TaxTMI Updates e-Newsletter
Jul 28,2018

Summary order. Writ petition dismissed as withdrawn with liberty to approach the appropriate authority for appropriate relief in accordance with law.

Inclusion of foreign exchange gain/loss in operating profit for TNMM/PLI comparison - nexus between forex fluctuation gains and the taxpayer's business activity - direction of the Dispute Resolution Panel under section 144C(5) to treat forex gain as operating in nature - maintainability of appeals under Section 260-A of the Income-tax Act

Inclusion of foreign exchange gain/loss in operating profit for TNMM/PLI comparison - nexus between forex fluctuation gains and the taxpayer's business activity - Tribunal correctly included foreign exchange gain as part of operating profit for determining the Profit Level Indicator under TNMM because the forex fluctuation gain related to sale proceeds and thus had nexus with the assessee's business activity. - HELD THAT: - The Tribunal found that the foreign exchange fluctuation and the resulting gain arose from realization of sale proceeds and therefore bore a direct connection with the assessee's business transactions. The High Court, having considered the Tribunal's reasoning and the nature of the forex gain, held that the Revenue's challenge was unsustainable and that the nexus between the forex gain and the business activity could not be said to be unascertained. The Court further observed that unless a Tribunal's finding is ex facie perverse, appellate interference under Section 260-A is not maintainable; the present factual conclusion of nexus did not meet that threshold. [Paras 3, 5, 6]

The Tribunal's inclusion of the forex gain in operating profit for PLI/TNMM comparison is upheld and the Revenue's challenge is dismissed.

Direction of the Dispute Resolution Panel under section 144C(5) to treat forex gain as operating in nature - maintainability of appeals under Section 260-A of the Income-tax Act - The Tribunal was correct in upholding the DRP's direction to the TPO to treat the forex gain as operating in nature without further fact-finding, and the High Court held that this did not give rise to a substantial question of law maintainable under Section 260-A. - HELD THAT: - The DRP directed the TPO to include the forex gain as operating in nature. The Tribunal affirmed that direction on the basis that the forex gain pertained to the sale proceeds of the assessee and thus was connected to its business operations. The High Court, applying settled precedent, explained that appeals under Section 260-A are not entertainable merely because the Revenue is dissatisfied with factual findings of the Tribunal; absent a finding that the Tribunal's conclusion is perverse, no substantial question of law arises. Consequently, the Court declined to entertain the Revenue's challenge to the DRP's direction. [Paras 3, 4, 5, 6]

The Tribunal's upholding of the DRP's direction is sustained and the Revenue's appeal against that direction is dismissed as not raising a substantial question of law.

Final Conclusion: The Revenue's appeal is dismissed for lack of any substantial question of law; the Tribunal's findings regarding inclusion of the forex gain as operating and the DRP's direction are upheld. No costs.

Reliance on information received from investigative/customs authorities - invocation and applicability of section 69C to expenditure arising from under valuation of imports - estimation of taxable profit element versus addition of entire under invoiced amount

Reliance on information received from investigative/customs authorities - Whether the Assessing Officer and the Commissioner (Appeals) erred in basing additions solely on the information and report of the DRI without making independent enquiries or the assessee adducing counter material. - HELD THAT: - The Tribunal noted that the assessee failed to place any independent material before the Assessing Officer, the Commissioner (Appeals) or the Tribunal to rebut the information furnished by the DRI. In these circumstances the authorities were justified in acting upon the DRI material; absent any contrary evidence or explanation from the assessee there was no basis to fault the authorities for relying on the investigative findings. The Tribunal found no reason to interfere with the confirmation of the additions made on the basis of the DRI information. [Paras 7]

Ground asserting that the orders were merely a reproduction of DRI information is dismissed for lack of any independent material from the assessee.

Invocation and applicability of section 69C to expenditure arising from under valuation of imports - Whether section 69C could be invoked in respect of the impugned expenditure and whether invoking it required prior rejection of books of account. - HELD THAT: - The Tribunal accepted the Commissioner (Appeals)'s reasoning that the proviso to section 69C applies where an assessee has incurred expenditure and offers no satisfactory explanation as to its source. The seized materials, GEQD reports and statements were held to show expenditure beyond what was shown in invoices and the assessee failed to satisfactorily explain the source. The Tribunal agreed that section 69C does not stipulate a pre condition that books of account be rejected before invoking the provision, and upheld the invocation of section 69C. [Paras 11]

Invocation of section 69C was upheld and the plea that it was inapplicable is rejected.

Estimation of taxable profit element versus addition of entire under invoiced amount - Whether, as an alternative, only the profit element (and not the entire under invoiced amount) should have been subjected to addition. - HELD THAT: - The Tribunal examined the material and concluded that the department's case concerned under valuation of imports (under invoicing at the import stage) rather than under invoicing of sales. The assessee had admitted under valuation before DRI and paid differential duties; no evidence was produced to show that sales were undervalued in the books so as to restrict addition to profit element. Statements relied upon by the assessee were held irrelevant or insufficient. The Tribunal therefore found no merit in the alternative plea that only the profit element should be added. [Paras 12]

Alternative contention that only profit element be taxed is rejected; the addition based on under valuation of imports stands.

Final Conclusion: All appeals are dismissed with respect to the contested grounds: the authorities were entitled to act on DRI information in absence of contrary material from the assessee; section 69C was rightly invoked; and the alternative plea to restrict addition to profit element was rejected. The findings apply mutatis mutandis to the related assessment years.

Disallowance under section 14A read with Rule 8D - ad-hoc disallowance for unverifiable expenses - disallowance under section 36(1)(va) for late deposit of provident fund contributions - precedential effect of Coordinate Bench decisions

Disallowance under section 14A read with Rule 8D - precedential effect of Coordinate Bench decisions - Deletion of addition made under section 14A read with Rule 8D upheld. - HELD THAT: - The Tribunal followed the earlier decisions of the Coordinate Bench in the assessee's own case for preceding years. The material facts showed that investments were carried forward from earlier years and no fresh investments were made in the year under consideration. It was accepted that the investments had been made from internal accruals and not from borrowed funds; further, secured borrowings had specific end use restrictions for manufacturing and export activity. In these circumstances, and having regard to the Coordinate Bench's reasoning that no expenditure was incurred in earning the exempt income, no disallowance under section 14A was warranted. The addition made by the Assessing Officer was therefore deleted. [Paras 6]

Deletion under section 14A read with Rule 8D affirmed and Revenue's ground dismissed.

Ad-hoc disallowance for unverifiable expenses - Deletion of ad hoc 10% disallowance made on account of unverifiable expenses upheld. - HELD THAT: - The Assessing Officer made a subjective ad hoc disallowance of 10% of total expenses without pointing out specific defects or particular instances rendering expenses unverifiable. The accounts were audited and no concrete deficiency was identified. The CIT(A) deleted the disallowance following Coordinate Bench decisions and the Tribunal found no infirmity in that approach, confirming that an ad hoc percentage disallowance without verifiable basis could not be sustained. [Paras 7]

Ad hoc disallowance on account of unverifiable expenses deleted; Revenue's ground dismissed.

Disallowance under section 36(1)(va) for late deposit of provident fund contributions - Deletion of addition under section 36(1)(va) for late deposit of PF contributions upheld. - HELD THAT: - The CIT(A) found that the payments were made before the due date of filing the return of income and placed reliance on authoritative decisions of the Rajasthan High Court. Applying that reasoning, the Tribunal saw no infirmity in deleting the disallowance made by the Assessing Officer for late deposit of contributions and accordingly confirmed the CIT(A)'s order. [Paras 8]

Addition under section 36(1)(va) deleted; Revenue's ground dismissed.

Final Conclusion: Both appeals filed by the Revenue for A.Y. 2013 14 and A.Y. 2014 15 are dismissed and the deletions made by the CIT(A) in respect of section 14A/Rule 8D disallowance, ad hoc unverifiable expenses disallowance, and section 36(1)(va) addition are confirmed.

Work-in-progress - matching principle of accountancy - revenue expenditure vs capitalisation - disallowance of expenses - furnishing inaccurate particulars of income - penalty u/s. 271(1)(c) - difference of opinion - disclosure in return and notes to accounts

Work-in-progress - matching principle of accountancy - revenue expenditure vs capitalisation - disallowance of expenses - Whether expenditure incurred on Non-Performing Assets capitalised in the books as part of the NPA asset (work-in-progress) but claimed as revenue expenditure in the return can be allowed as deduction - HELD THAT: - The Tribunal upheld the view taken by the coordinate Bench in the assessee's own earlier years that the business of acquiring NPAs involves long-drawn processes of recovery and disposal, with uncertainty as to amount and timing of realisation. Expenditure incurred during the recovery process relates to anticipated recoveries which are accounted in the NPA account and, by application of the matching principle of accountancy, such expenditure treated as part of the cost of the NPA (work-in-progress) must be transferred to the profit and loss account only when the NPA is finally settled. Since the assessee had capitalised the expenses in the loan asset account in the books and had not realised the asset in the year, the Assessing Officer was justified in disallowing the claim as revenue deduction in the computation of income; consequently the CIT(A)'s confirmation of the disallowance was upheld and the appeals dismissed on this ground. [Paras 5, 7, 8]

Disallowance of expenses capitalised as cost of NPAs but claimed as revenue in the return sustained; appeals for A.Y. 2011-12 and A.Y. 2012-13 dismissed.

Furnishing inaccurate particulars of income - penalty u/s. 271(1)(c) - difference of opinion - disclosure in return and notes to accounts - Whether penalty under section 271(1)(c) is leviable where the assessee disclosed the claim in the return and supporting notes but the Assessing Officer disallowed the expenditure - HELD THAT: - Applying the ratio of the Supreme Court in Reliance Petroproducts and relevant High Court authorities, the Tribunal held that mere disallowance of a claim which was disclosed in the return and supported by notes and explanations amounts at most to a difference of opinion on a debatable legal issue and does not constitute furnishing of inaccurate particulars of income. The Assessing Officer had not alleged non-disclosure or false facts nor impugned the genuineness or revenue nature of the expenditure; penalty was therefore not justified. The CIT(A)'s deletion of penalty under section 271(1)(c) was affirmed. [Paras 5, 16]

Penalty levied under section 271(1)(c) deleted; departmental appeal dismissed and cross-objection by the assessee rendered infructuous.

