TaxTMI Updates e-Newsletter
Aug 02,2022

Grant of bail in economic offence involving fraudulent Input Tax Credit - Non-bailable nature of offences under Section 132(5) of the Central Goods and Services Tax Act and judicial discretion to grant bail - Seriousness of charge versus right to personal liberty and delay in conclusion of trial - Compounding of offences and its effect on abatement of criminal proceedings - Admissibility of information retrieved from digital devices as hardcopies under the provision for digital evidence - Conditions of bail including surrender of passport, bank guarantee, and prohibition against tampering with evidence

Grant of bail in economic offence involving fraudulent Input Tax Credit - Seriousness of charge versus right to personal liberty and delay in conclusion of trial - Applicant entitled to bail despite grave economic offence allegations involving fraudulent Input Tax Credit. - HELD THAT: - The Court found the accused implicated in a large-scale Input Tax Credit fraud but observed that seriousness of the charge is not conclusive against bail. Taking into account the evidence in the complaint, the magnitude of investigation and the likelihood that trial would take considerable time, the risk that pre-conviction incarceration could exceed the statutory maximum sentence was a relevant factor. Authorities on bail balancing (including principles in Sanjay Chandra and Dataram Singh as cited by the Court) were applied to weigh liberty against prevention. The applicant's custodial detention since 18.2.2022, absence of prior criminal history and the availability of measures (conditions and security) to address flight risk and tampering justified exercise of discretion in favour of bail without expressing any opinion on merits.

Bail granted to the applicant subject to conditions.

Non-bailable nature of offences under Section 132(5) of the Central Goods and Services Tax Act and judicial discretion to grant bail - Existence of statutory non-bailable categorisation did not preclude grant of bail in the present facts. - HELD THAT: - Although the offence charged is cognizable and specified as non-bailable, the Court exercised its discretionary jurisdiction after balancing factors relevant to bail. The Court treated the statutory classification as one factor among others (seriousness, evidence, detention period, prospects of delay in trial) and concluded that discretionary bail could be granted with stringent conditions to protect investigation and trial integrity.

Discretion to grant bail upheld and exercised notwithstanding non-bailable classification.

Admissibility of information retrieved from digital devices as hardcopies under the provision for digital evidence - Compounding of offences and its effect on abatement of criminal proceedings - Court accepted that material retrieved from digital devices is admissible as hardcopies and that compounding remains a statutory avenue which bears on the prosecution but did not finally adjudicate evidentiary disputes. - HELD THAT: - The Court noted the prosecution's reliance on digital material and observed that the provision permitting admissibility of hardcopies of information retrieved from digital devices applies; the applicant's objection that data was collected by a private firm and lacked specific certification was not accepted as a bar at bail stage. Separately, the Court observed the statutory scheme permitting compounding of offences (even after institution of prosecution) on payment of tax, interest and penalty and that the Commissioner has power to propose abatement of proceedings upon such payment; this statutory remedial mechanism was a material consideration in exercising bail discretion because it affords a mechanism for recovery and possible abatement, but the Court did not compound or order compounding itself.

Digital material held admissible for present purposes and compounding regime noted as relevant; evidentiary and compounding remedies remain for trial/administrative process.

Final Conclusion: Bail application allowed; applicant to be released on furnishing personal bond and two sureties and subject to conditions including surrender of passport (or affidavit), furnishing a bank guarantee, prohibition on tampering with prosecution evidence, undertaking against committing further offences and not seeking frivolous adjournments; breach to invite cancellation of bail and forfeiture of the bank guarantee.

Bail - Economic / socio-economic offences - Seriousness of charge is a relevant but not conclusive factor in bail - Delay in concluding trial as a factor in favour of bail - Compounding of offence and abatement of criminal proceedings by recovery of tax, interest and penalty - Article 21 - right to personal liberty - Non-compliance of statutory procedure under CGST regarding searches and reasons to believe - Precautionary conditions to prevent tampering with prosecution evidence - Statutory threshold rendering certain offences cognizable and non-bailable where tax evasion exceeds the prescribed amount

Bail - Economic / socio-economic offences - Seriousness of charge is a relevant but not conclusive factor in bail - Delay in concluding trial as a factor in favour of bail - Article 21 - right to personal liberty - Compounding of offence and abatement of criminal proceedings by recovery of tax, interest and penalty - Precautionary conditions to prevent tampering with prosecution evidence - Grant of bail to the applicant pending trial in Case Crime No. 325 of 2020 subject to conditions - HELD THAT: - The Court assessed the nature of accusations of involvement in registration of fake firms and availing bogus input tax credit, the material collected during investigation and the applicant's personal circumstances. The court noted that no firm is registered in the applicant's name, no monetary benefit was found in his bank accounts from the alleged illegal ITC, the applicant has been in custody since 10.03.2022 and has no criminal history. The trial and the process of investigation are likely to take considerable time; in that context and having regard to the statutory power of the Commissioner to recover tax, interest and penalty and to compound offences (thereby abating criminal proceedings on payment), the court concluded that the seriousness of the charge alone does not bar grant of bail. Reliance was placed on precedents that seriousness is only one factor and that pre-conviction imprisonment has punitive content; consequently the court exercised its discretionary jurisdiction to grant bail but imposed stringent conditions to prevent tampering with evidence or absconding, including surrender of passport/affidavit, bank guarantee, and undertakings against intimidation of witnesses and abuse of adjournments. The court observed non-compliance by the Commissioner with certain procedural requirements in the CGST Act but proceeded on the basis that recovery and compounding mechanisms exist and that the case is fit for discretionary release. [Paras 11, 12, 13, 14, 15]

Applicant directed to be released on bail on furnishing personal bond and two sureties, and subject to specified conditions including surrender of passport or affidavit, bank guarantee to be furnished and verified, prohibition on tampering with evidence, not committing further offences, and undertaking regarding adjournments; breach to invite cancellation of bail and forfeiture of bank guarantee.

Non-compliance of statutory procedure under CGST regarding searches and reasons to believe - Statutory threshold rendering certain offences cognizable and non-bailable where tax evasion exceeds the prescribed amount - Compounding of offence and abatement of criminal proceedings by recovery of tax, interest and penalty - Procedural compliance and availability of compounding were considered but the Court did not deny bail on the ground of alleged procedural lapses; compounding and recovery powers weighed in favour of granting bail - HELD THAT: - The Court observed that certain procedural provisions of the CGST Act (as recorded) had not been complied with by the Commissioner and noted statutory provisions which make offences punishable where tax evasion or wrongly availed ITC exceeds the prescribed threshold. The Court also examined the compounding scheme which permits abatement of criminal proceedings upon payment of tax, interest, penalty and a compounding amount. Balancing these considerations, the court held that the availability of recovery and compounding remedies and the protracted nature of trial justified exercise of discretion to grant bail despite the gravity and cognizable nature of the alleged economic offences. [Paras 5, 9, 10, 11]

Proceedings not stayed; availability of compounding and recovery was a factor in favour of bail, but conditions imposed to secure prosecution and prevent tampering with evidence.

Final Conclusion: Bail granted to the applicant in Case Crime No. 325 of 2020 subject to furnishing personal bond, two sureties and specified conditions (surrender of passport/affidavit, bank guarantee, non-tampering and undertakings); breach of conditions to entail cancellation of bail and forfeiture of the bank guarantee.

