TaxTMI Updates e-Newsletter
Jul 19,2024

Restriction on Electronic Credit Ledger under Rule 86A - Lapse of restriction after one year under Rule 86A(3) - Blocking of Input Tax Credit

Restriction on Electronic Credit Ledger under Rule 86A - Lapse of restriction after one year under Rule 86A(3) - Blocking of Input Tax Credit - Restriction imposed under Rule 86A on debits from the petitioner's electronic credit ledger ceased to have effect after one year and therefore the blocking has lapsed. - HELD THAT: - Rule 86A empowers the Commissioner or an authorised officer, for reasons to be recorded in writing, to disallow debit of an amount equivalent to credit in the electronic credit ledger where there is reason to believe the credit was fraudulently availed or is ineligible. Sub rule (3) of Rule 86A expressly provides that such restriction shall cease to have effect after the expiry of a period of one year from the date of imposing the restriction. The restriction challenged in this petition was imposed on 23rd November 2022. The one year period provided by Rule 86A(3) accordingly expired on or about 23rd November 2023. By operation of the statutory provision the restriction therefore stood terminated on expiry of that period. Having regard to the statutory cessation of effect after one year, the impugned blocking has lapsed and there remains no subsisting restriction to be quashed or continued by this Court.

The restriction imposed on 23rd November 2022 ceased by efflux of time on or about 23rd November 2023 and the blocking of the petitioner's electronic credit ledger has lapsed; petition disposed.

Final Conclusion: The Court held that the statutory restriction under Rule 86A(3) expired after one year from imposition; the impugned blocking therefore lapsed by operation of law and the petition was disposed accordingly.

Natural justice - burden of proof - production of supporting documents - remand conditioned on interim deposit - opportunity of personal hearing

Natural justice - production of supporting documents - remand conditioned on interim deposit - opportunity of personal hearing - Validity of the impugned order dated 29.12.2023 and the manner in which the assessing authority should proceed on the petitioner's claim of no purchases during financial year 2017-2018 - HELD THAT: - The petitioner replied to the show cause notice asserting cessation of business and absence of purchases and bank transactions for financial year 2017-2018 but did not furnish documentary evidence such as bank statements or stock registers. The respondent contended that principles of natural justice were observed by issuance of intimation, the show cause notice and by considering the petitioner's brief reply. Having regard to the absence of supporting documents, the Court held that the petitioner must be put on terms to substantiate his negative assertion rather than the authority being required to prove purchases at suppliers' end without any material. Consequently, the impugned order was set aside and the matter remitted for fresh consideration on the specific conditions that the petitioner remit an interim sum of Rs. 1,00,000/- towards the disputed demand within two weeks and file an additional reply with supporting documents within the same period. Upon receipt of the deposit and additional materials, the assessing authority is directed to afford a reasonable opportunity, including a personal hearing, and thereafter pass a fresh order within three months from receipt of the additional reply. The Court thus balanced the duty to afford opportunity of personal hearing and the administrative need to have material before adjudication by imposing a remand conditioned on interim deposit and requiring production of supporting documents by the petitioner. [Paras 4, 5]

Impugned order set aside and matter remitted for fresh consideration on condition that the petitioner deposits Rs. 1,00,000/- within two weeks and files supporting documents, after which the respondent shall provide a personal hearing and pass a fresh order within three months.

Final Conclusion: Writ petition disposed of by setting aside the impugned order and remitting the matter for fresh adjudication on the petitioner making the stipulated interim deposit and furnishing documentary proof, with liberty to a personal hearing and a direction to decide afresh within three months; no order as to costs.

Making of the award induced or affected by fraud or corruption - contractual enforcement of promised financial incentives - statutory bar on refund of tax and public policy (Amrit Banaspati principle) - stay of arbitral award under Section 36(2)-(3) of the Arbitration and Conciliation Act, 1996

Making of the award induced or affected by fraud or corruption - Whether a prima facie case of fraud or corruption in the making of the award is established to warrant an unconditional stay under the proviso to Section 36(3). - HELD THAT: - The Court examined the petitioners' contention that the Arbitral Tribunal had 'created a new case', disregarded the contract and thereby committed or was induced to commit fraud in making the Award. The Court noted that the petitioners did not allege fraud or corruption on the part of Essex and that the Tribunal had recorded and considered the parties' pleadings and materials. Relying on the principles that fraud in the making of an award requires plain, prima facie indicia of inducement or concealment causally linked to the Award, the Court found no such prima facie case. The Court observed that mere error of law, disagreement with the Tribunal's conclusions, or the Tribunal's distinguishing of authority (including Amrit Banaspati) does not amount to fraud or corruption sufficient to invoke the proviso. Accordingly, the petitioners failed to discharge the onerous burden required for an unconditional stay under the proviso to Section 36(3). [Paras 50]

No prima facie case of fraud or corruption is made out; the proviso to Section 36(3) for unconditional stay is not attracted.

Contractual enforcement of promised financial incentives - statutory bar on refund of tax and public policy (Amrit Banaspati principle) - Whether the incentives promised in Schedule 5 of the Share Purchase Agreement are contractual financial obligations enforceable as a claim for payment (and not a prohibited refund of tax). - HELD THAT: - The Court analysed Schedule 5 and related clauses of the Share Purchase Agreement, including the change of law clause which provides that incentives would be adjusted in the event tax no longer accrues to the State and would be payable only to the extent tax accrues to the State. The Court found that the incentives in Schedule 5 were not extended under the expired West Bengal Incentive Scheme but were contractual commitments by the State under the SPA, including mechanisms (State support/input tax refund by way of State support) to effect payment. The Tribunal had treated the claim as a contractual entitlement and used the tax payments by HPL as a yardstick for quantification; the Court accepted that approach and recorded that the Award did not amount to an unlawful refund of tax within the Amrit Banaspati principle because the SPA created an independent contractual obligation and contained an express provision dealing with change of law. The State had not discharged any onus to show loss to the State under the change of law clause or that the SPA was frustrated by GST. [Paras 52, 54, 55]

The incentives under Schedule 5 are contractual obligations under the SPA and the Award represents enforcement of that contractual entitlement rather than an impermissible statutory tax refund.

Stay of arbitral award under Section 36(2)-(3) of the Arbitration and Conciliation Act, 1996 - Whether the Court should stay operation of the Award and, if so, on what conditions. - HELD THAT: - Having found no prima facie fraud or corruption, the Court declined to grant an unconditional stay under the proviso to Section 36(3). Exercising its discretionary power under Section 36(3) (having regard to the CPC guidance referenced in authorities), the Court nonetheless stayed operation of the Award subject to security. The petitioners were directed to secure the entire awarded amount within six weeks: 50% by transfer to the Registrar, Original Side (to be invested in an interest bearing fixed deposit) and 50% by way of bank guarantee. The stay of the Award was made to operate from the date on which the total security was furnished; failure to secure the amount would permit the award holder to enforce the Award in accordance with law. [Paras 57]

Award stayed on furnishing the directed security (50% deposit and 50% bank guarantee within six weeks); no unconditional stay granted.

Final Conclusion: The application for unconditional stay under Section 36(2) was dismissed insofar as a prima facie case of fraud or corruption was not established; the Court accepted the Arbitral Tribunal's treatment of the Schedule 5 incentives as contractual obligations enforceable by Award and granted a conditional stay on security (50% deposit and 50% bank guarantee within six weeks), failing which the Award may be enforced.

Cancellation of registration - non-consideration of reply - mechanical and perverse order - opportunity of hearing - remand for reconsideration - revocation of suspension - non-compliance of Rule 25 of the West Bengal Goods and Services Tax Rules, 2017 - application disposal within prescribed time

Cancellation of registration - non-consideration of reply - mechanical and perverse order - Validity of the order dated 8th March, 2021 cancelling the firm's registration - HELD THAT: - The Court found that although a show cause notice was issued and the petitioners filed a response dated 9th February, 2021, the Proper Officer proceeded on the premise that the firm had failed to reply and cancelled the registration. The cancellation order records non-reply and adverse factual findings but was rendered without taking into consideration the petitioners' response. The order was therefore characterised as mechanical and perverse and unsustainable in law. [Paras 15, 16]

Order dated 8th March, 2021 cancelling the registration is set aside.

Remand for reconsideration - opportunity of hearing - revocation of suspension - non-compliance of Rule 25 of the West Bengal Goods and Services Tax Rules, 2017 - application disposal within prescribed time - Post-settlement procedure: remand to Proper Officer and ancillary directions - HELD THAT: - The matter is remitted to the Proper Officer to reconsider the firm's case afresh, taking note of the response dated 9th February, 2021 and after affording an opportunity of hearing to the petitioners. The petitioners are permitted to raise all points available in law, including alleged non-compliance of Rule 25 of the West Bengal GST Rules, 2017. The petitioners are also at liberty to apply for revocation of the suspension order under Rule 21A; if such an application is filed, the Proper Officer must dispose of it expeditiously, not later than four weeks from filing. The reconsideration of the show cause notice must be completed within six weeks from communication of this order. [Paras 17, 18, 19, 20]

Matter remanded for reconsideration with liberty to raise objections and specified timelines for disposal of revocation application and reconsideration.

Final Conclusion: The High Court set aside the cancellation order dated 8th March, 2021 as having been passed without considering the petitioners' reply, remitted the matter to the Proper Officer for fresh consideration after hearing, permitted the petitioners to raise all legal points including Rule 25 non-compliance and to apply for revocation under Rule 21A, and prescribed short timelines for disposal.

Cancellation of registration - violation of principles of natural justice - defective show cause notice lacking particulars and reasons - duty to disclose evidence relied upon - reasonable opportunity of hearing - speaking order - remand for fresh consideration

Cancellation of registration - violation of principles of natural justice - defective show cause notice lacking particulars and reasons - duty to disclose evidence relied upon - reasonable opportunity of hearing - speaking order - remand for fresh consideration - Impugned orders cancelling the petitioner's GST registration were passed without adequate reasons and in breach of principles of natural justice and therefore quashed; matter remitted for fresh proceedings. - HELD THAT: - The Court applied the guidelines laid down by the Coordinate Bench in M/s. Aggrawal Dyeing & Printing, holding that where an order of cancellation travels beyond the scope of the show cause notice or relies upon evidence not previously brought to the notice of the dealer, principles of natural justice are infringed. The authorities are obliged to issue a show cause notice containing necessary particulars and reasons, disclose any evidence or inspection/spot reports intended to be relied upon so that the dealer may respond, and thereafter pass a speaking order on merits after affording a reasonable opportunity of hearing. In view of the admitted procedural deficiency in the impugned notices and orders, the appellate and assessing orders cancelling registration were set aside and the matter remitted to the Assessing Officer with liberty to issue a fresh notice incorporating particulars and reasons, afford hearing, consider the petitioner's objections and documents, and pass appropriate speaking orders in accordance with law. The Court expressly refrained from deciding the merits of the underlying tax allegations. [Paras 5, 6]

Impugned orders quashed; matter remitted to Assessing Officer to issue fresh show cause notice with particulars, afford hearing, permit filing of objections/documents and pass a speaking order on merits; merits not decided.

Final Conclusion: Writ petition allowed on procedural grounds: cancellation orders quashed for breach of natural justice; matter remanded for fresh, reasoned proceedings in accordance with the directions given, without expressing any opinion on the merits.

Remand for fresh consideration - setting aside orders - opportunity of personal hearing - duty to consider reply to show cause notice - conditional remand subject to deposit - cancellation of GST registration and monitoring of portal

Remand for fresh consideration - conditional remand subject to deposit - opportunity of personal hearing - duty to consider reply to show cause notice - Impugned orders confirming the tax proposal, imposing interest and issuing recovery notice were set aside and remitted for fresh consideration on specified conditions. - HELD THAT: - The Court observed that the order confirming the tax proposal arose from discrepancies between the petitioner's GSTR-3B return and the auto-populated GSTR-2A, and that cancellation of the petitioner's GST registration diminished the petitioner's reason to monitor the GST portal. In view of these circumstances it was just to afford the petitioner an opportunity to contest the tax demand on merits. Accordingly, the impugned orders were set aside and the matter remanded to respondents 1 and 2 for reconsideration. The remand was made conditional: the petitioner must remit 10% of the disputed tax demand within two weeks of receiving a copy of the order and may submit a reply to the show cause notice within that period. On receipt of the petitioner's reply and being satisfied that the deposit has been made, respondents 1 and 2 are to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter pass fresh orders. The Court directed that the fresh orders be issued within three months from receipt of the petitioner's reply. [Paras 5, 6]

Impugned orders set aside; matter remanded to respondents 1 & 2 for fresh consideration subject to petitioner remitting 10% of disputed tax demand within two weeks and submitting a reply; respondents to grant hearing and pass fresh orders within three months.

Final Conclusion: Writ petitions disposed of by setting aside the impugned orders and remanding the matter for fresh adjudication on merits on the conditions specified, with no order as to costs.

Principles of natural justice - personal hearing - remand for reconsideration - conditional remand on deposit of a portion of disputed tax - verification of tax payment and reconciliation between GSTR 3B and GSTR 1 - limitation under Section 74(2) of GST enactment

Principles of natural justice - personal hearing - remand for reconsideration - Impugned order set aside for breach of principles of natural justice and remanded for fresh consideration with opportunity of hearing. - HELD THAT: - The Court found that the impugned order was passed without the petitioner being heard despite the existence of show cause proceedings; this failure engaged principles of natural justice. Although the respondent maintained that intimations and notices had been issued, the Court considered that reconsideration was necessary in the interest of justice because the petitioner asserted lack of actual communication and non attendance at a hearing. Consequently the order of 27.11.2023 was set aside and the matter remanded for fresh consideration after providing the petitioner a reasonable opportunity, including a personal hearing. The direction specifies procedural steps and a timeline for completion of the fresh adjudication. [Paras 4, 5]

Order dated 27.11.2023 set aside; matter remanded for reconsideration and fresh order after affording a personal hearing.

Verification of tax payment and reconciliation between GSTR 3B and GSTR 1 - conditional remand on deposit of a portion of disputed tax - Discrepancy between GSTR 3B and GSTR 1 and alleged excess tax remittance to be verified; remand made conditional on deposit of 10% of disputed demand and submission of reply. - HELD THAT: - The Court noted that the tax proposal related to a discrepancy between the petitioner's GSTR 3B and GSTR 1 for financial year 2017 2018 and that the petitioner had produced portal evidence of additional remittance. The Court directed that the respondent verify the payment and reconciliation after receipt of the petitioner's reply. Remand was made subject to the petitioner remitting 10% of the disputed tax demand within two weeks and filing a reply; upon satisfaction of receipt the respondent must grant a hearing and pass a fresh order within three months from receipt of the reply. [Paras 4, 5]

Discrepancy and alleged excess remittance remitted for verification; fresh adjudication directed on receipt of 10% deposit and petitioner's reply, with personal hearing and fresh order within three months.

Final Conclusion: Writ petition disposed by setting aside the impugned order dated 27.11.2023 and remanding the matter for fresh consideration; remand is conditional on the petitioner depositing 10% of the disputed tax demand and filing a reply, after which the respondent shall afford a personal hearing and pass a fresh order within three months.

