orders were held to have been passed mechanically without proper exercise of discretion, but remand was declined and the Tribunal modified the provisional release conditions itself.

Transaction value under Customs Valuation Rules and re determination of value - prima facie valuation for provisional release - security to cover duty, fines and penalties - Whether, on a prima facie basis, the value of the seized goods and the quantum of bond and security for provisional release should be adjusted and, if so, to what extent. - HELD THAT: - The Tribunal noted that the appellants had declared transaction value under contracts with an unrelated supplier at US$0.95/kg and that the DRI letter relied upon to re determine value at US$2.83/kg had not been supplied to the appellants and related to a different assessment order. The Tribunal observed that other imports of similar goods had been accepted at lower enhanced values (noted as US$1.55/kg) and that the Circular permits case specific adjustment of security. While the plea on penalties and final valuation could not be finally adjudicated at this stage, these matters were relevant for a prima facie exercise of discretion under Section 110A. Taking these factors into account, the Tribunal provisionally determined the value at US$1.5/kg for the limited purpose of setting conditions for provisional release and accordingly reduced the bond and security amounts: Elvance to execute a bond of Rs. 2 crores and furnish bank guarantee/cash security of Rs. 20 lakhs; Sedna to execute a bond of Rs. 1 crore and furnish bank guarantee/cash security of Rs. 10 lakhs. Release was ordered upon compliance within ten days. [Paras 22, 23, 26, 32, 33]

On a prima facie basis the value was fixed at US$1.5/kg for provisional release and the bond/security amounts were reduced as specified; goods to be released on compliance within ten days.

Final Conclusion: The appeals were allowed in part: the Tribunal held that the adjudicating authority had applied the Circular mechanically and, without remanding the matter, made a prima facie valuation adjustment to US$1.5/kg and reduced the bond and security to specified amounts for Elvance and Sedna, directing release of the goods on compliance within ten days.

Misuse of EPCG licence - third party export under EPCG scheme - export obligation under EPCG licence - premature adjudication of export obligation - overvaluation of export goods - confiscation and redemption fine under Section 125 of the Customs Act, 1962 - penalty under Section 114AA of the Customs Act, 1962 - penalty under Section 117 of the Customs Act, 1962

Export obligation under EPCG licence - premature adjudication of export obligation - third party export under EPCG scheme - Whether the show cause notice alleging non-fulfilment of export obligation under the EPCG licence was premature and unsustainable. - HELD THAT: - The EPCG licence was issued in 2015 and carried a six-year period for completion of the export obligation; the show cause notice was issued on 18.11.2020. The Tribunal accepted the submission that the licence period had not expired and that fulfilment of export obligation and issuance of the export obligation fulfillment certificate is a matter for DGFT, to be considered after the licence validity period and upon production of requisite documents. The licence permits discharge of export obligation through third party exports provided the shipping bill notes the third party exporter and licence particulars. Given the remaining validity of the licence and the availability of time to submit documents to DGFT, the adjudication by Customs on non-fulfilment at that stage was held to be premature and cannot be sustained. [Paras 6]

Show cause notice alleging non-fulfilment of export obligation was premature and unsustainable.

Overvaluation of export goods - misuse of EPCG licence - confiscation and redemption fine under Section 125 of the Customs Act, 1962 - penalty under Section 114AA of the Customs Act, 1962 - penalty under Section 117 of the Customs Act, 1962 - Whether the goods were overvalued and the export constituted misuse of the EPCG licence warranting confiscation, redemption fine and penalties. - HELD THAT: - The Tribunal examined statements and documentary material including the job-work agreement, challans showing supply of yarn, invoices and the admitted invoice No.470 which reflected only job-work charges. The licence holder manufactured knitted fabric as a job worker using imported capital goods and the third party exporter carried out further processes and export. The determination of overvaluation by Customs rested principally on the job-work invoice; there was no independent evidence of dishonest intention or fabrication by the appellants. The appellants had produced documents and explanations and it was the first instance of endorsing the EPCG licence on a shipping bill. Given the absence of proof of deliberate overvaluation or misuse, the finding of attempted improper export was not established. Consequently confiscation, redemption fine and the penalties imposed were unwarranted. [Paras 7, 8, 9]

Findings of overvaluation, confiscation and the penalties imposed were not sustained; confiscation and penalties set aside.

Final Conclusion: The Tribunal allowed the appeals: the show cause notice alleging non-fulfilment of EPCG export obligation was held premature and unsustainable, and the findings of overvaluation, confiscation and the penalties imposed were not established; the impugned order is set aside and appeals are allowed with consequential relief as per law.