Conditions for use of amount available in electronic credit ledger - Blocking of electronic credit ledger under Rule 86A - Interpretation of 'available' and 'has been' in Rule 86A - Input tax credit as concession, not a vested right - Power to create a lien pending adjudication

Input tax credit as concession, not a vested right - Whether availment of input tax credit is a vested right of the assessee - HELD THAT: - The Court held that availment of input tax credit is not a vested or proprietary right but a statutory concession governed by the conditions in the statute and rules. Reliance was placed on precedents establishing that entitlement to input tax credit is conditional upon strict compliance with statutory provisions; therefore the appellant cannot assert a vested right to operate the electronic credit ledger irrespective of compliance. [Paras 8]

Availment of input tax credit is a statutory concession subject to conditions and not a vested right.

Interpretation of 'available' and 'has been' in Rule 86A - Blocking of electronic credit ledger under Rule 86A - Power to create a lien pending adjudication - Whether Rule 86A can be invoked only if a positive balance exists in the electronic credit ledger on the date of the blocking order - HELD THAT: - The Court interpreted Rule 86A by reading the words 'available' together with 'has been' and the rule as a whole. It rejected the construction that the rule requires a present positive balance in the ledger at the time of invocation. The words 'has been' indicate that the 'availability' of credit is to be read with reference to the period when the alleged fraudulent or ineligible availment occurred, and not necessarily the ledger balance on the date of the order. Rule 86A is designed to create a hold or lien on specified amounts pending adjudication and is not a provision for actual recovery; reading 'available' to require a present positive balance would render the rule otiose and defeat its object of deterring fraudulent or ineligible claims. The Court endorsed the reasoning in R M Dairy Products LLP that the words 'input tax available' relate back to the time of alleged wrongful availment. [Paras 9, 10, 19, 21]

Rule 86A may be validly invoked even if the electronic credit ledger shows no positive balance on the date of the order, because the term 'available' relates to credit that 'has been' availed in the relevant past period; the provision authorises withholding/debarring (a lien) pending adjudication.

Blocking of electronic credit ledger under Rule 86A - Conditions for use of amount available in electronic credit ledger - Whether the impugned order blocking the appellant's electronic credit ledger should be quashed and whether further adjudication is required - HELD THAT: - Applying the above legal conclusions to the facts, the Court was not persuaded to interfere with the impugned order. The existence of show-cause notices alleging mismatch and prima facie inadmissibility of credits for the stated periods justified invocation of Rule 86A. However, the Court directed that the respondent must consider the appellant's reply, afford personal hearing, examine documents and adjudicate the show-cause notices by a reasoned order. The Court therefore sustained the procedural validity of blocking but remitted the matter for full adjudication within a specified timeframe. [Paras 10, 22, 23, 24, 25]

The challenge to the blocking order is rejected and the appeal is dismissed; the matter is remitted to the first respondent to adjudicate the show-cause notices after hearing and to pass a reasoned order within the time directed.

Final Conclusion: The High Court held that input tax credit is a statutory concession, Rule 86A may be invoked with reference to credits that 'has been' availed (and need not depend on a positive ledger balance on the date of the order), and declined to quash the blocking order; the matter is remitted to the tax authority to afford hearing, consider the appellant's reply and adjudicate the show-cause notices by a reasoned order within the period directed.

Inter-state supply and levy of IGST - E-way bill suspension pursuant to GST Council recommendation - Detention, seizure and penalty under Section 129(3) of the U.P. GST Act - Refund of deposit and release of bank guarantee

Inter-state supply and levy of IGST - Whether the goods dispatched by the petitioner were liable to tax under the U.P. G.S.T. Act when an invoice showed I.G.S.T. charged and the consignment originated outside Uttar Pradesh. - HELD THAT: - The Tax Invoice dated 26.02.2018 showed I.G.S.T. at the prescribed rate and the goods were dispatched from Telangana to a consignee outside Uttar Pradesh. On the material before the Court the supply was an inter-state supply and therefore not taxable under the U.P. G.S.T. Act. The deten tion, assessment and levy under the State Act could not be sustained where the invoice and transportation showed I.G.S.T. had been charged and the transaction was interstate.

The demand and penalty imposed under the U.P. G.S.T. Act insofar as they rest on a premise of liability to State tax are unsustainable and set aside.

E-way bill suspension pursuant to GST Council recommendation - Detention, seizure and penalty under Section 129(3) of the U.P. GST Act - Refund of deposit and release of bank guarantee - Whether seizure and penalty under Section 129(3) could be sustained for want of a State E-way bill when (i) the GST Council had recommended non-enforcement of e-way bill requirements until 31.03.2018, and (ii) the petitioner had generated an e-way bill on the Central portal and paid tax. - HELD THAT: - The Court noted the contemporary regulatory position that the G.S.T. Council had recommended that the e-way bill requirement not be enforced until 31.03.2018, and observed that this recommendation was relevant to resolve confusion prevailing at the relevant time. Given that the petitioner had paid I.G.S.T. and generated the e-way bill on the Central portal, the State authorities' reliance on revived State e-way requirements to justify seizure and imposition of penalty was misplaced. For these reasons the orders of detention, demand and penalty under Section 129(3) could not be sustained. Consequentially, the statutory mechanism that required only 10% deposit pending appeal was also considered in granting relief to the petitioner.

The seizure, demand and penalty under Section 129(3) are set aside; the 10% deposit shall be refunded in accordance with law and the bank guarantee released.

Final Conclusion: Writ petition allowed: the orders of detention, demand and penalty dated 19.03.2018 and the appellate order dated 06.11.2018 are quashed; the 10% deposit shall be refunded in accordance with law within two months and the bank guarantee shall be released to the petitioner.

Condonation of delay - exercise of discretionary power - transitional credit through TRAN-1 and TRAN-2 - directions of the Supreme Court - disposal in terms of higher court order

Condonation of delay - exercise of discretionary power - Application to condone delay of 643 days in filing the appeal was allowed. - HELD THAT: - The Court considered the affidavit supporting the application and, although the reasons advanced were not very convincing, exercised its discretionary power to condone the delay. The discretion was exercised having regard to the reasoned order of the Hon'ble Supreme Court dated 22nd July, 2022, which influenced the Court's decision to admit the appeal despite the inordinate delay. The Court recorded satisfaction with the explanation and accordingly allowed the application to condone delay. [Paras 3, 4, 5]

Delay of 643 days in filing the appeal is condoned and I.A. CAN 1 of 2022 is allowed.

Transitional credit through TRAN-1 and TRAN-2 - directions of the Supreme Court - disposal in terms of higher court order - Appeal was disposed of in terms of the directions issued by the Hon'ble Supreme Court regarding filing and verification of TRAN-1 and TRAN-2. - HELD THAT: - The appeal by the revenue challenged an order of the Learned Single Bench. The Court noted and reproduced the Hon'ble Supreme Court's comprehensive directions dated 22nd July, 2022 concerning opening of the portal for TRAN-1 and TRAN-2, the two-month window for filing/revision, assurance against technical glitches, a 90-day period for verification by officers, and subsequent reflection in the Electronic Credit Ledger. In view of those directions, the High Court held that no further orders were required in the present appeal and disposed of the matter accordingly, bringing the case within the operative scope of the Supreme Court's directions. [Paras 6, 7, 8]

The appeal and connected application stand disposed of in terms of the Hon'ble Supreme Court's order dated 22nd July, 2022 concerning TRAN-1 and TRAN-2.