Penalty for transporting goods after expiry of e-way bill - absence of mens rea / no deliberate intention to evade tax - breakdown of vehicle as reasonable cause for delay - setting aside orders of adjudicating and appellate authorities - refund of penalty subject to compliance of legal formalities

Penalty for transporting goods after expiry of e-way bill - absence of mens rea / no deliberate intention to evade tax - breakdown of vehicle as reasonable cause for delay - Impugned orders confirming penalty for transporting the vehicle after expiry of the e-way bill were set aside and the petitioners entitled to refund of the penalty subject to compliance of legal formalities. - HELD THAT: - The petitioners were intercepted about eighteen hours after the e-way bill had expired and pleaded that the vehicle had broken down, causing the delay. The respondents were unable to demonstrate any deliberate or willful intention on the part of the petitioners to evade tax. The High Court, having regard to the facts on record and precedents relied upon by the petitioners, concluded that the imposition and confirmation of the penalty could not be sustained. Consequently, the orders of the adjudicating authority and the appellate authority were set aside and the petitioners were directed to be refunded the penalty, subject to completion of statutory formalities.

Impugned appellate and adjudicating orders set aside; refund of the penalty allowed subject to compliance of legal formalities.

Final Conclusion: Writ petition allowed: orders imposing and confirming penalty for transporting goods after expiry of the e-way bill set aside and refund of the penalty directed subject to compliance with legal formalities.

Statutory stay on recovery under sub section (9) of section 112 of the CGST/OGST Acts - non constitution of the Appellate Tribunal under section 109 - Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 - clarification by CBIC (Circular No.132/2/2020 GST) on calculation of limitation for appeals - requirement of deposit as condition for grant of stay - temporary extension of limitation period pending constitution of Tribunal

Statutory stay on recovery under sub section (9) of section 112 of the CGST/OGST Acts - requirement of deposit as condition for grant of stay - Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 - Grant of the statutory stay of recovery to the petitioner despite non constitution of the Appellate Tribunal, subject to specified deposit condition - HELD THAT: - The Court found that the impugned order is appealable under section 112 and that the petitioner has been deprived of the statutory remedy because the Appellate Tribunal required by section 109 has not been constituted. Having regard to the Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 and the CBIC circular clarifying computation of limitation in such circumstances, the Court directed that the petitioner be extended the benefit of the stay under sub section (9) of section 112. This extension is made conditional upon verification of deposit of an amount equal to 20 percent of the remaining tax in dispute (or such deposit being made if not already deposited) in addition to any amount earlier deposited under sub section (6) of section 107. While so extended, recovery of the balance amount and any steps taken in that regard are to be deemed stayed, because the deprivation of the statutory remedy resulted from the respondents' non constitution of the Tribunal. [Paras 3, 6]

Petitioner granted stay under sub section (9) of section 112 subject to verification/deposit of 20 percent of the remaining disputed tax; recovery stayed meanwhile.

Non constitution of the Appellate Tribunal under section 109 - temporary extension of limitation period pending constitution of Tribunal - clarification by CBIC (Circular No.132/2/2020 GST) on calculation of limitation for appeals - Duration and conditionality of the stay and the obligation to file appeal once the Tribunal is constituted - HELD THAT: - The Court held that the stay granted on account of the Tribunal not being constituted cannot be indefinite. In order to balance equities, the petitioner must file the appeal under section 112 once the Tribunal is constituted and the President or State President enters office, observing the statutory time limits as clarified by the Removal of Difficulties Order and the CBIC circular. If the petitioner elects not to file the appeal within the period that may be specified upon constitution of the Tribunal, the respondent Authorities are at liberty to proceed further in accordance with law. Thus the stay is provisional and conditional upon subsequent compliance by the petitioner with the statutory appeal mechanism after constitution of the Tribunal. [Paras 6]

Stay is not open ended; petitioner must file appeal before the Tribunal after its constitution within the period specified, failing which authorities may proceed.

Final Conclusion: Writ petition disposed by granting the petitioner the statutory stay under section 112(9) of the CGST/OGST Acts subject to deposit/verification of 20% of the remaining disputed tax; the stay is temporary and conditioned on the petitioner filing the appeal before the Appellate Tribunal once it is constituted, failing which respondents may proceed in accordance with law.

Input tax credit - conditions for taking input tax credit - apportionment of credit and blocked credits - plant and machinery - construction and capitalisation - transfer of capital goods

Input tax credit - conditions for taking input tax credit - apportionment of credit and blocked credits - plant and machinery - transfer of capital goods - Eligibility of the applicant to avail input tax credit on capital goods (wires/cables and related electrical equipment) installed outside factory premises and subsequently to be handed over to the DISCOM (GETCO). - HELD THAT: - The Authority examined whether the applicant satisfied the statutory conditions for availing input tax credit and whether any provision of section 17 (blocked credits) barred the claim. The Authority found that the applicant had met the conditions set out under the provisions governing entitlement to input tax credit, including possession of tax invoices, receipt of goods/services, communication of outward supply details by the supplier, furnishing of returns and compliance with the payment-within-180-days condition. On the question of blocked credit under section 17, the Authority analysed the definition of plant and machinery and the exclusions thereto and observed that the goods in question (66 KV underground cable laid in a duct, not fixed to earth) were not covered by the exclusions that would prohibit credit. The Authority further noted that there is no provision in the Act which prevents a registered person from availing input tax credit on capital goods even if those goods are subsequently handed over to the DISCOM under an agreement; it did, however, draw attention to a separate liability provision under section 18(6) without deciding that matter as it was not before the Authority. Reliance placed by the applicant on earlier judgments was held not determinative under the GST regime. On these bases the claim for input tax credit on the specified cables and electrical equipment was allowed. [Paras 20, 21, 22, 23, 24]

The applicant is eligible to take input tax credit on the capital goods in the form of the specified wires/cables and electrical equipment used for transmission of electricity from the DISCOM to the factory premises.

Final Conclusion: The Advance Ruling permits the applicant to avail input tax credit on the specified capital goods (66 KV cable and associated electrical equipment) installed outside the factory and to be transferred to the DISCOM, subject to any separate liabilities under other provisions not adjudicated in this ruling.

Supply under GST - Perquisites provided by employer to employee - Input Tax Credit restriction under clause (b) of section 17(5) - Proviso applicability to entire clause (b) of section 17(5) - Obligation to provide canteen under the Factories Act

Supply under GST - Perquisites provided by employer to employee - Deduction of a nominal amount from employees' salaries for canteen food is a 'supply' by the applicant under section 7 of the CGST Act, 2017. - HELD THAT: - The Authority examined Section 7 and the submissions that the canteen facility is provided pursuant to the employer's statutory obligation under section 46 of the Factories Act, 1948 and in terms of contract/policy with employees. Circular No. 172/04/2022-GST was applied to hold that perquisites provided by an employer to an employee in terms of their contractual arrangement are not subject to GST when provided in terms of that contract. The factual matrix - undisputed mandatory provision of canteen, HR policy acknowledging subsidised canteen and salary deductions, and limitation of access to employees - led the Authority to conclude that the nominal deduction does not constitute a consideration for a supply by the applicant in the course or furtherance of business. The determinative reasoning is that the transaction is a perquisite provided under the employment contract and falls outside the scope of 'supply' under Section 7 as clarified by the cited circular and Schedule III principles. [Paras 13, 14]

The deduction is not a 'supply' by the applicant under section 7 and hence not liable to GST.

Input Tax Credit restriction under clause (b) of section 17(5) - Proviso applicability to entire clause (b) of section 17(5) - Obligation to provide canteen under the Factories Act - Whether Input Tax Credit (ITC) is available to the applicant on GST charged by the canteen service provider and if so, to what extent. - HELD THAT: - The Authority considered the amended clause (b) of section 17(5) and Circular No. 172/04/2022-GST clarifying that the proviso permitting ITC where goods or services are obligatory for an employer to provide is applicable to the whole of clause (b). Having found as a fact that the applicant is mandated by section 46 of the Factories Act, 1948 (and Gujarat Factory Rules, 1963) to provide a canteen for its employees, the Authority held that ITC in respect of food and beverages supplied as a canteen facility is available. The availability of ITC is, however, confined to the extent of cost borne by the applicant for providing canteen services to its permanent employees; proportionate credit embedded in amounts recovered from employees is to be disallowed. The Authority relied on the statutory amendment, the CBIC clarification and precedent to limit ITC to the employer's cost borne. [Paras 16, 17, 18]

ITC is available to the applicant for canteen-related supplies as they are obligatory under the Factories Act, but restricted to the extent of cost borne by the applicant, disallowing the portion embedded in recoveries from employees.

Final Conclusion: The Authority ruled that salary deductions for the subsidised canteen do not amount to a 'supply' by the employer under Section 7 and are not liable to GST; separately, ITC on GST charged by the canteen service provider is admissible to the employer because provision of canteen is obligatory under the Factories Act, subject to restriction to the employer's net cost (excluding amounts recovered from employees).

Works contract - divisible contract - composite supply - treatment of works contract as supply of services - time of supply of goods - time of supply of services - Notification No. 66/2017-CT - GST on advances

Works contract - divisible contract - single source responsibility - The turnkey contract entered into by the applicant is not a divisible contract but is a works contract (indivisible composite contract). - HELD THAT: - The contract, though split into Part I (supply) and Part II (installation services) under the same agreement, imposes interlinked and interdependent obligations with single source responsibility: performance of Part I is tied to completion of Part II and breach of one part constitutes breach of the other (Article 5). The goods supplied are to be moved to site and installed, and satisfactory performance is defined by successful installation and commissioning. Applying the statutory definition of works contract and authoritative precedent, the supply and services form an indivisible composite works contract rather than separately enforceable promises; therefore the contract is not severable into independent contracts for supply and for services (paras 16-21). [Paras 17, 18, 19, 20, 21]

Turnkey contract is a works contract and cannot be treated as a divisible contract.

Treatment of works contract as supply of services - composite supply - Notification No. 66/2017-CT - Notification No. 66/2017-CT dated 15.11.2017 is not applicable to the turnkey contract because a works contract is to be treated as a supply of services under Schedule II. - HELD THAT: - Schedule II classifies a works contract as a supply of services (composite supply treated as service). Notification No. 66/2017 grants deferment of tax on advances only for supplies of goods by prescribing time of supply under section 12(2)(a). Since the turnkey arrangement has been held to be a works contract and hence a supply of services, the benefit of Notification No. 66/2017 cannot be availed in respect of this contract (paras 23-24). [Paras 23, 24]

Notification No. 66/2017-CT is not applicable to the turnkey (works) contract.

Time of supply of services - GST on advances - works contract - GST is payable on advances received in respect of the turnkey contract. - HELD THAT: - Having held the contract to be a works contract treated as supply of services, the time of supply provisions applicable to services govern liability. The exemption/deferral available under Notification No. 66/2017 (applicable to goods) is inapplicable; accordingly the advances received against the turnkey contract attract GST at the time determined under the law governing services (paras 23-25). [Paras 24, 25, 26]

Advances received under the turnkey/works contract are liable to GST.

Final Conclusion: The Authority ruled that the turnkey contract is a works contract (not divisible), Notification No. 66/2017 CT is inapplicable, and GST is payable on advances received under the turnkey/works contract.

Advance ruling maintainability - proviso to Section 98(2) of the CGST Act, 2017 - pending departmental proceedings as bar to admission of advance ruling - rejection of advance ruling application

Advance ruling maintainability - proviso to Section 98(2) of the CGST Act, 2017 - pending departmental proceedings as bar to admission of advance ruling - Application for advance ruling is not maintainable as the question raised is already the subject matter of pending departmental proceedings. - HELD THAT: - The Authority examined the applicant's request for an advance ruling on whether GST is leviable on stamp duty and registration fee and noted that audit proceedings were initiated by the Audit Commissionerate, CGST, Bhubaneswar (Audit Observation and issuance of DRC-01A). The proviso to sub-section (2) of Section 98 of the CGST Act, 2017 precludes admission of an advance ruling application where the question raised is already pending in any proceedings relating to the applicant. Since the subject matter was already taken up and pending in proceedings under Section 65 by the Audit Commissionerate, the application falls within the first proviso to Section 98(2) and therefore could not be admitted for advance ruling.

Application for advance ruling rejected as not maintainable under the proviso to Section 98(2) of the CGST Act, 2017.

Final Conclusion: The Authority rejected the applicant's request for advance ruling on maintainability grounds under the proviso to Section 98(2) of the CGST Act, 2017; the applicant may appeal to the State Appellate Authority for Advance Ruling within the statutory period.

Renting of transport vehicles with operator - Service of transportation of goods by road - Taxability of transport of minerals within a mining area - Applicability of CBIC Circular No. 177/09/2022-TRU clause 9 - GST rate 12% where cost of fuel is included in consideration

Renting of transport vehicles with operator - Service of transportation of goods by road - Taxability of transport of minerals within a mining area - Classification of the Applicant's service of transporting coal from the mine stockyard to railway siding/delivery point under SAC 9966 or SAC 9965. - HELD THAT: - The Applicant's contractual scope includes provision of vehicles with drivers for transporting coal from the coal stockyard at the mine to the railway siding or delivery point for a specified period at an agreed per-ton price, with costs of diesel, operator salary and incidental costs borne by the Applicant. Circular No. 177/09/2022-TRU (cl. 9) clarifies that where vehicles with drivers are deployed at the disposal of the mining lease operator for a period and operated as per the operator's requirements, such services constitute rental services of transport vehicles with operator falling under Heading 9966 and are not supply of transportation of goods by road. Applying that clarification to the facts of the CMA, the Authority held the service to be renting of transport vehicles with operator (SAC 9966) rather than transportation of goods by road (SAC 9965). [Paras 4]

The service is classified under SAC 9966 as renting of transport vehicles with operator.

Applicability of CBIC Circular No. 177/09/2022-TRU clause 9 - Taxability of transport of minerals within a mining area - Whether Clause 9 of Circular No. 177/09/2022-TRU applies to the Applicant's transportation services. - HELD THAT: - Clause 9 of the circular addresses representations about transport of minerals within a mining area by vehicles deployed with drivers for a specific duration and clarifies that such services are rental of transport vehicles with operator. The CMA facts-vehicles with drivers at the disposal of the service recipient for transporting coal within mining operations and costs of fuel included in the contractual consideration-fall squarely within the scenario envisaged by Clause 9. The Authority therefore found the circular applicable to the services provided by the Applicant. [Paras 4]

Clause 9 of Circular No. 177/09/2022-TRU is applicable to the Applicant's services.

GST rate 12% where cost of fuel is included in consideration - Renting of transport vehicles with operator - Applicable GST rate on the Applicant's renting-of-vehicles-with-operator service. - HELD THAT: - The circular states that renting of trucks and other freight vehicles with driver is a service under Heading 9966 and that where the cost of fuel is included in the consideration charged from the recipient, the GST rate was reduced from 18% to 12% with effect from 18.07.2022. The CMA stipulates that transportation price is paid per ton and that diesel and related costs are within the Applicant's scope. Applying the circular to these contractual terms, the Authority concluded that the service attracts GST at 12% w.e.f. 18.07.2022. [Paras 4]

GST at 12% is applicable from 18.07.2022 on the service, as the cost of fuel is included in the consideration.

Final Conclusion: The Authority ruled that the Applicant's service of transporting coal from the mine stockyard to railway siding/delivery point is renting of transport vehicles with operator (SAC 9966); Clause 9 of CBIC Circular No.177/09/2022-TRU applies; and GST at 12% is payable with effect from 18.07.2022 where fuel cost is included in the consideration.