Final Conclusion: The Tribunal dismissed the assessee's appeals against disallowance of expenses relating to NPAs for A.Ys. 2011-12 and 2012-13, holding such costs to be work-in-progress to be recognised on realisation; concurrently, the Tribunal upheld the CIT(A)'s deletion of penalty under section 271(1)(c) for A.Y. 2010-11, finding the claim to be disclosed and at best a debatable view not constituting furnishing of inaccurate particulars.

Summary order. Special Leave Petition dismissed; delay condoned and pending applications, if any, disposed of.

Summary order. Last opportunity of one week granted to the appellant to file adequate number of spare copies; failure to do so will result in the appeals being dismissed for non-prosecution without further reference to the Court.

Summary order. The Special Leave Petition is dismissed on the ground of delay as well as on merits.

Summary order. Special Leave Petition dismissed on the ground of delay and on merits.

Low tax effect - dismissal of Special Leave Petition for negligible tax effect - condonation of delay - question of law left open

Low tax effect - dismissal of Special Leave Petition for negligible tax effect - question of law left open - Special Leave Petition dismissed on the ground of low tax effect while leaving the substantive question of law undecided. - HELD THAT: - The Court recorded condonation of delay and disposed of the Special Leave Petition by dismissing it solely on the basis that the tax effect involved was low. The Court expressly refrained from adjudicating or deciding the substantive question of law raised in the petition, leaving that question open for future consideration. No reasoning on the merit of the legal contention was given; the disposition was limited to the court's conclusion regarding the limited tax consequence.

Special Leave Petition dismissed on the ground of low tax effect; substantive question of law left open; delay condoned.

Final Conclusion: The Special Leave Petition was dismissed on the narrow ground of low tax effect, with delay condoned and the question of law deliberately left undecided.

Deduction under Section 54F - Deposit in Capital Gains Account Scheme - Time limit for investment under section 139(4) - Intermediary period deposit requirement under section 54F(4) - Beneficial construction of tax exemption provisions

Deduction under Section 54F - Intermediary period deposit requirement under section 54F(4) - Time limit for investment under section 139(4) - Allowability of deduction under Section 54F in respect of capital gains on transfer of agricultural land - HELD THAT: - The Tribunal examined whether the assessee satisfied the conditions of Section 54F, having sold the asset on 01/04/2005, filed return in AY 2006-07, and made substantial investment in a partly completed house on 22/01/2007. It agreed with precedents that the relevant extended time limit for investing in purchase/construction can be the due date under section 139(4), and that Section 54F is a beneficial provision to be construed liberally. However, where the investment is made after the sale and not within the primary period, Section 54F(4) requires that the unutilised capital gains during the intermediary period be deposited in a notified Capital Gains Account Scheme. The Tribunal found it necessary to have the Assessing Officer verify whether the assessee fulfilled the intermediary period requirements (i.e., deposit and proof thereof) and whether the investment was made within the permissible extended time limit, before finally allowing the deduction. For these reasons the Tribunal did not decide the claim on merits but remitted the matter for fresh consideration by the Assessing Officer with directions to give the assessee opportunity to prove compliance with Section 54F (including deposit/utilisation in accordance with statute) and to consider the investment within the period under section 139(4) (noting 31/03/2007 as the relevant date in the case). [Paras 8]

Issue remitted to the Assessing Officer for fresh consideration of allowability of deduction under Section 54F, with direction to examine satisfaction of intermediary period deposit/usage conditions and investment within the extended time under section 139(4).

Statutory appeals and monetary limit directions - Effect of Revenue appeal and cross objection after remand/partial allowance - HELD THAT: - The Tribunal heard the Revenue's appeal despite the assessee's submission about the CBDT monetary limit for filing appeals. Having reached a substantive disposition (partial allowance and remand on the Section 54F issue), the Tribunal recorded its decision on the appeal on merits to the extent indicated and observed that the assessee's cross objection became academic once the Revenue's appeal was so decided. [Paras 8, 9, 10]

Revenue's appeal partly allowed for statistical purposes; cross objection dismissed as infructuous.

Final Conclusion: The Tribunal remitted the question of allowability of deduction under Section 54F to the Assessing Officer for fresh consideration of compliance during the intermediary period and investment within the extended time under section 139(4); the Revenue's appeal is partly allowed for statistical purposes and the assessee's cross objection is dismissed as infructuous.

Refund claim - unjust enrichment - rebuttable presumption and burden on department to rebut - due process of law - remand for fresh adjudication

Refund claim - due process of law - remand for fresh adjudication - Impugned order of Commissioner (Appeals) set aside and matter remanded for fresh adjudication because the appellate authority failed to consider the appellant's submissions and cited precedents. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) did not take into account the factual submissions and the judicial authorities relied upon by the appellant when rejecting the refund claim. Since the appellate authority's order does not reflect consideration of the parties' contentions and relevant case law, the Tribunal exercised its jurisdiction to set aside that order and remand the matter for fresh decision. The Commissioner (Appeals) is directed to decide the appeal afresh in accordance with law and after following due process, giving appropriate consideration to the evidence, submissions and precedents relied upon by the appellant. The remand is ordered with a direction to conclude the matter within three months from receipt of the Tribunal's order.

Impugned order set aside; appeal allowed by remand to Commissioner (Appeals) for fresh adjudication in accordance with law within three months.

Final Conclusion: The Tribunal set aside the Commissioner (Appeals) order for failure to consider the appellant's submissions and authorities, and remitted the matter to the Commissioner (Appeals) for fresh decision after following due process, to be completed within three months.

Classification of goods - binding effect of earlier tribunal order - res judicata / finality of classification - change of circumstances doctrine

Classification of goods - general purpose exerciser - The product 'Health Oxygen Equipment' of model MR 930 'Morning Walker' is to remain classified under CTH 90191020 (heading for devices like vibrating massagers/general purpose exerciser) as previously determined by this Bench. - HELD THAT: - The Tribunal noted that an earlier decision of the same Bench (order No. A-1187-A-1188/Calcutta-99 dated 12.11.1999) had classified the goods as a vibrating massager under heading 9019.10. The record showed no change in the nature of the product since that classification. On that basis the Tribunal affirmed that the product falls within the earlier classification as a general purpose exerciser and is not to be reclassified under Chapter Heading 95069010.

Applications by the Revenue to reclassify the goods under CTH 95069010 are dismissed; the goods remain classifiable under CTH 90191020 as previously determined.

Binding effect of earlier tribunal order - res judicata / finality of classification - change of circumstances doctrine - The Revenue cannot disturb the earlier final classification in the absence of any change in the product or other circumstances that would justify departing from the settled classification. - HELD THAT: - Relying on settled authority that a prior adjudication on classification continues to operate unless there is a material change in the product or relevant circumstances, the Tribunal observed that the Department had neither appealed the earlier order nor shown any alteration in the nature of the imported goods. Inputs such as import data and alternative port classifications were held insufficient to overcome the finality of the Bench's earlier classification where no change of circumstances was demonstrated.

The Department's contention to reclassify the goods on grounds of higher duty or import database entries is rejected; the earlier tribunal order remains binding in the absence of change.

Final Conclusion: The departmental appeals are dismissed and the earlier classification of the product under CTH 90191020 is maintained; reclassification in the absence of any change of circumstances is not permitted.

Summary order. Review petition dismissed; order dated 5th March, 2018 (which dismissed the Special Leave Petition) is affirmed.

Summary order. The special leave petition is dismissed as having become infructuous.

Summary order. Admission refused and the civil appeal dismissed; delay condoned.

Summary order. Special leave petition dismissed both on the ground of delay and on merits.

Insider trading - unpublished price sensitive information - prohibition on dealing while in possession of unpublished price sensitive information - disclosure under Regulation 13(6) of the PIT Regulations, 1992 - disclosure under Regulation 7(1A) of the SAST Regulations, 1997 - liability of directors for company violations - penalty under Section 15A(b) of the SEBI Act, 1992

Unpublished price sensitive information - insider trading - prohibition on dealing while in possession of unpublished price sensitive information - Whether the sales of PVP Ventures shares by its subsidiary during 1-21 October 2009 were in violation of the PIT Regulations because UPSI existed with effect from 30 September 2009. - HELD THAT: - The Tribunal upheld the AO's finding that information relating to the diminution in value (journal entry dated 30 September 2009) constituted UPSI effective from 30 September 2009 and that sales effected between 1-21 October 2009 fell within the period when the sellers were in possession of that UPSI. The appellants' contentions that an earlier (July 15, 2009) audit disclosure eliminated UPSI, that crystallisation occurred only after October sales, or that Accounting Standard (AS) 4 permitted back-dating of October sales to value the September 30 position were rejected. The Board's disclosure in July was held to be indicative and was discounted by the company's Board; AS 4(8.3) was held to preclude using post-balance-sheet market fluctuations to adjust investments for the prior period. The Tribunal also accepted that the subsidiary's sales produced an avoidable benefit to the company, and that both the company and its director were liable for the insider trading violation, although liability did not require identical punishment. [Paras 3, 9, 11, 12, 13]

Sales between 1-21 October 2009 contravened the PIT Regulations as UPSI existed from 30 September 2009; both the company and the director are liable for insider trading, subject to differentiation in penalty.

Disclosure under Regulation 7(1A) of the SAST Regulations, 1997 - liability of directors for company violations - Whether penalties imposed under Regulation 7(1A) of the SAST Regulations, 1997 on the company and its director in respect of the sales were sustainable. - HELD THAT: - The Tribunal held that the appellants were entitled to the benefit of this Tribunal's ratio in Ravi Mohan (as relied upon by the appellants) with respect to disclosures under Regulation 7(1A). Consequently, the penalty of Rs. 15 lakh each imposed under Regulation 7(1A) on the company and its director in the impugned order could not be sustained and was set aside. [Paras 14, 23]

Penalty of Rs. 15 lakh each under Regulation 7(1A) is set aside.