Liability for breach of custodianship obligations under HCCAR, 2009 - duty to verify Let Export Order before permitting movement into sterile area - responsibility of custodian to prevent unauthorised access to Customs area - standard of proof required to establish violation of security and access controls - condonation of minor procedural lapse by a custodian

Duty to verify Let Export Order before permitting movement into sterile area - condonation of minor procedural lapse by a custodian - liability for breach of custodianship obligations under HCCAR, 2009 - Validity of penalty insofar as it was predicated on alleged scanning of cargo prior to grant of LEO in Shipping Bill No.5981482 dated 01.08.2019. - HELD THAT: - On examination of the X-Ray register the Tribunal found that although the cargo reached the scanning area at 16:45 hrs, it was detained and the X Ray scan was not carried out until 17:27 hrs after the Let Export Order had been granted. The department does not allege any wrongful intention by the custodian nor any export of goods without proper documentation. The discrepancy thus amounted to a short, technical time difference noticed in respect of a single shipping bill during a routine visit. Having regard to the custodial role and the factual matrix, the Tribunal treated the brief timing lapse as a condonable procedural shortcoming rather than a breach warranting the penalty imposed under the HCCAR, 2009. [Paras 7]

The penalty cannot be sustained on the ground of scanning prior to LEO in respect of the said shipping bill; the short timing lapse is condonable.

Responsibility of custodian to prevent unauthorised access to Customs area - standard of proof required to establish violation of security and access controls - liability for breach of custodianship obligations under HCCAR, 2009 - Sustainability of allegations and penalty based on purported admission of unauthorised persons into the Customs area (Regulation 5(n) of HCCAR, 2009). - HELD THAT: - The show-cause notice alleged that unauthorised persons accessed the premises and that identity cards were not properly verified, but the department did not furnish details or evidence of the unauthorised persons observed, nor any list of issued or revoked ID cards to substantiate the allegation. In absence of supporting material or specific proof, the allegation remained unsubstantiated. The Tribunal held that an allegation of unauthorised access unsupported by evidence cannot be sustained as a ground for imposing penalty under the HCCAR, 2009. [Paras 7]

Allegation of allowing unauthorised persons into the Customs area is not proved; penalty cannot be sustained on this ground.

Final Conclusion: The appeal is allowed; the penalty imposed under the HCCAR, 2009 is set aside and the impugned order is quashed. Consequential relief, if any, shall follow.

Amendment of shipping bill - EGM/shipping bill incorrect or incomplete - power of proper officer under section 41(3) - no fraudulent intention requirement - eligibility for MEIS benefit

Amendment of shipping bill - power of proper officer under section 41(3) - eligibility for MEIS benefit - no fraudulent intention requirement - Validity of allowing amendment of shipping bills to include MEIS benefit under sub-section (3) of section 41. - HELD THAT: - The Court applied sub-section (3) of section 41 which permits amendment of an export manifest or shipping bill if the proper officer is satisfied that the filing is incorrect or incomplete and there was no fraudulent intention. The respondent sought amendment of draw-back shipping bills to include MEIS benefit and the department did not contest the respondent's eligibility for that benefit. The departmental objection-that post-filing retrieval or database verification difficulties justify denial of amendment-was held to be untenable where the statutory power to amend exists and the officer is satisfied the request is genuine. The Commissioner (Appeals) examined the facts and law and, consistent with the Tribunal's earlier consideration in M/s. Ambadi Enterprises Ltd. , allowed the amendment. The Tribunal found no error in that conclusion and declined to interfere.

Order of Commissioner (Appeals) permitting amendment of the shipping bills to include MEIS benefit is upheld and the departmental appeal is dismissed.

Final Conclusion: The appeal is dismissed; the Commissioner (Appeals)'s order allowing amendment of the shipping bills to include MEIS benefit is upheld as within the statutory power under section 41(3) and not vitiated by the department's procedural objections.

Application of the Limitation Act to proceedings under the Insolvency and Bankruptcy Code - condonation of delay under Section 5 of the Limitation Act - concept of 'sufficient cause' and its liberal construction - accrual of right to sue on default for initiation of CIRP under Sections 7 and 9

Application of the Limitation Act to proceedings under the Insolvency and Bankruptcy Code - condonation of delay under Section 5 of the Limitation Act - concept of 'sufficient cause' and its liberal construction - Whether the Adjudicating Authority erred in dismissing the application under Section 5 of the Limitation Act seeking condonation of delay in filing a Section 9 petition under the IBC. - HELD THAT: - The Tribunal held that the Limitation Act, 1963 applies to applications under Sections 7 and 9 of the I&B Code and Article 137 of the Limitation Act is attracted; the right to sue for initiation of CIRP accrues on the date of default. While Section 5 of the Limitation Act may be invoked to condone delay, the power is discretionary and depends on the applicant satisfying the court that 'sufficient cause' exists. The Tribunal reviewed the appellant's averments that limitation ran from 02.12.2016 to 01.12.2019 and that, after excluding the COVID lockdown period, a delay of 241 days remained. Applying the settled principles (including the need for a liberal construction of 'sufficient cause' but requiring due diligence and bona fides), the Tribunal recorded that it was not subjectively satisfied that the appellant had shown sufficient cause for the long and inordinate delay of 241 days. Consequently, the Tribunal declined to exercise its discretion to condone the delay in the facts of this case. [Paras 23, 25, 26, 27, 28]