Exemption for transmission or distribution of electricity - composite supply - ancillary or incidental supply - scope of supply - eligibility for input tax credit for plant and machinery - reversal of input tax credit under section 17(2) read with Rules 42 and 43

Exemption for transmission or distribution of electricity - composite supply - ancillary or incidental supply - Deposit work and 6% supervision charges are integral to or ancillary to transmission or distribution of electricity and hence exempt - HELD THAT: - The Authority examined whether deposit works (creation, modification or shifting of electrical infrastructure) and supervision charges are naturally bundled with the supply of electricity or are independent taxable supplies. The Authority noted that deposit works are undertaken on specific request of the consumer, recovered as non tariff charges, and may be executed either by the licensee or by the consumer, thus making them separable from the continuous supply of electricity. Applying the definition of composite supply, the Authority found that deposit works are not 'naturally bundled' with supply of electricity and do not satisfy the conditions of section 2(30) to be treated as ancillary/incidental to the principal supply. The clarificatory Circular listing various services as taxable was held to support that such ancillary services, when supplied on specific request, are taxable. Consequently, the exemption in Entry No. 25 is confined to the activity of transmission or distribution of electricity and does not extend to deposit contribution works or supervision charges, which are taxable services classified under the relevant SAC and rate notification. [Paras 4, 5]

Negative

Eligibility for input tax credit for plant and machinery - input tax credit in course or furtherance of business - Eligibility to claim ITC on GST paid to contractors and on materials/equipment supplied free of cost for deposit work - HELD THAT: - Considering section 16 entitlement and the explanation to sub section (5) of section 17, the Authority held that supplies of goods and services used or intended to be used in the course or furtherance of business qualify for ITC. The infrastructural works executed as deposit works result in apparatus, equipment and machinery fixed to earth by foundation or structural support used for making outward supply of services; thus such items fall within the definition of 'plant and machinery' for the purpose of ITC. Accordingly, ITC on GST paid to contractors for execution of deposit works and on materials/equipment supplied free of cost (whether from centrally procured stock or procured project specific) can be admissible subject to the conditions in the law. [Paras 4, 5]

ITC can be admissible

Reversal of input tax credit under section 17(2) read with Rules 42 and 43 - Whether any part of admissible ITC is required to be reversed under section 17(2) read with Rules 42 and 43 - HELD THAT: - Having held that ITC may be admissible for plant and machinery used for transmission or distribution, the Authority addressed the compliance consequence under the reversal provisions. It recorded that where ITC has been availed but conditions for retention are not met (including use for exempt/non-business purposes or other restricts under section 17(2) and the corresponding rules), reversal in accordance with section 17(2) and Rules 42 and 43 is required. The Authority therefore directed that input tax credit, to the extent exigible under those provisions, must be reversed as per the statutory mechanism. [Paras 4, 5]

Yes, reversal required under section 17(2) read with Rules 42 and 43

Final Conclusion: The Authority ruled that deposit works and supervision charges are not exempt as part of transmission or distribution of electricity and are taxable; ITC on GST paid for execution and materials forming plant and machinery can be claimed subject to conditions, and any portion exigible under section 17(2) read with Rules 42 and 43 must be reversed.

Reopening of assessment under Section 148 - reasons to believe - reasons recorded - unexplained cash credit under Section 68 - onus on assessee to prove identity, capacity and genuineness of creditor - proviso to Section 68 (inserted with effect from 01.04.2013) and prospective operation - taxation of share premium under Section 56(1)(viib) - prospective application - delay filling SLP

Appeal allowed by HC [2023 (6) TMI 133 - KARNATAKA HIGH COURT] ITAT order upholding the AO and CIT(A) is set aside. The reassessment and the addition under Section 68 in respect of the share premium for AY 2008-09 are quashed and the substantial questions of law are answered in favour of the assessee and against the Revenue.

HELD THAT:- We have perused the application seeking condonation of delay. It is noted that on 21.03.2024 the special leave petition was sent to CAS after vetting, there afterwards nothing is stated and special leave petition has been filed on 07.06.2024. However, what is stated in the application seeking condonation of delay is otherwise. The explanation offered for the said delay is also not satisfactory and neither is it sufficient in law to condone the same.

Penalty u/s 271(1)(c) - concealment of particulars of income - furnishing inaccurate particulars of income - requirement of specificity in penalty notice - penalty proceedings entail civil consequences - gross delay of 202 days in preferring the Special Leave Petition

HC [2023 (8) TMI 1373 - DELHI HIGH COURT] held penalty notices that do not specify which limb of Section 271(1)(c) is invoked are deficient under settled precedent, and no substantial question of law is shown to warrant admission of these appeals.

HELD THAT:- As perused the application seeking condonation of delay. It is noted from the memorandum of special leave petition that the affidavit verifying special leave petition is dated 22.05.2024 and the special leave petition has been filed on 05.06.2024. However, what is stated in the application seeking condonation of delay is otherwise. The explanation offered for the said delay is also not satisfactory and neither is it sufficient in law to condone the same.

Refund of the income tax for the past years on exempted income of disability pension (service element and disability element) - petitioner is a disabled officer of the Indian Army who was commissioned and retired with service pension - Delay in filling SLP -

HC [2023 (5) TMI 741 - PUNJAB AND HARYANA HIGH COURT] allowed writ petition as once the disability pension was exempted from income tax then why this benefit has not been given to the petitioner and the amount of income tax paid by the petitioner for the relevant years be refunded to him alongwith interest @ 9% p.a. within a period of one month from the date of receipt of certified copy of this order alongwith costs of Rs.1 lac.

HELD THAT:- There is a delay of 279 days in the filing of the present special leave petitions. Looking at the nature of controversy and the stand taken by the petitioner, we are not inclined to interfere with the impugned judgments/orders.

The application for condonation of delay and, consequently, the special leave petitions are dismissed.

Assessment under Section 148 of the Income Tax Act - notice under Section 142(1) and obligation to reply - requirement to consider tax paid challan and TDS in assessment - burden to adequately explain source of income and applicability of Section 69A - remand for fresh consideration subject to costs - direction to provide portal access and opportunity for personal hearing - consequences of failure to file return

Assessment under Section 148 of the Income Tax Act - notice under Section 142(1) and obligation to reply - requirement to consider tax paid challan and TDS in assessment - burden to adequately explain source of income and applicability of Section 69A - remand for fresh consideration subject to costs - direction to provide portal access and opportunity for personal hearing - Whether the impugned assessment order for assessment year 2019-20 should be set aside and the matter remanded for fresh consideration because material evidence of source and tax payment was not considered. - HELD THAT: - The petitioner, though not having filed the return for assessment year 2019-20, responded to notices under Section 142(1) by stating that sale proceeds of a property (financial year 2017-18) were invested in fixed deposits and interest income arose, and furnished an income computation, bank statements, the sale deed and an income-tax challan evidencing self-assessment tax payment for the relevant year. The assessing officer recorded the sale deed and noted the contention about interest income but did not take into account the income-tax challan and TDS evidence produced by the assessee. The Court observed that Section 69A operates where the source is not adequately explained, whereas here the assessee had identified and supported the source with documentary material. Although the assessee failed to reply to the subsequent show cause notice and had not filed the return after issuance of notice under Section 148, in the circumstances a remand was appropriate so that the assessing officer may consider the tax paid challan and TDS and afford the assessee a reasonable opportunity, including personal hearing. The Court therefore set aside the assessment order on condition that the petitioner pay costs to the Tamil Nadu State Legal Services Authority, be permitted to file a reply within the specified period with portal access to be provided by the respondents, and directed the assessing officer, upon receipt of the reply and on satisfaction that costs were received, to grant a hearing and pass a fresh assessment order within three months. [Paras 4, 5]

Impugned assessment order dated 15.02.2024 is set aside and the matter is remanded for fresh consideration on the stated conditions and directions.

Final Conclusion: Writ petition allowed by setting aside the assessment order dated 15.02.2024; petitioner permitted to reply to the show cause notice within two weeks subject to payment of costs to the Tamil Nadu State Legal Services Authority, respondents to provide portal access, and the assessing officer to afford opportunity and pass a fresh assessment within three months of receipt of the reply.

Deemed dividend under Section 2(22)(e) - search and seizure under Section 132 - proceedings under Section 153A - requirement of incriminating material for assessment under Section 153A - abatement of pending assessments on search - reopening under Sections 147/148 - reliance on SLP dismissal simpliciter

Proceedings under Section 153A - requirement of incriminating material for assessment under Section 153A - abatement of pending assessments on search - Assessing Officer's power to make additions in completed/unabated assessments under proceedings assumed by virtue of search when no incriminating material is found. - HELD THAT: - The Court applied the ratio of the Apex Court in Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell Pvt. Ltd., which holds that where no incriminating material is unearthed during a search under Section 132 (or requisition under Section 132A), the Assessing Officer cannot assess or reassess completed or unabated assessments by relying on other material unearthed during the search; pending assessments stand abated on assumption of jurisdiction under Section 153A. The Court noted that the Revenue has been unable to place any incriminating material relied upon for the impugned additions and, on that basis, concluded that the Assessing Officer was not justified in making the additions in the absence of incriminating material. The Court further observed that re-opening of completed assessments remains available only under Sections 147/148 subject to their conditions. [Paras 9, 10]

Additions in the impugned assessments cannot be sustained in absence of any incriminating material; the Tribunal's and CIT(A)'s conclusions are affirmed.

Deemed dividend under Section 2(22)(e) - search and seizure under Section 132 - Validity of the Tribunal's acceptance that the audited tally statement found during search and said statement being filed with the return (e-filed annexure-less return) did not justify the additions made. - HELD THAT: - The Tribunal accepted the assessee's stand regarding the audited tally statement and the returns, and the High Court found no material to disturb that conclusion. In the factual matrix before the Court, the Revenue failed to produce incriminating material which was said to form the basis for the addition under the head of deemed dividend. Having regard to the absence of such material and the applicable legal position, the Court affirmed the Tribunal's approach in allowing the appeals and deleting the additions. [Paras 10]

Tribunal's acceptance of the assessee's position on the audited tally/return is upheld and the additions are deleted.

Reliance on SLP dismissal simpliciter - Whether reliance on a dismissal of Special Leave Petition simpliciter in PCIT v. Meeta Gutgutia could sustain the Revenue's case before the Tribunal and this Court. - HELD THAT: - Although the admitted substantial questions included challenge to the Tribunal's reliance on an SLP dismissal simpliciter, the High Court rested its decision on the authoritative ratio in Abhisar Buildwell (referred to and quoted). The Court observed that the impugned appeals are answerable against the Revenue on the ground that no incriminating material was produced and therefore the Tribunal's dismissal of Revenue's appeals is sustainable irrespective of any reliance on an SLP dismissal simpliciter. [Paras 6, 9, 10]

The Tribunal's outcome is sustained without requiring reliance on the SLP dismissal; the substantial questions framed are answered against the Revenue.

Final Conclusion: The appeals are dismissed; the order of the Income Tax Appellate Tribunal deleting the additions is affirmed on the ground that no incriminating material was produced to justify assessment under Section 153A, the substantial questions of law are answered against the Revenue, and there shall be no order as to costs.

Faceless assessment regime - automated allocation - jurisdictional exclusivity of allocated officer (FAO/JAO) - invalidity of action taken contrary to statutory scheme without proof of prejudice - issuance of notice under Section 148/148A subject to Scheme under Section 151A

Faceless assessment regime - issuance of notice under Section 148/148A subject to Scheme under Section 151A - automated allocation - jurisdictional exclusivity of allocated officer (FAO/JAO) - Validity of notices and orders issued by the Jurisdictional Assessing Officer contrary to the faceless assessment Scheme notified under Section 151A of the Income Tax Act. - HELD THAT: - The Court held that the Scheme issued under Section 151A establishes a regime of faceless assessment and requires, inter alia, that issuance of notice under Section 148 and actions under Section 148A be carried out through the faceless mechanism and by automated allocation as specified in the Scheme. Where the Scheme assigns specific jurisdiction by automated allocation, that allocation is mandatory and excludes concurrent exercise of jurisdiction by the JAO. A notice, order or reassessment initiated by a JAO in breach of the Scheme (i.e., without allocation/authorization under the faceless procedure) is contrary to the statutory mandate. Consistent with the Division Bench decision in Hexaware Technologies Ltd., such acts done contrary to the Scheme are invalid and liable to be quashed; the petitioner need not further establish prejudice, since acting contrary to the statutory procedure itself causes prejudice to the assessee. Applying these principles to the present facts, the impugned notices and order issued by the JAO under Section 148A(b)/148 were issued in breach of the faceless Scheme and therefore unsustainable. [Paras 4, 6, 7, 8]

Impugned notice under Section 148A(b), the order under Section 148A(d) and the notice under Section 148 issued by the JAO are quashed and set aside for non-compliance with the faceless assessment Scheme under Section 151A; writ petition allowed.

Final Conclusion: Writ petition allowed; notices and order issued by the Jurisdictional Assessing Officer under Section 148A/148 for AY 2019-20 quashed for being in breach of the faceless assessment Scheme notified under Section 151A of the Act; no order as to costs.

Notice under Section 148 - limitation for reopening under Section 149 - first proviso - prospective amendment cannot revive expired limitation - strict construction of taxing statute

Notice under Section 148 - limitation for reopening under Section 149 - first proviso - prospective amendment cannot revive expired limitation - Validity of the notice dated 19.07.2022 issued under Section 148 for Assessment Year 2015-16 in view of the limitation prescribed by the first proviso to Section 149. - HELD THAT: - The Court applied the reasoning of the Division Bench in Hexaware Technology Ltd., holding that the first proviso to Section 149 operates such that for relevant assessment years beginning on or before 1 April 2021 the erstwhile limitation period governs whether a notice under Section 148 can be issued. For AY 2015-16 the earlier six-year limitation expired on 31 March 2022; consequently a notice issued on 19 July 2022 was beyond the permissible period. The proviso must be given effect to and cannot be read so as to permit revival of a limitation period already expired; taxing statutes are to be strictly construed. In light of these principles the impugned notice fails the statutory time-limit test and cannot be sustained. [Paras 6, 7, 8]

Impugned notice dated 19.07.2022 quashed and set aside as barred by limitation.

Final Conclusion: Writ petition allowed; the notice under Section 148 dated 19.07.2022 (and related order) for AY 2015-16 is quashed as being beyond the time limit prescribed by the first proviso to Section 149; rule made absolute, no costs.