Final Conclusion: The High Court condoned the delay in filing the appeal and, applying the Supreme Court's directions on transitional credit (TRAN-1 and TRAN-2) dated 22nd July, 2022, disposed of the appeal and connected application in terms of that higher court order.

Detention and seizure proceedings under Section 129 - conclusion of proceedings on payment under Section 129(5) - intimation by FORM GST DRC-03 and discharge by FORM GST DRC-05 - operation of Rule 142(3) - absence of entitlement to mandamus where proceedings are concluded - exercise of writ jurisdiction under Article 226

Detention and seizure proceedings under Section 129 - conclusion of proceedings on payment under Section 129(5) - intimation by FORM GST DRC-03 and discharge by FORM GST DRC-05 - operation of Rule 142(3) - absence of entitlement to mandamus where proceedings are concluded - Whether mandamus can be issued directing respondent to pass consequential order under Section 129(3) or to supply a copy of such order after the petitioner had paid the amount and intimated payment in FORM GST DRC-03 which resulted in issuance of FORM GST DRC-05 concluding the proceedings. - HELD THAT: - The Court recorded that a notice under Section 129(3) was issued, the petitioner deposited the demanded amount on his own and intimated the payment by filing FORM GST DRC-03, and the proper officer thereafter issued FORM GST DRC-05. In terms of sub-section (5) of Section 129, proceedings in respect of the notice stand concluded on payment; Rule 142(3) contemplates intimation in FORM GST DRC-03 and issuance of FORM GST DRC-05 to conclude the proceedings. Once the statutory mechanism for discharge was availed and the proper officer issued the concluding order, there remained no live proceeding in respect of the notice for which a mandamus to pass an order under Section 129(3) could be granted. The petitioner's request for a direction to pass or to furnish a copy of an order under Section 129(3) was therefore inconsistent with the legislative mandate that payment concludes the proceedings. [Paras 6, 7, 8]

Writ for mandamus was not maintainable; no direction could be issued because the proceedings stood concluded on payment and issuance of FORM GST DRC-05.

Final Conclusion: The writ petition is dismissed: the petitioner had deposited the amount and intimated payment by FORM GST DRC-03, the proper officer issued FORM GST DRC-05 concluding the proceedings under Section 129(5) read with Rule 142(3), and consequently no mandamus could be granted to require issuance of the Section 129(3) order or its copy.

Anticipatory bail - custodial interrogation for effective investigation - recovery of weapon - delay in lodging of FIR - gravity of offence

Anticipatory bail - gravity of offence - custodial interrogation for effective investigation - recovery of weapon - delay in lodging of FIR - Anticipatory bail petition under Section 438 Cr.P.C. was to be considered and determined. - HELD THAT: - The petitioner was alleged to have fired a celebratory shot during a ceremony which struck the complainant's lower limb, resulting in hospitalization and eventual amputation of a portion of the limb. Although the petitioner is said to have borne medical expenses and the complainant earlier gave a written statement calling the incident an accident, the court held that such facts did not mitigate the seriousness of the offence alleged. The court declined to express a view on the explanation for delay in lodging the FIR at this stage. The firearm used has not been recovered and the court found custodial interrogation necessary for effective investigation. In view of the nature and gravity of the injuries alleged and the investigative requirements, the court concluded that anticipatory bail should not be granted.

Petition for anticipatory bail dismissed; custodial interrogation and recovery of weapon to be effected as part of investigation.

Final Conclusion: Anticipatory bail dismissed on merits because the allegations disclose a grave offence causing amputation, the firearm remains unrecovered, and custodial interrogation is necessary for effective investigation; observations made are not expressions on the ultimate merits.

Advance ruling maintainability - Power of Authority for Advance Ruling under Section 95 - Scope of Chapter XVII (Advance Ruling) - Recipient versus supplier distinction - Ruling limited to supplies undertaken or proposed to be undertaken by the applicant

Advance ruling maintainability - Power of Authority for Advance Ruling under Section 95 - Recipient versus supplier distinction - Application for advance ruling by the Board of Secondary Education is not maintainable as the applicant is a recipient of services and not the supplier of the supplies in question. - HELD THAT: - The Authority for Advance Ruling is empowered by Chapter XVII of the GST Act to decide questions specified in Section 97(2) only in relation to supplies of goods or services being undertaken or proposed to be undertaken by the applicant. Section 95 confines the Authority's jurisdiction to matters concerning the applicant as supplier. In the present case the Board is a recipient of various services (printing, online form filling, annual maintenance, operator services, result processing) supplied by distinct third party suppliers. Because the supplies under consideration are not being undertaken or proposed to be undertaken by the applicant itself, the Authority lacks jurisdiction to decide the merits of those questions. Consequently the application cannot be entertained and is liable to be rejected without examining substantive merits. [Paras 6, 7, 8, 9, 10]

Application rejected as not maintainable since the applicant is a recipient and not a supplier; advance ruling cannot be pronounced.

Final Conclusion: The Advance Ruling application is dismissed for want of maintainability: the Authority has no jurisdiction to rule on exemptions concerning supplies made by third party suppliers to the applicant, and therefore the application is rejected without pronouncement on merits.

Pure services provided to Central Government, State Government or Union Territory or local authority by way of activity in relation to functions entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W - Entry 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (Chapter 99) - NIL rate for specified pure government-related services

Pure services provided to Central Government, State Government or Union Territory or local authority by way of activity in relation to functions entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W - Entry 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (Chapter 99) - Whether the consultancy/Implementation Support Agency services supplied by the applicant to the PHE Department, Administration of Union Territory of Ladakh, fall within Entry 3 of Notification No.12/2017 Central Tax (Rate) dated 28.06.2017 and are therefore NIL rated. - HELD THAT: - The Authority examined the contract and the EOI and found that the services to be supplied are pure services (no supply of goods or work contract/composite supply), fulfilling the first condition of the Entry. The recipient is the Public Health Engineering Department of the Administration of the Union Territory of Ladakh, a government department, satisfying the requirement that the services be provided to Central/State/UT or a government entity. The Authority compared the nature of the activities to the matters listed in the Eleventh and Twelfth Schedules and concluded that the work relates to entry 11 (Drinking water) of Article 243G and entry 5 (Water supply for domestic, industrial and commercial purposes) of Article 243W; thus the services are by way of activity in relation to functions entrusted to Panchayats/Municipalities under Articles 243G/243W. Applying these findings to Entry 3 of Notification No.12/2017 Central Tax (Rate) dated 28.06.2017 (Chapter 99), the Authority held that the supply qualifies as NIL rated under that entry. [Paras 7, 8]

The supply of services by the applicant to the PHE Department, Administration of Union Territory of Ladakh, is covered by Entry 3 of Notification No.12/2017 Central Tax (Rate) dated 28.06.2017 (Chapter 99) and is NIL rated.

Final Conclusion: Advance Ruling: The applicant's consultancy/ISA services supplied from its principal place of business in Bhopal to the PHE Department, Administration of Union Territory of Ladakh, qualify under Entry 3, Chapter 99 of Notification No.12/2017 Central Tax (Rate) dated 28.06.2017 and are NIL rated; the ruling is subject to statutory provisions governing Advance Rulings.