The Adjudicating Authority did not err in refusing to condone the delay; the application under Section 5 is rejected on the facts for want of sufficient cause.

Final Conclusion: The appeal is dismissed for lack of merits; the order refusing condonation of delay stands and there shall be no order as to costs.

Operational debt and default - demand notice under Section 8 and initiation under Section 9 of the Code - liability of transferee company under sanctioned scheme - admission of corporate insolvency resolution process (CIRP) - moratorium upon admission of CIRP - appointment of Interim Resolution Professional

Liability of transferee company under sanctioned scheme - operational debt and default - Whether the Corporate Debtor, as transferee under an approved scheme, is liable to pay the unpaid operational dues claimed by the Operational Creditor. - HELD THAT: - The Tribunal examined the work order issued in favour of the Operational Creditor and the sanctioned scheme by which all assets and liabilities of the transferor company were vested in the transferee (the Corporate Debtor). On the basis of those documents the Tribunal held that the Corporate Debtor, being the transferee under the approved scheme, could not deny liability for the unpaid bills that arose under the work order originally issued by the transferor. The forwarding of bills to another group company and the subsequent dealings between the Operational Creditor and that group company were held not to absolve the Corporate Debtor of its liability under the scheme. The plea that there was no privity or that another group company was primarily liable was rejected as an afterthought. [Paras 1, 2, 3]

The Corporate Debtor is liable as transferee under the approved scheme for the unpaid operational debt claimed by the Operational Creditor; the contention denying liability is rejected.

Demand notice under Section 8 and initiation under Section 9 of the Code - operational debt and default - Whether the petition under the Code was complete, the demand notice remained unanswered, and the debt and default were established for admission of CIRP. - HELD THAT: - The Tribunal found that the Operational Creditor had issued the statutory demand notice and that the Corporate Debtor did not respond to it. On consideration of the pleadings and documents, the Tribunal concluded that the existence of operational debt and default was established and that the application was complete and within limitation. The Tribunal expressly rejected the respondent's defence which rested on alleged payments and dealings with another group company, noting absence of dispute or reply to the demand notice. [Paras 2, 3]

The debt and default are established; the petition is complete and within limitation, warranting admission.

Admission of corporate insolvency resolution process (CIRP) - appointment of Interim Resolution Professional - moratorium upon admission of CIRP - Reliefs and consequential orders upon admission of the Company Petition under the Code. - HELD THAT: - Upon admitting the petition, the Tribunal ordered initiation of CIRP against the Corporate Debtor, appointed an Interim Resolution Professional from the IBBI list (in the absence of any suggestion by the Operational Creditor), directed deposit towards initial CIRP costs, and imposed the statutory moratorium restraining institution or continuation of suits and certain enforcement actions. The Tribunal further directed public announcement of CIRP, vesting of management in the IRP/RP during CIRP, supply of documents by suspended management, and communication of the order to the Registrar of Companies. These orders follow from admission and are directed to facilitate the CIRP process. [Paras 4]

The petition is admitted; CIRP is initiated, an IRP is appointed, initial CIRP costs are directed to be deposited, and statutory moratorium and ancillary directions are imposed.

Final Conclusion: The Tribunal admitted the Company Petition, held the Corporate Debtor liable as transferee for the unpaid operational debt, initiated CIRP, appointed an Interim Resolution Professional, directed payment towards initial CIRP costs, and imposed the statutory moratorium with consequential directions for conduct of the CIRP.

Date of default - limitation under Section 7 of the Insolvency and Bankruptcy Code, 2016 - effect of acknowledgment on limitation - admissibility of belated documents and after thought police complaint - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional

Date of default - limitation under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Whether the application filed by the Financial Creditor under Section 7 was within limitation having regard to the date of default stated in the application and the date of filing. - HELD THAT: - The Tribunal recorded that the Part 4 of the Section 7 application expressly stated the date of default as 07.06.2016 and that the application was filed on 04.06.2019/06.06.2019. The Appellant had itself, in its reply affidavit before the Adjudicating Authority, admitted that the account was declared NPA on 07.06.2016 and that the default on the installment commenced on 30.01.2016. Applying the limitation principle relied upon by the parties, the Appellate Tribunal held that the application under Section 7 was filed within the prescribed period and there was no bar of limitation to the admission of the petition. [Paras 8, 9]

The Section 7 application was within limitation and the Adjudicating Authority did not err in proceeding to admit the petition.