Taxability as "royalty" under Section 9(1)(vi) of the Income tax Act - application of DTAA Article 12 to computer software supplied under EULAs/distribution agreements - liability to deduct tax at source under Section 195 in respect of payments for computer software - characterisation of payments for computer software as business income versus royalty - precedential effect of Engineering Analysis Centre of Excellence (SC) on royalty characterisation

Taxability as "royalty" under Section 9(1)(vi) of the Income tax Act - application of DTAA Article 12 to computer software supplied under EULAs/distribution agreements - liability to deduct tax at source under Section 195 in respect of payments for computer software - Whether payments received by the assessee for supply of computer software to Reliance were income by way of "royalty" taxable in India and whether there was an obligation on the payor to deduct tax at source. - HELD THAT: - The Court held that the Tribunal and CIT(A) correctly concluded that the receipts were not taxable as "royalty" in India. The Court applied the authoritative ratio of the Supreme Court in Engineering Analysis Centre of Excellence (P.) Ltd., which determined that distribution agreements/EULAs in the facts of those cases did not create any interest or right in the distributor/end user amounting to the use of or right to use copyright within the meaning of Article 12 of relevant DTAAs and Section 9(1)(vi). Having regard to that binding pronouncement and the similarity of the transactions and applicable DTAAs in the present matters, the approach of the Assessing Officer treating the receipts as royalty was contrary to law. Consequentially, there was no obligation on the persons referred to in Section 195 to deduct tax at source in respect of such payments in the circumstances before the Court. The Court therefore found no substantial question of law arising from these appeals and declined to disturb the findings of the Tribunal and CIT(A). [Paras 15, 20]

Findings of the Tribunal and CIT(A) that the payments were not "royalty" and that no TDS obligation arose are affirmed; appeals dismissed.

Final Conclusion: Appeals dismissed as the question of law raised is covered by the Supreme Court's decision in Engineering Analysis Centre of Excellence (P.) Ltd.; the Tribunal's and CIT(A)'s conclusions that the payments were not "royalty" and that no TDS obligation arose are upheld.

Pre-deposit - installments for pre-deposit - prima facie case - balance of convenience - financial stringency - expeditious disposal of appeal - senior citizen

Pre-deposit - installments for pre-deposit - prima facie case - balance of convenience - financial stringency - Validity of the second respondent's order granting the petitioner the right to remit the 20% pre-deposit in 18 instalments - HELD THAT: - The court examined the stay application principles-prima facie case, balance of convenience and financial stringency-and the impugned order. The second respondent had considered the financial stringency pleaded by the petitioner and permitted payment of the 20% pre-deposit in 18 instalments. The respondents defended the order on the ground that protective additions were made in several cases and there was reason to believe those additions may be confirmed in the petitioner's case. The High Court found no infirmity in the second respondent's exercise of discretion in allowing instalments and declined to interfere with that order. [Paras 6]

Impugned order permitting the 20% pre-deposit to be remitted in 18 instalments is unimpaired and will not be interfered with.

Expeditious disposal of appeal - senior citizen - guidelines for disposal of appeals - Whether the petitioner's appeal should be directed to be disposed of expeditiously - HELD THAT: - The court noted the appeal had been filed in January 2020 and remained pending for over four years. The petitioner is on affidavit shown to be a senior citizen, and counsel relied on instructions and guidelines relating to expeditious disposal of appeals. In view of these circumstances and the delay in adjudication, the High Court concluded that a case is made out for expeditious disposal of the appeal and issued a time-bound direction for final disposal. [Paras 5, 7]

The third respondent is directed to dispose of the appeal filed on 14.01.2020 in respect of assessment year 2022-23 within four months from receipt of a copy of this order.

Final Conclusion: Writ petition disposed: the stay order permitting the pre-deposit in 18 instalments is upheld; the appellate authority is directed to finally dispose of the petitioner's appeal (filed 14.01.2020 for assessment year 2022-23) within four months.

Assessment proceedings under section 153A of the Income-tax Act - Search and seizure under section 132 and incriminating/seized material - Unexplained cash credit under section 68 - Disallowance under section 14A read with Rule 8D - Reopening of assessments under sections 147/148 - In unabated assessments no additions under section 153A in absence of incriminating material (Abhisar Buildwell ratio)

Assessment proceedings under section 153A of the Income-tax Act - Search and seizure under section 132 and incriminating/seized material - Unexplained cash credit under section 68 - Disallowance under section 14A read with Rule 8D - In unabated assessments no additions under section 153A in absence of incriminating material (Abhisar Buildwell ratio) - Additions made under section 68 and disallowance under section 14A read with Rule 8D in assessments initiated under section 153A are invalid where no incriminating/seized material was found during the search. - HELD THAT: - The Assessing Officer's additions related to share application money/share premium (treated as unexplained cash credits under section 68) and a disallowance under section 14A read with Rule 8D arose from inquiries conducted during assessment proceedings by calling for bank statements, confirmations and return copies. The assessment orders do not refer to any incriminating or seized material or to any statements recorded during the search; the additions were made on the basis of the AO's satisfaction formed during ordinary inquiry in the assessment process. Applying the ratio of the Hon'ble Supreme Court in Abhisar Buildwell, where an assessment is unabated on initiation of proceedings under section 153A, no additions can be made in respect of completed/unabated assessments in the absence of incriminating material unearthed during the search. Consequently, the additions and disallowance made in the impugned orders cannot be sustained and are to be deleted. [Paras 8, 9, 10]

Deletions of additions under section 68 and disallowance under section 14A read with Rule 8D directed; grounds 1 and 2 of the assessee's cross objections allowed and the Revenue's appeals dismissed as infructuous.

Final Conclusion: The Tribunal held that where no incriminating/seized material was found in the search, additions made in unabated assessments under section 153A (here, under section 68 and section 14A read with Rule 8D) are unsustainable; the additions/disallowance were deleted, the assessee's cross objections allowed and the Revenue's appeals dismissed.

Ex parte order - Opportunity of hearing - Section 250(6) of the Income-tax Act, 1961 - Remand for fresh consideration - Deduction under section 54F

Ex parte order - Opportunity of hearing - Section 250(6) of the Income-tax Act, 1961 - Remand for fresh consideration - Validity of the CIT(A)'s ex parte order and whether the appeal required remand for fresh consideration - HELD THAT: - The Tribunal found that the CIT(A) dismissed the appeal by an ex parte order after issuing notices with long gaps and without affording reasonable and sufficient opportunity of hearing to the appellant or his legal heirs. The assessee had sought adjournment in response to an initial notice dated 30.12.2020 and subsequently the assessee died on 26.04.2021; subsequent notices were issued much later. The CIT(A)'s order was cryptic and did not state the points arising, the decision thereon and reasons as required by Section 250(6) of the Income-tax Act, 1961. The Tribunal held that such non-speaking treatment vitiates the appellate order because it prevents the appellant from understanding the precise grounds decided and frustrates effective further appeal. In these circumstances, and having regard to the assessee's plea that evidences and explanations supporting the claim under section 54F were available, the Tribunal concluded that the matter ought to be heard on merits rather than disposed of by a non-speaking ex parte order.

CIT(A)'s ex parte order set aside and the matter remitted for fresh consideration after affording adequate opportunity of hearing.

Deduction under section 54F - Remand for fresh consideration - Whether the addition disallowing deduction under section 54F was to be finally adjudicated at this stage - HELD THAT: - The Tribunal did not decide the merits of the Assessing Officer's disallowance under section 54F. Noting that the AO had disallowed a substantial portion of the claim for lack of supporting evidence and that the CIT(A) confirmed that disallowance by a cryptic ex parte order, the Tribunal remitted the matter to the file of the Assessing Officer. The remand directs the Assessing Officer to pass a fresh assessment order in accordance with law after granting adequate opportunity of hearing to the assessee (or legal heirs), enabling the parties to place evidence and explanations on record and for the authorities to examine source, proof of demolition/construction, municipal approvals and completion status as necessary.

Addition under section 54F not adjudicated; matter remitted to AO for fresh assessment after giving opportunity to produce evidence and explanations.

Final Conclusion: The CIT(A)'s ex parte, non-speaking order was set aside for failure to afford reasonable opportunity and to comply with Section 250(6); the Tribunal remitted the matter (AY 2014-15) to the Assessing Officer for fresh assessment in accordance with law after granting adequate opportunity of hearing; appeal allowed for statistical purposes.

Addition on account of bogus purchases - addition under section 69C - restriction of addition to 12.5% based on binding precedent - interlinking of purchases and sales

Addition on account of bogus purchases - restriction of addition to 12.5% based on binding precedent - interlinking of purchases and sales - addition under section 69C - Whether the addition made by the AO on account of alleged bogus purchases amounting to Rs. 22,20,594/- should be retained in full or restricted to 12.5% of the disputed purchases. - HELD THAT: - The Tribunal, after hearing rival contentions and on perusal of the record, accepted the assessee's contention that sales in the impugned year were executed dependent on the purchases and that purchases and sales were interlinked for the relevant year. The bench noted binding precedent of the jurisdictional High Court in PCIT vs S.V. Jiwani where, on similar facts, the High Court upheld ITAT's decision restricting additions to 12.5% of bogus purchases. Applying that precedent and considering that the AO rejected only the purchases (not the sales), the Tribunal held that restricting the addition to 12.5% of the disputed purchase amount was fair and reasonable. Consequently, the AO's full addition was quashed and limited to 12.5% of Rs. 22,20,594/-. The Tribunal set aside the CIT(A)'s order to the extent that it had upheld the full addition and directed the AO to compute the addition accordingly. Other grounds raised before the Tribunal were treated as academic and not decided on merits. [Paras 6, 8]

Appeal allowed; addition on account of alleged bogus purchases reduced and restricted to 12.5% of the disputed purchases for A.Y. 2011-12; other grounds remain academic.

Final Conclusion: The Tribunal allowed the appeal, quashed the AO's full addition in respect of alleged bogus purchases and directed that the addition be restricted to 12.5% of the disputed purchase amount for A.Y. 2011-12, applying the binding precedent of the jurisdictional High Court; remaining grounds were left academic.

Validity of notice under Section 274 read with Section 271(1)(c) - Requirement to specify limb of charge in penalty notice - Concealment of income - Furnishing inaccurate particulars of income - Penalty under Section 271(1)(c) - Binding precedents

Validity of notice under Section 274 read with Section 271(1)(c) - Requirement to specify limb of charge in penalty notice - Penalty under Section 271(1)(c) - Binding precedents - Notice for penalty under Section 274 read with Section 271(1)(c) is invalid for failure to specify whether the allegation is concealment of income or furnishing of inaccurate particulars of income, and penalty levied on that basis is unsustainable. - HELD THAT: - The Tribunal examined the notice issued under Section 274 read with Section 271(1)(c) and the penalty order and found that neither the notice nor the penalty order specifically identified which limb-concealment of income or furnishing inaccurate particulars-was alleged. The assessee raised objections during the penalty proceedings and before the first appellate authority on this very ground. The Tribunal, following binding judicial precedents of the High Court and subsequent treatment by the Supreme Court, held that a notice which does not specify the particular limb of offence renders the penalty proceedings legally defective. In view of these legal authorities and the specific procedural defect in the notice, the Tribunal concluded that the penalty could not be sustained and deleted the penalty. The Tribunal further observed that since the appeal was decided on this legal ground, the merits of the assessment adjustment remain undecided and are left open for consideration if required. [Paras 11, 12]

Penalty under Section 271(1)(c) quashed for invalid notice which failed to specify whether concealment or furnishing of inaccurate particulars was alleged; appeal allowed.

Final Conclusion: Following binding authority and on the ground that the penalty notice did not specify the particular limb of offence, the Tribunal quashed the penalty imposed under Section 271(1)(c) and allowed the assessee's appeal, leaving the assessment merits open for decision.

Decision on wrong issue - restoration for fresh adjudication - mistake apparent in order - rectification under section 154 - infructuous appeal - opportunity of hearing - condonation of delay

Decision on wrong issue - restoration for fresh adjudication - opportunity of hearing - Whether the order of the Commissioner (Appeals) deciding an issue different from that raised in the appeal amounted to a mistake warranting setting aside and restoration for fresh adjudication. - HELD THAT: - The Tribunal examined the notice of appeal issued by the Commissioner (Appeals) which expressly recorded that the appeal related to the assessment order dated 12.12.2017 passed under section 143(3). Contrary to that, the Commissioner (Appeals) had disposed of the appeal by addressing a different issue relating to levy of late fee under section 234E as dealt with by the Assessing Officer, CPC-TDS. This demonstrated that the appellate order addressed an altogether different controversy than the one before the Commissioner (Appeals). In the interest of justice, where an appellate authority disposes of an appeal on a different issue than that raised by the appellant, the proper remedy is to set aside the impugned order and restore the matter to the appellate file for fresh decision on the issue actually appealed against, after affording adequate opportunity of hearing to the assessee. [Paras 6, 7]

Impugned order of the Commissioner (Appeals) dated 03.01.2023 set aside and matter restored to his file to decide the disallowance made by the Assessing Officer dated 12.12.2017 after affording due and adequate opportunity of hearing.

Rectification under section 154 - mistake apparent in order - infructuous appeal - Whether the appeal against the Commissioner (Appeals)'s order dismissing the assessee's application under section 154 r.w.s. 250 is maintainable after the main appellate order is set aside and restored. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) had also passed an order dated 31.10.2023 dismissing the assessee's application under section 154 (filed in relation to the earlier appellate order). Since the Tribunal has set aside the main appellate order and restored the matter for fresh adjudication, the order passed on the section 154 application no longer has any operative effect. An appeal against a consequential or rectification order which rests upon an appellate order that has been set aside becomes infructuous. [Paras 8]

Appeal against the Commissioner (Appeals)'s order dated 31.10.2023 dismissed as infructuous.

Final Conclusion: The appeal challenging the appellate order dated 03.01.2023 is allowed for statistical purposes by setting aside that order and restoring the matter to the Commissioner (Appeals) for fresh adjudication on the disallowance made in the assessment order dated 12.12.2017 after providing opportunity of hearing; the appeal against the order dated 31.10.2023 is dismissed as infructuous; delay in filing the appeal was condoned.

Furnishing incorrect particulars of income - penalty under section 271(1)(c) - speculative loss - manipulated / synchronized trading - withdrawal of claim by revised computation - recording of satisfaction by the Assessing Officer - service of show cause notice

Furnishing incorrect particulars of income - speculative loss - manipulated / synchronized trading - Levy of penalty under section 271(1)(c) for claiming speculative loss as business loss which was treated as resulting from manipulated synchronized trading - HELD THAT: - The Tribunal found no dispute that the loss of Rs. 44,57,310 arose from intra-day transactions on the NMCE/MCX with no delivery and purchases and sales executed within seconds, thereby constituting speculative transactions. The assessee had reported that loss as business loss in the return and thereafter, during scrutiny, the Assessing Officer obtained exchange data and concluded the transactions were contrived synchronized trades; the claim was thus an impermissible set-off of speculative loss against business income and amounted to furnishing incorrect particulars of income. The subsequent filing of a revised computation withdrawing the claim after initiation of scrutiny did not convert the original return into a bona fide position nor negate that incorrect particulars were furnished when the return was filed. Reliance placed on authorities favourable to the assessee was held inapplicable in light of the facts showing conscious claim of speculative loss as business loss. [Paras 5, 7]

Penalty under section 271(1)(c) was properly levied for furnishing incorrect particulars by claiming speculative loss as business loss arising from manipulated synchronized trading.

Recording of satisfaction by the Assessing Officer - service of show cause notice - penalty under section 271(1)(c) - Validity of initiation of penalty proceedings and of the show cause notice and satisfaction recorded by the Assessing Officer - HELD THAT: - The Assessing Officer recorded specific satisfaction in the assessment order that the losses were contrived and that inaccurate particulars were furnished, and the show cause notice expressly charged the assessee with furnishing inaccurate particulars under section 271(1)(c). The Tribunal held that the penalty proceedings were initiated on a definite and communicated charge, and there was therefore no defect in recording satisfaction or in issuance of the show cause notice. The objection that the AO was unsure about the charge was rejected as the assessment order and the show cause notice consistently stated the specific charge. [Paras 6]

Initiation of penalty proceedings and the show cause notice were valid and the recorded satisfaction by the AO was sufficient for proceeding under section 271(1)(c).

