TaxTMI Updates e-Newsletter
Jul 19,2023

Regular bail - offence under Section 132 of the GST Act - pre-charge stage - custody for extended period - absence of risk of absconding or tampering with evidence - maximum sentence as a consideration for bail

Regular bail - custody for extended period - pre-charge stage - absence of risk of absconding or tampering with evidence - maximum sentence as a consideration for bail - Grant of regular bail to the petitioner arrested in a complaint under Section 132 of the GST Act. - HELD THAT: - The Court noted that the petitioner has been in custody for approximately two years since his arrest and that the criminal complaint remains at the pre-charge evidence stage. The maximum sentence prescribed under the relevant GST provision is five years. The respondent did not contend, nor adduce material to show, that release on bail would expose the prosecution to the risk of the petitioner absconding, fleeing from justice, influencing witnesses, or tampering with evidence. Weighing the prolonged custody, the pre-charge status of the proceedings, the statutory maximum sentence, and the absence of any asserted risk to the prosecution's case if bail were granted, the Court exercised its discretion in favour of releasing the petitioner on regular bail. The Court qualified that its observations are confined to the bail petition and are not expressions on the merits of the underlying case.

Petitioner granted regular bail on furnishing bail/surety bond to the satisfaction of the trial Court/Duty Magistrate; observations not to be treated as opinion on merits.

Final Conclusion: Third bail petition allowed; petitioner released on regular bail in view of extended pre-charge custody of about two years, the maximum sentence under the offence, and absence of any material showing risk of absconding or tampering with evidence; liberty granted without prejudice to merits.

Show Cause Notice - opportunity of being heard - failure to consider reply - non-speaking order - order under Section 73 of the Delhi Goods and Services Tax Act, 2017 - audit report as basis for demand - quash and remand for fresh consideration

Failure to consider reply - non-speaking order - order under Section 73 of the Delhi Goods and Services Tax Act, 2017 - Validity of the impugned order passed under Section 73 which raised a demand without dealing with the petitioner's reply or stating reasons. - HELD THAT: - The Court recorded that the impugned order neither dealt with the submissions made by the petitioner in its detailed reply nor furnished reasons for raising the demand, and treated the order as non-speaking. The record shows a substantive reply was filed and a request for hearing was made; the officer did not consider those submissions. An order proposing a tax demand must engage with the noticee's response and disclose reasons for the demand so as to enable effective judicial review. In the absence of such consideration and reasoning, the impugned order cannot be sustained and is liable to be set aside. [Paras 3, 5, 8, 11]

Impugned order under Section 73 set aside for failure to consider the petitioner's reply and for being non-speaking.

Show Cause Notice - opportunity of being heard - audit report as basis for demand - quash and remand for fresh consideration - Validity of the impugned Show Cause Notice and the procedure of fixing a personal hearing before the expiry of the period allowed for filing a reply. - HELD THAT: - The impugned Show Cause Notice did not disclose detailed reasons for the proposed demand and contained a hearing date earlier than the deadline for filing a reply. The purpose of permitting a reply is to enable the noticee to place its case on record before being heard; affording a hearing before expiry of the reply period undermines effective opportunity to be heard. The demand was premised on observations in an audit report, to which the petitioner had responded in detail. Given these procedural defects and the petitioner's substantive response, the Court found it appropriate to set aside the Show Cause Notice and direct reconsideration on merits after affording the petitioner a proper opportunity of hearing. [Paras 5, 6, 12, 13, 14]

Impugned Show Cause Notice set aside; matter remitted to the concerned officer to consider the petitioner's response and pass a fresh order after affording due opportunity of hearing.

Final Conclusion: The petition is allowed: the impugned order and the Show Cause Notice are set aside, and the matter is remitted to the concerned officer to consider the petitioner's detailed reply and pass a fresh, reasoned order after affording the petitioner a proper opportunity of being heard.

Natural justice - Audi alteram partem - Quashing of order for being outside scope of show cause notice - Fresh show cause notice and opportunity to be heard

Natural justice - Quashing of order for being outside scope of show cause notice - Impugned cancellation of GST registration was quashed because it was based on a ground not pleaded in the show cause notice, causing prejudice to the petitioners and violating principles of natural justice. - HELD THAT: - The Court found that the order cancelling the petitioners' GST registration proceeded on a ground wholly outside the scope of the earlier show cause notice, such that the petitioners had not been given an opportunity to meet that case. This procedural defect caused prejudice and amounted to a breach of the principles of natural justice (audi alteram partem). In view of this determinative defect, the cancellation order could not stand and was quashed and set aside while preserving the respondents' right to issue a fresh show cause notice and to pass an appropriate order after affording the petitioners a hearing. [Paras 5, 6]

Impugned cancellation order quashed and set aside for violation of natural justice; respondents permitted to issue fresh show cause notice and proceed after hearing.

Fresh show cause notice and opportunity to be heard - Remand for fresh proceedings permitting issuance of a fresh show cause notice and requiring the designated officer to hear the petitioners and pass a reasoned order within specified timelines. - HELD THAT: - The Court granted liberty to the respondents to issue a fresh show cause notice as permissible in law. The Court directed that a notice would be issued to the petitioners within three weeks and that the petitioners shall respond. Thereafter the designated officer, after granting a hearing to the petitioners, shall pass an appropriate order in accordance with law within three weeks from the date of the hearing granted to the petitioners. These directions effect a remand for fresh adjudication limited to observance of statutory procedure and fair hearing. [Paras 6, 7]

Matter remanded for fresh show cause proceedings with directions to issue notice within three weeks and to decide after hearing the petitioners within three weeks of the hearing.

Final Conclusion: The petition succeeds insofar as the cancellation order is quashed for being based on a ground outside the show cause notice and for violating natural justice; respondents may issue a fresh show cause notice and, after hearing the petitioners, pass an appropriate order in accordance with law within the timelines directed by the Court.

Mixed supply - composite supply - works contract - transaction value - valuation under Section 15 - eligibility for input tax credit under Section 16 - exemption for electricity transmission or distribution utility - service classification HSN/SAC 998631

Mixed supply - exemption for electricity transmission or distribution utility - service classification HSN/SAC 998631 - Taxability and classification of services rendered by PSTCL for shifting of transmission lines (contribution work) on request of NHAI. - HELD THAT: - The Authority found that although PSTCL's principal business is transmission of electricity (which is exempt under the exemption notification), the ancillary services of contribution work are provided on specific request, charged separately and are not naturally bundled nor supplied in conjunction with the exempt transmission service. Consequently these services do not enjoy the exemption available for transmission/distribution of electricity. The activities undertaken in contribution work fall within the service classification HSN/SAC 998631 (support services to electricity transmission and distribution) and are taxable. On that basis the contribution work for shifting of transmission lines is a mixed supply and taxable at the rate applicable to the component attracting the highest rate. [Paras 5]

Services for shifting of transmission lines (contribution work) are taxable and classified under HSN/SAC 998631.

Transaction value - valuation under Section 15 - Basis and quantum of value on which GST is to be levied for the contribution work (whether GST is on material, labour and supervision or only supervision charges). - HELD THAT: - Relying on the valuation provisions, the Authority held that the value of supply is the transaction value, i.e., the price actually paid or payable. Although materials used are owned by PSTCL and remain its property after execution, the entirety of cost (material, labour and supervision) is recovered from the third party; accordingly such amounts constitute the transaction value. Section 15(2)(b) supports inclusion of amounts the supplier is liable to pay but which have been incurred by the recipient. Thus GST is leviable on the total transaction value (material, labour and supervision charges) charged to the third party. [Paras 5]

GST is to be charged on the transaction value, i.e., total amount recovered (material, labour and supervision charges).

Eligibility for input tax credit under Section 16 - apportionment and blocked credit under Section 17 - Whether PSTCL can claim input tax credit on materials and services used in the contribution works where the resulting asset remains the property of PSTCL. - HELD THAT: - The Authority observed that input tax credit is available to a registered person for inputs and input services used in the course or furtherance of business. The infrastructure created in contribution works facilitates transmission of electricity and is used for PSTCL's business. None of the exclusions in Section 17 applied to deny credit in the facts of this case. Therefore input tax credit is admissible on materials and services used in execution of such works, whether executed by PSTCL itself or through turnkey contracts. [Paras 5]

PSTCL is eligible to claim input tax credit on materials and services used in the contribution works.

Final Conclusion: The Authority ruled that contribution works executed by PSTCL at the request of third parties are taxable as services under HSN/SAC 998631 at 18% and valued at the transaction value (total amount recovered including material, labour and supervision); PSTCL is entitled to claim input tax credit on inputs and input services used for such works.

Services by way of renting of residential dwelling for use as residence - Services by a hotel, inn, guest house, club or campsite for residential or lodging purposes having declared tariff below one thousand rupees per day - Applicability of exemption Notification No. 12/2017 CT(Rate) as amended by Notification No. 04/2022 CT(Rate) - Classification under HSN 996322 (room or unit accommodation services provided by hostels) - Concept of 'residence' versus temporary stay in determining exemption

Services by a hotel, inn, guest house, club or campsite for residential or lodging purposes having declared tariff below one thousand rupees per day - Applicability of exemption Notification No. 12/2017 CT(Rate) - Hostel accommodation provided to students charging less than Rs. 1,000 per day during 01.08.2021 to 12.07.2022 is exempt from GST under the exemption notification - HELD THAT: - The Authority examined the description and scope of Entry No. 14 of Notification No. 12/2017 CT(Rate) (as in force prior to amendment) and CBIC Circular No. 32/06/2018, concluding that the entry is user based: accommodation used for residential or lodging purposes is covered irrespective of the label 'hostel'. Hostels providing residential/lodging services with declared tariff below Rs. 1,000 per day fall within the exemption. The Authority also noted the classification of hostel accommodation under HSN 996322 and that the applicant's hostel provided inclusive residential facilities to students for fixed terms (annual), with per day charges below Rs. 1,000, thereby satisfying the description of the exempted service as it stood until the amendment. [Paras 19, 20, 22]

Answered in the affirmative: the hostel accommodation in the period 01.08.2021 to 12.07.2022 is exempt from GST under the then applicable Entry No. 14 of Notification No. 12/2017 CT(Rate).