Disclosure under Regulation 13(6) of the PIT Regulations, 1992 - penalty under Section 15A(b) of the SEBI Act, 1992 - Whether PVP Ventures made the disclosures required under Regulation 13(6) of the PIT Regulations and whether the penalty under Section 15A(b) was justified. - HELD THAT: - The Tribunal accepted the stock exchanges' statements that they did not receive the requisite disclosures and treated the appellants' production of fax call reports as an afterthought. The appellants had admitted inadvertent non-disclosure in earlier correspondence. Given the admitted failure to forward the disclosures to the exchanges on multiple occasions and the regulatory framework requiring prompt transmission by the listed company, the Tribunal upheld the finding of violation of Regulation 13(6). Considering the frequency and scale of non-disclosure, and the statutory range of penalty under Section 15A(b), the Tribunal found the imposed penalty appropriate and dismissed the appeal challenging that penalty. [Paras 16, 18, 20, 21, 22]

The finding of non-compliance with Regulation 13(6) is upheld and the penalty imposed under Section 15A(b) is sustained; Appeal No. 356 of 2015 is dismissed.

Penalty under Section 15A(b) of the SEBI Act, 1992 - liability of directors for company violations - Appropriate quantum of penalty for the insider trading violations in Appeal No. 357 of 2015. - HELD THAT: - The Tribunal agreed that both the company and its director are liable but found it inappropriate to impose identical quantum on both where the company alone received the financial benefit. The record showed the company's avoidable benefit of about Rs. 10.94 crore and no evidence that the director sold his personal shares to obtain gain. Applying proportionality, the Tribunal retained the Rs. 15 crore penalty on the company but reduced the director's penalty from Rs. 15 crore to Rs. 5 crore. [Paras 15, 23]

Penalty on the company under insider trading upheld at Rs. 15 crore; penalty on the director reduced to Rs. 5 crore (from Rs. 15 crore).

Final Conclusion: Appeal No. 356 of 2015 is dismissed (non-disclosure under Regulation 13(6) upheld and penalty under Section 15A(b) sustained). In Appeal No. 357 of 2015, penalties under Regulation 7(1A) are set aside; penalty of Rs. 15 crore on the listed company for insider trading is retained, and the penalty on the director is reduced to Rs. 5 crore. Both appeals disposed of with no order as to costs.

Initiation of corporate insolvency resolution process - financial creditor - default - authorization by financial creditor - incomplete application - opportunity to rectify - evidence of financial debt and default - Form 1 Part IV and Part V

Authorization by financial creditor - incomplete application - opportunity to rectify - Form 1 Part IV and Part V - Whether the Adjudicating Authority was justified in rejecting the Section 7 application without first granting the financial creditor an opportunity to remedy the alleged defects of omission of authorization and incomplete documentation. - HELD THAT: - The Tribunal held that Section 7 and the accompanying Rules require that where an application is incomplete the Adjudicating Authority must give notice and an opportunity to the financial creditor to rectify defects. The failure to file an authorisation letter or to furnish the particulars and records called for in Part IV and Part V of Form 1 renders the application incomplete; in such circumstances the Adjudicating Authority should have allowed time to complete the record instead of rejecting the petition outright. The court therefore set aside the Adjudicating Authority's order and directed that the appellant be permitted to remove defects and furnish the required authorization and particulars within a limited time, failing which the Adjudicating Authority may decide the application in accordance with law. [Paras 5, 8, 9]

Order of rejection set aside; appellant permitted to remove defects and file authorization and required Form 1 particulars within three weeks; if not removed, Adjudicating Authority may dismiss.

Default - financial creditor - evidence of financial debt and default - Whether questions as to existence of debt and occurrence of default fall to be examined at the stage of admission of a Section 7 application when the corporate debtor disputes debt or default. - HELD THAT: - The Tribunal reiterated that the Adjudicating Authority must ascertain existence of default from records of an information utility or other evidence furnished by the financial creditor. A challenge by the corporate debtor that no debt or no default exists permits the Adjudicating Authority to examine whether the debt is due. However, where incompleteness of the application prevents such ascertainment (for example, absence of evidence required in Form 1 Parts IV and V), the proper course is to allow rectification first and, thereafter, to consider any defence or dispute raised by the corporate debtor on the question of debt or default. [Paras 6, 7, 8]

Existence of debt and default may be examined when the corporate debtor disputes them, but the Adjudicating Authority must first permit completion of the application so that requisite evidence can be considered.

Final Conclusion: The NCLT order rejecting the Section 7 petition for want of an authorisation and incomplete particulars is set aside; the appellant is directed to cure the defects and file the authorisation and requisite Form 1 material within three weeks, after which the Adjudicating Authority shall proceed; failure to cure may result in dismissal.

Maintainability of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - existence of a bona fide dispute arising from invoices relied upon for demand notice under Section 8(1) - effect of settlement between parties on ongoing insolvency proceedings - setting aside of admission and consequential orders (appointment of Interim Resolution Professional, moratorium, freezing of accounts)

Maintainability of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - existence of a bona fide dispute arising from invoices relied upon for demand notice under Section 8(1) - Application under Section 9 was not maintainable because a dispute existed concerning the invoice on which the demand notice was based. - HELD THAT: - The Tribunal found that two documents bearing the same invoice number and date purportedly pertained to two different companies - the corporate debtor and its sister concern - giving rise to a real dispute about the correctness and ownership of the invoice relied upon for issuance of the Section 8(1) notice. In view of that conflict in documentary foundations for the claim, and coupled with the parties' subsequent settlement, the Tribunal concluded that the Section 9 petition could not be maintained and that the impugned admission was unsustainable. [Paras 5]

Impugned order admitting the Section 9 application is set aside and the Section 9 application is dismissed.

Setting aside of admission and consequential orders (appointment of Interim Resolution Professional, moratorium, freezing of accounts) - effect of settlement between parties on ongoing insolvency proceedings - All consequential orders passed pursuant to the impugned admission and actions taken by the Interim Resolution Professional were declared illegal and set aside; the corporate debtor was released from the rigours of the insolvency process. - HELD THAT: - Because the admission under Section 9 was annulled for want of maintainability, the Tribunal held that all orders flowing from that admission - including appointment of an Interim Resolution Professional, declaration of moratorium, freezing of accounts and any actions taken by the IRP (including advertisement for claims) - were without lawful basis and therefore set aside. The Tribunal directed closure of the proceeding, permitted the corporate debtor to resume independent functioning through its board, and required the corporate debtor to pay the IRP's fees and costs, to be fixed by the Adjudicating Authority. The parties' settlement informed the decision not to remit the matter for fresh consideration. [Paras 6]

All consequential orders and actions pursuant to the impugned admission are set aside; the Adjudicating Authority to fix the IRP's fees which the corporate debtor shall pay; the proceeding is closed and the corporate debtor is released to function through its board.

Final Conclusion: The appeal is allowed: the admission of the Section 9 petition was set aside on account of a documentary dispute over the invoice relied upon for the demand notice; consequential insolvency orders and IRP actions were declared illegal and rescinded, the Section 9 application is dismissed, the proceeding is closed, and the corporate debtor is restored to independent management, subject to payment of IRP's fees and costs to be fixed by the Adjudicating Authority.

Cenvat credit - exempted services - trading not being a taxable service - proportionate reversal of credit - maintenance of separate accounts for input and input services - Explanation to Rule 2(e) clarificatory vs prospective - Rule 6(3) of the Cenvat Credit Rules - extended period of limitation for recovery

Cenvat credit - trading not being a taxable service - proportionate reversal of credit - maintenance of separate accounts for input and input services - Whether the assessee was only entitled to proportionate Cenvat credit and not full set-off because substantial part of its business (trading) was not within the scope of the Cenvat credit scheme. - HELD THAT: - The Court held that activities which are neither a service nor manufacture lie outside the scope of the Cenvat credit scheme and,input-service credit cannot be claimed in respect of such activities. Where an assessee carries on both taxable services and activities not covered by the credit scheme (such as trading), it must segregate and exclude the quantum of input services attributable to the non-covered activity; absence of separate accounts requires a reasonable method to attribute and reverse excess credit. The Court found the proportional turnover-based attribution adopted by the adjudicating authority to be a reasonable method and upheld the concurrent findings that the assessee had availed credit attributable to trading and was liable to reversal and recovery of that proportionate credit. [Paras 15, 16, 17, 18, 19]

Assessee entitled only to proportionate Cenvat credit after excluding input-service credit attributable to trading; proportionate reversal upheld.

Explanation to Rule 2(e) clarificatory vs prospective - trading not being a taxable service - Whether the Explanation inserted into Rule 2(e) w.e.f. 01.04.2011 is merely clarificatory or operates only prospectively so as to affect prior periods. - HELD THAT: - The Court observed that trading was never a taxable service under the Finance Act, 1994, and the 2011 Explanation created a deeming fiction for the operation of the Cenvat scheme by treating trading as an "exempted service" for purposes of the Rules. However, the Court found that the amendment did not alter the underlying position that trading was outside the levy and the credit scheme during the material periods; the 2011 amendment only clarified the mechanics for attribution and reversal under the Rules and did not absolve prior improper claims of credit for activities not covered by the scheme. [Paras 6, 20]

The Explanation did not change the fact that trading was not a taxable service during the material period; the amendment did not operate so as to validate prior credit claims for non-covered activity.