Benefit of input tax credit - commensurate reduction in prices - methodology for calculation of profiteering - scope of investigation under Section 171 and Rules 128-133 of the CGST Rules, 2017 - reversal of input tax credit on unsold units on receipt of Occupancy/Completion Certificate - liability to pass on benefit with interest under Rule 133(3)(b) - non imposition of retrospective penalty under Section 171(3A)

Benefit of input tax credit - commensurate reduction in prices - Whether the Respondents availed additional input tax credit post-GST and the quantum of profiteering required to be passed on to buyers - HELD THAT: - The Authority accepted the DGAP's recalculation comparing the ratio of CENVAT/ITC to turnover in the pre-GST and post-GST periods. The pre GST ratio (April 2016-June 2017) was found to be 3.70% and the post GST ratio (July 2017-November 2019) 5.25%, yielding an additional benefit of 1.55% of turnover. Applying this increase to the base price collected in the post GST period produced an excess collection (profiteering) of Rs. 67,18,426/- attributable to Respondent No.1 and Rs. 4,59,286/- attributable to Respondent No.2. The Authority held that this methodology, applied to the project specific facts and records, correctly quantifies the commensurate benefit of ITC that ought to have been passed on to the recipients under Section 171(1) of the CGST Act, 2017. [Paras 19, 20, 24, 38, 39]

Additional ITC benefit of 1.55% of turnover accrued; profiteering determined as Rs. 67,18,426/- (Respondent No.1) and Rs. 4,59,286/- (Respondent No.2) for the period April, 2016 to June, 2017 and 01.07.2017 to 30.11.2019 as relevant.

Passing on benefit of input tax credit - liability to pass on benefit with interest under Rule 133(3)(b) - Whether the Respondent No.1 and Respondent No.2 have passed on the benefit to eligible buyers and what further compliance is required - HELD THAT: - The DGAP verified documents (credit notes, tax invoices, statements of account and undertakings) and found that Respondent No.1 has passed on benefits by credit notes and invoice adjustments to 84 buyers and to Respondent No.2; overall the benefit passed by Respondent No.1 exceeded the computed profiteered amount by an aggregate shortfall/excess reconciliation showing an excess amount passed on in the DGAP's reconciliation. Respondent No.2, while having passed certain amounts, remained short by Rs. 3,61,621/-. The Authority accepted these verifications and directed both respondents to ensure passing of the profiteered amounts to eligible buyers; further, it directed payment of interest at 18% p.a. from the date of collection until actual passing on/return in accordance with Rule 133(3)(b). [Paras 21, 22, 24, 39, 40]

Respondent No.1's and Respondent No.2's passing of benefit verified; Respondent No.2 directed to pass outstanding Rs. 3,61,621/- with interest; both Respondents to pay interest @18% p.a. on additional sums collected until passed on.

Methodology for calculation of profiteering - scope of investigation under Section 171 and Rules 128-133 of the CGST Rules, 2017 - Whether the Authority/DGAP's case specific methodology for computing profiteering and the exercise of investigating supplies beyond the individual applicant's claim were lawful - HELD THAT: - The Authority held that Section 171(1) requires passing on benefits of ITC or rate reductions for 'any supply' and that the Authority is empowered under Rule 126 to determine methodology. It rejected the Respondent's submission that absence of a single universal formula renders proceedings arbitrary, noting that methodology must be tailored to sector and project facts. The Authority further held that the DGAP was justified in examining supplies beyond the applicant's own purchase because the statutory mandate to pass on benefits applies to each recipient and the complaint gave sufficient grounds to investigate other buyers. [Paras 36, 38]

DGAP's project specific methodology and investigation scope beyond the applicant were lawful and properly applied in the circumstances.

Reversal of input tax credit on unsold units on receipt of Occupancy/Completion Certificate - Effect of reversal of ITC for unsold units on computation of eligible ITC and the investigative period - HELD THAT: - The Authority accepted the DGAP's treatment that provisional ITC attributable to units unsold at the time of OC/CC must be reversed under Sections 17(2) and 17(3). The DGAP accounted for reversals and, to cover buyers who paid after OC, extended the investigation period to 30.11.2019 so that ITC availed post OC and corresponding turnover were included in the computation. The Authority found the apportionment and reversal adjustments correctly reflected in the revised calculation. [Paras 14, 36, 38]

ITC reversed for unsold units on receipt of OC must be treated as provisional and excluded from eligible ITC; the DGAP's apportionment and extension of investigation period to capture post OC transactions were appropriate.

Non imposition of retrospective penalty under Section 171(3A) - Whether penalty under Section 171(3A) could be imposed retrospectively for the investigation period - HELD THAT: - The Authority noted that specific penalty provision (Section 171(3A)) was introduced by Finance Act, 2019 and came into force from 01.01.2020. The period under investigation (01.07.2017 to 30.11.2019) precedes the effective date of that penal provision; accordingly, the Authority held that penalty under Section 171(3A) could not be imposed retrospectively for violations occurring during the investigation period. [Paras 38]

Penalty under Section 171(3A) cannot be imposed for the period 01.07.2017 to 30.11.2019.

Final Conclusion: The Authority accepted the DGAP's re investigation and determined that additional ITC benefit of 1.55% of turnover accrued, fixing profiteering at Rs. 67,18,426/- against Respondent No.1 and Rs. 4,59,286/- against Respondent No.2 for the periods stated; it found the DGAP's methodology and scope lawful, verified passing of benefits in part, directed Respondent No.2 to make up the shortfall (Rs. 3,61,621/-) and directed both Respondents to ensure all eligible buyers receive the profiteered amounts with interest at 18% p.a., while holding that retrospective penalty under Section 171(3A) cannot be imposed for the investigation period.

TDS u/s 195 - withholding of tax - PE in India - obligation to deduct TDS - issuance of Certificate under Section 197(1) - non-resident entity to be taxed in India - Seeking fresh Certificate u/s 197 for deduction of Nil tax on payments received from ONGC for activities carried on outside India - Earlier appellant requested issuance of Certificate for deduction of TDS at 4% of taxable value -Appellant contends that a certificate of Nil TDS, for payments received in respect of activities outside India, should have been issued to the Appellant.

INDIRA BANERJEE, J.

HELD THAT:- It is well settled that the obligation to deduct TDS is limited to appropriate proportion of income chargeable to tax under the IT Act that forms part of the gross sum of money payable to the non-resident. A person paying any sum to a non-resident is not liable to deduct any tax at source if such sum is not chargeable to tax under the IT Act, as held by this Court in G E India Technology Centre Pvt. Ltd.[2010 (9) TMI 7 - SUPREME COURT]

High Court rightly held that the question of whether the Appellant had PE, could not possibly be undertaken in an enquiry for issuance of Certificate under Section 197 having regard to the time-frame permissible in law for deciding an application, more so, when regular assessment had been completed in respect of the immediate preceding year and the Appellant found to be taxable under the IT Act at 10% of the contractual receipts. The Assessing Authority found that the Appellant had PE in India in the concerned Assessment Years. The appeal of the Appellant is possibly pending disposal.

As held by the High Court, it is well settled that the principle that res judicata is not applicable to income tax proceedings because assessment for each year is final only for that year and does not cover later years.