Effect of acknowledgment on limitation - admissibility of belated documents and after thought police complaint - Whether the acknowledgment dated 19.11.2018 produced by the Financial Creditor could be treated as genuine for the purpose of limitation and whether the police complaint alleging forgery, lodged after production of the document, vitiated the reliance on that acknowledgment. - HELD THAT: - The Adjudicating Authority took on record the acknowledgment dated 19.11.2018 purportedly signed by two directors acknowledging the debt. The Appellant contended forgery and pointed to a police complaint lodged after the document was produced before the Tribunal. The Appellate Tribunal examined the record and noted that the acknowledgment was signed by two directors, that one of the directors had since died, and that on the face of it the signatures matched those on loan documents. The Tribunal found no reason to interfere with the Adjudicating Authority's conclusion that the objections to the document were unsustainable and that the acknowledgment could be relied upon. The belated police complaint, instituted only after production of the document, was treated as an after thought and did not negate the Adjudicating Authority's finding on the document's admissibility and effect. [Paras 8, 9]

The acknowledgment dated 19.11.2018 was properly taken into account by the Adjudicating Authority and the Appellant's contention of forgery based on the later police complaint was rejected.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - Whether the orders of the Adjudicating Authority declaring moratorium and appointing an Interim Resolution Professional in the admitted Section 7 petition were sustainable. - HELD THAT: - The Adjudicating Authority admitted the Section 7 petition and declared the moratorium with its attendant prohibitions; it also appointed an Interim Resolution Professional. The Appellate Tribunal, having upheld the admission (including its findings on limitation and the acknowledgment), found no illegality in the impugned order insofar as the moratorium and the appointment of the IRP were concerned. Consequently, there was no scope to interfere with those consequential orders made by the Adjudicating Authority. [Paras 1, 2, 9]

The declaration of moratorium and the appointment of the Interim Resolution Professional were affirmed.

Final Conclusion: The impugned order of the Adjudicating Authority admitting the Section 7 petition, declaring moratorium and appointing an Interim Resolution Professional is affirmed; the appeal is dismissed and the period during the pendency of this appeal is excluded from the CIRP period.

Withdrawal of application admitted under Section 9 - Inherent powers under Rule 11 of NCLAT Rules - Regulation 30 A of the CIRP Regulations (pre constitution withdrawal procedure) - Proceeding in rem / collective proceeding - Constitution of Committee of Creditors - Intervention applications by operational creditors

Inherent powers under Rule 11 of NCLAT Rules - Withdrawal of application admitted under Section 9 - Proceeding in rem / collective proceeding - NCLAT can, in exercise of its inherent powers under Rule 11, allow withdrawal of an admitted Section 9 application prior to constitution of the Committee of Creditors. - HELD THAT: - The Tribunal held that Rule 11 confers inherent powers on NCLAT to make orders necessary to meet ends of justice or to prevent abuse of process. While the Supreme Court in Swiss Ribbons recognised that where the CoC is not yet constituted a party can approach NCLT under its inherent powers, the Appellate Tribunal is not deprived of similar inherent jurisdiction. The Tribunal examined its own precedents where Rule 11 was exercised to allow withdrawal where settlement occurred prior to constitution of CoC and concluded that, in appropriate cases, NCLAT may exercise Rule 11 to allow withdrawal after hearing concerned parties and considering relevant factors. The Tribunal therefore exercised Rule 11 in the present facts where settlement with the operational creditor and payment of IRP costs had been shown and where the CoC was not constituted. [Paras 41, 45, 46]

NCLAT may exercise inherent powers under Rule 11 to permit withdrawal of a Section 9 application before constitution of the CoC in appropriate cases; such power has been exercised in the present case.

Regulation 30 A of the CIRP Regulations (pre constitution withdrawal procedure) - Withdrawal of application admitted under Section 9 - Regulation 30 A(1)(a) is not mandatorily applicable to bar NCLAT from exercising Rule 11 to allow withdrawal prior to constitution of the CoC in the facts of this case. - HELD THAT: - The Tribunal noted that Section 12 A and Regulation 30 A (as amended) provide a framework for withdrawal post constitution and pre constitution of the CoC respectively. It observed that the amended Regulation 30 A(1)(a) addresses procedure pre constitution but, applying Swiss Ribbons and subsequent authority, Regulation 30 A is directory and does not oust the Tribunal's inherent jurisdiction. The Tribunal therefore held that the procedure under Regulation 30 A(1)(a) did not mandatorily preclude NCLAT from exercising Rule 11 in the present circumstances and that Regulation 30 A(1)(a) was not applicable to prevent the exercise of inherent powers on these facts. [Paras 40, 41]

Regulation 30 A(1)(a) does not bar the exercise of inherent powers under Rule 11 by NCLAT in the facts of this case; Regulation 30 A is not mandatory to the extent urged by intervenors.