Extended period of limitation for recovery - Whether the extended period of limitation and penalties could be invoked for recovery of excess Cenvat credit claimed by the assessee. - HELD THAT: - The Court held that the assessee, being aware of its trading activity and having availed credits in respect of input services used for that activity, could not claim bona fide belief that Rule 6(3) did not apply; non-maintenance of separate accounts and failure to disclose or reverse impermissible credit amounted to suppression of material facts. Given these circumstances, invocation of the extended period of limitation and imposition of penalties were justified, and the concurrent authorities were correct in treating the demands as timely and imposing penalties. [Paras 6, 18, 20]

Extended period of limitation and penalties properly invoked and upheld.

Final Conclusion: The High Court dismissed the appeal, upholding the concurrent findings that the assessee must exclude and reverse input-service credit attributable to trading (an activity outside the Cenvat scheme), that the 2011 Explanation did not validate prior improper credit claims, and that the extended period of limitation and penalties for recovery were correctly invoked.

Penalty under Section 78 - Penalty under Section 76 - Discretionary imposition of penalty - Depositing tax does not absolve failure to file returns - Prospective operation of statutory amendment

Penalty under Section 78 - Foreknowledge of liability - Invocation of penalty under Section 78 was valid in the facts of the case. - HELD THAT: - The Court found that the assessee was aware of its service tax liability yet filed returns declaring no liability and only approached authorities and deposited dues when investigation loomed. That foreknowledge and conduct justified the imposition of penalty under Section 78. The court held that, on these facts, the invocation of Section 78 could not be faulted and was a permissible exercise of the adjudicating authority's power.

Penalty under Section 78 upheld.

Penalty under Section 76 - Discretionary imposition of penalty - Exercise of discretion to impose penalty under Section 76 was not interfered with. - HELD THAT: - The Court noted concurrent findings by the lower authorities and observed that choice to impose penalty under Section 76 (in the circumstances) was an exercise of discretion. Given the factual findings about the assessee's conduct and deposits, the Court found no impropriety in the adjudicating authority's decision and declined to interfere with the concurrent exercise of discretion.

Imposition of penalty under Section 76 not disturbed.

Depositing tax does not absolve failure to file returns - Payment or deposit of tax prior to show cause notice does not by itself absolve the assessee of the obligation to file returns or of liability to penalty. - HELD THAT: - The Court held that depositing the amount due (even before issuance of show cause notice) does not absolve the assessee from the statutory responsibility to file returns correctly. Such deposit does not automatically preclude the imposition of penalties where the authority, in exercise of its discretion and on the basis of concurrent findings, deems penalty appropriate.

Prior deposit did not preclude imposition of penalties.

Prospective operation of statutory amendment - The contention that amendment to Section 78 has retrospective effect was rejected. - HELD THAT: - Relying on the Court's earlier view in the cited decision, the Court held that amendments which make penalties under Sections 76 and 78 mutually exclusive operate prospectively and cannot be invoked to benefit the assessee for past periods. Consequently, the appellant's plea based on retrospective operation of the amendment was held to be unsubstantial.

Amendment held prospective; retrospective effect rejected.

Final Conclusion: Concurrent findings of the adjudicating authorities sustaining demands and penalties under Sections 76 and 78 were upheld; deposits made did not preclude penalty and the appellant's plea based on retrospective operation of amendment was rejected; appeal dismissed.

Condonation of delay in filing statutory appeals - limitation ceiling of 90 days under Section 85 of the Finance Act - exercise of writ jurisdiction under Articles 226 and 227 to prevent failure of justice - refund of wrongly collected service tax - remand for adjudication on merits without reference to limitation - jurisdictional excess / failure of justice as ground for interference

Condonation of delay in filing statutory appeals - limitation ceiling of 90 days under Section 85 of the Finance Act - exercise of writ jurisdiction under Articles 226 and 227 to prevent failure of justice - Validity of the Appellate Authority's dismissal of appeals as barred by delay and whether the High Court could interpose to remedy consequent failure of justice. - HELD THAT: - The Court examined the Commissioner of Service Tax (Appeals) decision rejecting the appeals as time barred (delay of up to 4 months 22 days) and the respondents' reliance on the outer limit in Section 85. Having considered the petitioners' affidavits filed after remand explaining the cause of delay and the Court's duty to prevent injustice, the Court held that in exceptional circumstances where rights to a refund of wrongly paid service tax are involved and substantial justice requires it, writ jurisdiction under Articles 226 and 227 can be exercised to negate the technical bar of limitation. The Division Bench precedent of this Court (referred to in the judgment) supports interference where the authority has failed to consider meritorious grounds and a failure of justice results. Applying that principle, the Court found it proper to quash the appellate order dismissing appeals solely on grounds of delay and laches and to require consideration on merits, notwithstanding the statutory limitation argument invoked by the respondents. [Paras 13, 15, 16, 18, 19]

The appellate order dismissing the appeals for delay is quashed in view of the Court's power to secure substantial justice and in light of relevant precedents; the matter cannot be allowed to rest on the technicality of limitation.

Remand for adjudication on merits without reference to limitation - refund of wrongly collected service tax - Whether the appeals should be remanded for fresh adjudication on merits without treating them as time barred. - HELD THAT: - The Court remanded the matters to the Commissioner of Service Tax (Appeals) with a specific direction to decide the appeals on merits and without reference to limitation, observing that the petitioners had filed affidavits explaining delay and that substantial justice required adjudication on the substantive claim for refund of wrongly collected service tax. The remand directs the appellate authority to afford reasonable opportunity, consider additional affidavits already filed pursuant to the earlier remand, and pass orders strictly in accordance with law on the merits of the refund claims. [Paras 4, 13, 19]

Matters remanded to the Commissioner of Service Tax (Appeals) to decide the appeals on merits without reference to limitation; impugned order dated 18.04.2016 quashed insofar as the present petitioners are concerned.

Final Conclusion: Writ petitions allowed; the Commissioner of Service Tax (Appeals) order dated 18.04.2016 is quashed insofar as these petitioners are concerned and the appeals are remanded for fresh adjudication on merits without reference to limitation, with directions to proceed strictly in accordance with law.

Pre-deposit requirement for filing appeal - condonation of delay - reinstatement of appeal - remand for adjudication on merits

Pre-deposit requirement for filing appeal - condonation of delay - reinstatement of appeal - Whether dismissal of the appeal by CESTAT for non-payment of the ordered pre-deposit should be sustained where the assessee subsequently made the pre-deposit and the delay in payment was condoned by the High Court. - HELD THAT: - The Court recorded that although the Tribunal dismissed the appeal for failure to make the pre-deposit within the time granted, the assessee later effected the said pre-deposit and obtained condonation of the delay from this Court. Having condoned the delay and recorded compliance with the condition of pre-deposit, the Court held that the procedural default which led to dismissal no longer subsists. In consequence, the dismissal order could not be allowed to bar appellate consideration on merits. The appropriate course is to set aside the dismissal and restore the appeal for adjudication on merits by the Tribunal in accordance with law.

Impugned order of dismissal dated 26.4.2010 set aside; appeal restored and remitted to the Tribunal for decision on merits.

Remand for adjudication on merits - Direction to the Tribunal following restoration of the appeal. - HELD THAT: - Having recalled the earlier order and condoned the delay in payment of the pre-deposit, the Court directed that the appeal be placed before the Tribunal for adjudication on merits in accordance with law. The Tribunal is to proceed to hear and decide the substantive controversy without being influenced by the prior dismissal which has been set aside.

Matter remitted to CESTAT to be heard and decided on merits.

Final Conclusion: The High Court recalled the earlier dismissal for non-compliance, condoned the delay in payment of the pre-deposit, set aside the CESTAT order dated 26.4.2010 and remitted the appeal to the Tribunal for adjudication on merits.

Service tax on security agency services - commercial concern - profit motive - value of taxable service - business in taxing statute - limitation and extended period - penalty

Service tax on security agency services - commercial concern - profit motive - value of taxable service - business in taxing statute - Whether the appellant, a society/charitable trust engaged in providing security services and retaining a portion of receipts for administrative and training purposes, is liable to service tax as a security agency despite absence of profit motive. - HELD THAT: - The Tribunal found that the appellant was engaged in the business of providing security services, retained 15% of amounts received as consideration and paid the balance to employees. The charging provision levies service tax on the value of taxable service charged by a service provider and does not require the service to be rendered with a profit motive. The definition of security agency describes a commercial concern engaged in rendering security services; however, the use of the word 'business' in a taxing statute does not import a mandatory requirement of profit motive but denotes an activity carried out for consideration as a regular occupation rather than a gratuitous or casual activity. Reliance on decisions holding charitable activities outside 'commercial' scope was considered but the Tribunal followed the detailed reasoning in the Punjab & Haryana High Court decision which holds absence of profit motive does not exclude an entity from being a commercial concern for taxing purposes. Applying these principles, the Tribunal upheld the taxability of the appellant's services. [Paras 7, 8, 9, 10, 12]

The appellant's activity of providing security services is taxable as security agency services; the appeal challenging taxability is dismissed on this ground.

Limitation and extended period - penalty - Whether invocation of the extended period of limitation and imposition of penalties was justified against the appellant. - HELD THAT: - The Tribunal noted that the appellant is a charitable organisation and that several Tribunal decisions supported the appellant's interpretative view; on that basis the appellant could have entertained a bonafide belief against tax liability. Given this bona fide position and the existence of contrary Tribunal precedents, the Tribunal concluded there was no justification for invoking the extended period of limitation or for imposing penalties. Consequently, those aspects were set aside. [Paras 5, 6]

Invocation of extended period of limitation and imposition of penalties are set aside; appeal is allowed only to this extent.

Final Conclusion: The appeal is dismissed insofar as it challenges the taxability of the security services; it is allowed insofar as the extended period of limitation and penalties are set aside, and otherwise the appeal is partly allowed.