Whether the Appellant had PE or not, during the Assessment Year in question, is a disputed factual issue, which has to be determined on the basis of the scope, extent, nature and duration of activities in India. Whether project activity in India continued for a period of more than nine months, for taxability in India in terms of the AADT, is a question of fact, that has to be determined separately for each Assessment Year.

The scope of enquiry and investigation in proceedings for grant of Certificate under Section 197 of the IT Act is different from the scope of assessment proceedings. The High Court rightly declined to direct the Revenue to hold that the Appellant did not have PE in India.

By its letter dated 22nd June 2019, referred to above, the Appellant made a request to the Revenue for issuance of Certificate under Section 197(1) of the IT Act permitting deduction of TDS at the rate of 4% plus applicable surcharge and cess, for all contractual receipts, in line with assessment proceedings for the Assessment Year 2016-2017 without prejudice to its legal position, since the Appellant had been facing financial hardship and urgently required funds. On 26th June 2019, the Respondent No.1 issued the impugned Certificate directing ONGC to deduct TDS at the rate of 4% for all sums receivable in respect of activities both outside and inside India.

The impugned Certificate being as per the request of the Appellant, it is not open to the Appellant to make a volte-face and challenge the impugned Certificate.

Letter of request dated 22nd June 2019, of the Appellant, referred to above, for issuance of a Certificate under Section 197 of the IT Act, for TDS at the rate of 4% on all receipts was without prejudice to the rights in law and contentions of the Appellant. Such a request without prejudice to the rights and contentions of the Appellant would not operate as estoppel against the Appellant in any Assessment Proceedings, Appellate proceedings or any other proceedings. However, the impugned Certificate having been issued as per the Appellant’s own request, the Appellant is estopped from questioning the impugned Certificate by initiation of proceedings under Article 226 of the Constitution of India. The Appellant itself made a request for Certificate for TDS at the rate of 4% on all receipts.

There is no such infirmity in the reasoning of the High Court which calls for interference of this Court under Article 136 of the Constitution of India. As rightly held by the High Court, since the Appellant requested issuance of Certificate for deduction of TDS at 4% of taxable value it is not for the Appellant to challenge the certificate. Moreover, it appears that in the final assessment for one or two preceding Assessment Years it was found that the Appellant did have PE in India. Appeals are pending. In any event, Tax deducted at source is adjustable against the tax, if any, ultimately assessed as payable by the Assessee and any excess tax deducted is refundable with interest. Interference is not warranted at this stage.

In course of hearing, Counsel for the Revenue handed us a Draft Assessment Order, issued in respect of the Assessment Year in question, that is 2020-21, holding that the Appellant had PE in India and was liable to tax in India under the IT Act. In the event, it is found that the Appellant is not liable to tax, the Appellant will be entitled to refund of TDS with interest. Appeal dismissed.

J.K. MAHESHWARI, J.

HELD THAT:- As issuance of a certificate under Section 197 of the IT Act, an application shall be made to assessing officer under subrule (1) of Rule 28. The assessing officer after recording satisfaction that existing and estimated tax liability justifies the deduction of tax at lower rate or no deduction of tax as the case may be shall issue certificate. While exercising the power to issue a certificate, the assessing officer is required to follow the procedure as per subrule (2). The assessing officer shall consider the existing and estimated liability that what may be tax payable on estimated income of the previous year; tax payable on the assessed or returned income of the last four years from previous year; existing liability under the IT Act; advance tax payment i.e. tax deducted and collected at source for the assessment year relevant to the previous year till the date of making application under subrule (1) of Rule 28. Thus, for the purpose of issuance of certificate under Chapter XVII of Section 197 of the IT Act, the procedure for determination has been prescribed to the assessing officer on which satisfaction may be recorded by him.

Order passed by the High Court is without considering the perspective and scope of issuance of the certificate for deduction of tax at lower rate or no deduction at tax and also without following the prescribed procedure. The High Court has wrongly distinguished the previous judgement [2017 (5) TMI 1054 - DELHI HIGH COURT] on the premises which is not tenable, and relied upon undertaking dated 22.06.2019 of appellant submitted perforce. After due consideration view High Court has committed error in dismissing the writ petition; therefore, we am unable to concur the opinion of the esteemed sister Judge.

During hearing, it is said that against the previous judgment of Delhi High Court [2016 (2) TMI 47 - DELHI HIGH COURT] is pending, which relates to assessment orders pertaining to financial years 2007-2008 to 2009-2010, but it cannot be connected to the issue of certificate under Section 197(1) of the IT Act for the year 2019-2020. The other judgment of Delhi High Court [2017 (5) TMI 1054 - DELHI HIGH COURT] directly deals the issuance of the certificate under Section 197(1) of the IT Act. For the reasons mentioned in detail I endorse the view taken by Delhi High Court as correct and plausible view. Thus, it is made clear here that the TDS certificate granted under Section 197 (1) shall be provisional subject to the assessment of the returned income.

The appeal filed by the appellant is hereby allowed setting aside the order of the High Court with a direction to the respondent to reconsider the application of the appellant and issue certificate following the prescribed procedure.

Double Taxation Avoidance Agreement primacy where more beneficial to assessee - Section 206AA and tax deduction at source versus charging provisions - Section 90(2) overriding domestic provisions to give effect to DTAA - Non-obstante clause and its limited application to domestic provisions - Characterisation of payment for aircraft engine lease as equipment under Article 12(4) of DTAA (not royalty or FTS) - Permanent establishment and source-state taxation under Article 7 of DTAA

Double Taxation Avoidance Agreement primacy where more beneficial to assessee - Section 206AA and tax deduction at source versus charging provisions - Section 90(2) overriding domestic provisions to give effect to DTAA - Whether the provisions of Section 206AA of the Income Tax Act override the beneficial provisions of the DTAA so as to mandate higher TDS in the absence of PAN. - HELD THAT: - The Court affirmed the Tribunal's conclusion, following this Court's earlier decision in Danisco India (P.) Ltd., that Section 206AA, being a procedural provision governing collection and deduction of tax at source, cannot be read to override the principle in Section 90(2) that DTAAs prevail to the extent they are more beneficial to the assessee. The Court noted the distinction between charging provisions (which determine taxability) and Chapter XVII-B provisions (which deal with withholding mechanics), and accepted the view that where DTAA prescribes a lower rate or more beneficial treatment, that rate governs even for TDS purposes; consequently Section 206AA cannot be invoked to insist on a higher deduction merely because the non-resident lacks PAN. The Court held that the ITAT correctly applied settled precedent that Section 206AA does not negate the overriding effect of Section 90(2) and that the assessee was entitled to apply the DTAA rate. [Paras 6, 7]

Section 206AA does not override the beneficial provisions of the DTAA; the Tribunal's deletion of the demand was upheld and no substantial question of law arises on this point.