Intervention applications by operational creditors - Constitution of Committee of Creditors - Intervention applications filed by operational creditors during the pendency of the appeal prior to constitution of the CoC are disallowed in the present matter. - HELD THAT: - The Tribunal recorded that numerous proposed intervenors, all operational creditors, filed intervention applications claiming dues and invoking various fora (including arbitration). The Tribunal observed that before constitution of the CoC mere filing of claims does not by itself constitute default for the purpose of defeating a pre CoC settlement. Having examined the facts, the settlement between the applicant operational creditor and the corporate debtor (including payment of IRP costs) and the absence of a constituted CoC, the Tribunal held that the intervention applications should be dismissed and that those intervenors had no locus to prevent the negotiated settlement in these circumstances. [Paras 42, 43, 46, 47]

Proposed intervention applications filed prior to constitution of CoC are dismissed; they do not prevent acceptance of the settlement in this case.

Withdrawal of application admitted under Section 9 - Proceeding in rem / collective proceeding - The admission order dated 30.03.2021 under Section 9 is set aside and the CIRP proceedings against the corporate debtor are closed; consequential orders (moratorium, appointment of IRP, freezing of accounts) are vacated. - HELD THAT: - On the evidence of settlement (communication confirming payment of the claimed operational debt and satisfaction of IRP costs) and having exercised its inherent powers under Rule 11, the Tribunal allowed IA 815, set aside the impugned admission order and directed closure of proceedings. The Tribunal explicitly released the corporate debtor from the rigours of CIRP and directed the Adjudicating Authority to close the proceedings, while leaving open the right of any creditor to file a fresh CIRP application to be heard afresh and uninfluenced by observations in this order. [Paras 46, 47, 48]

IA 815 is allowed; the Section 9 admission order is set aside and the CIRP proceedings are closed with consequential vacatur of moratorium and related orders.

Final Conclusion: The Appellate Tribunal, exercising its inherent powers under Rule 11, allowed the withdrawal application based on a demonstrated settlement and payment of IRP costs before constitution of the CoC; Regulation 30 A(1)(a) was not held to bar such exercise, all interim intervention applications by operational creditors filed pre CoC were dismissed, and the Section 9 admission order dated 30.03.2021 was set aside with directions to close the CIRP and release the corporate debtor from the rigours of the process.

Condonation of delay - Special Leave Petition - timelines for filing appeals - litigation management - inter ministerial committee - use of technology for case monitoring

Condonation of delay - Special Leave Petition - Delay in filing the appeal was condoned. - HELD THAT: - The Court recorded that sufficient cause had been shown for the delayed filing of the appeal and, on that basis, exercised its discretion to condone the delay. The order therefore disposes of the interlocutory plea regarding extension of time by granting condonation and permitting the appeal to proceed. [Paras 3]

Delay in filing the appeal is condoned.

Timelines for filing appeals - litigation management - inter ministerial committee - use of technology for case monitoring - Union government to further examine and place a consolidated proposal for reducing delay in filing SLPs, incorporating technological modalities; further hearing listed. - HELD THAT: - The Court recorded a detailed note prepared after consultations with senior officials and accepted the need for administrative reforms to reduce repetition and delay in revenue appeals. It directed that authorities refine and finalise the proposed mechanism (including consideration of a Committee within each Board, timelines, enlarged panel of counsel, and software monitoring with timestamps) and place a consolidated proposal before the Court on the next date of listing. The Solicitor General was recorded as agreeable to interact with the National Informatics Centre to incorporate technological measures. The matter was accordingly posted for further hearing to enable those deliberations. [Paras 2]

Authorities of the Union government to place a consolidated proposal, including technological modalities, before the Court on the next date of listing; further hearing posted for 15 March 2021.

Final Conclusion: The Court condoned the delay in filing the appeal, recorded the administrative note on reducing delays in filing SLPs, and directed the Union government to place a consolidated, technology incorporating proposal before the Court for further hearing; procedural timelines for filing a counter affidavit and filing of brief notes by parties were also specified.