Mutual exclusivity of service tax and VAT - Renting of immovable property service - Transfer of right to use goods / leasing of movable property - Taxability of services ancillary to renting of immovable property

Mutual exclusivity of service tax and VAT - Renting of immovable property service - Transfer of right to use goods / leasing of movable property - Liability to pay service tax on amounts received for leasing office fit outs. - HELD THAT: - The appellants had executed two separate agreements: one for renting premises and another for leasing fit outs (movable items such as air conditioners, CCTV, fire alarms). The appellants have been discharging VAT on the amounts received for leasing the fit outs, including prior to the imposition of service tax on renting of immovable property. Applying the principle that service tax and VAT are mutually exclusive, and following the decisions cited by the appellants, the amounts received under the separate agreements for leasing movable fit outs cannot be treated as consideration for renting of immovable property. The Tribunal therefore accepted that the demand of service tax on the rent for fit outs could not be sustained and set aside the impugned orders. [Paras 5]

The demand of service tax on rent received for leasing fit outs is set aside; the appeals are allowed.

Final Conclusion: The Tribunal held that service tax could not be demanded on amounts received for leasing fit outs covered by separate agreements and on which VAT had been discharged for the period June, 2007 to September, 2010; the impugned orders are set aside and the appeals are allowed, and the cause title is amended as prayed.

Eligibility of CENVAT credit on capital goods and inputs - distinction between inputs for manufacture and inputs for provision of services - interpretation of the phrase 'in or in relation to' and 'directly or indirectly' - construction of Rule 2(k) and Rule 2(a)(A) of the Cenvat Credit Rules - imposition of penalty in cases involving bona fide interpretation of statutory provisions

Eligibility of CENVAT credit on capital goods and inputs - distinction between inputs for manufacture and inputs for provision of services - construction of Rule 2(k) and Rule 2(a)(A) of the Cenvat Credit Rules - interpretation of the phrase 'in or in relation to' and 'directly or indirectly' - CENVAT credit in respect of excise duty paid on telecommunication towers, their parts and prefabricated buildings/shelters/PUF panels used by contractors for erection of towers for providing telecommunication services is not admissible to the service provider. - HELD THAT: - The Tribunal analysed Rule 2(a)(A) (definition of "capital goods") and Rule 2(k) (definition of "input") of the Cenvat Credit Rules and accepted the distinction between the two parts of the definition of "input". The first part, applicable to manufacture, expressly employs phrases such as "in or in relation to" and "directly or indirectly", thereby permitting an enlarged scope to include goods indirectly used in manufacture. The second part, relating to a provider of output service, lacks those wider expressions and therefore must be confined to goods used directly for providing the output service. Applying that construction, telecommunication towers, parts thereof and prefabricated buildings/shelters were not held to be "inputs" for the purpose of a service provider's Cenvat credit. The Tribunal followed the earlier decisions (including Vodafone India Ltd. and Bharati Airtel Ltd.) construing the Rules similarly and concluded that the Commissioner's view denying credit was legal and required no interference. [Paras 4]

Appeals dismissed on merits insofar as entitlement to CENVAT credit is concerned; the denial of credit is upheld.

Imposition of penalty in cases involving bona fide interpretation of statutory provisions - penalty relief under Section 80 of the Finance Act, 1994 - Whether penalty should be imposed on the appellant-telecom undertaking for the disputed CENVAT credit claim. - HELD THAT: - Although the demand for duty was upheld, the Tribunal considered that the question was essentially one of interpretation of the Cenvat Credit Rules and involved a governmental undertaking. Reliance was placed on Tribunal precedents which have set aside penalties where the controversy arises from an interpretation of statutory provisions and the demand falls within normal limitation. The Tribunal therefore concluded that imposition of penalty was unwarranted and that recourse to Section 80 of the Finance Act, 1994 could be taken to set aside penalties. [Paras 4]

Penalties imposed by the Commissioner set aside.

Final Conclusion: The appeals are dismissed on the substantive issue of CENVAT credit (denial of credit upheld), but the penalties imposed by the Commissioner are set aside.

Business exhibition service - Leasing of stalls - Taxability of promoting commercial use or exhibition - Extended period for service tax - Service Tax liability prior to 01.07.2010

Extended period for service tax - Validity of the revisionary proceedings insofar as the extended period was invoked in the revisional SCN - HELD THAT: - The original show-cause notice expressly alleged suppression with intent to evade payment of service tax and made mention of the extended period. The revisional SCN expanded reasons for invoking the extended period but did not introduce the extended-period ground afresh. Having regard to the disclosure in the original notice, the Tribunal held that the Revenue did not impermissibly go beyond the scope of the original SCN by elaborating the grounds for invoking the extended period, and therefore the appellants' contention that the revision was invalid on that score was rejected. [Paras 5]

The invocation of the extended period in the revisional proceedings was not vitiated by going beyond the original SCN.

Business exhibition service - Leasing of stalls - Taxability of promoting commercial use or exhibition - Service Tax liability prior to 01.07.2010 - Whether the appellants' activity of leasing stalls for the Dusshera exhibition amounts to taxable business exhibition service - HELD THAT: - The Tribunal examined the Memorandum of Association and the factual matrix, noting that the appellants are a registered society constituted to organize a cultural exhibition and that they awarded a tender to a successful bidder who in turn leased stalls to individual exhibitors. The Tribunal found that the appellants did not render the service of providing exhibition stalls directly to the individual exhibitors; the contractual service-receiver was the tenderer. On the facts the activity was the leasing of land/stalls by way of tender and organising cultural programmes to project cultural and educational achievements. The Tribunal held that such leasing and the conduct described did not amount to the business exhibition service as alleged by the Revenue. It observed further that the provision taxing promotion of commercial use or exhibition was made applicable only with effect from 01.07.2010, and could not be invoked for the period in issue. [Paras 6, 7]

Leasing of stalls by the appellants in the stated facts does not constitute taxable business exhibition service; the appellants' activity is not taxable under that head for the period under challenge.

Final Conclusion: The appeals are allowed on merits: the revisional invocation of extended period was not invalidated, but on the substantive question the appellants' leasing of stalls did not attract tax as business exhibition service, and consequential interest and penalty do not survive.

Definition of "goods" for service tax - marketability test for goods - Goods Transport Agency (GTA) service - bonafide belief as defence to penalty

Goods Transport Agency (GTA) service - bonafide belief as defence to penalty - Tax liability and penalty consequences in respect of freight for transportation of crude oil/condensate and outward transportation where tax demand was not pressed by the appellant - HELD THAT: - The appellants conceded the tax demands in respect of freight for transportation of crude oil and condensate and in respect of outward transportation; the Tribunal therefore sustained those tax liabilities. However, the Tribunal found that the appellants had maintained a consistent, bonafide stance from the outset that condensate and effluent water lacked marketability and hence were not 'goods' attracting GTA service tax, as reflected in the show cause notice and the original adjudication. Given that the tax liabilities in question had been paid before issuance of the SCN and the bona fide belief was evident from the record, the Tribunal held that penalties cannot be sustained in respect of the freight relating to condensate; the small disputed amount arising from quantification was also relieved of penalty. [Paras 5]

Tax demands conceded by the appellant are sustained; penalties in respect of freight for condensate and the small quantification dispute are set aside on account of bonafide belief and prior payment.

Definition of "goods" for service tax - marketability test for goods - Goods Transport Agency (GTA) service - Whether transportation of effluents falls within the definition of 'goods' and attracts service tax under GTA - HELD THAT: - Applying the definition of 'goods' as incorporated into service tax law from Section 2(7) of the Sale of Goods Act, the Tribunal followed earlier decisions holding that for service tax purposes 'goods' must satisfy the marketability/movability test and be capable of being sold. The Tribunal relied on the Tribunal's earlier decision in Gujarat State Fertilizers & Chemicals Ltd. and the Supreme Court's interpretation requiring marketability, and concluded that effluent/waste disposed of by the appellant is not an item purchased in the market but a waste disposed of using appellant's services. Consequently, transportation of such effluents does not qualify as transportation of 'goods' under the GTA definition and does not attract service tax; attendant penalties based on that demand could not be sustained. [Paras 5]

Freight charged for transportation of effluents is not taxable as GTA service; the tax demand and penalties in respect thereof are set aside.

Final Conclusion: The appeal is allowed in part: tax demands conceded by the appellants are sustained but penalties relating to condensate and a minor quantification dispute are set aside for bonafide belief and prior payment; the tax demand and penalty relating to transportation of effluents are set aside as effluents do not qualify as 'goods' for GTA service tax purposes.

Banking and Other Financial Services - taxable service - non-banking financial institution - scope of show cause notice

Banking and Other Financial Services - non-banking financial institution - taxable service - Whether the assessee, a registered charitable trust engaged in micro credit and group lending, is liable to service tax under the head 'Banking and Other Financial Services' for the disputed periods - HELD THAT: - The Tribunal examined the statutory definition of the taxable service and the amendment that for the limited period 01.05.2006 to 30.04.2007 the phrase "any other person" was inserted. It further noted that the Show Cause Notice and the impugned order proceeded on the specific allegation that the assessee was a "non banking financial institution". Under the RBI Act the expression "non banking financial institution" applies to a company, corporation or cooperative society and does not include a charitable trust such as the assessee. The adjudicating authority's finding that the assessee was a non banking financial institution was thus unsustainable. Applying the Tribunal's earlier decision in Grama Vidiyal Trust (paras reproduced in the order) and having regard to the nature of the assessee's activities (group based lending, peer liability, voluntary nominal collections, restricted deposit facilities), the Tribunal concluded that the assessee cannot be characterised as a banking company, financial institution or non banking financial company for the purposes of the service tax levy. Consequently, the demands confirmed in respect of the periods when the definition did not genuinely encompass the assessee must be set aside. [Paras 5]

Demand under 'Banking and Other Financial Services' set aside for the disputed periods as the assessee is not a banking company, financial institution or non banking financial institution.

Scope of show cause notice - interpretation of amendment 'any other person' - Whether confirmation of demand for the period 01.05.2006 to 30.04.2007 by invoking the temporary inclusion of "any other person" was within the scope of the Show Cause Notice - HELD THAT: - The Tribunal observed that the Show Cause Notice specifically alleged that the assessee was a non banking financial institution and framed the case on that basis. It held that the adjudicating authority could not go beyond the case made in the SCN by resting the confirmation on the insertion of the phrase "any other person" when the SCN did not charge the assessee on that basis. Since the impugned order confirmed demand by relying on the broader amendment although the SCN itself did not plead that charge, the demand for the period 01.05.2006 to 30.04.2007 was beyond the scope of the SCN and could not be sustained. [Paras 5]

Confirmation of demand for 01.05.2006 to 30.04.2007 was beyond the scope of the SCN and is set aside.