Services by way of renting of residential dwelling for use as residence - Applicability of exemption Notification No. 12/2017 CT(Rate) as amended by Notification No. 04/2022 CT(Rate) - Classification under HSN 996322 (room or unit accommodation services provided by hostels) - Hostel accommodation provided to students charging less than Rs. 1,000 per day from 13.07.2022 onward is not exempt under the amended notification - HELD THAT: - The Authority considered the effect of Notification No. 04/2022 CT(Rate) dated 13.07.2022 which omitted Entry No. 14 and amended Entry No. 12 to exclude cases where the residential dwelling is rented to a registered person. In view of these amendments and the consequential changes to the annexure classifications, services of the kind rendered by the applicant from the stated later period no longer attract the earlier tariff based exemption. The Authority therefore held that post amendment the applicant's hostel services (even where per day rate is below Rs. 1,000) do not remain covered by the exemption insofar as the amended text applies. [Paras 20, 22]

Answered in the negative: the hostel accommodation from 13.07.2022 till today is not exempt under Notification No. 12/2017 CT(Rate) as amended by Notification No. 04/2022 CT(Rate).

Final Conclusion: The Authority ruled that the applicant's hostel accommodation to students charging less than Rs. 1,000 per day was exempt from GST for the period 01.08.2021 to 12.07.2022 under the then operative Entry No. 14 of Notification No. 12/2017 CT(Rate), but that the same transactions from 13.07.2022 onward do not attract that exemption following the amendment effected by Notification No. 04/2022 CT(Rate).

Classification of goods - solar power based devices - HSN classification - applicable GST rate - deemed valuation 70:30 between goods and taxable service - General Rules for Interpretation of Tariff (Rule 3)

Classification of goods - solar power based devices - HSN classification - Supply of the Solar Home Lighting System is covered under the description 'Solar power based devices' inserted as Entry No. 201A of Schedule II of Notification No. 1/2017-Central Tax (Rate) as amended by Notification No. 8/2021. - HELD THAT: - The Authority examined the detailed composition and use of the applicant's Solar Home Lighting System and the terms of Notification No. 08/2021 which inserted Entry No. 201A listing, inter alia, 'Solar power based devices'. Having considered the applicant's description that the system uses solar cells to convert sunlight into electricity for lighting and stores energy in batteries for domestic use, and noting the entry in the Schedule which expressly covers 'Solar power based devices', the Authority concluded that the supply falls within that entry. The application was admitted under the classification jurisdiction and the notification language was applied to the facts as stated by the applicant. [Paras 14, 17, 18]

Supply of the Solar Home Lighting System is covered under 'Solar power based devices' as per Entry No. 201A of Schedule II.

HSN classification - applicable GST rate - General Rules for Interpretation of Tariff (Rule 3) - deemed valuation 70:30 between goods and taxable service - The appropriate HSN code and applicable GST rate for the Solar Home Lighting System. - HELD THAT: - The Authority considered the candidate HSN headings identified by the applicant and examined classification principles under the General Rules for Interpretation of Tariff (Rule 3). Having regard to the composite nature of the product and the headings available (including 9405 and specific entries for solar lanterns/lamps), the Authority determined that the Solar Home Lighting System is classifiable under heading 94055040. In consequence of its inclusion within Entry No. 201A of Schedule II, the product attracts GST at 12% (CGST 6% and SGST 6%). The Authority noted the explanation in the notification regarding valuation where goods are supplied along with taxable services (70:30) but found on the facts that no installation or related service was supplied by the applicant; the ruling on classification and rate follows from the tariff construction and the notification inserted entry. [Paras 15, 16, 17]

Solar Home Lighting System is classifiable under heading 94055040 and is taxable at 12% GST (CGST 6% and SGST 6%).

Final Conclusion: The Authority rules that the applicant's Solar Home Lighting System falls within 'Solar power based devices' (Entry No. 201A of Schedule II) and is classifiable under HSN 94055040, attracting GST at 12% (CGST 6% + SGST 6%) within the jurisdiction of the Authority for Advance Ruling, Uttar Pradesh.

Classification of goods - mixtures and essential character - General Rules for Interpretation of the First Schedule (Rule 3 and Rule 4) - Chapter Note 1(b) to Chapter 9 (mixtures of products of headings 0904 to 0910) - mixed condiments and mixed seasonings - common parlance / commercial usage test for classification - applicability of Customs/Excise classification principles to GST Tariff/Rate Schedule

Chapter Note 1(b) to Chapter 9 (mixtures of products of headings 0904 to 0910) - mixtures and essential character - classification of goods - Whether the product 'Dhathri Dahasamani' is classifiable under CTH 0910 91 00 as a mixture referred to in Note 1(b) to Chapter 9 - HELD THAT: - The Authority examined the composition of the product and found that only one ingredient (dried ginger) falls under Chapter 9 and that ingredient constitutes only 8% of the mixture while ingredients falling under Heading 1211 together constitute 92% of the product. Chapter Note 1(b) permits classification in Chapter 9 only where mixtures of products of Chapters 0904-0910 retain the essential character of goods of those headings despite addition of other substances. Applying the General Rules for Interpretation (in particular Rule 3), the explanatory circulars and the common-parlance/commercial-usage approach affirmed by precedent, the Authority concluded that the mixture does not retain the essential character of Chapter 9 spices because the predominant character arises from Heading 1211 ingredients. Therefore the product cannot be classified under CTH 0910 91 00. [Paras 7]

No; 'Dhathri Dahasamani' is not classifiable under CTH 0910 91 00.

Mixed condiments and mixed seasonings - Rule 3 of the General Rules for Interpretation - classification of goods - applicability of Customs/Excise classification principles to GST Tariff/Rate Schedule - Whether the product 'Dhathri Dahasamani' is classifiable under Heading 2103 90 40 as mixed condiments and mixed seasonings and the corresponding GST rate - HELD THAT: - Having rejected classification under Chapter 9, the Authority applied Rule 3 (essential character of composite goods) and the CBIC circular guidance distinguishing spices (Chapter 9) from mixed condiments/seasonings (Heading 21.03) and residuary edible preparations. The product is used to flavour boiling water for its aromatic and seasoning properties and is not a food preparation consumed in its own right. Given that the mixture is predominantly composed of condiments/seasonings (as per composition) and serves the aromatic/flavouring function, the Authority held it falls within Heading 2103 90 40 as mixed condiments and mixed seasonings. The Authority further observed that classification principles under the Customs/Excise Tariff apply to the GST Tariff/Rate Schedule and, accordingly, the applicable GST rate follows the entry for Heading 2103 90 40 under the Notification cited. [Paras 7]

'Dhathri Dahasamani' is classifiable under Heading 2103 90 40 and liable to GST at the rate specified for that entry.

Final Conclusion: The Advance Ruling holds that 'Dhathri Dahasamani' is not classifiable under CTH 0910 91 00 because the product does not retain the essential character of Chapter 9 spices, and that it is appropriately classifiable under Heading 2103 90 40 as mixed condiments and mixed seasonings, with the GST rate applicable to that entry.

Neither a supply of goods nor a supply of service - supply within the meaning of Section 7 of the CGST Act - consideration for supply - reverse charge liability under Notification No. 13/2017 - CT (Rate) - Notification No. 14/2017 - activities in relation to functions entrusted to Panchayat under Article 243G - fee under Section 27A of the Kerala Conservation of Paddy Land and Wetland Act, 2018

Notification No. 14/2017 - activities in relation to functions entrusted to Panchayat under Article 243G - fee under Section 27A of the Kerala Conservation of Paddy Land and Wetland Act, 2018 - consideration for supply - reverse charge liability under Notification No. 13/2017 - CT (Rate) - neither a supply of goods nor a supply of service - Reverse charge liability under Notification No. 13/2017 is attracted on the fee paid to the State under Section 27A of the Kerala Conservation of Paddy Land and Wetland Act, 2018. - HELD THAT: - The Authority examined whether the activity of permitting change of nature of unnotified land under Section 27A falls within Notification No. 14/2017 which treats certain government activities "neither as a supply of goods nor a supply of service" when undertaken as a public authority in relation to functions entrusted to a Panchayat under Article 243G. While the permission is an activity performed by the State as a public authority, the Authority found that the core object and operation of Section 27A - permitting conversion of unnotified land for residential, commercial or other uses subject to conditions and levy of fees - primarily confers a private benefit on the applicant. On a combined reading of the Act, definitions of "conversion" and "reclamation", and the provisions of Section 27A, the activity of granting permission subject to fees and conditions cannot be considered an activity in relation to the specific Panchayat functions in the Eleventh Schedule (such as agricultural extension, land improvement, soil conservation, minor irrigation or water management). Consequently the activity does not qualify for exclusion from supply under Notification No. 14/2017. Further, the fee charged by the State is a consideration/compensation for conferring that private benefit and is therefore consideration for a supply. Given these conclusions, the payment is taxable and attracts liability under the reverse charge mechanism as per Notification No. 13/2017 - CT (Rate). [Paras 7]

The fee paid under Section 27A is not covered by Notification No. 14/2017 and is consideration for a taxable supply; reverse charge under Notification No. 13/2017 applies.

Final Conclusion: The Authority ruled that the payment made to the Government of Kerala under Section 27A of the Kerala Conservation of Paddy Land and Wetland Act, 2018 for change of description of land is not excluded from supply by Notification No. 14/2017 and, being consideration for a taxable activity, attracts GST under reverse charge as per Notification No. 13/2017 - CT (Rate).

Income attributable to the assessee's PE in India - Deployment of assets in India - as decided by HC [2022 (9) TMI 311 - DELHI HIGH COURT] ITAT held that CIT(A) rightly attributed 15% of the revenue to the Respondent’s PE in India - HELD THAT:- The issues which arise in this petition have been considered and held against the Revenue in Director of Income Tax, New Delhi Vs. Travelport Inc. [2023 (5) TMI 227 - SUPREME COURT] by affirming the judgment of the High Court. His submission is placed on record.

Special leave petition is dismissed.

Allowability of marked-to-market loss on open equity stock future contracts - Market loss on stock-in-trade as an ascertained liability - Deduction in computation of income for business loss -

Permissible deduction in the hands of the assessee - marked to market loss on open equity stock future contracts - ITAT had specifically rejected the Department’s contention that the market loss of stock in trade, is not an ascertained liability. Thereby deduction of the amount, on account of the market loss suffered on stock in trade, was held in favour of the assessee as relying upon case of United Commercial Bank, Calcutta v. Commissioner of Income Tax, W.B.-III, Calcutta [1999 (9) TMI 4 - SUPREME COURT]

HELD THAT:- We have considered the reasoning of both the forums. Upon reading the High Court’s impugned judgment, no infirmity is seen. As such, no interference is called for in the present matter.