Definition of input service - exclusion of works contract and construction services - modernisation and renovation as input services - refund of input service credit under Notification No.27/2012-CE - requirement of nexus between input service and exported service

Definition of input service - exclusion of works contract and construction services - modernisation and renovation as input services - refund of input service credit under Notification No.27/2012-CE - Whether the services availed for electrical works, installation and modernization of premises qualify as "input service" for the purpose of claiming refund of input service credit and are therefore admissible under Notification No.27/2012-CE for the period April 2016 to June 2016. - HELD THAT: - The Tribunal examined the statutory definition of "input service" in Rule 2(l) of the CENVAT Credit Rules, 2004, which includes services used in relation to setting up, modernization, renovation or repairs of a factory or premises of a provider of output service but expressly excludes the service portion in execution of works contract and construction services insofar as used for construction of a building or civil structure or laying of foundation. The Tribunal found that the disputed services related to electrical works, installation and modernization of existing premises and were not for construction of a new building or laying of foundations supporting capital goods. The court placed reliance on circular guidance that repair or renovation of factory or office premises falls within the inclusive part of the input service definition, and on precedents considering modernization and renovation as admissible input services (including Musaddilal Projects Ltd. and Mahindra & Mahindra Ltd.), concluding that such services are eligible for credit. Applying this legal test to the material on record, the Tribunal held that the Commissioner(Appeals) erred in treating the disputed services as excluded construction/works contract services and, consequently, the rejection of part of the refund was not sustainable.

Appeal allowed; impugned order set aside and refund claim insofar as related to the disputed services upheld, with consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeal, holding that the services in dispute constituted modernization/renovation input services within the definition of "input service" and were eligible for refund under Notification No.27/2012-CE for the period April 2016 to June 2016; the impugned order rejecting part of the refund was set aside.

CENVAT credit admissibility - Cross-examination of prosecution witnesses - Natural justice - right to cross-examination - Relevancy of statements under Section 9D of the Central Excise Act, 1944 - Statements recorded under Section 14 of the Central Excise Act, 1944 - Admissibility of third party statements for confirming duty demand

CENVAT credit admissibility - Cross-examination of prosecution witnesses - Natural justice - right to cross-examination - Admissibility of third party statements for confirming duty demand - Whether denial of CENVAT credit and imposition of duty/penalty could be sustained when the Department relied solely on statements of third parties which were not permitted to be cross examined. - HELD THAT: - The Tribunal held that the departmental proceedings and the impugned appellate orders rested entirely on statements of manufacturers and dealers recorded by DGCEI, which were relied upon to conclude non receipt of goods by the appellant. The appellants had repeatedly sought cross examination of those persons to test veracity, but the request was refused on the ground that the witnesses did not appear despite opportunities. The Tribunal found this reasoning legally unsustainable: where third party statements are relied upon to penalise or deny benefits to an assessee, natural justice requires an effective opportunity to cross examine those witnesses. Absent such opportunity, adverse inference cannot be drawn against the assessee and the statements become inadmissible for sustaining the demand. The Tribunal applied the consistent ratio of earlier decisions holding that Revenue cannot rely on untested third party statements to confirm a demand. Having disregarded the unexamined statements, there remained no evidence to prove non receipt of inputs or illegality in availing CENVAT credit. Consequently the findings based solely on those statements could not stand and the orders confirming duty, interest and penalty were held unsustainable. [Paras 7]

Impugned orders denying CENVAT credit and imposing duty/penalty, being founded solely on third party statements not subject to cross examination, are set aside; appeals allowed with consequential relief.

Final Conclusion: The Tribunal set aside the original and appellate orders which denied CENVAT credit and imposed duty and penalty for the periods 2012-13, 2013-14 and 2014-15, holding that reliance on untested third party statements without affording cross examination violated principles of natural justice and left no admissible evidence to sustain the demands; all appeals were allowed with consequential relief.

Admissibility of Cenvat credit - outward transit insurance and freight/GTA - sale on FOR basis - sale invoice as contract - binding jurisdictional precedent - consequential relief

Admissibility of Cenvat credit - outward transit insurance and freight/GTA - sale on FOR basis - sale invoice as contract - binding jurisdictional precedent - Cenvat credit in respect of outward GTA/freight is admissible where the sale is on FOR basis and freight is paid and borne by the assessee. - HELD THAT: - The Tribunal found on the material before it that the sales were on FOR basis, the freight was paid and borne in bond by the appellant, and the sale invoices expressly recorded the FOR condition and coverage of risk up to destination. The sale price was inclusive of freight on which excise duty was charged. The original authority had examined invoices, LR copies and the CA certificate and had allowed credit on that basis. Applying the Tribunal's earlier orders in the appellant's own cases and the jurisdictional decisions in Ultratech Cement Ltd and Sanghi Industries Ltd (and noting the Board circular issued after the Supreme Court decision), the Tribunal held that the sale invoices operate as the contractual evidence of FOR sales and that the reported contrary view did not consider the subsequent circular or binding jurisdictional precedent. On these grounds the Tribunal concluded that Cenvat credit for outward transit-related services is admissible. [Paras 4, 5]

Appeal allowed; impugned order set aside and Cenvat credit on outward freight/GTA admitted with consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeal, holding that where sales are on FOR basis (so recorded in invoices), and freight/outward transit charges are borne and paid by the assessee, Cenvat credit on such outward transit services is admissible; consequential relief granted.