Final Conclusion: The Tribunal dismissed the appeal and upheld the penalty imposed under section 271(1)(c) for furnishing incorrect particulars of income by claiming speculative loss as business loss derived from manipulated synchronized trading; initiation of penalty proceedings and the show cause notice were held valid.

Permission to export warehoused goods - deposit of export proceeds with Court Registry - security by way of interest-bearing fixed deposit - placement in a nationalised bank at highest available rate - time-bound compliance

Permission to export warehoused goods - deposit of export proceeds with Court Registry - interest-bearing fixed deposit with auto-renewal - Grant of leave to the petitioner to export the warehoused goods/machineries subject to specified conditions regarding the proceeds. - HELD THAT: - The Court permitted the petitioner to proceed with export of the warehoused goods and machineries which are the subject matter of the special leave petition, on the condition that the proceeds of the export sale be deposited with the Registry of this Court. The deposit must be made within two weeks from the date of receipt of the proceeds. Upon such deposit, the Registry is directed to place the amount in an interest-bearing Fixed Deposit Account in a nationalised bank offering the highest rate of interest, initially for six months on an auto-renewal basis. The order thereby conditions the export permission on provision of security in the form of court-held deposits earning interest, and prescribes the timing and manner of investment of those proceeds.

Permission to export granted subject to deposit of proceeds with the Court Registry within two weeks and placement of the deposit in an interest-bearing Fixed Deposit Account in a nationalised bank at the highest available rate for an initial period of six months on auto-renewal.

Final Conclusion: Petitioner's application for export of the warehoused goods/machineries is allowed on the condition that the export proceeds are deposited with the Court Registry within two weeks and invested by the Registry in an interest-bearing Fixed Deposit Account in a nationalised bank at the highest rate for an initial six-month period on auto-renewal.

Inconsistency in concurrent fact-finding - Admissibility and weight of statement recorded under Section 108 - Remand for fresh consideration by last fact-finding authority - Imposition of penalty on clearing agent

Inconsistency in concurrent fact-finding - Admissibility and weight of statement recorded under Section 108 - Remand for fresh consideration by last fact-finding authority - Tribunal's inconsistent conclusion that the respondents were actively involved in undervaluation yet exonerated from duty required reconsideration and remand. - HELD THAT: - The Tribunal had recorded extensive extracts of statements attributed to the respondents and found that they used IEC codes of others to import undervalued goods and effected differential payments to overseas suppliers, yet concluded that no duty was payable by the respondents. The High Court observed this to be a clear inconsistency: the Tribunal could not accept parts of the recorded statements to sustain active involvement and simultaneously exonerate the respondents without addressing the statements in their entirety. There was also no record of any valid retraction of those statements. As the learned Tribunal is the last fact-finding authority, the matter must be re-examined by it on the complete factual matrix, with full consideration of the statements recorded under Section 108 and other material, and a clear reasoned conclusion reached.

Order of the Tribunal is set aside insofar as it exonerated Rakesh Magoo and John Miranda; matter remanded to the Tribunal for fresh consideration in accordance with law after notice to parties.

Imposition of penalty on clearing agent - Appeal dismissed - Validity of the penalty imposed on the clearing agency was affirmed by this Court. - HELD THAT: - The High Court noted that the order imposing penalty on the clearing agency, Sai Dutta Clearing Agency Pvt. Ltd., had previously been affirmed by this Court when the appeal filed by that agency (CUSTA/17/2024) was dismissed by judgment dated 26.04.2024. Consequently, no interference with that aspect was warranted in the present proceedings.

Penalty imposed on the clearing agency stands affirmed; appeal in respect of that agency dismissed.

Final Conclusion: Appeals by both revenue and assessee are allowed to the extent indicated: the Tribunal's order is set aside insofar as it exonerated Rakesh Magoo and John Miranda and the matter is remanded to the Tribunal for fresh consideration; the penalty imposed on the clearing agency is affirmed.

Rectification of inadvertent electronic filing error - Entitlement to MESI/MEIS benefits despite erroneous EDI selection - Rectification notwithstanding digital processing and absence of a statutory bar - Precedential weight of concordant High Court decisions and Kusum Ingots principle - Article 14 - prohibition of state wise discrimination in application of central law

Rectification of inadvertent electronic filing error - Entitlement to MESI/MEIS benefits despite erroneous EDI selection - The petitioner is entitled to MESI benefits despite having entered 'N' instead of 'Y' in the EDI, the error being bona fide and inadvertent. - HELD THAT: - The Court accepted the Single Judge's finding that the petitioner, but for mistakenly selecting 'N' instead of 'Y' in the Electronic Data Interchange, would have been entitled to MESI (MEIS) rewards. The error was found to be bona fide and inadvertent, and relevant circumstances - including the implausibility that an entitled party would voluntarily forgo benefits - were noted as material which the Policy Relaxation Committee had not considered. The High Court declined to interfere with the Single Judge's reasoning and upheld the quashing of the Committee's decision refusing MESI rewards on that basis.

Quash the Policy Relaxation Committee's refusal and confirm entitlement to MESI benefits subject to compliance with the condition imposed by the Single Judge.

Rectification notwithstanding digital processing and absence of a statutory bar - Precedential weight of concordant High Court decisions and Kusum Ingots principle - Article 14 - prohibition of state wise discrimination in application of central law - Digital handling of the scheme and the possibility of automated processing do not preclude rectification of an inadvertent error, and there is no notified rule barring condonation of delay in this case; concurrent High Court decisions supporting rectification are persuasive. - HELD THAT: - The Court rejected the Revenue's contention that digital processing precludes human error and therefore bars rectification. It observed that errors can occur in any system and may be rectified in the absence of a law to the contrary. The Court further relied on the persuasive force of multiple High Court decisions and the principle in Kusum Ingots that concordant high court views on centrally applicable law merit acceptance, noting that divergent regional outcomes would engender impermissible discrimination under Article 14. No rule was shown which imposes an absolute limitation or precludes condonation in the circumstances.

Repel the contention that digital handling or limitation principles bar rectification; uphold the Single Judge's direction to extend MESI benefits.

Final Conclusion: The intra court appeal is dismissed; the Single Judge's order quashing the Policy Relaxation Committee decision and directing grant of MESI benefits (subject to the condition specified by the Single Judge) is affirmed and directed to be implemented within eight weeks.

Mandatory nature of time-limits under Regulation 17 of the Customs Broker Licensing Regulations, 2018 - right to cross-examination under Regulation 17(4) of the Customs Broker Licensing Regulations, 2018 - non-compliance with mandatory procedural timelines vitiating adjudicatory proceedings - denial of opportunity to cross-examine witnesses resulting in prejudice and vitiation of the order

Mandatory nature of time-limits under Regulation 17 of the Customs Broker Licensing Regulations, 2018 - non-compliance with mandatory procedural timelines vitiating adjudicatory proceedings - Whether delay in submission of the Inquiry Report beyond the 90-day period prescribed by Regulation 17(5) vitiates the proceedings under CBLR, 2018. - HELD THAT: - Regulation 17(1), (5) and (7) together prescribe sequential time limits for issuance of show cause notice, submission of the inquiry report and passing of final order. The scheme is such that delay in one stage causes cascading delay thereafter. The Tribunal, following consistent judicial precedent, held that the time periods in Regulation 17 are mandatory and not directory. In the present case the offence report was issued and the inquiry report required to be submitted within 90 days of the show cause notice; however the inquiry report was filed beyond that period. Non-compliance with the prescribed timeline therefore vitiates the subsequent proceedings and the impugned order based on the delayed inquiry report could not be sustained. [Paras 4]

Proceedings were vitiated by delay in submission of the inquiry report in breach of the mandatory timelines in Regulation 17 and that part of the process could not sustain the revocation order.

Right to cross-examination under Regulation 17(4) of the Customs Broker Licensing Regulations, 2018 - denial of opportunity to cross-examine witnesses resulting in prejudice and vitiation of the order - Whether denial of opportunity to cross-examine witnesses relied upon by the department, without recording reasons as required by Regulation 17(4), vitiates the adjudication. - HELD THAT: - Regulation 17(4) recognises the Customs Broker's right to seek examination of persons whose statements are relied upon and requires the Inquiry Officer to record reasons in writing if permission to examine is declined. Jurisprudence establishes that denial of opportunity to cross-examine a witness whose statement is relied upon will vitiate adjudication unless exceptional circumstances exist. In this case the appellant sought cross-examination of persons whose statements were material; the Inquiry Officer declined to permit cross-examination without recording reasons, and the Commissioner proceeded to decide the matter without remedying that omission. The Tribunal found that failure to allow cross-examination and failure to record reasons caused serious prejudice to the appellant and rendered the impugned order unsustainable. [Paras 4]

Denial of the opportunity to cross-examine material witnesses without recording reasons prejudiced the appellant and vitiated the adjudication.

Final Conclusion: The impugned order revoking the customs broker's licence, forfeiting the security deposit and imposing penalty was set aside; the appeal is allowed and the matter remitted with consequential relief.

Retracted statements and need for corroboration - rejection of transaction value - sequential application of Rules 5 to 8 of the Customs Valuation Rules - use of contemporaneous imports for redetermination of value - limited probative value of LME/DGOV circular in presence of contemporaneous import data - finality of assessment and bar on subsequent re-enhancement - inadmissibility of relying on evidence from cases where enhancement has been set aside

Retracted statements and need for corroboration - rejection of transaction value - Reliability of statements retracted by deponents and their sufficiency to reject declared transaction value. - HELD THAT: - The Tribunal held that statements recorded during investigation which were subsequently retracted and denied in cross-examination cannot be the sole basis for rejecting the declared transaction value. There is no independent documentary corroboration on record to support the Revenue's allegation that amounts over and above the invoice price were paid to the overseas supplier or their representatives. Where documentary contemporaneous import data contradicts oral statements, documentary evidence must prevail. Consequently the Department failed to place credible evidence to justify rejection of the invoice transaction value. [Paras 7]

Statements retracted by the deponents are unreliable and insufficient to sustain rejection of the declared transaction value.

Sequential application of Rules 5 to 8 of the Customs Valuation Rules - use of contemporaneous imports for redetermination of value - Proper methodology for redetermination of value where contemporaneous import data exists. - HELD THAT: - The Tribunal reaffirmed that if declared transaction value is to be rejected, the proper officer must proceed sequentially through Rules 5 to 8 of the Customs Valuation Rules. When contemporaneous imports of similar goods are available, those prices form the appropriate basis for redetermination. The adjudicating authority erred in overlooking contemporaneous import data placed on record by the appellant and in re-determining value on alternative bases without following the prescribed sequence. [Paras 8]

Contemporaneous import data must be used for re-determination of value in preference to resorting directly to alternative valuation methods.

Limited probative value of LME/DGOV circular in presence of contemporaneous import data - rejection of transaction value - Validity of relying on LME prices and DGOV Circular for valuation when contemporaneous import prices of similar goods are available. - HELD THAT: - The Tribunal held that LME prices and the DGOV Alert Circular cannot be treated as sacrosanct evidence to substantiate undervaluation where contemporaneous import prices of the same commercial level are available. Established authorities require contemporaneous evidence to displace declared invoice value; absent such contemporaneous evidence the re-determination based on DGOV circular and LME discounts was unsustainable. [Paras 9]

Re-determination of value on the basis of LME/DGOV circular, ignoring contemporaneous imports, is not permissible.

Finality of assessment and bar on subsequent re-enhancement - Whether Revenue can seek further enhancement of value after an assessment order has attained finality. - HELD THAT: - The Tribunal observed that where the bill of entry had already been assessed and the assessment order has attained finality (no appeal by Revenue), further attempts to re-enhance the value are impermissible. Precedents recognize the finality of an accepted assessment and bar subsequent enhancement on the same basis once the order is final. [Paras 10]

Further re-enhancement of value is barred once the earlier assessment order has attained finality.

Inadmissibility of relying on evidence from cases where enhancement has been set aside - Permissibility of relying upon evidence recovered in another importer's case where that other's enhancement has been set aside. - HELD THAT: - The Tribunal held that evidence or enhancement conclusions drawn from the case of another importer (Associated Aluminium Industries) cannot be relied upon to enhance value in the present case when the enhancement in that other case has itself been set aside by the Tribunal. Reliance on such tainted or unsustained findings for determining value here is unsustainable. [Paras 11]

Evidence from another importer's case, where enhancement was set aside, cannot be used to enhance value in the present proceedings.

Rejection of transaction value - finality of assessment and bar on subsequent re-enhancement - Overall sustainability of adjudicated demands, confiscation and penalties imposed against the appellants. - HELD THAT: - Applying the foregoing conclusions - unreliability of retracted statements without corroboration, availability and primacy of contemporaneous import data, incorrect reliance on DGOV circular/LME and the bar arising from finality of prior assessments - the Tribunal concluded that the adjudged demands, confiscation proposal and penalties (including personal penalties on directors) were unsustainable. The impugned order failed to record appropriate consideration of submissions and documentary evidence and therefore could not be upheld. [Paras 12]

Impugned adjudication, confiscation rationale and penalties are set aside and appeals allowed.

Final Conclusion: All appeals are allowed; the impugned Order-in-Original dated 13.03.2019 setting aside the declared transaction value, confirming demands, and imposing penalties is set aside, with consequential relief as per law.

Town seizure and absence of foreign markings - requirement of reasonable belief before seizure - burden of proof under Section 123 of the Customs Act, 1962 regarding origin of seized gold - confiscation of smuggled goods - discharge of onus by production of purchase documents

Town seizure and absence of foreign markings - requirement of reasonable belief before seizure - burden of proof under Section 123 of the Customs Act, 1962 regarding origin of seized gold - Confiscation of the seized gold was not sustainable in the absence of reasonable belief that the gold was of foreign origin. - HELD THAT: - The Tribunal found that the gold was seized in a town premises and bore no foreign markings; chemical testing showed purity of 99.5%-99.6%. In such a town seizure, the officer effecting seizure must have a reasonable belief that the goods are of foreign origin before invoking confiscation. The Tribunal relied on earlier decisions (notably the decision in Nand Kishor Sumani) holding that where there are no foreign markings, non-uniformity in weight/purity and no corroborative evidence of foreign origin, the mere percentage purity determined by chemical analysis does not establish foreign origin. The adjudicating authority failed to establish a reasonable belief of foreign origin and did not discharge the legal requirement necessary to cast the onus under Section 123; hence the confiscation could not be sustained. [Paras 7, 9]

Confiscation of the gold set aside; appellant entitled to claim the gold.

Confiscation of smuggled goods - discharge of onus by production of purchase documents - Penalty imposed on the appellant was not sustainable once confiscation was set aside and onus of foreign origin was not established. - HELD THAT: - Having held that there was no reasonable belief that the gold was of foreign origin and that confiscation was improper, the Tribunal concluded that imposition of penalty on the appellant could not be sustained. The Tribunal noted authorities where production of sale/purchase vouchers and lack of corroborative evidence of smuggling led to discharge of the onus and setting aside of penalties. In the circumstances of this case, with no satisfactory evidence of foreign origin and similarity to cited precedents, imposition of penalty was unjustified. [Paras 9, 10]

Penalty set aside; no penalty imposable on the appellant.