Special Leave Petition stands dismissed.

Exemption u/s 80-IC - Availability of exemption to the appellants herein having regard to the decision of Classic Binding Industries [2018 (8) TMI 1209 - SUPREME COURT] - 100% or 25% - whether Assessees were entitled to 100% exemption and this Court in the case of Aarham Softronics [2019 (2) TMI 1285 - SUPREME COURT] has held that the judgment in Classic Binding Industries case had omitted to take note of the definition of “Initial Assessment Year” contained in Section 80-IC and had instead based its conclusion on the definition contained in Section 80-IB, which did not apply to the case at all?

HELD THAT:- We find that the judgment referred to above, squarely applies to the case at hand and therefore, the High Court, which has stated that the substantial questions of law were answered against the Assessees and in favour of the Revenue on the basis of Classic Binding Industries case, will have to be now set aside. Consequently, the Assessees succeed and are entitled to 100% exemption.

In this regard, it is relevant to notice that in the case of Tejpal Chaudhary, the Assessing Officer has clearly held that the Assessee was entitled to exemption under Section 80-IC but to the extent of 25% only which is now held to be 100%. The finding that the Assessee was entitled to deduction has attained finality. In so far as the case of M/s. Friends Alloys is concerned, the Revenue has conceded to the fact that the said Assessee is entitled to exemption.

Claim for credit in respect of advance tax paid by a declarant under the Scheme, 2016 - character of the advance tax - Income Declaration Scheme, 2016 - Is advance tax entitled to the same dispensation as is given to the TDS? - HC held [2022 (2) TMI 344 - BOMBAY HIGH COURT] advance tax paid by the petitioner was not relatable to the income for the relevant assessment years, which petitioner disclosed. If the said payment is not apportionable towards any other liability, there is no justifiable reason to deprive the declarant from getting the credit for the same against the liability under the Scheme, 2016 - HELD THAT:- This Court is not inclined to interfere with the impugned order and judgment of the High Court.

The special leave petition is dismissed on the ground of delay.

Re-opening of assessment under Section 148 of the Income Tax Act - failure to disclose fully and truly all material facts - change of opinion - set-off of unabsorbed depreciation against capital gains versus business income - jurisdiction to re-open assessment more than four years after the relevant assessment year - Assessing Officer's oversight cannot be remedied by reopening (Gemini Leather principle)

Re-opening of assessment under Section 148 of the Income Tax Act - failure to disclose fully and truly all material facts - jurisdiction to re-open assessment more than four years after the relevant assessment year - Validity of notice dated 26th April 2011 under Section 148 for Assessment Year 2006-2007 - HELD THAT: - The Court held that more than four years had elapsed since the end of Assessment Year 2006-2007 and therefore the jurisdiction to issue a notice under Section 148 existed only if there was failure to disclose fully and truly all material facts. The Assessing Officer's reasons for reopening rested solely on a subsequent judicial pronouncement (Times Guaranty) and an assertion that unabsorbed depreciation for earlier years could not have been set off against capital gains. The petitioner had filed returns and accompanying computation showing brought forward unabsorbed depreciation, and the Assessing Officer had considered and discussed this issue in the original assessment order under Section 143(3). Consequently the Assessing Officer had the primary material facts before him when he completed the original assessment and the present reopening amounted to a change of opinion. Applying the principle that reopening cannot be used to rectify the Assessing Officer's own oversight (as explained in Gemini Leather), the Court found there was no allegation or evidence of non-disclosure by the assessee that would attract the extended period of limitation. [Paras 6, 10, 11, 12, 13]

Impugned notice dated 26th April 2011 issued under Section 148 is without jurisdiction and is quashed.

Set-off of unabsorbed depreciation against capital gains versus business income - change of opinion - Assessing Officer's oversight cannot be remedied by reopening (Gemini Leather principle) - Whether a subsequent judicial decision (Times Guaranty) could, by itself, justify re-opening the assessment - HELD THAT: - The Court noted that the Assessing Officer's sole basis for believing income had escaped assessment was a judicial decision rendered after completion of the assessment. The Court held that reliance on a later judicial pronouncement, without any finding of non-disclosure of primary facts by the assessee, amounts to a change of opinion and does not furnish jurisdiction to reopen an assessment after the four-year period. Even if the Assessing Officer ought to have drawn a different legal inference from the facts available at the time of the original assessment, that constitutes an error or oversight of the Assessing Officer and cannot be remedied by invoking Section 147/148. [Paras 9, 11]

Re-opening based solely on a subsequent judicial pronouncement is a change of opinion and cannot sustain the notice under Section 148.

Final Conclusion: The writ petition succeeds; the notice dated 26th April 2011 under Section 148 for Assessment Year 2006-2007 is quashed and set aside, and the petition is disposed of with no order as to costs.

Kar Vivad Samadhan Scheme, 1998 - disputed tax and disputed income (definition and computation) - effect of refunds and interest on determination of tax remaining unpaid - computation of amount payable under KVSS at 35% of disputed income - prohibition against an assessee taking advantage of incorrect prior tax computation

Disputed tax and disputed income (definition and computation) - effect of refunds and interest on determination of tax remaining unpaid - computation of amount payable under KVSS at 35% of disputed income - Whether, for the purposes of the Kar Vivad Samadhan Scheme, 1998, the amount of refund granted to the assessee together with interest paid thereon must be deducted from the prepaid taxes in computing the disputed tax and disputed income, and whether the Certificate and computation made by the designated authority were correct. - HELD THAT: - The Court examined the statutory scheme and definitions in the Finance Act. Section 88(a)(i) requires a company to pay 35% of the disputed income; Section 87(e) defines disputed income as so much of total income as is relatable to disputed tax; Section 87(f) defines disputed tax as the total tax determined and payable which remains unpaid as on the date of declaration. To determine tax which "remains unpaid" it is necessary to deduct taxes already paid; where the Revenue had, prior to declaration, refunded amounts to the assessee (comprising both excess prepaid tax and interest under Section 244A), effect must be given to that refund in computing the net tax paid. The Court held that if the refunded amount (including interest paid on the refunded tax) is not deducted from prepaid taxes, the figure arrived at would not represent tax that remains unpaid on the date of declaration. Applying these principles to the facts, the Court found that Respondent no. 2 correctly treated the total assessed tax as Rs. 14,70,40,140 and deducted the prepaid taxes of Rs. 5,53,22,454 after reducing therefrom the refund of Rs. 2,50,06,177 (comprising excess prepaid tax and interest), arriving at net prepaid tax of Rs. 3,03,16,277; disputed tax thus computed at Rs. 11,67,23,863 and, on that basis, disputed income and the KVSS liability at Rs. 8,88,11,635 were correctly worked out. The Court rejected the petitioner's contention that the interest component of the refund should not be deducted, observing that the Revenue refunded tax (and paid interest) because the assessee had not disclosed or calculated tax properly and that the assessee cannot benefit from its own incorrect computation; this interpretation is consistent with the statutory definitions and the objective of determining tax remaining unpaid as on declaration date. [Paras 28, 29, 30, 31, 32]

Respondent no. 2's computation treating the refund (including interest) as reducing prepaid taxes for purposes of calculating disputed tax and disputed income under the KVSS is correct; the Certificate and amount payable under the Scheme were validly determined.

Final Conclusion: Writ Petition dismissed; the designated authority's Certificate and computation under the Kar Vivad Samadhan Scheme, 1998, treating the refund (including interest) as reducing prepaid taxes and arriving at the disputed tax and amount payable, are upheld; Rule discharged and no order as to costs.

Validity of reopening notice issued in the name of a deceased person - Nullity of proceedings initiated against a dead person - Jurisdictional requirement of service for issuance of notice under Section 148 - Inapplicability of Section 292BB where proceedings are initiated against a deceased person - Maintainability of writ petition where proceedings are wholly without jurisdiction despite availability of alternate remedy - No statutory duty on legal heirs to intimate death of assessee to the revenue

Validity of reopening notice issued in the name of a deceased person - Nullity of proceedings initiated against a dead person - Jurisdictional requirement of service for issuance of notice under Section 148 - Notice under Section 148 issued in the name of the deceased assessee is unenforceable and consequential proceedings are null and void. - HELD THAT: - The Court held that the assesee's death on 08.07.2020 was undisputed and a notice dated 31.03.2021 under Section 148 addressed to the deceased could never have been validly served; service on the living person is a jurisdictional prerequisite to confer power to reopen assessment. Proceedings initiated and continued in the name of the deceased therefore lacked jurisdiction and were void ab initio. Multiple High Court precedents were followed to the effect that initiation of proceedings against a dead person is a nullity and foundational to the jurisdiction to reopen assessments (paras 3, 4, 6, 17, 22, 24, 25). [Paras 3, 4, 6, 17, 25]

The notice dated 31.03.2021 under Section 148 and all consequential proceedings in the name of the deceased assessee are quashed and set aside.

Inapplicability of Section 292BB where proceedings are initiated against a deceased person - Section 292BB construed as applying only where the assessee has appeared or cooperated - Section 292BB cannot validate notices or cure service defects where the proceedings were initiated against a dead person. - HELD THAT: - The Court explained that Section 292BB operates only where the assessee himself appeared in or cooperated with proceedings or inquiries; it is intended to preclude objections to defective service by an assessee who has participated. In the present case the deceased did not and could not appear or cooperate; the petitioner (legal heir) appeared, but that cannot substitute for the prerequisite that the assessee himself participated. Hence Section 292BB is inapplicable to validate a foundational error of initiating proceedings against a dead person (paras 14-16). [Paras 14, 15, 16]

Section 292BB does not validate the impugned notice or subsequent proceedings initiated in the name of the deceased.

Maintainability of writ petition where proceedings are wholly without jurisdiction - No statutory obligation on legal heirs to intimate death of the assessee - Writ petition was maintainable despite availability of alternate statutory remedies because the notice and consequential proceedings were wholly without jurisdiction; legal heirs are not under statutory duty to intimate the death of the assessee. - HELD THAT: - The Court recalled the settled principle that alternative statutory remedies do not bar writ jurisdiction when the order or proceedings are wholly without jurisdiction. Given that the notice was addressed to a dead person and thus could not be validly served, the petition challenging jurisdiction was maintainable. The Court also noted precedent that legal representatives are not under a statutory obligation to intimate the death of the assessee to the revenue, so non-intimation did not validate the proceedings (paras 13, 18, 19, 20, 25). [Paras 13, 18, 19, 20, 25]

Writ petition was maintainable and succeeds; the challenge to jurisdiction was upheld and the proceedings quashed.