Final Conclusion: The assessee's appeal is allowed and the demand, interest and penalties confirmed for the disputed periods (including 01.05.2006 to 30.04.2007) are set aside; the Department's appeal is dismissed.

Classification of services as Works Contract Service versus Erection, Commissioning and Installation service - leviability of service tax prior to 01.06.2007 on indivisible composite works contracts - abatement/deduction of value of goods and materials sold by the service provider - requirement of recomputation/quantification of service tax for the period subject to levy

Classification of services as Works Contract Service versus Erection, Commissioning and Installation service - leviability of service tax prior to 01.06.2007 on indivisible composite works contracts - Whether the services under the second agreement fall within Works Contract Service and whether service tax is leviable thereon prior to 01.06.2007. - HELD THAT: - The Tribunal found that the contracts, though split into separate supply and works/service agreements, formed part of an indivisible EPC/turnkey contract and that the contractual cross fall/breach clauses and the nature of performance established a single works contract. Applying the ratio of the Supreme Court in Larsen & Toubro (as discussed), the charging provisions of the Finance Act, 1994 did not contemplate taxation of indivisible composite works contracts prior to 01.06.2007; taxable entries in Section 65(105) refer to service contracts simpliciter and not to composite works contracts. The Tribunal also relied on subsequent High Court authority and Supreme Court dicta recognising that vivisection of works contracts for levying service tax before the legislative amendment was impermissible. Consequently, the Tribunal held that the services under the second agreement are properly classifiable as Works Contract Service and are not chargeable to service tax before 01.06.2007. [Paras 6, 7]

The services are Works Contract Service and service tax is not leviable on them prior to 01.06.2007; liability (if any) remains only for the period 01.06.2007 to 30.09.2007.

Abatement/deduction of value of goods and materials sold by the service provider - entitlement under Notification No.12/2003-ST and related exemption/abatement provisions - Whether the appellant was entitled to abatement/deduction for the value of goods/materials sold/used in execution of the works and service agreements. - HELD THAT: - The Tribunal examined Notification No.12/2003 ST which exempts that portion of taxable service value equal to the value of goods and materials sold by the service provider, subject to documentary proof and conditions. The record showed that VAT had been paid on the materials supplied/used and that the conditions for denial of the exemption (non fulfilment of clauses (a) and (b)) were not made out. Applying the principles in Safety Retreading and related authorities, the Tribunal concluded that the value of materials legitimately shown and on which local tax was paid is eligible for deduction/abatement from the service tax base. [Paras 6]

The appellant is entitled to the abatement/deduction for the value of goods/materials sold or used in execution of the contract in terms of the Notification, subject to documentary proof; the denial by Revenue is not sustained.

Requirement of recomputation/quantification of service tax for the period subject to levy - Whether any tax, interest or penalty requires recomputation or adjustment for the period found leviable (01.06.2007 to 30.09.2007). - HELD THAT: - Having held that liability exists only from 01.06.2007, the Tribunal directed recomputation of service tax for the period 01.06.2007 to 30.09.2007. The appellant had paid service tax after availing benefit of Notifications Nos.19/2003 ST and 1/2006 ST; the Tribunal ordered recomputation and adjustment of any excess or shortfall in accordance with the Act and Rules. This is a ministerial/quantification exercise consequent to the classification and allowance of abatement and does not involve fresh adjudication on the core classification issue. [Paras 6, 7]

Recomputation and adjustment of service tax (and consequential interest/penalty implications) for 01.06.2007 to 30.09.2007 as per law and applicable Notifications is required.

Appeal against non imposition of penalty by Revenue - Whether the Revenue's appeal against the adjudicating authority's non imposition of penalty under Section 76 is maintainable/sustainable. - HELD THAT: - The Tribunal, having upheld the appellant's principal plea and classification, found no merit in Revenue's appeal seeking imposition of penalty. In view of the substantive decision in favour of the appellant and the entitlement to abatement/deduction, the Revenue's contention for penalty could not be sustained. [Paras 6, 8]

The Revenue's appeal is dismissed; the adjudicating authority's non imposition of penalty is upheld.

Final Conclusion: The appellant's appeal is allowed in part: the services under the second agreement are held to be Works Contract Service and not chargeable to service tax prior to 01.06.2007; liability, if any, is confined to 01.06.2007-30.09.2007, with entitlement to abatement/deduction for value of materials where supported by documentary proof and local tax payment; recomputation and adjustment for the leviable period is directed. The Revenue's appeal is dismissed.

Goods Transport Agency service - reverse charge liability - benefit of Notification No. 34/2004 ST - individual consignment vs. consignments to multiple consignees - exemption threshold of gross freight for notification applicability

Goods Transport Agency service - reverse charge liability - Whether services provided by individual truck owners engaged by the appellant fall within the definition of Goods Transport Agency (GTA) service and are leviable to service tax on reverse charge basis. - HELD THAT: - The Tribunal adopted the reasoning of the Hon'ble Madras High Court that the expression covered by the definition of Goods Transport Agency encompasses any person providing transport of goods by road and issuing consignment notes, however described. In the absence of words of restriction, a commercial or proprietary concern or an individual providing transport service by road falls within the GTA definition. Consequently, the contention that individual truck owners are not GTA service providers was rejected and such service providers are assessable to service tax under the Finance Act, 1994 on the GTA service rendered to the appellant. [Paras 7]

Individual truck owners engaged by the appellant are GTA service providers and their services are leviable to service tax on reverse charge basis.

Benefit of Notification No. 34/2004 ST - individual consignment vs. consignments to multiple consignees - exemption threshold of gross freight for notification applicability - Whether the exemption limit under Notification No. 34/2004 ST is Rs. 1,500 per trip or Rs. 750 per individual consignment in the appellant's case and whether the appellant was entitled to the higher threshold. - HELD THAT: - The Tribunal accepted the interpretation that Notification No. 34/2004 ST draws a distinction between consignments carried in a goods carriage for more than one consignee and goods transported in a goods carriage for a single consignee. Clause (i) relates to consignments relatable to more than one consignee and fixes the exemption limit to Rs. 1,500 for the gross amount charged on consignments; Clause (ii), as clarified by the Explanation, refers to an "individual consignment" carried for a consignee and limits exemption to charges not exceeding Rs. 750. On the admitted facts the goods were transported for a single consignee and therefore Clause (ii) applies; accordingly service tax is payable on freight charged above Rs. 750 per trip. [Paras 7]

Notification No. 34/2004 ST applies under Clause (ii) to the appellant's shipments; the exemption threshold of Rs. 750 per trip governs and service tax is payable on freight exceeding that amount.

Final Conclusion: The Tribunal dismissed the appeal, holding that individual truck owners constitute GTA service providers and that Notification No. 34/2004 ST operates under Clause (ii) for the appellant's shipments so that service tax is leviable on freight exceeding Rs. 750 per trip.

Summary order. Appeal dismissed in terms of the judgment dated 07.03.2018 passed in C.A. No. 2013 of 2014 titled "Union of India & Anr. Versus M/s. Intercontinental Consultants & Technocrats Pvt. Ltd."

Appeal against order - Interference by appellate court - Standard for interference - Dismissal of civil appeal

Interference by appellate court - Standard for interference - Dismissal of civil appeal - Whether the appellate court should interfere with the impugned order. - HELD THAT: - The Supreme Court heard learned counsel for the parties and perused the material on record. Upon consideration, the Court found no legal or valid ground warranting interference with the impugned order. No independent legal principle was articulated beyond the conclusion that the appellate jurisdiction ought not to be exercised in the facts and materials before the Court.

The Civil Appeal is dismissed for want of any legal and valid ground of interference.

Final Conclusion: The Supreme Court, after hearing counsel and perusing the record, concluded that there was no legal or valid ground to interfere and dismissed the civil appeal.

Summary order. Appeal dismissed on the ground of limitation.

Excisability of goods - classification on transition from six-digit to eight-digit tariff - applicability of exemption notification - requirement of specific tariff entry for excisability - recognition by exemption notifications as indicia of excisability - twin test for excisable goods

Excisability of goods - requirement of specific tariff entry for excisability - applicability of exemption notification - classification on transition from six-digit to eight-digit tariff - recognition by exemption notifications as indicia of excisability - twin test for excisable goods - Rags cleared to DTA during October 2004 to February 2005 are excisable and eligible for benefit of Notification No. 23/2003-CE dated 31.03.2003. - HELD THAT: - The Tribunal held that the absence of an explicit eight digit tariff entry for rags prior to 01.03.2005 did not mean that rags were not excisable. The transition from six digit to eight digit classification was a re arrangement and did not introduce new commodities; Board Circular No.808/5/2005-CX dated 25.02.2005 and the decision in ECO Valley Farms & Foods Ltd support that principle. Further, rags had been repeatedly recognised as excisable by the Department through earlier exemption notifications (for example Notification Nos. 6/88-CE and 103/93-CE) and judicial authority has treated rags as falling within the tariff schedule. Applying the twin test for excisable goods and the settled principle that technical re classification does not create a new taxable product, the Tribunal concluded that rags satisfied the criteria of excisable goods for the period in question and therefore the exemption notification applied. [Paras 6, 7]

Impugned order set aside; rags held excisable and eligible for the exemption for the stated period.

Final Conclusion: The appeal is allowed; the order of the Commissioner is set aside and rags cleared to DTA during the period October 2004 to February 2005 are held to be excisable and entitled to the benefit of the exemption notification.