Final Conclusion: Appeal allowed: order of absolute confiscation of gold and penalty imposed on the appellant set aside; appellant entitled to claim the seized gold with consequential relief.

No statutory mechanism for recovery of cost recovery charges under HCCAR, 2009 - absence of prescribed rates and manner by the Ministry of Finance for cost recovery charges - delegated legislation ultra vires where power to levy tax/fee is not specifically conferred - distinction between fee and tax in imposition of administrative/cost recovery charges - regulatory relief by suspension/revocation not equivalent to power of monetary recovery

No statutory mechanism for recovery of cost recovery charges under HCCAR, 2009 - absence of prescribed rates and manner by the Ministry of Finance for cost recovery charges - Validity of confirmation and recovery of cost recovery charges by the Commissioner under HCCAR, 2009 - HELD THAT: - The Tribunal held that although Regulations 5(2) and 6(1)(o) of the Handling of Cargo in Customs Areas Regulations, 2009 impose an obligation on a Customs Cargo Service Provider to bear cost recovery charges, the Regulations do not provide the statutory machinery to effect monetary recovery. Regulation 6(1)(o) expressly makes payment subject to rates and manner to be specified by the Government of India/MoF, and there was no record of any such prescription. In the absence of prescribed rates and manner and of any recovery mechanism in the Regulations, the adjudicating authority lacked jurisdiction to confirm and order recovery of the cost recovery charges. The Tribunal relied on consistent precedents of this Tribunal and recent High Court reasoning that a delegated regulation cannot impose a tax/fee or administrative charge without specific legislative or subordinate-authority prescription, and that revocation/suspension procedures in the Regulations are not a substitute for a recovery mechanism. Consequently the confirmation of the demand for cost recovery charges was unsustainable.

Demand for cost recovery charges confirmed by the Adjudicating Authority set aside as without jurisdiction and unsustainable.

Regulatory relief by suspension/revocation not equivalent to power of monetary recovery - distinction between fee and tax in imposition of administrative/cost recovery charges - Whether the Commissioner was entitled to confirm recovery of amounts attributed to House Rent Allowance and Transport Allowance where the assessee provided accommodation and transport to officers - HELD THAT: - The Tribunal affirmed the Adjudicating Authority's non-confirmation of cost recovery charges to the extent attributable to House Rent Allowance and Transport Allowance because the assessee had provided accommodation and transport to the departmental officer. That factual finding supported disallowance of recovery for those components and the Tribunal found no error in declining to confirm that part of the demand.

Recovery demand qua House Rent Allowance and Transport Allowance correctly not confirmed; no interference warranted.

Final Conclusion: Assessee's appeal allowed by setting aside the confirmation and recovery of cost recovery charges; Revenue's appeal dismissed and the Adjudicating Authority's non-confirmation of charges attributable to accommodation and transport upheld.

Circular trading - transaction value / FOB valuation under Section 14 - value addition under Foreign Trade Policy (Target Plus / FTP) - confiscation and penalty under Section 113/114 of the Customs Act - admissibility and evidentiary weight of foreign import documents and emails - authority of licensing (DGFT/Jt. DGFT) on redemption of Advance Licences

Circular trading - admissibility and evidentiary weight of foreign import documents and emails - The allegation of circular trading between the Indian exporters and overseas entities is unsustainable on the evidence - HELD THAT: - The Tribunal/Appellate body examined the documentary matrix relied upon by the Department (import/export invoices, seized charts, emails and comparative cost sheets) and the oral statements relied upon by the Department and concluded that the material does not establish circular trading. The Tribunal found (a) consignments comprised multiple lots with variations in weight/quality such that singling out a few lots does not demonstrate repeated circulation of identical goods; (b) sequences in the alleged circular movements were inconsistent on the documentary record; (c) charts and emails at best illustrated a business plan or internal coordination and, in the absence of the authors' statements (notably the mail author), could not substitute for direct evidence of control or fund-flow proving circular trading; and (d) unauthenticated copies of foreign import declarations cannot be given decisive evidentiary weight where certified/attested copies produced by the respondents were available. On this basis the defence to circular trading was found plausible and ultimately accepted, and the charge of circular trading was rejected.

Charge of circular trading rejected for want of cogent evidence; the pleaded circular trading does not survive.

Transaction value / FOB valuation under Section 14 - value addition under Foreign Trade Policy (Target Plus / FTP) - Declared FOB/transaction value in the shipping bills was accepted as correct under Section 14 and could not be rejected on the basis that simple processing could not produce the prescribed value addition - HELD THAT: - The Tribunal distinguished the independent statutory concept of FOB/transaction value under Section 14 from the FTP concept of value addition. It found contemporaneous verification by customs appraisers at the time of export, realisation of sale proceeds in foreign exchange and absence of a market inquiry or other evidence required under Section 14 to displace the declared FOB. The Tribunal also held that FTP's value addition requirement does not, on its literal reading, mandate a specified quantum or type of processing and that routine industry processes (e.g., sieving, boiling, assorting in the diamond context; and casting/finishing/setting processes for jewellery) can effect value addition. The Department had not led expert or other evidence to show that the simple processes could not produce the requisite percentage of value addition; accordingly, rejection of declared FOB on the ground that value addition could not be achieved was unsustainable.

Declared FOB/transaction value upheld; valuation challenge under Section 14 dismissed.

Admissibility and evidentiary weight of foreign import documents and emails - Unauthenticated foreign import documents and email extracts could not be relied upon to prove mis-declaration or to displace contemporaneous export appraisal and certification - HELD THAT: - The Adjudicating Authority and Tribunal scrutinised the provenance and authenticity of foreign documents and emails relied upon by the Department. Where the Department produced unauthenticated or unsigned copies (or copies not certified by the foreign customs), and where respondents produced certified/attested copies and other documentary corroboration (including certifications from a recognised jewellers' association and export appraisal records), the Tribunal accorded greater evidentiary weight to the authenticated material and contemporaneous customs appraisals. The Tribunal emphasised that suspicion or uncorroborated emails cannot substitute for admissible evidence proving mis-declaration or falsity of export description/value.

Foreign documents/emails, when unauthenticated or unsupported, are insufficient to establish mis-declaration or to overturn export certifications.

Confiscation and penalty under Section 113/114 of the Customs Act - Confiscation of exported goods and penalties imposed were set aside because the foundational allegations of mis-declaration, over-valuation and circular trading were not proved - HELD THAT: - Because the Tribunal accepted the correctness of declared FOB values, rejected the circular trading charge on the available evidence, and found that exports had been examined and certified by customs appraisers (and in some cases by recognised jewellers' association representatives) at the time of export, it held that the statutory prerequisites for confiscation under Section 113 and imposition of penalties under Section 114 were not made out. The Tribunal further observed that penalties under Section 114 require individual culpability to be established and that the adjudicator had not demonstrated acts or omissions by named individuals sufficient to attract vicarious or personal penalty liability.

Orders of confiscation and penalties set aside; demands dismissed.

Authority of licensing (DGFT/Jt. DGFT) on redemption of Advance Licences - Redemption/acceptance by DGFT of fulfillment of export obligations under Advance Licences is a relevant and decisive administrative fact that undermines the Department's case for demanding duty and confiscation - HELD THAT: - The appellate decision records and relies upon the Joint DGFT/Jt. DGFT order(s) accepting that export obligations were discharged and redeeming the Advance Licences. The Tribunal and the appellate bench gave effect to the licensing authority's acceptance, observing that where the licensing authority has redeemed licences after finding obligations fulfilled, the customs department's contrary penal demand lacks force absent independent, cogent proof of mis-use. The Tribunal and appellate bench also referenced earlier favourable judicial decisions upholding exports and redemption in related matters, reinforcing that DGFT's redemption militates against the Department's allegations.

DGFT redemption and related administrative findings support upholding the adjudicating authority's dropping of demands; licensing authority's determinations are material and undercut the revenue's claims.

Final Conclusion: The appeals preferred by the revenue are dismissed. The adjudicating orders dropping the show cause proceedings, demands, confiscation and penalties were correctly upheld: declared export values were accepted, the charge of circular trading was not established on the evidence, foreign unauthenticated documents/emails could not displace contemporaneous export appraisals and DGFT's redemption of Advance Licences corroborated fulfilment of export obligations.

Constitutional power under Article 142 - constitution of High-Powered Sale Committee - vesting of Civil Court powers in a supervisory committee - liquidation and auction of attached assets for refund to investors - refund process through escrow account and investor identification - obligation on parties to produce title deeds and execute sale deeds - appointment and remuneration of committee members - cooperation and assistance by State authorities and police - interim bail as an equitable relief in aid of asset liquidation

Constitution of High-Powered Sale Committee - Constitutional power under Article 142 - Constitution and composition of a High-Powered Sale Committee (HPSC) to supervise liquidation and disposal of the companies' assets. - HELD THAT: - In exercise of its powers under Article 142 of the Constitution, the Court constituted a High-Powered Sale Committee with a former Supreme Court Judge as Chairperson, a former High Court Judge as Member, a SEBI nominee (preferably Director rank), State Revenue officers (not below Collector) as State Representatives, a Member Secretary-cum-Nodal Officer and an EOW officer as Secretary. The HPSC may associate technical experts and is empowered to coordinate with SEBI, MPID Court and State authorities to expedite identification, valuation, custody and sale of the assets. The constitution is framed to meet exigencies arising from dispersed properties, pending criminal proceedings and the need for an expert supervisory mechanism to realize value for investor refunds. [Paras 7]

HPSC constituted with specified membership and mandate.

Vesting of Civil Court powers in a supervisory committee - liquidation and auction of attached assets for refund to investors - Extent of powers and operational modalities of the HPSC including vesting it with powers of a Civil Court to facilitate auction and disposal of properties. - HELD THAT: - The Court vested the HPSC with all powers of a Civil Court to take necessary actions to speed up liquidation, including obtaining property documents from SEBI/EOW/MPID Court/Sub-Registrars, creating a database, safe custody and digitalisation of title deeds, empanelment of certified valuers, appointment of e-auction service providers, and deciding the procedure for disposal. The HPSC has discretion to determine the mechanism for sale to fetch best market value and the final decision regarding disposal; upon sale the property shall vest in the buyer free from encumbrances. SEBI is directed to open and operate a separate account to receive sale proceeds to be jointly operated by the Chairperson (or nominee) and SEBI's member. [Paras 7, 10]

HPSC vested with Civil Court powers and directed to manage auction and sale proceeds as specified.

Refund process through escrow account and investor identification - liquidation and auction of attached assets for refund to investors - Procedure for identification of investors and disbursement of sale proceeds for refund to genuine investors. - HELD THAT: - The HPSC is directed to identify investors and create a database, determine amounts refundable to each investor, fix a threshold recovery limit to commence refunds, categorise investors for phased disbursement, and decide documents and mode of claims and refunds. An Escrow Account shall be opened with a bank designated by SEBI; amounts from the MPID Court account and sale proceeds shall be transferred into it. Claims will be invited by widely publicised public notices. These procedural steps are mandated to ensure transparent, segregated and simultaneous refunds to investors once sufficient realisations are available. [Paras 8]

Refund process and escrow mechanism prescribed to identify investors and disburse sale proceeds.

Obligation on parties to produce title deeds and execute sale deeds - Obligations of the Petitioners and their companies to cooperate with HPSC in handing over documents and executing sale deeds. - HELD THAT: - The Petitioners and their companies are directed to forthwith submit details of all immovable assets and jewellery and to hand over original title deeds and relevant documents to the HPSC. They are obliged to execute necessary sale deeds as per HPSC instructions after sale confirmation and receipt of full consideration. Where title disputes exist, the HPSC shall determine the companies' rights for the limited purpose of auctioning; except where legal impediments exist, such properties shall be auctioned without delay and the Petitioners (or authorized representatives) must execute documents to effect the sale. [Paras 9]

Petitioners directed to produce title deeds and execute sale deeds; HPSC to determine limited title rights for auction.

Appointment and remuneration of committee members - Fixation of honorarium and reimbursement mechanism for HPSC members and expenses of the liquidation process. - HELD THAT: - Instead of a fixed monthly honorarium, the Court fixed sitting-day honoraria: specified rates for the Chairperson, the former High Court Judge member, and the Member Secretary, with the SEBI nominee not entitled to remuneration but reimbursed expenses. Remuneration for experts to be determined by HPSC. Expenditure on honoraria, office, secretarial assistance and auction procedure shall be reimbursed from sale proceeds, with initial expenditure reimbursable from proceeds of already sold properties which SEBI will transfer to the Escrow Account. [Paras 11, 12]

Honorarium fixed per sitting day and expenses to be reimbursed from sale proceeds as directed.

Cooperation and assistance by State authorities and police - Direction to State Governments and police authorities to provide assistance to HPSC in execution of its mandate. - HELD THAT: - Chief Secretaries and Financial Commissioners (Revenue) of specified States are directed to extend full cooperation and appoint Revenue officers (not below Collector) to assist the HPSC and provide requisite information and sign proceedings as State Representatives. Directors General of Police of those States are directed to assist in securing and protecting possession of properties, and HPSC may deploy private guards if required. SEBI and the Petitioners are likewise directed to extend full cooperation to the HPSC. [Paras 13, 14, 15, 16]

States and police directed to provide assistance and cooperate with HPSC; SEBI and Petitioners to cooperate.

Interim bail as an equitable relief in aid of asset liquidation - Interim bail of Petitioner Nos. 1 and 2 to facilitate sale and disbursement process. - HELD THAT: - In view of the period of incarceration and to facilitate implementation of the sale and disbursement directions, the Court granted interim bail to Petitioner Nos. 1 and 2 to the satisfaction of the MPID Court, Mumbai in Case No. 7/2016; this interim bail is to be treated as interim bail in all the FIRs. The direction is issued as an exercise of Article 142 to advance the liquidation and refund process in the special facts of the case. [Paras 17]

Petitioner Nos. 1 and 2 enlarged on interim bail in all FIRs to facilitate the liquidation process.

Final Conclusion: The Supreme Court, invoking Article 142, constituted a High-Powered Sale Committee with specified membership and powers (including Civil Court powers) to identify, value, custody and auction the companies' movable and immovable assets, prescribed a detailed escrow-based refund mechanism for genuine investors, fixed sitting-day honoraria and reimbursement from sale proceeds, directed cooperation by States, police, SEBI and the Petitioners (who must hand over title deeds and execute sale deeds), and granted interim bail to Petitioner Nos.1 and 2 to facilitate the sale and disbursement process.

Summary order. Notice issued; respondents directed to file counter affidavit within two weeks and petitioner to file rejoinder within one week; matter listed before Roster Bench on 03.07.2024.