Final Conclusion: The petition was allowed: the notice dated 31.03.2021 under Section 148 and all consequential proceedings in the name of the deceased assessee for assessment year 2016-17 were held to be null and void and were quashed and set aside; writ jurisdiction was exercised as the proceedings were wholly without jurisdiction.

Obligation to deduct tax at source under Section 194A of the Income tax Act, 1961 - statutory corporation established under a State enactment (Development Authority) - notification SO 3489 dated 22.10.1970 - exemption from deduction of tax at source on interest - application of Supreme Court precedents on statutory development authorities (Canara Bank / NOIDA; Agra Development Authority)

Obligation to deduct tax at source under Section 194A of the Income tax Act, 1961 - notification SO 3489 dated 22.10.1970 - exemption from deduction of tax at source on interest - Whether the assessee bank was obliged to deduct TDS under Section 194A on interest paid to Jammu Development Authority for the assessment years 2010 11 and 2011 12. - HELD THAT: - The Court examined sub section (1) and sub section (3)(iii)(f) of Section 194A, and the Central Government notification SO 3489 dated 22.10.1970 which notifies, inter alia, any corporation established by a Central, State or Provincial Act as falling outside the operation of sub section (1). Applying those provisions and the notification, and following the binding exposition in Supreme Court decisions dealing with statutory development authorities, the Court held that interest paid to a statutory corporation established under a State development Act is not exigible to TDS under Section 194A. The Court expressly relied on the principle that where a payee is a corporation constituted under a State enactment and covered by SO 3489, the payer bank is under no obligation to deduct tax at source on interest paid to such authority. [Paras 7, 8, 9, 17]

The assessee was under no obligation to deduct TDS on interest paid to JDA for AYs 2010 11 and 2011 12.

Statutory corporation established under a State enactment (Development Authority) - application of Supreme Court precedents on statutory development authorities (Canara Bank / NOIDA; Agra Development Authority) - Whether Jammu Development Authority (JDA) is a corporation constituted under the State Development Act and thereby covered by the exemption contemplated by SO 3489. - HELD THAT: - The Court analysed Section 3 of the Development Act 1970 which empowers the State to declare a local area and constitute a Development Authority that 'shall be a body corporate' with perpetual succession, common seal and power to acquire, hold and dispose of property and to sue and be sued. Treating JDA as a statutory body constituted under Section 3, the Court applied the ratio of Supreme Court decisions which held that authorities constituted under State development enactments (e.g., NOIDA, Agra Development Authority) are corporations for purposes of the notification. Having regard to that settled precedent and the statutory language, the Court concluded that JDA is a corporation established by the State enactment and thus falls within the class notified by SO 3489. [Paras 12, 13, 15]

JDA is a corporation constituted under the State Development Act 1970 and is covered by the exemption in SO 3489.

Final Conclusion: The appeals are dismissed. The Income Tax Appellate Tribunal did not err in upholding deletion of the TDS disallowance: Jammu Development Authority is a statutory corporation under the State Development Act and, being covered by notification SO 3489 (22.10.1970) and relevant Supreme Court precedents, interest paid to it by the bank was not liable to deduction of tax at source under Section 194A for AYs 2010 11 and 2011 12.

Wholly or substantially financed by the Government - inclusion of interest in government grant for determining substantial financing - exemption under Section 10(23C)(iiiac) - Rule 2BBB - fifty per cent threshold of total receipts - interpretation of "total receipts" for the prescribed percentage

Inclusion of interest in government grant for determining substantial financing - Rule 2BBB - fifty per cent threshold of total receipts - Whether interest earned on earlier government grants must be included in computing the government grant for the purpose of determining whether an institution is substantially financed by the Government. - HELD THAT: - The Tribunal and CIT(A) held that interest earned on capital grants (specifically interest on capital grant for Phase II) must be factored into the quantum of government grant for the relevant previous year. The Tribunal relied on audit directions, grant release documents which contemplated inclusion of interest while seeking further release, and Rule 230(8) of the General Financial Rules which required that interest/earnings against grants-in-aid be returned to the Consolidated Fund of India if not adjusted - undermining the Assessing Officer's contention that interest cannot form part of grants since grants are not repayable. The High Court found this approach sound, concluding that interest should be included when quantifying government grant for the purpose of Rule 2BBB's percentage test. [Paras 11, 12, 13, 18, 20]

Interest earned on earlier government grants is to be included in computing the government grant for the purpose of determining whether the institution is substantially financed by the Government; when so included the grant exceeds the fifty per cent threshold.

Exemption under Section 10(23C)(iiiac) - wholly or substantially financed by the Government - interpretation of "total receipts" for the prescribed percentage - Whether the respondent hospital is entitled to exemption under Section 10(23C)(iiiac) for the period under consideration on the ground that it was wholly or substantially financed by the Government. - HELD THAT: - Section 10(23C)(iiiac) excludes from total income institutions existing solely for philanthropic purposes and which are wholly or substantially financed by the Government. The explanation and Rule 2BBB prescribe the test in terms of government grant exceeding a prescribed percentage of total receipts; Rule 2BBB prescribes fifty per cent. Applying the Tribunal's factual finding that grants including interest exceed fifty per cent of total receipts in FY 2012-13, the High Court sustained the CIT(A) and Tribunal conclusion that the respondent satisfied the condition of being substantially financed by the Government and thereby qualified for the exemption for AY 2013-14. The Court noted that the statutory framework permitted inclusion/adjustment of interest and that absent such adjustment the interest would have to be returned to the Government, reinforcing the correctness of the inclusion. [Paras 9, 16, 17, 20, 21]

The respondent hospital is entitled to exemption under Section 10(23C)(iiiac) for the period in question because, on the correct computation (including interest), government funding exceeded fifty per cent of total receipts.

Substantial question of law - Whether any substantial question of law arises for consideration. - HELD THAT: - Having accepted the Tribunal's factual and legal conclusions regarding inclusion of interest and the application of the fifty per cent test under Rule 2BBB to Section 10(23C)(iiiac), the High Court found no substantial question of law warranting interference. The Court therefore closed the appeal after condoning delay in filing and re-filing. [Paras 19, 21]

No substantial question of law arises; appeal dismissed/closed accordingly.

Final Conclusion: The High Court upheld the CIT(A) and Tribunal findings that interest on earlier government grants is to be included in computing government grant, that with such inclusion the grant exceeded fifty per cent of total receipts for FY 2012-13 (AY 2013-14), and that the respondent hospital is therefore entitled to exemption under Section 10(23C)(iiiac); no substantial question of law was found.

Reopening of assessment - "reason to believe" standard - failure to disclose fully and truly all material facts - Section 147 proviso - reopening after four years - change of opinion doctrine - reliance on information from third-party search and seizure - re agitation of issues after adverse appellate orders

Section 147 proviso - reopening after four years - failure to disclose fully and truly all material facts - "reason to believe" standard - Validity of reopening the assessment more than four years after the end of A.Y. 2012-2013 where reopening is predicated on alleged failure to disclose fully and truly all material facts. - HELD THAT: - The court examined the reasons recorded for re-opening and found that, although the AO referred to information received from another office and reproduced statements alleging accommodation entries, the reasons do not specify what material fact the assessee failed to disclose fully and truly. The proviso to Section 147 permits reopening after four years only where such a failure is the cause of escapement of income. The record of the original scrutiny shows that the AO had called for and the assessee had furnished detailed information, valuation report and supporting documents concerning the share subscription and premium; those matters were considered in the original assessment, deleted by the CIT(A) and affirmed by the ITAT. There is no clear articulation in the reasons to believe of the particular material fact withheld by the assessee, nor independent evidence on the face of the reasons demonstrating the alleged non disclosure. On these foundations the court concluded that the statutory threshold for reopening after four years was not met and that mere reproduction of external allegations without specifying the undisclosed material is insufficient to found jurisdiction to reopen. [Paras 10, 12, 17]

The notice under Section 148/147 was invalid and quashed for failure to show that income escaped assessment by reason of the assessee's failure to disclose fully and truly all material facts.

Reliance on information from third-party search and seizure - change of opinion doctrine - re agitation of issues after adverse appellate orders - Whether the information said to be received from third parties (statement of an entry operator and search material) furnished fresh tangible material justifying reassessment and whether reopening amounted to impermissible re agitation of issues already examined and decided on appeal. - HELD THAT: - The reasons rely on information from a search and the statement of an alleged entry operator identifying certain subscriber companies as paper companies. The court found no indication in the reasons that the assessee was aware of those alleged facts at the time of original assessment, but also observed that during the original scrutiny the AO had specifically investigated and called for documentary evidence regarding the share application and premium and the assessee had produced valuation reports, bank evidence and subscriber details. The matter was examined in the assessment, reversed by the CIT(A) and upheld by the ITAT, demonstrating that the issue was fully traversed on the merits. The court held that the material placed in the reasons did not demonstrate a distinct undisclosed material fact previously withheld by the assessee, and that reopening in the present circumstances amounted to re agitating the same controversy on which the revenue had already suffered adverse appellate orders. The court noted in obiter that such fresh information, if available within the four year period, might have been tangible, but did not uphold it as sufficient in the present case. [Paras 11, 12, 17, 19]

The reliance on third party search related information did not furnish sufficient fresh tangible material to justify reassessment; reopening impermissibly re agitated an issue already considered and decided on appeal and thus could not be sustained.

Final Conclusion: The notice dated 19th March 2019 under Section 148 and the consequent order on objection and assessment order dated 7th September 2021 are quashed and set aside for lack of jurisdiction to reopen after four years; all rights and contentions of the parties are kept open for the pending appeal.