Characterisation of payment for aircraft engine lease as equipment under Article 12(4) of DTAA (not royalty or FTS) - Permanent establishment and source-state taxation under Article 7 of DTAA - Whether lease payments for an aircraft engine fall within DTAA Article 12(4) as rent for equipment (and therefore are not taxable as royalty or FTS in India absent a PE). - HELD THAT: - The Court recorded the Tribunal's factual and legal finding that an engine is a part of an aircraft and, for the purposes of the Indo-Netherlands DTAA, payment for the lease of the engine is covered under the definition of equipment in Article 12(4); Article 12 excludes the use of equipment from the definition of royalty and Article 12(6) excludes ancillary services to equipment rental from FTS. It was also accepted that the lessor had no permanent establishment in India under Article 7 and was a Netherlands tax resident. On these bases the Tribunal concluded, and this Court agreed, that the assessee was entitled to the DTAA's beneficial treatment and that taxability in India did not arise as royalty or FTS. [Paras 5]

Lease payments for the aircraft engine were held to be for equipment under Article 12(4) and not taxable as royalty or FTS in India in the absence of a PE; the Tribunal's allowance of DTAA treatment was affirmed.

Final Conclusion: The appeals are dismissed: the High Court agrees with the Tribunal that (i) Section 206AA does not negate the beneficial rates or scope afforded by the DTAA under Section 90(2), and (ii) the engine-lease payments qualify as equipment rent under the Indo-Netherlands DTAA and are not taxable as royalty or FTS in India in the absence of a permanent establishment; accordingly the tax demands were correctly deleted.

Meaningful and effective opportunity of hearing under Section 148A(b) of the Income tax Act, 1961 - violation of principles of natural justice by non furnishing of information relied upon - requirement to pass a reasoned order when rejecting the assessee's response under Section 148A(d) - duty to disclose information culled out from the insight portal before initiating reassessment - quashing and remand for fresh consideration with directions to provide opportunity to be heard

Condonation of delay - Application to condone delay of 15 days in filing the intra Court appeal was allowed. - HELD THAT: - The Court examined the affidavit in support of the application for condonation and found the reasons satisfactory. Having considered submissions of counsel for the parties, the Court exercised its discretion to condone the short delay and permitted the appeal to proceed. [Paras 3, 4]

Delay of 15 days in filing the appeal is condoned and I.A. CAN 1 of 2022 is allowed.

Meaningful and effective opportunity of hearing under Section 148A(b) of the Income tax Act, 1961 - violation of principles of natural justice by non furnishing of information relied upon - requirement to pass a reasoned order when rejecting the assessee's response under Section 148A(d) - duty to disclose information culled out from the insight portal before initiating reassessment - quashing and remand for fresh consideration with directions to provide opportunity to be heard - Validity of the order dated 13th April, 2022 passed under Section 148A(d) - whether reassessment proceedings complied with statutory safeguards and principles of natural justice. - HELD THAT: - The Court found that the assessee had submitted a reply with documents on 9th April, 2022 in response to the notice under Section 148A(b) and had specifically requested production of the insight portal information on which the proceedings were premised. The assessing officer did not furnish the insight portal information, did not address the assessee's objections or the documents placed on record, and passed an order under Section 148A(d) without assigning reasons showing why the reply was unsatisfactory. The Court relied on the amended scheme under Section 148A which requires a meaningful opportunity to be afforded and on authorities emphasizing that such opportunity must not be illusory and that orders rejecting replies must be reasoned. In those circumstances the impugned order was held to be unsustainable for violation of natural justice and failure to comply with the duty to disclose and consider the material relied upon. [Paras 11, 12, 13, 17]

Order dated 13th April, 2022 under Section 148A(d) is quashed for non compliance with principles of natural justice and statutory safeguards; the matter is remanded for fresh consideration.

Remand with directions to furnish insight portal information and to afford a further hearing - non enforcement of reassessment notice pending fresh consideration - requirement to pass a reasoned order after hearing in person or virtually - Relief to be granted on remand and interim effect of the decision. - HELD THAT: - The Court directed the assessing officer to furnish the complete information culled from the insight portal relating to the assessee, grant seven days thereafter for the assessee to file further reply with documents, and to hear the assessee in person or virtually. After considering the replies and documents the assessing officer is to pass a reasoned order on merits in accordance with law. Pending fresh consideration, the reassessment notice dated 13th April, 2022 shall not be enforced. The Court therefore remitted the matter for compliance with these directions. [Paras 19, 20]

Matter remitted to the assessing officer with directions to furnish insight portal information, grant 7 days for further reply, hear the assessee (physical or virtual) and thereafter pass a reasoned order; the reassessment notice shall not be enforced in the interregnum.

Final Conclusion: The Court condoned the short delay in filing the intra Court appeal, quashed the order passed under Section 148A(d) for failure to provide and consider the insight portal information and for want of a reasoned decision, and remanded the matter to the assessing officer with directions to furnish the information, grant a further seven days to the assessee, hear the assessee (physically or virtually) and thereafter pass a reasoned order; the reassessment notice is not to be enforced during this process.

Deduction under Section 80HHC - Computation of profits derived from export - Explanation (baa) to Section 80HHC - exclusion of ninety per cent of specified receipts - Profit on transfer of DEPB (Section 28(iiid)) - First, second and third provisos to Section 80HHC - additions relating to export incentives

Deduction under Section 80HHC - Profit on transfer of DEPB (Section 28(iiid)) - Explanation (baa) to Section 80HHC - exclusion of ninety per cent of specified receipts - Computation of profits derived from export - Whether deduction under Section 80HHC must be computed by excluding ninety per cent of the profit on transfer of DEPB (and not ninety per cent of the entire sale proceeds), and consequent remand for recomputation in accordance with the binding decision in Topman Exports (as affirmed by the Supreme Court). - HELD THAT: - The Tribunal had remitted the issue to the assessing officer for recomputation in accordance with the Special Bench decision in Topman Exports. The High Court noted that the legal question has since attained finality by the Supreme Court's decision which held that Explanation (baa) to Section 80HHC excludes ninety per cent of the amount referred to in clause (iiid) of Section 28, i.e., ninety per cent of the profit on transfer of DEPB (the excess of sale value over face value), and not ninety per cent of the entire sale proceeds. The Supreme Court's analysis, reproduced in the judgment, explains that exclusion under Explanation (baa) operates on the profits of the business (reduced by specified amounts) and that the provisos effect additions in specified circumstances; thus the statutory language must be applied strictly. In view of this binding precedent, the impugned order is set aside and the matter is remitted to the assessing officer to compute the deduction under Section 80HHC in conformity with the Supreme Court's ruling, after affording the assessee an opportunity of hearing. [Paras 7, 8, 9]

The Tribunal's order is set aside to the extent indicated; the matter is remitted to the assessing officer to recompute deduction under Section 80HHC in accordance with the Supreme Court's decision in Topman Exports, with opportunity of hearing and fresh orders to be passed.

Final Conclusion: The appeals are disposed of by setting aside the impugned order and remitting the matter to the assessing officer for recomputation of deduction under Section 80HHC in accordance with the Supreme Court's decision in Topman Exports; the assessing officer shall afford the assessee a hearing and complete the exercise within three months.