Cenvat credit - utilisation of Cenvat credit for payment of duty on the final product - reversal of Cenvat credit - applicability of Rule 3(5) of the Cenvat Credit Rules, 2004 - whether activity amounts to manufacture

Cenvat credit - utilisation of Cenvat credit for payment of duty on the final product - reversal of Cenvat credit - whether activity amounts to manufacture - Lawfulness of cenvat credit taken on inputs where the assessee's pre-clearance activity was challenged as not amounting to manufacture and whether such credit required reversal when utilised for payment of duty on the final product. - HELD THAT: - The Tribunal held that when cenvat credit availed on inputs has been utilised for payment of duty on the final product, there is no obligation to reverse that credit even if the activity undertaken prior to clearance is contested as not amounting to manufacture. The Tribunal followed and applied the ratios of the cited High Court decisions which establish that bona fide payment of duty on the final product and utilisation of credit for that duty preclude demand for reversal of credit. On that basis the adjudicating authority's finding that the cenvat credit taken by the assessee was lawful was upheld and the Revenue's appeal was dismissed. [Paras 5, 6]

Appeal dismissed; impugned order upholding the lawfulness of the cenvat credit is affirmed.

Final Conclusion: The Tribunal, following relevant High Court precedents, affirmed that cenvat credit lawfully availed and utilised to pay duty on the final product need not be reversed even if the pre-clearance process is alleged not to amount to manufacture; Revenue's appeal dismissed.

Inclusion of design and art-work charges in assessable value - amortisation and recovery of design charges - treatment of debit-note recoveries for development and maintenance of designs - penalty for suppression and evasion of duty - precedential effect of Tribunal decision endorsed by the Supreme Court

Inclusion of design and art-work charges in assessable value - treatment of debit-note recoveries for development and maintenance of designs - amortisation and recovery of design charges - Whether amounts recovered towards drawing, designing and preparation of layout/designs are includible in the assessable value of printed cartoons - HELD THAT: - The Tribunal upheld the view that charges recovered by the appellant by raising separate debit notes for "Development and Maintenance of Design and Art work" were not shown to have been incorporated in the invoice value of the finished product or amortised and charged earlier. The appellants' cost sheets did not disclose these recoveries or any amortisation, and customers paid the invoice price plus separate debit-note charges, which indicates the amounts were additional and not part of the invoiced assessable value. The Tribunal applied its earlier decision in Paper Products Ltd., which has been endorsed by the Supreme Court, and followed that precedent to hold such recoveries includible in value for levy of duty where they are not demonstrably subsumed in the invoiced price.

Amounts recovered as design, drawing and layout charges by separate debit notes were held includible in the assessable value of the manufactured printed cartoons; the demand was confirmed.

Penalty for suppression and evasion of duty - Whether penalty for suppression/evasion of duty can be imposed for non-disclosure of additional recoveries - HELD THAT: - The Tribunal accepted the Commissioner's finding that the appellant did not disclose the additional recoveries in the relevant assessment documents for the period in question, thereby suppressing facts and evading duty. The Tribunal found that an earlier departmental notice did not amount to disclosure in the assessments and, applying the same reasoning as in the precedent it relied upon, held the imposition of penalty justified.

The penalty imposed for suppression/evasion of duty was upheld.

Final Conclusion: The appeal is dismissed; the demand for additional duty by inclusion of design and related debit-note charges in assessable value is sustained and the penalty for suppression/evasion is upheld, the Tribunal following its earlier decision as endorsed by the Supreme Court.

Commissioner (Appeal) power to remand - amendment of Section 35A(3) by Finance Act, 2001 - parity with Section 128(3) of the Customs Act - precedential value of Larger Bench decision - principles of natural justice

Commissioner (Appeal) power to remand - amendment of Section 35A(3) by Finance Act, 2001 - precedential value of Larger Bench decision - Whether the Commissioner (Appeal) retained power to remand matters to the adjudicating authority after the amendment of Section 35A(3) by the Finance Act, 2001. - HELD THAT: - The Tribunal considered conflicting decisions on the effect of the 2001 amendment to Section 35A(3). Having noted divergent High Court and Tribunal precedents, the Bench followed the Larger Bench decision in Commissioner of Central Excise, Bhubaneswar v. Oripol Industries which reconciled earlier conflicts and concluded that the remand power is not available to the Commissioner (Appeal) after the amendment. The Tribunal held that earlier contrary views (including those following the Gujarat High Court in Medico Labs) are outweighed by the Larger Bench ruling and by the pari materia reasoning drawn from the corresponding provision in the Customs Act. Applying that precedent, the Commissioner (Appeal)'s order remanding the matter was set aside and the Revenue's appeal was allowed. The matter was returned to the Commissioner (Appeal) to take appropriate further action in accordance with law and observing the principles of natural justice. [Paras 3, 5, 6]

The remand by the Commissioner (Appeal) was held impermissible post-amendment; the Commissioner (Appeal)'s remand order is set aside, the Revenue's appeal is allowed, and the matter is returned to the Commissioner (Appeal) for further action as per law following principles of natural justice.

Final Conclusion: Following the Larger Bench precedent, the Tribunal held that the Commissioner (Appeal) has no power to remand matters after the amendment to Section 35A(3) by the Finance Act, 2001; the remand order was set aside, the Revenue's appeal allowed, and the matter returned to the Commissioner (Appeal) to proceed in accordance with law and natural justice.

Summary order. Delay condoned; review petitions dismissed for lack of any error, much less an apparent error, in the impugned judgment dated 10.11.2017.

Limitation - dismissal on limitation grounds

Limitation - dismissal for delay - Appeals dismissed on the ground of limitation. - HELD THAT: - The Court heard learned counsel for the appellant and concluded that the appeals were barred by limitation. No other legal or factual issues were considered; the order records dismissal on limitation without extended reasoning.

Appeals dismissed as time barred.

Final Conclusion: The Supreme Court dismissed the appeals on the sole ground that they were barred by limitation.

Summary order. Appeals dismissed in terms of the signed order.

Summary order. Review petition dismissed; delay condoned.

Summary order. Civil appeal dismissed and delay condoned.

Principles of natural justice - opportunity of personal hearing - reasonable opportunity to show cause - assessment to the best of judgment under Section 22(2) - contemporanea expositio - remand for fresh consideration with directions

Principles of natural justice - opportunity of personal hearing - reasonable opportunity to show cause - Failure to afford a personal hearing where demanded and where factual determinations are involved amounts to violation of principles of natural justice. - HELD THAT: - The Court examined the impugned assessment passed as a best judgment assessment under Section 22(2) following issuance of summons. There is no record of service or of any date fixed for personal hearing and the assessing authority did not communicate any hearing date to the petitioner. Relying on the departmental circular and the authorities discussed in SRC Projects Private Limited (as set out), the Court held that the concept of a reasonable opportunity to show cause must, by contemporanea expositio of the circular, include a personal hearing when so demanded or when complex factual issues require oral consideration. Authorities cited establish that fairness may require an oral hearing in matters involving contested or complex facts, and administrative construction given by the department is entitled to weight. In the facts of this case, the absence of a personal hearing amounted to a breach of natural justice. [Paras 6, 7, 9]

Impugned order is set aside on the ground that no opportunity of personal hearing was afforded and principles of natural justice were violated.

Remand for fresh consideration with directions - assessment to the best of judgment under Section 22(2) - Appropriate remedial course and directions following the invalidation of the assessment order. - HELD THAT: - Having concluded that the assessment order was vitiated for want of a personal hearing, the Court remanded the matter to the assessing authority for fresh decision. The petitioner was directed to file objections within a limited period and, upon receipt, the respondent was directed to afford a personal hearing and pass final orders. The timelines prescribed were 15 days for filing objections from receipt of the order and four months for passing final orders after personal hearing, thereby confining the scope of remand to fresh consideration in accordance with natural justice. [Paras 10]

Matter remitted; petitioner to file objections within 15 days and assessing authority to afford personal hearing and pass fresh final orders within four months.

Final Conclusion: Writ petition allowed; the assessment order dated 29.06.2010 is set aside for want of personal hearing and the matter is remitted to the assessing authority with directions to receive objections, afford personal hearing and pass final orders within the prescribed timeframes.

Deemed assessment - proviso to Section 22(2) of the TNVAT Act - reopening of assessment - exercise of powers under Section 27 of the TNVAT Act - principles of natural justice

Deemed assessment - proviso to Section 22(2) of the TNVAT Act - Validity and enforceability of the original assessment order dated 20.05.2013 for the assessment year 2011-12 in view of the deemed assessment provision. - HELD THAT: - The Court examined the proviso to Section 22(2) of the TNVAT Act which deems dealers to have been assessed where assessment orders were not passed for earlier specified years by the cut-off date. Applying the principle that the deeming clause renders a dealer assessed for the year in question, the Court held that the impugned assessment order dated 20.05.2013 for the assessment year 2011-12 cannot be enforced insofar as it seeks to override the statutory time-limit and the deeming effect. The Court followed earlier precedent of this court which concluded that the statutory time limit prescribed by the proviso cannot be extended by the assessing authority and that post cut-off assessment orders cannot be given effect to. [Paras 5, 8]

The impugned order dated 20.05.2013 for assessment year 2011-12 is not to be enforced.

Reopening of assessment - exercise of powers under Section 27 of the TNVAT Act - principles of natural justice - Whether the assessing authority may reopen assessment proceedings or initiate fresh proceedings if discrepancies are found in the returns. - HELD THAT: - The Court clarified that the deeming of assessment does not constitute a total bar to reopening where competent authorities identify inconsistencies or discrepancies in the returns. The Court noted that reopening or initiation of proceedings remains open to the respondent if the authority, acting within statutory powers (including under Section 27 of the TNVAT Act), deems it fit to do so, subject to compliance with applicable procedural protections and principles of natural justice. Consequently, the Court granted liberty to the respondents to initiate reopening proceedings if appropriate, but restrained them from enforcing the impugned order. [Paras 6, 7, 8]

Liberty is granted to the respondents to initiate reopening proceedings if they deem fit; reopening must be undertaken in accordance with statutory powers and principles of natural justice.