Penalty under Section 271(1)(c) - concealment of particulars of income - furnishing inaccurate particulars of income - requirement for Assessing Officer to record satisfaction in the penalty notice - distinction between concealment and furnishing inaccurate particulars for quantification of penalty - doctrine of stare decisis

Penalty under Section 271(1)(c) - concealment of particulars of income - furnishing inaccurate particulars of income - requirement for Assessing Officer to record satisfaction in the penalty notice - Validity of penalty proceedings where the show-cause notice failed to indicate which limb of Section 271(1)(c) was attracted - concealment or furnishing inaccurate particulars. - HELD THAT: - The Court found that Section 271(1)(c) contemplates two distinct circumstances - concealment of particulars of income and furnishing inaccurate particulars - and that the Assessing Officer must indicate, in the penalty notice, the limb or prima facie satisfaction under which proceedings are initiated. The AO in the present matter did not clearly record which limb was attracted; the show-cause notice merely recited both phrases without expressing a clear satisfaction as to which limb applied. The distinction is material because the gravity and the pecuniary consequences of a finding for concealment may differ from those for furnishing inaccurate particulars, and the AO's satisfaction guides the scope and quantum of penalty. The Tribunal relied on coordinate-bench precedents to hold the penalty untenable for want of such clarity, and this Court, applying the doctrine of stare decisis and noting no persuasive reason to depart from those decisions, agreed that the AO's failure in this respect rendered the penalty order unsustainable. Consequently, no substantial question of law arises for interference with the Tribunal's conclusion. [Paras 15, 16, 17, 20]

The penalty proceedings are vitiated for failure of the AO to indicate which limb of Section 271(1)(c) was attracted; the Tribunal's allowance of the assessee's appeal is upheld and no substantial question of law arises.

Final Conclusion: Appeal dismissed; no substantial question of law arises. The Tribunal's order setting aside the penalty is upheld because the Assessing Officer did not clearly indicate in the penalty notice whether proceedings were based on concealment of particulars or on furnishing inaccurate particulars under Section 271(1)(c).

Release of seized assets under Section 132B - Effect of final appellate order on custody of seized assets - Application of seized assets to outstanding liability of third party - Assessment under Section 153C and consequential additions

Release of seized assets under Section 132B - Effect of final appellate order on custody of seized assets - Remaining seized gold (100.350 grams) to be released to the petitioner as there was no outstanding liability of the petitioner after giving effect to the appellate order. - HELD THAT: - The Court examined the records showing that the Assessing Officer's addition in respect of the petitioner was deleted by the CIT(A) by order dated 25.02.2021, and that the Revenue did not challenge that appellate order before a higher forum. On giving effect to the appellate order, a NIL demand was raised on 07.04.2021. Section 132B(1)(i) and sub-section (3) provide for recovery of liabilities from seized assets and for making over remaining assets to persons from whose custody they were seized. Since no liability remained against the petitioner after the appellate order attained finality, the statutory scheme required release of the petitioner's portion of the seized gold. The Court relied on analogous Division Bench precedent and concluded that the authorities could not continue to withhold the petitioner's gold merely because a demand remained against a third party. [Paras 8, 9]

The Respondent-authorities are directed to grant approval for release of the seized gold weighing 100.350 grams in favour of the petitioner.

Application of seized assets to outstanding liability of third party - Assessment under Section 153C and consequential additions - The existence of an assessment order and demand against the sender (M/s. Anant Jewellers) did not justify withholding the petitioner's seized gold once the petitioner's own liability stood discharged. - HELD THAT: - The respondents withheld 100.350 grams of gold on the ground that an addition and demand had been raised against the sender, M/s. Anant Jewellers, in respect of that portion. The Court observed that Section 132B permits recovery of liabilities from seized assets where the person in whose hands liability exists is in default, but the statute and the authorities' practice do not permit continuation of possession against the owner whose liability has been adjudicated and discharged. The appellate order in the petitioner's favour having attained finality, and no demand being outstanding against him, the pendency of a separate demand against the sender could not override the petitioner's right to release of his asset portion. [Paras 8]

Withholding the petitioner's portion of the seized gold on account of a demand against the sender was not justified; the gold must be released to the petitioner.

Final Conclusion: Writ petition allowed; Respondent-authorities directed to grant approval for release of the remaining seized gold (100.350 grams) to the petitioner forthwith, the appellate order in the petitioner's favour having attained finality and no liability remaining against him.

Validity of notice under Section 148A(b) - Limitation for reopening assessments - Principle of consistency in reassessment - Requirement of speaking assessment order

Validity of notice under Section 148A(b) - Limitation for reopening assessments - The notice dated 23.05.2022 issued under Section 148A(b) of the Income Tax Act, 1961 in respect of AY 2019-20 is sustainable in law. - HELD THAT: - The court held that the notice could not be declared untenable merely because it referred to the Supreme Court decision in Union of India v. Ashish Aggarwal; on the material before the court limitation for AY 2019-20 had not expired (expiry being 31.03.2023 as asserted) and the notice was issued under the post-01.04.2021 regime (Section 148A(b)). Accordingly, the reference to Ashish Aggarwal did not vitiate the notice and the respondents were entitled to proceed under the new statutory regime. [Paras 12, 13, 14]

Notice dated 23.05.2022 under Section 148A(b) sustained; not liable to be quashed on the grounds advanced.

Principle of consistency in reassessment - Consideration of earlier assessment years' records - Requirement of speaking assessment order - The Assessing Officer must advert to and consider the records and earlier decisions in relation to AYs where similar aspects were examined or dropped before passing the assessment order for AY 2019-20, and pass a speaking assessment order applying the principle of consistency. - HELD THAT: - Although res judicata does not apply to distinct assessment years, the court observed that where the reasons for reopening are consistently similar across years, the AO is required to apply the principle of consistency. The petitioner's contention that identical issues were earlier examined and reassessment proceedings dropped for AYs 2013-14 to 2017-18, and that AY 2018-19 (regular assessment) and AY 2020-21 (scrutiny) dealt with the same aspects, warranted attention. The court directed that the AO should examine the earlier records, deal with the petitioner's communication of 13.06.2022, granted personal hearing had already been given, and issue a speaking assessment order addressing these points (citing Radhasaomi Satsang v. CIT as applicable precedent). [Paras 15, 16, 17, 18]

Matter remitted to the AO to consider earlier assessment years' records, apply the principle of consistency, and pass a speaking assessment order after hearing the authorised representative.

Final Conclusion: Writ petition disposed of: the reassessment notice under Section 148A(b) for AY 2019-20 is upheld; the matter is remitted to the Assessing Officer to examine earlier years' records, apply consistency, and pass a speaking assessment order after affording hearing.

Deduction under section 10A - capital versus revenue expenditure on software licences - ascertained provisions and deductibility of employee-related provisions - contingent liability versus determined liability for provisions - foreign tax credit under DTAA

Deduction under section 10A - Validity of disallowance of section 10A deduction for Assessment year 2003-04 where deduction had been allowed in earlier years and one earlier year's order was not challenged - HELD THAT: - The Court observed that questions 1 and 2 (relating to entitlement to deduction under section 10A and the relevance of non-challenge of an earlier year's order) were covered by this Court's earlier decision in the assessee's own case and accordingly need not be re-opened. Having regard to that precedent and the findings recorded, the Tribunal's disallowance is not sustained and the questions are answered in favour of the assessee. The appeal was allowed and the orders of the authorities below set aside insofar as they disallowed the deduction. [Paras 3, 21]

Disallowance under section 10A set aside; questions 1 and 2 answered in favour of the assessee.

Capital versus revenue expenditure on software licences - Whether annual subscription fee for Microsoft software licence is capital expenditure or deductible revenue expenditure - HELD THAT: - The Court accepted the assessee's case that the payment was for an annual subscription and that the licence was for a fixed period after which the software could not be used without renewal. Relying on the reasoning in Toyota Kirloskar Motors (which held that fees for software licensed for a limited period are revenue in nature), the Court held that an annual subscription licence fee is not capitalized merely because software is used on a computer treated as a capital asset. Where the life of the right is limited and renewal is required to use the software beyond that period, the fee is revenue in nature. The question was answered in favour of the assessee. [Paras 4, 5, 7, 8, 9]

Annual Microsoft licence subscription is revenue expenditure; disallowance as capital expenditure is reversed.

Ascertained provisions and deductibility of employee-related provisions - contingent liability versus determined liability for provisions - Whether provisions of Rs. 50,08,053 made for employee-related payments are disallowable as contingent or allowable as ascertained liabilities - HELD THAT: - The Court examined the explanation and particulars furnished to the Commissioner (A) showing seven quantified heads forming the provision and noted that additional heads were allowed. The assessee had reflected these figures in the books and had quantified the amounts. The Court rejected the Revenue's contention that the amounts were merely contingent because employees might leave employment, observing that such departures would be minimal and, in any event, reversal could be made in the following year. Given that the provisions represented ascertained liabilities as at the close of accounts and were quantified, the disallowance by the Assessing Officer and its confirmation by lower authorities was held to be perverse and unsustainable. The provision was allowed. [Paras 11, 12, 13, 14, 15]

Provisions quantified in the books as ascertained liabilities are deductible; disallowance set aside.

Foreign tax credit under DTAA - deduction under section 10A and interaction with foreign tax credit - Entitlement to credit for taxes withheld in USA and Canada where the assessee had paid foreign taxes and had claimable income in India (assessment covers multiple units, one with loss and another with profit) - HELD THAT: - The Assessing Officer denied foreign tax credit on the basis that the assessee had not claimed section 10A deduction for the SEEPZ unit in that year and had incurred loss in that unit, relying on a Tribunal decision that refund of withholding taxes cannot be granted where the income is not taxable in India. The Court observed that the overall assessment assessed income (Rs.11.32 crores) and that if after computing deduction under section 10A the assessee remains taxable, it is entitled to foreign tax credit under the DTAA. Noting that section 10A deduction had been allowed in related proceedings, and following precedents recognizing entitlement to credit notwithstanding section 10A (citing Wipro Ltd), the Court held that the assessee is entitled to the tax credit. Accordingly the denial was set aside. [Paras 16, 17, 18, 19, 20]

Assessee entitled to credit for taxes withheld in USA and Canada under DTAA; disallowance set aside.