Forfeiture of earnest money deposit for failure to pay balance consideration within stipulated time - binding force of E auction Process Information Document and bidder's undertaking - issue of sale certificate subject to orders of the adjudicating authority - no liability of liquidator for non issuance of sale certificate due to court orders - precedent supporting forfeiture of bid security where bidder withdraws during bid validity - inapplicability of Section 74 of the Indian Contract Act to auctions under Liquidation Process Regulations

Forfeiture of earnest money deposit for failure to pay balance consideration within stipulated time - binding force of E auction Process Information Document and bidder's undertaking - precedent supporting forfeiture of bid security where bidder withdraws during bid validity - inapplicability of Section 74 of the Indian Contract Act to auctions under Liquidation Process Regulations - Forfeiture of the appellant's EMD was valid in view of the appellant's failure to pay the balance sale consideration within the time stipulated under the E auction Process Information Document. - HELD THAT: - The E auction Process Information Document contained express timelines for payment and an express forfeiture clause (Clause 4.9) which permitted forfeiture where the successful bidder failed to make complete payment within the stipulated period. The appellant was declared successful, received the Letter of Intent and was bound by the Process Document. Admitted non payment within the 90 day period entitled the liquidator to forfeit the EMD. The Tribunal relied on authoritative precedent holding that forfeiture of bid security is permissible where a bidder withdraws or fails to perform during the bid validity period, and that Section 74 of the Indian Contract Act does not apply to such auction sales under the Liquidation Process Regulations. The appellant's plea that it was unaware of the Adjudicating Authority's order does not assist since the Process Document already made issuance of the sale certificate subject to orders of the Tribunal and bidders were thereby put on notice of that contingency. [Paras 17, 19, 25]

Appellant's EMD rightly forfeited; impugned order rejecting refund of EMD upheld.

Issue of sale certificate subject to orders of the adjudicating authority - no liability of liquidator for non issuance of sale certificate due to court orders - binding force of E auction Process Information Document and bidder's undertaking - Liquidator not liable for non issuance of Sale Certificate or for alleged consequential losses where issuance was restrained by an order of the Adjudicating Authority. - HELD THAT: - Order dated 04.04.2022 expressly restrained issuance of sale certificates without prior approval of the Adjudicating Authority. The Process Document also stated that issuance of sale certificates was subject to orders of NCLT/NCLAT. The liquidator therefore could not issue the Sale Certificate until the Adjudicating Authority disposed of IA No.98/2022; this inability arose from the court's direction and not from any dereliction by the liquidator. Multiple bidders similarly awaited leave and obtained sale certificates once the Adjudicating Authority disposed of the matter. Given these facts, the Adjudicating Authority correctly declined to award compensation or damages against the liquidator for the delay caused by judicial proceedings. [Paras 18, 25]

Claim for compensation/damages against the liquidator rejected; liquidator not liable for delay in issuance of Sale Certificate caused by tribunal orders.

Final Conclusion: Appeal dismissed; order of the Adjudicating Authority upholding forfeiture of the EMD and rejecting claims for refund and compensation is affirmed.

Initiation of CIRP under Section 7 based on Recovery Certificate - Debt and default established by Recovery of Debts Due to Banks and Financial Institutions Act recovery certificate - Effect of interlocutory proceedings before DRT/DRAT on finality of Recovery Certificate - Corporate guarantor's liability and invocation of corporate guarantee - Insufficiency of corporate assets not a ground to deny admission under Section 7 - Reliance on Supreme Court precedent in Dena Bank v. C. Shivakumar Reddy for fresh cause of action

Debt and default established by Recovery of Debts Due to Banks and Financial Institutions Act recovery certificate - Initiation of CIRP under Section 7 based on Recovery Certificate - Reliance on Supreme Court precedent in Dena Bank v. C. Shivakumar Reddy for fresh cause of action - Debt and default as reflected in the DRT Recovery Certificate constituted sufficient cause of action to admit the Section 7 application against the corporate guarantor. - HELD THAT: - The Tribunal held that the DRT had issued a Recovery Certificate in favour of the financial creditor for the decretal amount and that the corporate guarantee had been invoked thereafter. Adjudicating Authority correctly relied on the Recovery Certificate and the Supreme Court's ruling in Dena Bank v. C. Shivakumar Reddy that a Recovery Certificate gives rise to a fresh cause of action for initiating proceedings under Section 7 of the IBC within the limitation period. On the material on record, including the Recovery Certificate naming the corporate guarantor as a certified debtor and the invocation of the guarantee, the Adjudicating Authority's conclusion that debt and default stood established was upheld. The Tribunal found no reason to disturb the admission under Section 7 on this ground. [Paras 7, 10, 12]

Section 7 admission based on the DRT Recovery Certificate and invocation of the corporate guarantee was valid and is upheld.

Effect of interlocutory proceedings before DRT/DRAT on finality of Recovery Certificate - Effect of pending review/appeal on admissibility of Recovery Certificate in insolvency proceedings - Pending interlocutory proceedings (appeal before DRAT and review before DRT) did not render the Recovery Certificate ineffective to constitute cause of action for Section 7 admission. - HELD THAT: - The Tribunal noted the DRAT order which disposed of the appeal by giving liberty to revive it if the review before the DRT succeeded; this procedural disposition did not stay or otherwise nullify the DRT order or Recovery Certificate. The Adjudicating Authority therefore rightly proceeded to treat the Recovery Certificate as operative for establishing debt and default. The existence of further litigation did not, on the record, preclude admission under Section 7. [Paras 8, 9]

Interlocutory or pending review/appeal did not prevent reliance on the Recovery Certificate for admittance of the Section 7 petition.

Corporate guarantor's liability and invocation of corporate guarantee - Insufficiency of corporate assets not a ground to deny admission under Section 7 - The contention that the corporate debtor's limited assets (single property) would make CIRP futile is not a ground to set aside admission under Section 7. - HELD THAT: - The Tribunal emphasised that admission of CIRP under Section 7 is triggered by the existence of debt and default of the corporate debtor (here, a corporate guarantor), and not by the assessed adequacy of the debtor's assets for eventual resolution. Questions as to realizable value of assets, feasibility or efficacy of resolution processes are matters for the resolution process and cannot be a ground to interdict admission. The Adjudicating Authority correctly declined to treat the paucity of assets as a bar to admission. [Paras 11]

The plea of insufficiency of assets does not vitiate the admission under Section 7 and is not a ground for interference with the impugned order.

Final Conclusion: The Tribunal found no merit in the appeal and dismissed it, holding that the Adjudicating Authority rightly admitted the Section 7 petition against the corporate guarantor on the basis of the DRT Recovery Certificate and invocation of the corporate guarantee; interlocutory challenges to the Recovery Certificate and the contention regarding insufficiency of assets did not warrant setting aside the admission.

Refund of Cenvat credit - retrospective application of amended Rule 5 - effect of Notification No. 5/2006-CE (NT) dated 14.03.2006 - refund claims filed after amendment - export-related eligibility for refund

Refund of Cenvat credit - retrospective application of amended Rule 5 - effect of Notification No. 5/2006-CE (NT) dated 14.03.2006 - Whether refund of Cenvat credit claimed after issuance of Notification No. 5/2006-CE (NT) dated 14.03.2006 can be rejected on the sole ground that the underlying exports pertain to a period prior to 14.03.2006. - HELD THAT: - The Tribunal considered the scope of the substituted Rule 5 and Notification No. 5/2006-CE (NT) and the revenue's contention that refunds are not admissible for periods prior to 14.03.2006. It relied on the earlier Division Bench decision in WNS Global Services (P) Ltd. which held that where refund claims are filed after the amendment and satisfy the requirements of the amended Rule 5 and the Notification, the refund cannot be denied merely because the exports were made prior to 14-3-2006. Applying that principle, the Tribunal found that the only reason given for rejection was that the claim related to a period prior to 14.03.2006; this objection is unsustainable in view of the binding precedent and the legal principle that the amended rule and notification apply to claims made after amendment if statutory conditions are met. Accordingly the impugned recovery based solely on the pre-14.03.2006 timing was held to be without merit. [Paras 4]

The appeal is allowed; the impugned order to recover the refund insofar as based only on the pre-14.03.2006 period is set aside and consequential relief granted.

Final Conclusion: The Tribunal set aside the impugned order to the extent it directed recovery of refund solely on the ground that the exports related to a period prior to 14.03.2006, holding that where refund claims filed after the amendment satisfy the amended Rule 5 and Notification No. 5/2006-CE (NT), they cannot be denied for relating to an earlier period; appeal allowed with consequential relief.

Sale of space for advertisement - print media exclusion - registration with Registrar of Newspapers for India - interpretation of Section 65(105)(ZZZM)

Sale of space for advertisement - print media exclusion - registration with Registrar of Newspapers for India - interpretation of Section 65(105)(ZZZM) - Whether the amounts charged by the appellant for publishing advertisements in its publications fall within the taxable service 'sale of space for advertisement' under Section 65(105)(ZZZM), or are excluded because the publications qualify as 'newspaper' or 'book' registered with the Registrar of Newspapers for India. - HELD THAT: - The definition in Section 65(105)(ZZZM) treats 'sale of space or time for advertisement' as a taxable service but expressly excludes 'sale of space for advertisement in print media' where 'print media' includes newspapers and books while excluding business directories, yellow pages and trade catalogues. The appellant produced registration certificates from the Registrar of Newspapers for India classifying its publications (for example, 'INSITE' and others) as newspapers with monthly or bi-monthly periodicity, and an application to the sub divisional magistrate describing the publication as a newspaper. The Tribunal held that where the Registrar of Newspapers for India has classified the publication as a newspaper, that classification brings the publication within the statutory exclusion from the taxable category. The earlier Adjudicating Authority's conclusion that RNI registration alone was not a sufficient basis for exclusion was rejected because, on the record before the Tribunal, the publications were registered as newspapers and therefore fall within the exclusion in the definition under Section 65(105)(ZZZM). On that basis the Tribunal set aside the findings of the Adjudicating Authority and held that the service is not taxable as sale of space for advertisement in print media. [Paras 4]

The publications printed by the appellant are newspapers as per RNI registration and hence fall within the exclusion in Section 65(105)(ZZZM); the impugned Order In Original is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the appellant's registered publications qualify as newspapers and are excluded from the taxable service 'sale of space for advertisement' under Section 65(105)(ZZZM), and accordingly set aside the Adjudicating Authority's order.

Business Auxiliary Service - trading activity vs. service - valuation of taxable service - reimbursement not part of consideration - Rule 5(1) ultra vires the charging provisions - interpretation of Sections 66 and 67 - limitation for extended period where no suppression - bonafide belief and absence of suppression

Business Auxiliary Service - trading activity vs. service - Margin arising from purchase and resale of pre-booked airline cargo space is not exigible to service tax as Business Auxiliary Service. - HELD THAT: - The Tribunal found that the appellant, as an IATA member, purchased cargo space and resold it on its own account; there was no allegation of commission or that space was booked on behalf of specific clients. Such transactions are trading in purchase and sale of cargo space and the margin is profit of trading, not consideration for providing a service to a client. For BAS to apply, the activity must amount to promotion/arrangement of services on behalf of a third party; where the appellant buys and then sells on its own account, the essential elements of BAS are absent. The Tribunal relied on the Delhi CESTAT decision in the appellant's own earlier case and analogous Tribunal precedents which held that freight rebate/operational surplus earned from trading in cargo space cannot be taxed as BAS. Applying those conclusions to the factual matrix, the demand under BAS was unsustainable and was set aside. [Paras 9, 10, 11, 15]

Demand confirmed under Business Auxiliary Service in respect of margins on sale of cargo space set aside; appeal allowed on merits on this issue.

Valuation of taxable service - reimbursement not part of consideration - interpretation of Sections 66 and 67 - Rule 5(1) ultra vires the charging provisions - Amounts reimbursed to the appellant for payments made on behalf of clients are not includible in the value of the taxable service as consideration. - HELD THAT: - Relying on the reasoning of the Delhi High Court in Intercontinental Consultants & Technocrats Pvt. Ltd. and the Supreme Court's affirmance, the Tribunal held that valuation for service tax is confined to the gross amount charged 'for such service' and cannot include amounts incurred by the service provider in the course of providing the service. Rule 5(1), insofar as it sought to include such expenditures in valuation, goes beyond the charging provisions and is ultra vires. Applying that principle, the reimbursement receipts, which appear in the appellant's books as corresponding to expenses incurred and not as quid pro quo for the taxable service, cannot be treated as consideration liable to service tax; earlier Tribunal and High Court/Supreme Court precedents were applied and the demands premised on treating reimbursements as consideration were set aside. [Paras 12, 13, 14, 15]

Demand based on including reimbursements in valuation of service disallowed; confirmed demands on that basis set aside.

Limitation for extended period where no suppression - bonafide belief and absence of suppression - Confirmed demands relating to the extended period are not sustainable on limitation grounds in view of the appellants' bonafide belief and absence of suppression. - HELD THAT: - The Tribunal noted that the appellants had been regular service tax assessees filing ST-3 returns and that the figures used for quantification derived from the appellant's own Profit & Loss accounts and balance sheet. There was no departmental evidence of deliberate suppression or non-filing. Given the existence of an arguable legal foundation (precedents favourable to the appellant) supporting their bonafide belief that reimbursements and trading margins were not taxable, the extended-period demands could not be sustained. Accordingly the Tribunal set aside confirmed demands for the extended period on limitation grounds. [Paras 16]

Confirmed demands for the extended period set aside on limitation grounds given bonafide belief and absence of suppression.

Final Conclusion: The appeals are allowed; demands confirmed under Business Auxiliary Service and on account of reimbursements are set aside on merits, and extended-period demands are also set aside on limitation grounds; the appellant is entitled to consequential relief as per law.

Site Formation and Clearance, Excavation and Earthmoving and Demolition services - exclusion for services in relation to agriculture, irrigation, watershed development and water bodies - integrated waste management / solid waste management - service classification - part of a complete work versus independent provision - scope of exclusion and legislative intent (Board circular and exemption notification)

Site Formation and Clearance, Excavation and Earthmoving and Demolition services - integrated waste management / solid waste management - exclusion for services in relation to agriculture, irrigation, watershed development and water bodies - service classification - part of a complete work versus independent provision - Whether the services rendered under eight work orders of Coimbatore Municipal Corporation, seven work orders of M/s. UPL and hiring of earthmoving machinery are classifiable as "Site Formation and Clearance, Excavation and Earthmoving and Demolition services" and taxable. - HELD THAT: - The Tribunal examined the scope and nature of the work orders and the material placed on record and accepted the Commissioner's factual finding that the works were part of an Integrated Waste Management project aimed at safe management of municipal solid waste and protection of groundwater and water bodies. Although the work orders use terms such as excavation, levelling, dumping and earthmoving, the activities were performed to create impermeable liners, compact and stabilize waste mounds, spread geo-textile and soil layers, construct drainage and pathways and otherwise manage and reform municipal waste (bio-mining and composting), rather than to prepare land for construction, mining or other commercial exploitation. The Tribunal applied the exclusion embedded in the definition of the site-formation service (services in relation to agriculture, irrigation, watershed development and water bodies) and relied on the Board's explanatory circular and the legislative intent to hold that the works fall within waste-management activity and are not classifiable as SFCE. In consequence, the demand raised in respect of these work orders was correctly set aside by the Commissioner and the Department's appeal against dropping the demand was rejected. [Paras 14, 15, 17, 20, 21]

Demand in respect of the eight CMC contracts, seven UPL contracts and hiring of machinery is not classifiable as SFCE and the Commissioner's order setting aside the demand is upheld; Department's appeal dismissed.