Revisional jurisdiction under section 263 of the Income Tax Act - Explanation 2(a) to section 263 - order passed without making inquiries or verification which should have been made - Erroneous and prejudicial to the interests of the revenue - Distinction between lack of inquiry and inadequate inquiry - Assessing Officer's application of mind and plausible view

Explanation 2(a) to section 263 - order passed without making inquiries or verification which should have been made - Distinction between lack of inquiry and inadequate inquiry - Assessing Officer's application of mind and plausible view - Whether the Principal Commissioner was justified in invoking revisional jurisdiction under section 263 by treating the assessment order as erroneous and prejudicial to the interests of the revenue for alleged lack of enquiries/verification in respect of increase in share capital. - HELD THAT: - The Tribunal examined the scope of Explanation 2(a) to section 263 and reiterated the established principle that an order is 'erroneous' under section 263 only where the Assessing Officer has failed to make inquiries or verification which should have been made (lack of inquiry), or has reached a conclusion unsustainable in law or demonstrating non-application of mind. Mere inadequacy of inquiry, or the Commissioner taking a different view, does not justify exercise of revisional powers. The facts showed the case was selected for limited scrutiny; the Assessing Officer raised specific queries, elicited replies and documentary evidence from the assessee, and after considering the materials made additions treating part of the share application money as unexplained cash credits. The Principal Commissioner did not contend that the AO omitted to apply his mind or made no inquiries; rather he considered the scope of further inquiries. Applying precedents, the Tribunal held that where the AO has made enquiries and taken a plausible view after applying mind, the revisional power cannot be invoked merely because the Commissioner would have conducted further verification. On the record before it the AO had made detailed enquiries and recorded a considered conclusion; consequently initiation of section 263 proceedings and setting aside of assessment were unjustified. [Paras 8, 9, 10, 19, 20]

The invocation of revisional jurisdiction by the Principal Commissioner under section 263 was not justified; the assessment order was not erroneous or prejudicial to revenue and the assessee's appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the Assessing Officer had made enquiries and taken a plausible view in respect of the increase in share capital for AY 2015-16; therefore the revisional order under section 263 setting aside the assessment was unjustified and is quashed.

Deduction under section 80P(2)(d) - Interest income from investments with co-operative banks - Principle of mutuality - Scope of section 80P after insertion of subsection (4) - Revision under section 263

Deduction under section 80P(2)(d) - Interest income from investments with co-operative banks - Scope of section 80P after insertion of subsection (4) - Revision under section 263 - Principle of mutuality - Allowability of deduction under section 80P(2)(d) for interest earned on deposits made with co-operative banks and validity of Pr.CIT's revision under section 263 overturning the assessment for AY 2017-18. - HELD THAT: - The Tribunal examined whether the Pr.CIT was justified in invoking section 263 to set aside the assessment dated 30.12.2019 on the ground that the Assessing Officer had wrongly allowed deduction under section 80P for interest earned on deposits with co-operative banks. Relying on its coordinate bench decision in Rena Sahakari Sakhar Karkhana Ltd. (ITA No.1249/PUN/2018, 07.01.2022), the Tribunal analysed the scope of section 80P(2)(d) as amended by insertion of sub section (4). The Tribunal held that interest derived by a co operative society from investments with another co operative society falls within the plain language of section 80P(2)(d) and remains allowable, and that a co operative bank, being a co operative society registered under the relevant law, can be a source under section 80P(2)(d). The Tribunal noted that conflicting High Court decisions exist but, applying the principle that where non jurisdictional High Court decisions conflict a view favourable to the assessee should be preferred, it followed the decisions that permit deduction. The Tribunal further found that the Pr.CIT had not shown any legal infirmity in the Assessing Officer's conclusion sufficient to warrant exercise of revisional power under section 263; the PCIT's direction to verify principle of mutuality and source of deposits was thus not a proper basis to nullify the assessment. In view of these considerations the Tribunal concluded that the revision direction was without merit and should be reversed. [Paras 5, 6]

Pr.CIT's revision directions under section 263 set aside; allowance of deduction under section 80P(2)(d) in respect of interest from co operative banks upheld and the assessee's appeal allowed.

Final Conclusion: The Tribunal reversed the Pr.CIT's exercise of revision under section 263, held that interest income earned by the co operative society on deposits with co operative banks is eligible for deduction under section 80P(2)(d) as interpreted, and allowed the assessee's appeal for AY 2017-18.

Deduction under Section 10A - unit-wise computation - Taxability of lease rent - income from house property vs business income vs income from other sources - Section 14A disallowance and applicability of Rule 8D - Computation of book profit under Section 115JB - addback for expenditure relating to exempt income - Transfer pricing - arm's length determination by comparison with arithmetic mean of comparable companies

Deduction under Section 10A - unit-wise computation - Whether loss of one eligible unit can be set off against profit of another eligible unit for computing deduction under Section 10A. - HELD THAT: - The Tribunal applied the Supreme Court's decision in the assessee's own case and held that deductions under Section 10A are to be determined qua each eligible undertaking on its own, at the stage of computing the gross total income of the eligible undertaking under Chapter IV, and not by netting losses/profits across eligible or non eligible units at the stage of computing total income. Consequently, the CIT(A)'s contrary approach was set aside. [Paras 15, 16]

Allowed the assessee's ground and directed that unit wise computation under Section 10A be followed.

Taxability of lease rent - income from house property vs business income vs income from other sources - Whether lease rent received for office space should be taxed as income from house property, business income, or income from other sources. - HELD THAT: - The Tribunal declined to disturb the coordinate bench's earlier findings in the assessee's own case for relevant years. On the facts as considered by the authorities (including absence of temporary letting and the nature of the letting arrangements), the income was correctly treated as income from house property; the alternative contention to tax it as business income or under other sources and to allow depreciation was rejected following the bench's application of relevant precedents. [Paras 21]

Dismissed the assessee's grounds; lease rent sustained as income from house property.

Section 14A disallowance and applicability of Rule 8D - Whether disallowance under Section 14A could be computed by invoking Rule 8D for Assessment Year 2005-06. - HELD THAT: - The Tribunal found Rule 8D was not in existence for AY 2005 06 and therefore disallowance computed solely by applying Rule 8D could not be sustained. Nonetheless, the Tribunal held that Section 14A itself remained applicable and, following earlier coordinate bench decisions in the assessee's own case, upheld a proportional notional disallowance of Rs.1 lakh for the year in question. [Paras 25]

Deleted the Rule 8D based disallowance but upheld a notional Section 14A disallowance of Rs.1 lakh.

Computation of book profit under Section 115JB - addback for expenditure relating to exempt income - Whether the notional expenditure disallowed under Section 14A should be added back to book profit under Section 115JB by applying Rule 8D. - HELD THAT: - The Tribunal held that addition to book profit under Section 115JB must follow the mechanism provided by the explanation to Section 115JB (clause (f)) for expenditure related to exempt income, and that there is no justification for mechanically adopting the notional disallowance computed under Section 14A/Rule 8D as an addback to book profit. The Tribunal relied on Special Bench authority to conclude the addback made by the lower authorities was incorrect. [Paras 26]

Allowed the assessee's grounds and deleted the addback of the notional Section 14A amount to book profit under Section 115JB.

Transfer pricing - arm's length determination by comparison with arithmetic mean of comparable companies - Whether the assessing officer's transfer pricing adjustment should be sustained despite the CIT(A)'s finding that the assessee's operating margin exceeded the arithmetic mean of selected comparables. - HELD THAT: - The Tribunal observed that the CIT(A) had conducted a comparability exercise, computed the arithmetic mean of comparables at 18.30% and compared it with the assessable margin of 20.34%, and that the assessing officer did not challenge the inclusion/exclusion of comparables used by the CIT(A). In absence of any specific grievance as to the comparables or their treatment, the Tribunal found no merit in the AO's grounds and dismissed the AO's appeal. [Paras 11, 12]

Dismissed the revenue's appeal; transfer pricing adjustment deleted.