Final Conclusion: Appeal allowed; orders of the Assessing Officer, Commissioner (Appeals) and ITAT dated June 30, 2016 in I.T.A. No.415 (Mum)/2011 set aside. Questions 1 to 4 and 6 answered in favour of the assessee; question 5 did not arise.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - Deemed dividend under section 2(22)(e) and its application to loans and advances - Imposition of penalty where addition arises from a debatable question of law - Disclosure of loans/advances in balance-sheet and tax audit report as negating concealment

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - Deemed dividend under section 2(22)(e) and its application to loans and advances - Imposition of penalty where addition arises from a debatable question of law - Disclosure of loans/advances in balance-sheet and tax audit report as negating concealment - Whether penalty under section 271(1)(c) can be sustained for non-disclosure of deemed dividend under section 2(22)(e) where the addition arises from deeming provisions and the relevant borrowings were disclosed - HELD THAT: - The Tribunal followed coordinate-bench authority holding that levy of penalty under section 271(1)(c) is not sustainable where the addition is made by invoking the deeming fiction of section 2(22)(e), especially when the transactions (loans/advances) were disclosed in the assessee's accounts. The Tribunal observed that the applicability of section 2(22)(e) to particular loans is a debatable question of law and that where an addition is made for the first time on the basis of information gathered in assessment proceedings, a bona fide belief that the deeming provision may not apply negates the element of concealment or furnishing of inaccurate particulars. Having regard to the disclosure in the balance-sheet and the debatable nature of the legal issue, the circumstances did not reasonably point to deliberate concealment warranting penalty, and therefore deletion of the penalty was directed. [Paras 5, 6, 7, 8]

Penalty under section 271(1)(c) levied in relation to addition made by invoking section 2(22)(e) deleted and appeal allowed.

Final Conclusion: Following coordinate-bench decisions and on the facts that the loans/advances were disclosed and the applicability of section 2(22)(e) was debatable, the Tribunal deleted the penalty under section 271(1)(c) and allowed the appeal for A.Y. 2011-12.

Basic Customs Duty exemption - condition of use by importer - interpretation of "use for specified purpose" - effect of sale antecedent to on-site assembly - turnkey erection and commissioning as fulfilment of condition - precedential application of Nordex

Basic Customs Duty exemption - condition of use by importer - interpretation of "use for specified purpose" - effect of sale antecedent to on-site assembly - Whether the importer violated the condition for BCD exemption by selling imported WOEG parts (blades) to customers prior to on-site assembly, so as to forfeit the exemption - HELD THAT: - The Tribunal accepted the adjudicating authority's finding that the respondent had furnished the prescribed Ministry certificate and the required undertaking and had contractual arrangements comprising (i) supply of parts and (ii) erection, commissioning and installation. The authority found that the imported parts were utilized for manufacture/assembly of WOEGs because the respondent itself carried out assembly/erection at the customer's site, and that Condition No.45(b)(ii) requires use of the goods for the specified purpose but does not impose a bar on sale prior to on-site assembly. The Tribunal further applied the reasoning of the jurisdictional High Court in Nordex India Pvt. Ltd., which held that practical manufacturing and erection processes for windmills necessitate transportation of major components to the customer site and that the mere raising of an invoice or transfer of possession, in the context of a turnkey contract where the importer retains responsibility for fabrication, erection and commissioning, does not defeat the requirement that the goods be used for the specified purpose. Applying that principle, the Tribunal held the department's contention - that sale to the customer meant the importer did not 'use' the goods - to be a misconstruction and not a ground to deny the exemption absent evasion of duty. Consequently, the Tribunal found no breach of the notification conditions and declined to interfere with the order dropping proceedings. [Paras 11, 12, 13]

The demand in the show cause notice was unsustainable; the adjudicating authority's order dropping proceedings was confirmed and the Department's appeal dismissed.

Final Conclusion: The Tribunal affirmed that sale of imported WOEG parts to a customer before on-site assembly does not ipso facto vitiate the condition to 'use them for the specified purpose' where the importer retains contractual responsibility to fabricate, erect and commission the windmill; following the High Court precedent in Nordex, the proceedings were correctly dropped and the departmental appeal is dismissed.

Classification of goods under Customs Tariff - Burden of proof on Revenue in classification - Resort to a residual tariff entry - Relevance and use of HSN Explanatory Notes - Requirement of evidence and visual/documentary examination

Classification of goods under Customs Tariff - Resort to a residual tariff entry - Requirement of evidence and visual/documentary examination - Relevance and use of HSN Explanatory Notes - Burden of proof on Revenue in classification - Whether the re-classification of imported 'stainless steel tube fittings - couplings, tees, crosses' from tariff item 7307 2200 to the residual tariff item 7307 2900 by the departmental authorities was justified. - HELD THAT: - The Tribunal found that the lower authorities had re-classified the goods under the residual entry 7307 2900 without any recorded examination or evidentiary basis showing that the goods did not fall within the declared descriptions such as 'threaded elbows and sleeves'. Reliance was placed on HSN Explanatory Notes and General Rules for Interpretation, but the authorities failed to demonstrate that the alternative tariff item independently conformed to the goods. The decision reiterates that the burden of proof lies on the Revenue to produce proper evidence when seeking to displace the classification claimed by the importer; authorities must justify discarding the declared classification and prefer an alternative one. The Tribunal invoked the principles laid down in earlier Supreme Court decisions, as cited in the impugned order - HPL Chemicals Ltd v. Commissioner of Central Excise, Chandigarh and Hindustan Ferodo Ltd v. Commissioner of Central Excise, Bombay - to hold that, in absence of discharge of the Revenue's burden, re-determination of classification is unsustainable. Applying these principles to the record, the Tribunal concluded that the process adopted by the lower authorities did not meet the requisite standard of proof or reasoning and therefore could not stand. [Paras 2, 3, 4, 5]

Re-classification by the lower authorities is set aside for want of evidence and justification; the appeal is allowed.

Final Conclusion: The impugned order of the Commissioner (Appeals) which upheld re-classification to the residual entry is set aside and the appeal is allowed for failure of the Revenue to discharge its burden of proof in classifying the imported fittings.

Transaction value under Customs Valuation Rules - rejection of declared value under rule 12 - addition of freight and insurance under rule 10 - recourse to rule 3(4) for valuation - application of rule 9 for valuation of second-hand goods - non-applicability of section 14(1) where ownership transfers prior to importation - obligation to declare cargo in import general manifest - confiscation and penalty consequences under the Customs Act, 1962 - remand for fresh adjudication on valuation and penalties

Non-applicability of section 14(1) where ownership transfers prior to importation - transaction value under Customs Valuation Rules - recourse to rule 3(4) for valuation - application of rule 9 for valuation of second-hand goods - Validity of accepting declared purchase price as transaction value for the tug and barge given ownership transfer prior to arrival in India and the proper valuation rule to be applied. - HELD THAT: - The Tribunal found that ownership of both vessels had been transferred to the appellants before first arrival in India (Kakinada). Consequently, the statutory precondition for applying section 14(1) and rule 3(1) (transaction value) was not satisfied at the time and place of importation. Where the buyer and seller are not in the requisite transactional relationship at importation, valuation must proceed under the alternative valuation framework, including rule 3(4) and rule 9 for second hand goods. The adjudicating authority therefore erred in treating the declared purchase price as automatically constituting transaction value without first determining applicability of section 14(1) and without following the procedure for rejection of declared value under rule 12 where appropriate. The matter of valuation must be re determined in conformity with the Rules, applying rule 9 and the framework prescribed for valuation when transaction value is not the operative basis. [Paras 8, 9, 10]

Declared purchase price could not be accepted as transaction value where ownership transferred prior to importation; valuation must be re determined under the alternate valuation provisions (including rule 9/ rule 3(4)) in accordance with the Rules.

Rejection of declared value under rule 12 - addition of freight and insurance under rule 10 - transaction value under Customs Valuation Rules - Permissibility of adding freight and insurance to the declared value of the tug and barge, and the correctness of the adjudicating authority's reliance on rule 10 and post arrival certificate to reject or adjust declared value. - HELD THAT: - The Tribunal held that rule 10 (addition of freight and insurance) operates in the context of rule 3(1)/rule 3(4) when transaction value or its substitutes are being determined and presumes that such elements are part of ascertained value where incurred by or attributable to the goods at the time and place of importation. In the present case the tug involved no freight paid and the barge, owned by the appellants, did not incur separate freight or insurance at the relevant time and place; therefore adding freight and insurance under rule 10 was legally unsustainable. Further, the adjudicating authority's reliance on a post arrival certificate (chartered engineer) and adoption of a value without statutory reasoning or application of the rule 9 framework was inadequate. The process of rejecting declared value and making additions required adherence to the procedural protections in rule 12 and to the valuation hierarchy in the Rules. [Paras 11, 12, 13]

Addition of freight and insurance and the manner of rejecting/adjusting the declared values were not in conformity with the statutory valuation framework; those aspects of assessment are set aside for reconsideration in accordance with the Rules and after following rule 12 procedures where applicable.

Obligation to declare cargo in import general manifest - confiscation and penalty consequences under the Customs Act, 1962 - remand for fresh adjudication on valuation and penalties - Whether the adjudication on confiscation, penalties (including under section 114AA) and failure to declare in import general manifest was complete and whether Revenue's appeals should be allowed on these grounds. - HELD THAT: - The Tribunal noted that the confiscation and penalties flowed from findings on manifest filing and incorrect valuation. Because the valuation findings themselves were not sustained as lawful, the consequential confiscation/penalty determinations could not stand without being revisited. Revenue had appealed against the dropping of proposals for confiscation under section 111(l) and imposition of penalty under section 114AA; the Tribunal observed that these matters were tied to the valuation and declaration findings which are being remitted. The Tribunal also recorded that Revenue did not challenge acceptance of the purchase price of the tug, rendering parts of Revenue's appeal in respect of the tug infructuous, but left open other issues. Accordingly the adjudication on confiscation and penalties was set aside to enable fresh consideration by the original authority after lawful determination of valuation and declaration issues. [Paras 3, 14, 15]

Adjudication on confiscation and penalties (including proposals under section 111(l) and section 114AA) set aside and remitted for fresh decision in light of the re determination of valuation and declaration issues; Revenue's challenge to acceptance of the tug's purchase price is rendered infructuous to the extent indicated.

Final Conclusion: Impugned order set aside and the matter remitted to the original authority for fresh adjudication on valuation and related consequences (including confiscation and penalties) in accordance with the Customs Valuation Rules and procedural requirements; parts of Revenue's appeal concerning the tug's accepted purchase price are rendered infructuous.