Final Conclusion: Writ petition disposed of by directing that the impugned assessment order dated 20.05.2013 for assessment year 2011-12 shall not be enforced; respondents are granted liberty to reopen or initiate proceedings if they find discrepancies and if they act in accordance with statutory powers and principles of natural justice; no order as to costs.

Right to personal hearing - Reasonable opportunity before passing order - Circular compliance in assessment proceedings - Assessing officer's duty to independently apply mind - Remand for fresh consideration

Right to personal hearing - Reasonable opportunity before passing order - Circular compliance in assessment proceedings - Impugned assessment orders passed without affording personal hearing were invalid and liable to be set aside. - HELD THAT: - The Court found that the assessing authority passed final orders without affording the petitioner an opportunity of personal hearing. The Commissioner's Circular dated 03.02.2014 (Clause 3(a)) mandates that a fifteen days' time limit shall be given as a reasonable opportunity to dealers before passing any order and that personal hearing shall invariably be afforded to the dealer irrespective of whether the dealer has opted for personal hearing or not. The Division Bench precedent relied upon by the Court held that failure to submit objections to a pre-assessment notice does not entitle the assessing authority to deny personal hearing, and that hearing is required unless specifically excluded by statute. Applying these authorities and the Circular, the Court concluded that the orders passed without personal hearing were not in accordance with the mandated procedure and therefore could not stand. [Paras 5, 6]

Impugned orders are set aside for having been passed without affording the statutory/circular-mandated personal hearing.

Remand for fresh consideration - Assessing officer's duty to independently apply mind - Matter remanded for fresh consideration with directions to afford personal hearing and decide on merits after independent application of mind. - HELD THAT: - Having set aside the orders, the Court remanded the matter to the assessing authority for fresh consideration. The petitioner was directed to submit objections within 15 days from receipt of the order and to cooperate with the assessing officer. The assessing officer was directed to consider the objections, afford an opportunity of personal hearing, apply his independent mind (and not act merely on the inspecting team's report), and pass speaking orders on merits and in accordance with law within one month from receipt of the objections. [Paras 8]

Matter remanded for fresh adjudication: petitioner to file objections within 15 days; respondent to afford personal hearing, apply independent mind and pass orders on merits within one month thereafter.

Final Conclusion: Impugned assessment orders for AYs 2013-14, 2014-15 and 2015-16 are set aside; matter remanded for fresh consideration after objections and personal hearing, with directions to pass speaking orders in accordance with law within the stipulated time.

Principles of natural justice - Opportunity of personal hearing - Revised assessment notice - Remand for fresh consideration

Principles of natural justice - Opportunity of personal hearing - Validity of final assessment orders passed without affording an opportunity of personal hearing after issuance of revised assessment notices - HELD THAT: - The Court found that although personal hearings had been afforded during earlier stages, after issuance of the revised assessment notices dated 13.03.2018 no opportunity was given to the petitioner to submit objections or to be heard, despite specific requests and interim replies from the petitioner seeking personal hearing. The assessing authority treated the proceedings as a continuation of earlier hearings and relied on prior opportunities without independently affording hearing after the revised notices. The Court reiterated the settled principle that an assessing authority must give ample opportunity to a dealer to file objections and must afford personal hearing before passing final orders, and that failure to do so offends the principles of natural justice. Reliance was placed on the Division Bench decision cited in the judgment which holds that failure to submit objections to pre-assessment notices does not entitle the authority to deny an opportunity of personal hearing, and that hearing is required unless specifically excluded by statute. [Paras 5, 7, 9]

The impugned orders dated 30.04.2018 are unsustainable for non-compliance with principles of natural justice and are set aside.

Remand for fresh consideration - Revised assessment notice - Relief to be granted where final orders are passed without fresh personal hearing post revised assessment notices - HELD THAT: - Having set aside the impugned orders for procedural infirmity, the Court directed that the matters be remitted to the assessing authority for fresh consideration. The respondent was directed to furnish all documents relevant to the assessment, receive objections from the petitioner, fix a specific date for personal hearing, and pass orders on merits in accordance with law. The Court specified a time frame of six weeks from receipt of the order for completion of this exercise, thereby confining the remedy to remand for de novo adjudication limited to compliance with opportunity to be heard and merits consideration. [Paras 10]

Matters remanded to the respondent for fresh adjudication after furnishing documents, receiving objections and affording a specific personal hearing, to be completed within six weeks.

Final Conclusion: Writ petitions allowed; impugned assessment orders dated 30.04.2018 set aside and matters remitted for fresh consideration with directions to furnish documents, receive objections, afford a specific personal hearing and pass orders on merits within six weeks.

Personal hearing - principles of natural justice - pre-assessment notice - reasonable opportunity - clarification under Section 48A of the Tamilnadu VAT Act - departmental clarification - remand for fresh consideration

Personal hearing - principles of natural justice - reasonable opportunity - Impugned order passed without affording personal hearing violated principles of natural justice and applicable departmental guidelines. - HELD THAT: - The Court found that after issuance of the pre-revision/pre-assessment notice dated 01.02.2018 the petitioner requested one month's time by letter dated 28.02.2018 and sought clarification from higher authorities, but the assessing authority passed the impugned order on 26.03.2018 without communicating whether the request for time was granted and without affording personal hearing. The Commissioner had issued binding instructions and guidelines (Circular dated 03.02.2014, Clause 3(a)) requiring that a dealer be given a reasonable opportunity, including personal hearing, and that requests for further time be considered before passing orders. The Division Bench decision in G. V. Cotton Mills (supra) was applied to hold that failure to file objections does not entitle the assessing authority to deny a personal hearing. In view of these findings, the order was held vitiated for breach of the mandated opportunity to be heard. [Paras 4, 6, 7, 8]

Impugned order set aside insofar as it was passed without affording personal hearing; the omission amounted to violation of principles of natural justice.

Clarification under Section 48A of the Tamilnadu VAT Act - departmental clarification - remand for fresh consideration - Matter remanded to the assessing authority for fresh consideration after affording personal hearing and in light of the departmental clarification. - HELD THAT: - The Court noted that the petitioner had sought clarification under Section 48A and that the Commissioner issued a clarification (ACAAR No. 115/2015-16 dated 18.06.2018) directing that proceedings be deferred and appropriate instructions be given to ensure the clarification's purpose is attained. Because the impugned order was passed before awaiting or applying that clarification and without personal hearing, the Court directed that the respondent reconsider the objections after affording personal hearing and pass fresh orders. A time limit of one month from receipt of the copy of this order was imposed for disposal. [Paras 5, 8]

Writ petitions allowed; matter remanded to the respondent to consider objections after personal hearing and to pass orders within one month.

Final Conclusion: The writ petitions are allowed; the impugned order is set aside for failure to afford personal hearing and for being passed without awaiting departmental clarification, and the matter is remitted to the assessing authority to decide the objections after personal hearing within one month.

Deemed assessment - time-bar/non-extendibility of limitation - power to reopen assessment under Section 27 of the TNVAT Act - invalidity of original assessment after deemed assessment date - invalidity of provisional assessment notice

Deemed assessment - time-bar/non-extendibility of limitation - Assessments for the relevant years were deemed to have been completed on 30.06.2012 and could not be the subject of fresh original assessment thereafter. - HELD THAT: - The proviso to Section 22(2) of the TNVAT Act operates to treat returns for the listed years as assessed on 30.06.2012. Once the statutory cut-off is reached, the assessing authority cannot extend the time-limit or pass a fresh original assessment order for those years after that date. The Court applied this statutory deeming provision to the facts, concluding that for the identified years the assessment was already complete as of 30.06.2012 and therefore subsequent original assessment proceedings are impermissible. [Paras 3, 6]

The impugned exercise of passing fresh original assessment after 30.06.2012 is not permissible for the years so deemed to be assessed.

Power to reopen assessment under Section 27 of the TNVAT Act - invalidity of original assessment after deemed assessment date - Although original assessment cannot be made after the deemed-assessment date, the assessing authority retains power to initiate reopening proceedings under Section 27 if the returns or exemptions are found incorrect. - HELD THAT: - The Court distinguished between the prohibition on passing an original assessment after the cut-off and the statutory power of the authority to reopen assessments. It held that the statutory time limit for completing original assessments cannot be extended, but this does not strip the authority of its statutory power to reopen assessments under Section 27 where returns or claimed exemptions are erroneous. The proper remedy for alleged incorrect returns is reopening under the prescribed provision rather than issuance of a fresh original assessment post the deeming date. [Paras 4, 6]

Reopening under Section 27 remains available; the impugned original assessment proceedings cannot be given effect.

Invalidity of provisional assessment notice - deemed assessment - Issuance of a notice for provisional assessment for 2008-09 was improper in the circumstances and the impugned order and notice dated 01.02.2018 shall not be enforced; the respondent is granted liberty to initiate reopening proceedings if appropriate. - HELD THAT: - The Court found that issuing a provisional assessment notice for 2008-09 was a mistake in light of the deeming provision and the constraints on passing assessments after 30.06.2012. Consequently, the Court directed that the specific order and notice dated 01.02.2018 not be enforced for assessment years 2007-08 and 2008-09. At the same time, the Court preserved the respondent's statutory right to reopen assessments by permitting initiation of reopening proceedings if the respondent considers it fit. [Paras 7, 8]

The provisional assessment notice for 2008-09 and the assessment order for 2007-08 dated 01.02.2018 are not to be enforced; liberty granted to reopen under the statutory procedure.

Final Conclusion: Writ petitions allowed in part: the impugned order and notice dated 01.02.2018 for assessment years 2007-08 and 2008-09 are directed not to be enforced; respondent may, if appropriate, initiate reopening proceedings under the statutory provision but cannot pass fresh original assessments post the deemed-assessment date.

Summary order. Matter adjourned to 25/07/2018; any ad interim relief currently operative shall continue until the next date; if no ad interim relief was granted for a limited period, the existing order shall remain unaffected.