Site Formation and Clearance, Excavation and Earthmoving and Demolition services - service classification - part of a complete work versus independent provision - Whether the two work orders dated 13.02.2009 and 24.03.2009 (jungle clearance, dressing, levelling, excavation, earth filling and related works) are classifiable as SFCE and taxable. - HELD THAT: - The Tribunal analysed the specific terms of the two work orders and the context of the overall waste-management contract. Although the activities described include jungle clearance, dressing and levelling, excavation and earth filling, the Tribunal found these tasks to be integral and indispensable preliminary components of the integrated waste-management project rather than independent site-formation services provided separately for a non-waste-management purpose. Reliance was placed on the Board circular which states that SFCE is attracted only where such services are provided independently and not as part of a complete work. Since the two orders were necessary to enable the scientific waste-management operations (protection of water tables and compliance with municipal solid waste management norms), the Tribunal held that the original confirmation of service tax, interest and penalties on these orders was unsustainable. [Paras 22, 23, 24, 25]

The confirmation of service tax demand, interest and penalties in respect of the two work orders is set aside and the assessee's appeal is allowed as to those demands.

Final Conclusion: The Tribunal upheld the Commissioner's decision to drop the major portion of the demand relating to eight CMC contracts, seven UPL contracts and hiring of machinery (Department's appeal dismissed) and set aside the confirmed demand, interest and penalties in respect of the two disputed work orders dated 13.02.2009 and 24.03.2009 (assessee's appeal allowed).

Liability to service tax on construction of residential complex services - promoter/developer/builder exemption prior to 01.07.2010 - composite/indivisible works contract - works contract services as the taxable category for composite contracts - 67% abatement as indicium of composite nature of contract - classification conflict between construction of residential complex services and works contract services resolved in favour of works contract services for composite contracts

Liability to service tax on construction of residential complex services - promoter/developer/builder exemption prior to 01.07.2010 - Whether the appellant as promoter/developer/builder was liable to pay service tax under Construction of Residential Complex Services for the period prior to 01.07.2010. - HELD THAT: - The Tribunal held that for the period up to 30.06.2010 a promoter/developer/builder is not liable to pay service tax under Construction of Residential Complex Services, following the clarification in CBEC Circular No.108/2/2009 dated 29.01.2009 and the co-ordinate authority in the case of M/s. Krishna Homes . The Court noted that the explanation bringing builders/promoters within the service tax net was introduced only with effect from 01.07.2010 and therefore any demand falling prior to that date cannot be sustained. The Tribunal applied this principle to the present facts, observing that part of the demand relates to the period before 01.07.2010 and must therefore be set aside. [Paras 10, 11]

Demand for service tax under Construction of Residential Complex Services for the period prior to 01.07.2010 set aside.

Composite/indivisible works contract - works contract services as the taxable category for composite contracts - 67% abatement as indicium of composite nature of contract - classification conflict between construction of residential complex services and works contract services resolved in favour of works contract services for composite contracts - Whether the demand for service tax under Construction of Residential Complex Services is sustainable for the period after 01.07.2010 where the contracts are composite in nature. - HELD THAT: - The Tribunal found the contracts in the present case to be indivisible/composite, involving both supply of materials and rendition of services. Having regard to the statutory recognition of Works Contract Services as covering composite contracts and to the departmental quantification (which granted 67% abatement), the Tribunal concluded that a composite contract can be taxed only under Works Contract Services and not under Construction of Residential Complex Services. The Tribunal relied on its earlier decisions, including Real Value Promoters Pvt Limited and Jain Housing and Construction Ltd. , and on the principle that construction of residential complex services is a service simpliciter which cannot be used to tax composite works contracts. Applying this reasoning, the demand framed under Construction of Residential Complex Services for the post-01.07.2010 period was held unsustainable and was set aside. [Paras 12, 13, 14]

Demand for service tax under Construction of Residential Complex Services for the period after 01.07.2010 set aside; composite contracts are taxable as Works Contract Services, not under Construction of Residential Complex Services.

Final Conclusion: The impugned demand of service tax under Construction of Residential Complex Services for the period 01.04.2009 to 31.03.2011 (2009 to 2011) is set aside in respect of both the pre-01.07.2010 period (promoter/developer exemption) and the post-01.07.2010 period (contracts held composite and taxable only as Works Contract Services). The appeal is allowed with consequential reliefs.

Entitlement to Cenvat credit on input services - Scope of "input service" under the Cenvat Credit Rules, 2004 - Disallowance and recovery of inadmissible Cenvat credit under Rule 14 read with Section 11A(1) of the Central Excise Act, 1944 - Interest and penalty consequences of inadmissible Cenvat credit - Appellate interference with concurrent findings of fact

Entitlement to Cenvat credit on input services - Scope of "input service" under the Cenvat Credit Rules, 2004 - Disallowance and recovery of inadmissible Cenvat credit under Rule 14 read with Section 11A(1) of the Central Excise Act, 1944 - Allowance of Cenvat credit claimed by the assessee on various input services for April 2012 to March 2013 and correctness of the Tribunal's decision setting aside departmental demand. - HELD THAT: - The respondent-assessee, manufacturer of motorcycles, had availed Cenvat credit on several services used in or in relation to manufacture during the period April 2012 to March 2013. The Department issued a show cause notice alleging wrongful availment and sought disallowance, interest and penalties under the Cenvat Credit Rules and the Central Excise Act. The Tribunal allowed the assessee's appeal and set aside the demand. Before this Court, Revenue was unable to meaningfully contest the assessee's entitlement in the face of the definition of input service in Rule 2(l) of the Cenvat Credit Rules, 2004 and the Tribunal's findings. The High Court found no infirmity-factual or legal-in the Tribunal's reasoning and held that there was no basis for appellate interference with the concurrent/adopted findings allowing the credits. Accordingly the departmental demand, interest and penalty as assailed were not sustained. [Paras 8, 9]

Tribunal's order allowing the assessee's appeal is upheld; departmental appeals are dismissed.

Final Conclusion: Appeals dismissed; the Tribunal's order allowing the assessee's Cenvat credit claims for April 2012 to March 2013 is sustained and departmental challenge is rejected.

Cenvat credit - Business Auxiliary Service exclusion - Job work and manufacturing - Recipient cannot be denied credit where supplier's tax payment is accepted by department - Reversal under Rule 14 of the Cenvat Credit Rules, 2004 - Rule 6(3)(i) - payment on account of clearances without payment of duty

Cenvat credit - Business Auxiliary Service exclusion - Job work and manufacturing - Recipient cannot be denied credit where supplier's tax payment is accepted by department - Entitlement to Cenvat credit of service tax paid by the job worker for cement coating when the department contends the activity amounts to manufacture and not a Business Auxiliary Service. - HELD THAT: - The Tribunal examined whether the department could deny Cenvat credit to the assessee on the ground that the job worker's cement coating amounted to manufacture and therefore fell outside the definition of Business Auxiliary Service. Relying on precedent and the factual record that the job worker had paid service tax which was accepted by the department, the Tribunal held that once the supplier (job worker) has paid the tax and the payment has been accepted by the department, the recipient cannot be deprived of Cenvat credit. The Tribunal noted authority supporting the proposition that tax paid and accepted at the supplier end cannot be contested by officials in charge of the recipient unit to deny credit. Applying this principle to the facts, the Tribunal found the adjudicating authority's denial without merit and set aside the order-in-original.

Cenvat credit availed by the appellant in respect of service tax paid by the job worker is allowable; the order-in-original denying credit is without merit and set aside.

Rule 6(3)(i) - payment on account of clearances without payment of duty - Cenvat credit - Whether availment of Cenvat credit was improper because some clearances of cement coated pipes were effected without payment of excise duty and whether appropriate reversal under Rule 6(3)(i) was made. - HELD THAT: - The Tribunal considered the record showing that the assessee effected clearances of cement coated pipes both on payment of duty and under exemption (Notification No. 6/2006-CE), and that the assessee had paid an amount equal to 6% of the value of exempted clearances as required by Rule 6(3)(i) where common input services were used for both dutiable and exempted goods. The assessee also asserted and produced evidence that certain clearances were on payment of duty. Given compliance with Rule 6(3)(i) for exempted clearances and the fact that taxable clearances were also made, the Tribunal found the department's contention devoid of merit and not a ground to deny the credit.

Assessee's reversal under Rule 6(3)(i) and mixed clearances (dutiable and exempt) remove the basis to disallow Cenvat credit on this ground; department's challenge on this point is dismissed.

Reversal under Rule 14 of the Cenvat Credit Rules, 2004 - Cenvat credit - Sustainability of the adjudicating authority's demand and reversal under the show cause notice invoking Rule 14 and Section 11A(1) where credit was taken on invoices issued by the job worker. - HELD THAT: - The Tribunal analysed the show cause grounds and the appellant's replies, including reliance on precedents where credit could not be denied to a recipient when duty/tax paid by the supplier was accepted by the department. Finding that the department had not shown successful review or refund of the tax at the supplier end and that the assessee had complied with applicable adjustment rules for exempted clearances, the Tribunal concluded that the adjudicating authority's confirmations in the impugned order lacked merit. Consequently, the departmental appeal seeking to sustain those confirmations was dismissed.

Impugned order-in-original confirming reversal and demand is set aside; departmental appeal is dismissed and the assessee's appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal of M/s. Welspun Corp. Limited and set aside the order-in-original disallowing Cenvat credit; the departmental appeal was dismissed. No remand was directed.

Includibility of dealer incurred advertisement costs in assessable value - transaction value and the requirement that price is the sole consideration - enforceable legal right to insist on advertisement expenses - any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of or in connection with the sale

Includibility of dealer incurred advertisement costs in assessable value - transaction value and the requirement that price is the sole consideration - enforceable legal right to insist on advertisement expenses - Advertisement expenditure borne by dealers/distributors is not includible in the assessable/transaction value of excisable goods manufactured and sold by the appellant. - HELD THAT: - The Tribunal examined whether amounts spent by dealers/distributors on advertising which are either partially reimbursed by the manufacturer or borne by dealers as part of an internal understanding fall within the transaction/assessable value. Applying the legal tests laid down by the Supreme Court and several Tribunals, the determinative principle is whether the dealer was legally liable to pay such amounts to, or on behalf of, the manufacturer so that the payment is a condition of sale. Where there is no enforceable contractual right enabling the manufacturer to insist upon the dealer incurring the advertising expenditure (and no evidence that the dealer's payment was a compulsory additional price element), such dealer borne advertising is an expense of the dealer and not an extraneous consideration recoverable as part of the transaction value. The Tribunal further held that post 1.7.2000 amendments to the valuation provisions do not displace this principle: the statutory definition of "transaction value" requires that the buyer be liable to pay an additional amount to the seller by reason of or in connection with the sale; absent such liability or enforceable obligation, dealer advertising costs are not includible. The Tribunal followed and applied the ratios of earlier authorities including Philips India Ltd., TVS Motors Co. Ltd., Surat Textile Mills Ltd. and subsequent Tribunal decisions which reached similar conclusions, and found no evidence of a legally binding duty on dealers to incur the non reimbursed portion of the advertisement expenses. [Paras 4, 5]

Impugned order sustaining inclusion of dealer incurred advertisement expenses in assessable value is unsustainable and is set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that dealer/distributor incurred advertisement costs (including amounts not reimbursed by the manufacturer) are not includible in the transaction/assessable value in the absence of an enforceable legal obligation on the dealer to incur such expenditure; the impugned order was set aside.

Classification of goods - classification as cosmetics - classification as petroleum jelly - use for the care of skin - HSN Explanatory Notes as interpretative aid - primary function test (care v. cure) - proportion of ingredients not decisive - extended period of limitation for suppression

Classification of goods - classification as cosmetics - classification as petroleum jelly - use for the care of skin - HSN Explanatory Notes as interpretative aid - primary function test (care v. cure) - proportion of ingredients not decisive - Whether the disputed products are classifiable under CTH 2712 as petroleum jelly or under CTH 3304 as cosmetics - HELD THAT: - The Tribunal examined the character and primary function of the products marketed as Petroleum Jelly - Baby and Petroleum Jelly - Aloe Vera. Chapter 27.12 of the tariff covers petroleum jelly per se but the HSN explanatory notes specifically exclude petroleum jelly suitable for use for the care of skin and indicate such products are covered under Heading 33.04 which embraces preparations for the care of skin. Applying the tests reiterated by the Supreme Court (including the primary function test and the principle that proportion of ingredients is not decisive), the Tribunal found these variants were formulated and marketed for skin care (as barrier creams to prevent skin cracking) and were not altered in character merely by minor addition of fragrance. The Tribunal placed reliance on HSN explanatory notes as a persuasive interpretative aid and concluded that petroleum jelly intended for skin care falls within CTH 3304 rather than CTH 2712. The Tribunal rejected the revenue's contention that a minor deviation between HSN and the eight-digit CET description ousts reliance on explanatory notes, and disagreed with the view that negligible perfume transforms the product's chapter-classification where the primary function remains skin care. [Paras 11, 18, 21, 22]

The products are cosmetics intended for the care of skin and are correctly classifiable under CTH 3304; they are not classifiable under CTH 2712.

Extended period of limitation for suppression - proportion of ingredients not decisive - Whether invocation of the extended period of limitation on the ground of willful suppression of facts was justified - HELD THAT: - The Commissioner had held that sustained departmental verification revealed willful suppression because the appellant earlier classified the product under Chapter 27 and later under Chapter 33 after adding perfume, and that the activities were not disclosed. The Tribunal, however, accepted the appellant's evidence of communications with the department, the Food and Drug Administration endorsement and the contemporaneous classification and treatment of the perfumed variants as skin-care products. Given the Tribunal's finding that the products are correctly classifiable under CTH 3304 and that the presence of fragrance in minuscule quantity did not change the character, the premise for invoking extended limitation as suppression was not sustained in the appellate view. [Paras 9, 22, 23]

Extended period of limitation invoked on the ground of suppression is not sustained in view of the correct classification under CTH 3304 and the appellant's disclosures; the extended-period demand cannot be upheld.

Final Conclusion: The Tribunal allowed the appeal, holding that the disputed petroleum jelly variants are cosmetics for skin care and classifiable under CTH 3304, and set aside the impugned order (including the demand founded on invocation of the extended period of limitation) for the period August 2010 to February 2014.

Provisional assessment under Rule 7 of the Central Excise Rules, 2002 - inability to determine value of excisable goods - value unknown at time and place of removal - transaction value determined by grade

Provisional assessment under Rule 7 of the Central Excise Rules, 2002 - value unknown at time and place of removal - transaction value determined by grade - Respondent entitled to provisional assessment under Rule 7 because the value of coal was not ascertainable at the time and place of removal. - HELD THAT: - The Tribunal accepted the factual finding that at the time of clearance from the respondent's premises the grade of coal was not known and grading was to be carried out by the power utility (DVC) in terms of the joint venture arrangement. The price applicable to different grades is fixed by M/s Coal India Limited after grading, and consequently the transaction value - and the duty leviable - could not be determined at the time and place of removal. In that factual and contractual matrix, Rule 7 applies where the assessee is unable to determine the value of excisable goods. The Revenue's contention that the respondent should have its own testing facility was not accepted as it did not alter the agreed mechanism for grading and price fixation which rendered the value unknown at removal. The Commissioner (Appeals) correctly allowed provisional assessment, and the Tribunal found no scope for interference.

Impugned order allowing provisional assessment under Rule 7 is upheld; Revenue's appeal dismissed.

Final Conclusion: The appeal by the Revenue is dismissed and the order of the Commissioner (Appeals) allowing provisional assessment under Rule 7 is affirmed.