Confiscation of seized goods - reasonable belief of smuggling - burden of proof under Section 123 of the Customs Act - onus of proving licit provenance - corroborative evidence and verification of claims - seizure in a non customs (inland) location - setting aside confiscation where action is based on assumptions

Confiscation of seized goods - corroborative evidence and verification of claims - setting aside confiscation where action is based on assumptions - Validity of absolute confiscation of the seized gold and cash in the absence of verification and corroborative evidence. - HELD THAT: - The Tribunal found that the Department relied on assumptions and presumptions without conducting basic verification to rebut the Appellant's documentary and oral claims. The Appellant had produced trade licence, profit & loss account, balance sheet, fixed assets schedule and income tax returns, and had given particulars of persons who supplied gold for melting as well as a claim regarding gold from his mother. The Department made no effort to verify the mother's claim, the persons who supplied gold, or the Appellant's accounting records to contradict his explanation about the seized cash. Only one of the twelve gold pieces bore the marking "MELTER ASSAYER" and the remaining eleven pieces had no marking; the presence of a single marked piece did not suffice to conclude that all pieces were of foreign origin. The Tribunal held that confiscation cannot be sustained where the authorities have not probed the veracity of the Appellant's explanations and have acted on unsupported inference. [Paras 6]

The absolute confiscation of the seized gold and cash was set aside for want of verification and corroborative evidence; the appeal was allowed on this ground.

Reasonable belief of smuggling - burden of proof under Section 123 of the Customs Act - onus of proving licit provenance - seizure in a non customs (inland) location - Whether the Department established the requisite reasonable belief to invoke the shifted burden under Section 123 of the Customs Act and treat the seized gold as smuggled goods. - HELD THAT: - Relying on precedents, the Tribunal emphasised that to invoke the statutory presumption and shift the burden of proof, the revenue must first establish a reasonable belief that the goods are smuggled. Here, the seizure occurred at the Appellant's premises in Kolkata (an inland location, not a customs/border area), and the Department did not demonstrate a reasonable belief or undertake tests or enquiries to establish foreign origin of the gold. The Tribunal observed that mere marking on one piece and absence of enquiries into the Appellant's suppliers or his accounting records did not satisfy the initial burden required to attract the provision. In those circumstances, the statutory presumption could not be invoked and the onus did not properly shift to the Appellant. [Paras 6, 7, 8]

Revenue failed to establish the reasonable belief necessary to attract the presumption under Section 123; consequently the onus did not shift and confiscation could not be sustained.

Final Conclusion: The Tribunal set aside the orders of absolute confiscation and penalty, allowing the appeal on the grounds that the Department proceeded on assumptions without requisite verification and failed to establish the reasonable belief necessary to invoke the statutory presumption that the seized gold was smuggled.

Irregular Cenvat credit reversal - Liability under Rule 3(5) of the Cenvat Credit Rules, 2004 - Penalty under section 78 of the Finance Act, 1994 - Section 73(3) of the Finance Act, 1994 - payment before issue of show cause notice - Suppression of facts - Audit-detected discrepancies and waiver of penalty - Extended period of limitation

Penalty under section 78 of the Finance Act, 1994 - Section 73(3) of the Finance Act, 1994 - payment before issue of show cause notice - Audit-detected discrepancies and waiver of penalty - Whether penalty under section 78 is attracted where the irregular Cenvat credit and short-paid service tax were detected in audit and the amounts were paid before issuance of the show cause notice. - HELD THAT: - The Tribunal found that the irregular availment of Cenvat credit and the short payment of service tax were detected by the departmental audit from data disclosed by the appellant and that the appellant accepted the audit objection and paid the duty and credit reversal amounts before issuance of the show cause notice, with interest paid promptly. The appellant had filed ST-3 returns and disclosed details in audited accounts; there was no concealment of information. Applying the Tribunal's earlier reasoning in Bimal Auto Agency (extracts reproduced), where audit reconciliation had been done and no suppression was found, the Tribunal held that the penal provision under section 78 is not attracted in such circumstances and penalty is liable to be set aside. The Tribunal therefore allowed the appeal and quashed the penalty imposed under section 78. [Paras 5, 6, 7]

Penalty under section 78 set aside as not attracted where amounts were paid following audit detection and no suppression of facts was established.

Irregular Cenvat credit reversal - Liability under Rule 3(5) of the Cenvat Credit Rules, 2004 - Suppression of facts - Extended period of limitation - Whether the department could legitimately treat the availment of credit and non-payment as suppression warranting extended limitation or other adverse treatment when the discrepancies were disclosed in returns and audited accounts and detected during departmental audit. - HELD THAT: - The Tribunal examined the material and observed that the appellant had disclosed credit availment and utilization in ST-3 returns and the value of taxable services in audited balance sheets. The audit party's objections were raised from those disclosed records; there was no finding in the order of any deliberate suppression by the appellant. Relying on the Tribunal's earlier view in Bimal Auto Agency that where audit reconciliation was conducted and explanations given, suppression cannot be alleged and extended period cannot be invoked, the Tribunal concluded that suppression was not established and the extended limitation or penal invocation on that basis could not be sustained. [Paras 5, 6]

No suppression established; extended period of limitation and adverse consequences predicated on suppression cannot be invoked.

Final Conclusion: The appeal is allowed: the penalty under section 78 of the Finance Act, 1994 is set aside because the irregular Cenvat credit and short payment of service tax were detected from disclosures/audited accounts, the amounts were paid (with interest) in response to audit findings before issuance of the show cause notice, and no suppression of facts was established.

Quashing of show cause notice for delay - remand for adjudication - direction to conclude proceedings within fixed time-frame - right to adequate opportunity in adjudicatory proceedings

Quashing of show cause notice for delay - right to adequate opportunity in adjudicatory proceedings - Validity of the High Court's order quashing the two show cause notices on account of inordinate delay in adjudication - HELD THAT: - The High Court had quashed the show cause notices issued to the respondents and closed the proceedings on account of long delay. The Court noted that while a decade had elapsed without conclusion of proceedings, the Additional Solicitor General offered that the Department could conclude the adjudication within a limited time-frame. Having heard both sides and in view of the Department's undertaking to conclude the matter, the Supreme Court found it appropriate to set aside the High Court's order rather than allow the demands to be stifled. The Court emphasised that the adjudicating authority must give adequate opportunity to both sides before concluding the proceedings.

High Court's order quashing the show cause notices was set aside; the quashing was not upheld.

Remand for adjudication - direction to conclude proceedings within fixed time-frame - Remand of the matter to the adjudicating authority with directions for expeditious disposal - HELD THAT: - The Supreme Court remanded the matter to the Commissioner (adjudicating authority) with a clear mandate to conclude the proceedings within eight weeks from 10.08.2023. The respondents, being represented, were directed to appear before the authority on that date without expecting separate notices. The Court left all substantive contentions open for fresh consideration by the authority and required that adequate opportunity be afforded to both sides during the adjudication.

Matter remanded to the Commissioner for adjudication to be completed within eight weeks from 10.08.2023; respondents to appear on 10.08.2023; all contentions left open.

Final Conclusion: The appeal is allowed; the High Court order quashing the show cause notices is set aside and the matter is remanded to the Commissioner (adjudicating authority) with a direction to conclude the proceedings within eight weeks from 10.08.2023, the respondents to appear on that date without further notices; all contentions left open; no costs.

Recovery of erroneously refunded duty under Section 11A - extended period of limitation-fraud, collusion, willful misstatement or suppression of facts - finality of sanctioning order and prohibition on collateral proceedings - appeal/revision remedy under Section 35/35E as exclusive statutory route to challenge sanctioning orders - distinction between exemption granted under a notification and refund under Section 11B

Recovery of erroneously refunded duty under Section 11A - finality of sanctioning order and prohibition on collateral proceedings - appeal/revision remedy under Section 35/35E as exclusive statutory route to challenge sanctioning orders - Whether a refund of excise duty claimed under Notification No.56/2002-CE and sanctioned by the competent authority which has attained finality can be treated as an 'erroneous refund' and recovered under Section 11A by initiating collateral proceedings. - HELD THAT: - The Court held that an amount refunded after formal proceedings and by passing speaking orders which are appealable under the Act cannot be recast as an 'erroneous refund' in collateral proceedings under Section 11A so long as those sanctioning orders remain unchallenged and have attained finality. The revenue, having accepted and released sanctioned refunds and not availing the statutory appellate or revisional remedies, could not proceed to recover the sanctioned refund by invoking Section 11A. The appropriate course, if the revenue considered the sanctioning order erroneous, was to file appeal or seek revision under the Act; Section 11A cannot be used to circumvent those remedies. The Court relied on the determinative reasoning that parallel recovery proceedings cannot be launched in respect of a refund which stands on final adjudication in favour of the assessee and emphasised that prior speaking orders granting refund preclude treatment of such refunds as 'erroneous' for the purpose of collateral recovery under Section 11A. [Paras 15, 21, 22]

Refunds sanctioned by the competent authority under the notification which have attained finality are not 'erroneous refund' recoverable by collateral proceedings under Section 11A; revenue must challenge such sanctioning orders by the statutory appellate or revisional routes.

Extended period of limitation-fraud, collusion, willful misstatement or suppression of facts - distinction between exemption granted under a notification and refund under Section 11B - Whether the proviso to sub section (1) of Section 11A (extending limitation) is attracted in respect of the refunds sanctioned under the exemption notification-i.e., whether the revenue established fraud, collusion, willful misstatement or suppression of facts with intent to evade duty so as to invoke the extended five year period. - HELD THAT: - The Court examined the statutory requirement that the proviso to Section 11A applies only where refund was made by reason of fraud, collusion or willful misstatement or suppression of facts or contravention of the Act with intent to evade duty. On the material on record, the Court found no evidence of deliberate suppression or misstatement by the assessee, noting that the manufacturing process and exports were disclosed in periodical returns, audits were carried out, and speaking orders were passed sanctioning refunds. The Court reiterated established authority that mere classification differences or failure to declare do not amount to willful suppression; there must be positive deliberate concealment to invoke the proviso. Consequently, the extended five year limitation was not attracted and the present recovery notices were time barred. The Court also observed that exemption operationalised by a notification is distinct in application and that the revenue failed to demonstrate unjust enrichment or intent to evade duty. [Paras 12, 13, 14, 18, 22]

The proviso to Section 11A is not attracted because the revenue did not demonstrate fraud, collusion, willful misstatement or suppression of facts with intent to evade duty; therefore the extended period of limitation cannot be invoked and the recovery proceedings are time barred.

Final Conclusion: The appeal is dismissed. A refund sanctioned under Notification No.56/2002 CE by a competent authority which has attained finality cannot be treated as an 'erroneous refund' recoverable by collateral proceedings under Section 11A; the extended five year limitation under the proviso to Section 11A applies only where the record shows fraud, collusion or willful misstatement or suppression of facts with intent to evade duty, which was not established in this case.