Rectification of clerical error - review/recall of tribunal order for correction - correction of erroneous reference to administrative circular - effect of corrigendum on appellate order

Rectification of clerical error - correction of erroneous reference to administrative circular - Correction of an incorrect Board/Circular number in paragraph 4 of the Tribunal's order dated 28.01.2021 was permissible and the earlier reference is to be read as the correct circular. - HELD THAT: - The applicant pointed out that paragraph 4 of the Tribunal's order dated 28.01.2021 incorrectly cited Board Circular No. 97/8/2007-ST instead of the correct Circular No. 1065/4/2018-CX dated 08.06.2018. The Revenue's authorised representative conceded the error. On perusal of the record the error was apparent and not affecting the substantive decision. The Tribunal therefore permitted correction of the incidental clerical mistake in the earlier order and ordered that the reference be read as Circular No. 1065/4/2018-CX dated 08.06.2018. The Review/Rectification application was allowed for this limited purpose.

The apparent error in paragraph 4 of the order dated 28.01.2021 is corrected so that the reference reads Circular No. 1065/4/2018-CX dated 08.06.2018; the ROM application is allowed for this correction.

Final Conclusion: The Tribunal allowed the Review/Rectification application to correct an apparent clerical error in its earlier order by substituting the mistakenly cited circular number with the correct Circular No. 1065/4/2018-CX dated 08.06.2018.

Protection from prosecution for acts done in judicial or quasi-judicial capacity - quasi-judicial functions of tax assessing authority - judicial immunity under the Judges (Protection) Act, 1985 - good faith protection for official acts under a taxing statute - sanction under the Prevention of Corruption Act as substitute for departmental/statutory sanction - non-interference by superior's administrative directions with judicial discretion

Quasi-judicial functions of tax assessing authority - judicial immunity under the Judges (Protection) Act, 1985 - protection from prosecution for acts done in judicial or quasi-judicial capacity - Whether the petitioner, an Assistant Commissioner (Assessment), is entitled to protection under Section 3(1) of the Judges (Protection) Act, 1985 in respect of assessment orders passed under the KVAT Act. - HELD THAT: - The Court held that assessment orders under the KVAT Act are definitive judgments in a "legal proceeding" and that an assessing authority discharging the assessment function applies objective legal standards to facts after affording opportunity to the dealer; accordingly the act of passing the said assessment orders is judicial or at least quasi judicial. The Judges (Protection) Act defines "Judge" to include any person empowered by law to give a definitive judgment in a legal proceeding; hence the petitioner falls within that definition when passing the assessment orders. The Court applied established tests distinguishing judicial from administrative acts and relied on precedent recognizing tax assessment as quasi judicial. Protection under Section 3(1) attaches to acts done in the course of official or judicial duty to secure independence of decision making; erroneous or even illegal orders do not, by themselves, deprive that protection unless there is material showing the act was influenced by extraneous considerations or bad faith. No such material was alleged or produced in the charge sheet against the petitioner in relation to the impugned assessment orders, and therefore the prosecution based solely on those orders is not maintainable. [Paras 27, 31, 39, 58, 61]

The petitioner is entitled to the protection under Section 3(1) of the Judges (Protection) Act, 1985 in respect of the assessment orders dated 04.05.2011 and 31.05.2011, and the prosecution based solely on those orders is barred.

Good faith protection for official acts under a taxing statute - sanction under the Prevention of Corruption Act as substitute for departmental/statutory sanction - Whether the petitioner is entitled to protection under Section 79 of the KVAT Act and the effect of sanction under Section 19(1) of the Prevention of Corruption Act on such protection. - HELD THAT: - Section 79(1) and (2) of the KVAT Act bar proceedings without prior sanction and protect officers from liability for acts done in good faith in discharge of duties under the Act. The Court observed that the protection in Section 79(2) is limited to acts done in good faith and that "good faith" is a question of fact which cannot be finally determined in a Section 482 application. However, since the State Government has granted sanction for prosecution under Section 19(1) of the PC Act, it is not necessary to obtain a separate sanction under Section 79(1) of the KVAT Act. Thus while entitlement to Section 79(2) protection depends on factual determination of good faith (not resolved in the present petition), the procedural requirement of prior sanction under Section 79(1) is satisfied by the sanction under the PC Act. [Paras 12, 13, 14, 15, 17]

Sanction under Section 19(1) of the Prevention of Corruption Act obviates the need for a separate sanction under Section 79(1) of the KVAT Act; whether the petitioner is protected under Section 79(2) on the ground of good faith is a factual issue not susceptible of determination in this petition.