Exemption for inputs used in manufacture of final products under Notification 67/95 (proviso clause (vi)) - obligation and exceptions under Rule 6(6) of the Cenvat Credit Rules, 2004 (supply against International Competitive Bidding) - intermediate goods / captively consumed sub-assemblies having marketability - ineligibility of cenvat credit under Rule 9(1)(b) where duty is confirmed by extended period for suppression

Exemption for inputs used in manufacture of final products under Notification 67/95 (proviso clause (vi)) - obligation and exceptions under Rule 6(6) of the Cenvat Credit Rules, 2004 (supply against International Competitive Bidding) - intermediate goods / captively consumed sub-assemblies having marketability - Whether duty is payable on intermediate sub-assemblies cleared to Mega Power Projects where final products were supplied under international competitive bidding and the manufacturer manufactures both dutiable and exempted final products. - HELD THAT: - The Tribunal examined the proviso to Notification 67/95 which excludes the proviso's bar where the manufacturer of both dutiable and exempted final products has discharged the obligation under the Cenvat Credit Rules and where the exception in Rule 6(6) applies. Rule 6(6) of CCR 2004 provides that the obligations to reverse credit do not apply where excisable goods removed without payment of duty are supplied against International Competitive Bidding. It was found on the material that the sub-assemblies in question are intermediate goods with distinct marketability and that clearances were made to Mega Power Projects under international competitive bidding. The Tribunal followed earlier decisions in the appellant's own case and other precedents and held that where the conditions of clause (vi) of the proviso and Rule 6(6) are satisfied, duty on such intermediate goods cannot be sustained. Applying that determinative legal principle to the facts, the confirmed demands for duty on the intermediate products could not be sustained and were set aside. [Paras 11]

Demand of duty on intermediate sub-assemblies cleared to Mega Power Projects under international competitive bidding is unsustainable and set aside.

Ineligibility of cenvat credit under Rule 9(1)(b) where duty is confirmed by extended period for suppression - availability of credit where duty paid pursuant to demand later set aside - Whether cenvat credit availed on duty paid pursuant to a confirmed demand (invoking extended period) for intermediate goods is liable to be denied under Rule 9(1)(b) of CCR 2004. - HELD THAT: - The appellant had paid duty pursuant to an adjudication invoking the extended period and availed cenvat credit on that payment. The department sought denial of credit relying on Rule 9(1)(b) which bars credit where duty was paid due to extended-period demand for suppression. The Tribunal, having held that the duty demand on intermediate products is unsustainable and set aside those demands, concluded that there is no subsisting reason to deny credit. Where the foundational demand is vacated, the bar under Rule 9(1)(b) does not operate to render the credit ineligible. Accordingly the order denying credit for the period July 2015 was set aside and the credit held eligible. [Paras 12]

Denial of cenvat credit under Rule 9(1)(b) is set aside; credit availed on duty paid pursuant to the vacated demand is eligible.

Final Conclusion: Appeals allowed; demands of duty on intermediate sub-assemblies cleared under international competitive bidding are set aside and the denial of cenvat credit (for the period July 2015) is reversed, with consequential reliefs.

Exclusion of sales tax from transaction value under Section 4(4)(d)(ii) of the Central Excise Act, 1944 - remission as distinct from exemption for sales tax - remission deemed to be payment under sub-section (7A) of Section 11 of the Gujarat Value Added Tax Act, 2003 - incentive by way of remission/capital subsidy not forming part of transaction value - distinguishing Super Synotex on facts where tax was exempted at source

Exclusion of sales tax from transaction value under Section 4(4)(d)(ii) of the Central Excise Act, 1944 - remission as distinct from exemption for sales tax - remission deemed to be payment under sub-section (7A) of Section 11 of the Gujarat VAT Act, 2003 - incentive by way of remission/capital subsidy not forming part of transaction value - Sales tax/VAT remitted by the State Government as an incentive (remission) is not includible in the transaction value for central excise duty purposes where the tax was actually payable at the time of removal and subsequently remitted by the State. - HELD THAT: - The Tribunal found that the sales tax/VAT in the appellant's case was payable at the time of removal of goods and was subsequently remitted by the State Government under an incentive scheme which operated as a capital subsidy. Applying the definition of "transaction value" in Section 4 and the exclusion for taxes "actually paid or actually payable," the Tribunal held that remission - unlike exemption - indicates that tax was payable and treated as paid. The Tribunal relied on its earlier decision in Welspun Corporation Ltd where identical facts were held to show that remission under the State scheme amounted to tax being "actually payable/paid" and therefore excluded from transaction value. The decision distinguished the Supreme Court's ruling in Super Synotex, which dealt with an exemption scheme where tax was not payable at the time of removal; that ratio was held inapplicable because the Gujarat scheme involved remission/deemed payment and conditions tying the remission to capital subsidy. The Tribunal also noted sub-section (7A) of Section 11 of the Gujarat VAT Act, 2003, which deems remitted tax to have been paid, reinforcing that the central excise condition of "actually paid/actually payable" was satisfied. On this basis the demand for excise duty founded on inclusion of the remitted sales tax in assessable value was held unsustainable.

Impugned order confirming excise demand set aside; appeal allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, holding that sales tax/VAT remitted by the State under the incentive/remission scheme for the period December, 2006 to April, 2010 was not includible in the transaction value for central excise because it was payable at removal and deemed to have been paid, and therefore the confirmed excise demand was set aside.

Appeal against confirmation of duty - misidentification of appellant - remand for fresh consideration - finality of order setting aside penalty - principles of natural justice

Appeal against confirmation of duty - misidentification of appellant - remand for fresh consideration - Whether the Appeal before the Commissioner (Appeals) was filed by the Company and therefore requires fresh adjudication on the confirmation of duty. - HELD THAT: - The Tribunal examined the Form EA-1 and other appeal papers and found that the appeal pages were signed by the Managing Director on behalf of M/s Vikas Forge Pvt. Ltd. and that the contested duty amount was indicated in EA-1 serial No. 6(iii). The Commissioner (Appeals) had treated the filing as an appeal only against the personal penalty imposed on the Director, apparently overlooking these records. The Tribunal concluded that the appeal was filed by the Company against confirmation of duty and remanded the matter to the Commissioner (Appeals) for proper adjudication of the Company's appeal against the duty confirmed in OIO No.13/AC/CE/HND-I/ADJN/2014 dated 27.02.2014. [Paras 4, 5]

Remanded to the Commissioner (Appeals) to decide the Company's appeal against the confirmed duty.

Finality of order setting aside penalty - Whether the Commissioner (Appeals) may reopen or reconsider the personal penalty against the Director which has already been set aside. - HELD THAT: - The Tribunal noted that in the order passed by the Commissioner (Appeals) the personal penalty imposed on the Director had already been set aside. Consequently, the Commissioner (Appeals) has no jurisdiction to reconsider or reopen that issue when proceeding to decide the remanded appeal concerning the duty confirmed against the Company. [Paras 6]

The penalty already set aside shall not be reconsidered by the Commissioner (Appeals).

Principles of natural justice - remand for fresh consideration - The procedural requirements to be followed by the Commissioner (Appeals) on remand and the timeline for disposal. - HELD THAT: - The Tribunal directed that the Adjudicating Authority (Commissioner (Appeals)) shall follow the principles of natural justice while adjudicating the remanded matter. A specific, limited timeline was imposed to ensure expedition: the Commissioner (Appeals) is to decide the issue within three months from receipt of the Tribunal's order. [Paras 7]

Matter to be decided by the Commissioner (Appeals) in accordance with principles of natural justice within three months of receipt of the order.

Final Conclusion: The Tribunal remanded the Company's appeal for fresh adjudication by the Commissioner (Appeals) on the confirmed duty, clarified that the personal penalty already set aside shall not be reopened, and directed the Commissioner (Appeals) to decide the remanded matter in accordance with principles of natural justice within three months.

Maintainability of complaint by an unregistered firm - rebuttal of presumption under Section 139 of the Negotiable Instruments Act - proof of mercantile transaction and documentary evidence - scope of appellate interference in judgments of acquittal (perversity standard)

Maintainability of complaint by an unregistered firm - Complaint under Section 138 of the Negotiable Instruments Act filed by an unregistered firm is maintainable. - HELD THAT: - The trial Magistrate had held the complaint not maintainable relying on earlier authority. The Division Bench subsequently held that the bar under Section 69(2) of the Indian Partnership Act does not preclude filing a complaint under Section 138 of the Negotiable Instruments Act. Although that Division Bench view post-dated the trial court's decision, the High Court treated the later authoritative view as applicable when the appeal was argued and held the complaint to be maintainable. [Paras 9, 10]

Complaint is maintainable despite the firm being unregistered.

Rebuttal of presumption under Section 139 of the Negotiable Instruments Act - proof of mercantile transaction and documentary evidence - Presumption of liability under Section 139 was rebutted on the evidence and the complainant failed to prove the mercantile transaction satisfactorily. - HELD THAT: - The accused did not deny issuing the cheque but asserted it was issued at the instance of a third person and that the hiring transaction was with J. K. Construction. The notice reply raised the defence that the machine was hired to J. K. Construction and that J. K. Construction had paid the bills. The Court reviewed oral and documentary evidence and observed that the complainant failed to produce documentary proof (such as bills) to substantiate that the Poclain machine was hired to the accused. The accused adduced testimony (including owner of J. K. Construction) that created reasonable doubt about the complainant's claim. On that basis the presumption under Section 139 was held to be rebutted and the trial court's finding of acquittal on this ground was upheld. [Paras 16, 18, 19, 20, 21]

The presumption under Section 139 was rebutted; complainant failed to prove the mercantile transaction.

Scope of appellate interference in judgments of acquittal (perversity standard) - Appellate Court should not interfere with an acquittal merely because another view is possible; interference is warranted only if findings are perverse. - HELD THAT: - The High Court reiterated the principle that interference with an acquittal requires a finding of perversity-such as neglecting material evidence or ignoring a relevant legal provision. Where two reasonable views are possible on the evidence, the appellate court must not substitute its view for that of the trial court. Applying this principle to the present facts, the Court found that the trial court's conclusions were not perverse and therefore declined to interfere. [Paras 4, 24]

No interference with the trial court's acquittal as the findings are not perverse.

Final Conclusion: The appeal is dismissed: the complaint by an unregistered firm is maintainable, the presumption under Section 139 was rebutted on the evidence for lack of proven mercantile transaction, and the trial court's acquittal is not perverse warranting appellate interference.