Final Conclusion: The petition is allowed: the criminal proceedings against the petitioner in C.C.No.6 of 2020 (Court of the Enquiry Commissioner and Special Judge (Vigilance), Thrissur) are quashed insofar as they are founded on the assessment orders dated 04.05.2011 and 31.05.2011; the quashing is grounded on the petitioner's entitlement to statutory judicial immunity for acts done in his quasi judicial capacity, and the charge sheet contains no material of extraneous consideration or personal gratification to deprive him of that protection.

Mandatory personal hearing - reasonable opportunity - principles of natural justice - personal hearing under Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006 - remand for fresh consideration - validity of assessment order in absence of personal hearing

Mandatory personal hearing - reasonable opportunity - principles of natural justice - personal hearing under Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006 - validity of assessment order in absence of personal hearing - Impugned assessment order passed without granting personal hearing was unsustainable and required to be set aside and remanded. - HELD THAT: - The Court found that Section 27 of the Tamil Nadu Value Added Tax Act, 2006 guarantees reasonable opportunity including a personal hearing under Section 27(4), which is mandatory. The petitioner was not afforded a personal hearing before the second respondent passed the impugned order dated 23.04.2018. The respondents candidly admitted that personal hearing had not been given and undertook that on remand a personal hearing would be afforded and fresh orders would be passed in accordance with law. In these circumstances, the impugned order cannot stand for want of compliance with the principles of natural justice and must be set aside for fresh consideration after providing the mandated opportunity to the petitioner. [Paras 6, 7]

Impugned order set aside and matter remanded to the second respondent for fresh consideration after giving reasonable opportunity including personal hearing as contemplated under Section 27(4); exercise to be completed within eight weeks.

Final Conclusion: Writ petition allowed; impugned assessment order quashed and matter remanded for fresh disposal after affording mandatory personal hearing, to be completed within eight weeks; no costs.

Quashing of FIR under Section 482 Cr.P.C. - Abuse of process of court - Vindictive prosecution - Prima facie credibility of allegations - Concurrent civil remedy for recovery - Delay in lodging complaint as relevant to veracity

Quashing of FIR under Section 482 Cr.P.C. - Abuse of process of court - Vindictive prosecution - Whether the FIR registered in Cr.No.34/2019 is liable to be quashed in exercise of inherent jurisdiction under Section 482 Cr.P.C. as being frivolous and an abuse of process of court insofar as the petitioners are concerned. - HELD THAT: - The court examined the allegations in the FIR in the factual backdrop of an earlier FIR (Cr.No.421/2018) lodged by the second petitioner against the present complainant and others, and the charge sheet produced pursuant thereto. The petitioners had also initiated proceedings under Section 138 of the Negotiable Instruments Act against the complainant. The chronology shows that the complainant delayed taking police action despite having knowledge of the alleged irregularities earlier, and instituted the present FIR after the earlier FIR and proceedings had been set in motion. The High Court found that there was material casting doubt on the veracity of the complainant's allegations: the pendency of a prior criminal complaint by the petitioners alleging collusion and parallel business dealings, the charge sheet arising from that complaint, and the existence of civil and NI Act remedies pursued by the petitioners. The court noted that the core dispute-whether discounts were contractually agreed and amounts were due-was essentially a matter of contract and recovery which could be adjudicated in civil proceedings, and that forgery/forged invoices and delivery disputes could equally be subjected to civil adjudication or investigated where credible prima facie material exists. In view of the surrounding circumstances, including the timing of the complaint and the earlier complaint and charge sheet against the complainant, the allegations in FIR Cr.No.34/2019 did not, on a prima facie reading, appear to be believable and instead suggested a vindictive or frivolous prosecution. Having regard to these factors, the court concluded that continuation of criminal proceedings against the petitioners would amount to an abuse of process of the court and therefore intervention under Section 482 Cr.P.C. was warranted to prevent misuse of criminal law.

The FIR in Cr.No.34/2019 is quashed insofar as the petitioners (accused nos.1 and 2) are concerned.

Final Conclusion: On the facts and materials before the court - notably the prior FIR and charge sheet lodged by the petitioners, the pendency of civil/NI Act remedies, the complainant's delay, and doubts as to the prima facie veracity of the allegations - the High Court exercised its inherent jurisdiction under Section 482 Cr.P.C. and quashed FIR Cr.No.34/2019 against the petitioners as vexatious and an abuse of process.