Final Conclusion: The assessee's appeal was partly allowed (unit wise Section 10A deduction and deletion of Rule 8D addback to book profit; limited Section 14A disallowance upheld at Rs.1 lakh; deletion of addback under Section 115JB), the assessing officer's appeal was dismissed (transfer pricing adjustment deleted), and cross objections were dismissed as academic.

Deduction of tax at source on External Development Charges (EDC) - Penalty under section 271C for failure to deduct TDS - Bonafide belief and absence of contumacious conduct - Allowability of club subscription and related business entertainment expenses

Deduction of tax at source on External Development Charges (EDC) - Penalty under section 271C for failure to deduct TDS - Bonafide belief and absence of contumacious conduct - Whether the assessee was liable to deduct tax at source on payment of EDC to HUDA and whether penalty under section 271C was sustainable for non-deduction. - HELD THAT: - The Tribunal followed co-ordinate bench decisions holding that payments of EDC routed through the Governmental authority (DTCP) to HUDA were not payments made to HUDA under a contract for carrying out work for the assessee and that there was no privity of contract with HUDA. The findings noted the DTCP/State directions and clarifications indicating that EDC receipts were deposited in the Consolidated Fund of the State and that DTCP had directed colonizers not to deduct TDS. In view of this factual and legal matrix, and consistent with earlier decisions, the assessee had a bona fide belief that no TDS was required to be deducted; therefore imposition of penalty under section 271C, which contemplates contumacious conduct, was not warranted. The Tribunal held that no TDS deduction was required and that penalty could not be sustained. [Paras 7, 8]

Assessee relieved of TDS liability on EDC payments and penalty under section 271C deleted; ground allowed in favour of assessee.

Allowability of club subscription and related business entertainment expenses - Whether the subscription and related expenses paid to golf clubs were business expenses deductible in full. - HELD THAT: - The Tribunal observed that while attendance at clubs and entertaining clients may be incidental to the business of a real estate developer, the payments in question were to four golf clubs and the nexus between exclusive golf club membership and company business was not convincingly established. Given the possibility of personal benefit to the Managing Director, the Tribunal found it appropriate to restrict the disallowance rather than uphold it fully. Accordingly, the disallowance was proportionately limited to the amount specified by the Tribunal. [Paras 9]

Disallowance sustained only in part; restriction applied and disallowance reduced to the proportionate amount as directed (limited to the sum specified by the Tribunal).

Final Conclusion: The appeal is allowed overall: the Tribunal held that no TDS was exigible on EDC payments to HUDA and deleted the penalty; the disallowance of club expenses was allowed only partly, with the disallowance proportionately restricted as directed, and the matter is to be given consequential effect by the Assessing Officer.

Jurisdictional fact for levy of penalty - penalty under section 271D - penalty under section 271E - acceptance/repayment in contravention of section 269SS/269T - reasonable cause under section 273B - time bar under section 275

Jurisdictional fact for levy of penalty - penalty under section 271D - acceptance/repayment in contravention of section 269SS/269T - Maintainability of penalty levied under section 271D in respect of the alleged cash transaction on 25/08/2009. - HELD THAT: - The Tribunal found that the jurisdictional fact for imposing penalty under s.271D is the acceptance of money in contravention of s.269SS. The material on record (ledger annexures) demonstrated that on 25/08/2009 the assessee had paid cash to his wife and that there was no established acceptance by the assessee of cash from his wife on that date which would constitute a default under s.269SS. The Tribunal further held that the impugned default, if any, related to repayment/receipt vis-a -vis s.269T (repayment) and not acceptance under s.269SS, and therefore a penalty under s.271D was without the requisite jurisdictional basis. A mere incorrect reference to a penal provision does not validate levy where the foundational fact required for that specific section is absent. Consequently the levy under s.271D was annulled as lacking jurisdiction (see findings and conclusion in paras 3.4, 5(a) and 6). [Paras 3, 5, 6]

Penalty under section 271D is not maintainable for lack of the necessary jurisdictional fact and is annulled.

Penalty under section 271E - acceptance/repayment in contravention of section 269SS/269T - Whether the facts disclosed, insofar as they indicate contravention of section 269T, justify initiation or levy of penalty under section 271E. - HELD THAT: - The Tribunal concluded that the transaction as reflected by the records could amount to a default under s.269T (repayment/acceptance in cash) and hence, if warranted, penalty consequences would fall under s.271E rather than s.271D. Because the authority had levied penalty under s.271D (wrong head), the Tribunal held that the correct course, if any penalty is to be pursued, would be initiation under s.271E. The Tribunal therefore left the Revenue free to initiate proceedings under s.271E where so advised (paras 3.4, 5(b) and 6). [Paras 3, 5, 6]

The impugned facts, if constituting a default, pertain to s.269T and any penalty would lie under s.271E; Revenue may, if so advised, initiate penalty under s.271E.

Time bar under section 275 - Whether initiation of penalty proceedings was time-barred under section 275. - HELD THAT: - The Tribunal held that limitation under s.275(1) runs from the initiation of proceedings by the competent authority (the Joint Commissioner in this case) and not from earlier communication by the Assessing Officer proposing initiation. The letter dated 12/04/2016 from the AO was a proposal and not the initiation by the competent authority. Consequently the penalty proceedings initiated on 10/02/2017 were not barred by limitation (para 3.3). [Paras 3]

Penalty proceedings are not time-barred under section 275.

Admission of additional evidence - verification by Assessing Officer - Admission of additional contemporaneous evidence by the Tribunal and requirement of verification by the Assessing Officer. - HELD THAT: - The Tribunal allowed the assessee's oral plea to admit contemporaneous documents (sale deed dated 26/08/2009 and bank statements) as additional evidence, noting the Revenue did not object. However, because these materials had not been previously verified and the assessee's assertions lacked earlier documentary support, the Tribunal directed that the matter be remitted to the file of the Assessing Officer for verification of the claims and documents before any further adjudication or initiation under the correct penal provision (para 3.5). This remand was limited to verification and did not amount to adjudication on the merits of the newly tendered evidence. [Paras 3]

Additional contemporaneous evidence admitted; matter remitted to the Assessing Officer for verification of the evidence and claims.

Final Conclusion: The Tribunal vacated the CIT(A)'s findings and held the initiation and levy of penalty under section 271D to be without jurisdiction and annulled it; the proceedings were not time-barred and, if warranted, the Revenue may initiate penalty proceedings under section 271E after verification of the newly admitted evidence by the Assessing Officer.

Deduction under section 80IAB - Special Economic Zone operation - Sale of built-up units (bare shell / cold shell) to co-developer - Allocation of establishment and other expenses to SEZ activity - Application of coordinate-bench precedent / assessee's own-case rulings

Deduction under section 80IAB - Special Economic Zone operation - Sale of built-up units (bare shell / cold shell) to co-developer - Allocation of establishment and other expenses to SEZ activity - Application of coordinate-bench precedent / assessee's own-case rulings - Whether the deduction claimed under section 80IAB on profits from SEZ operations is allowable, notwithstanding sale of bare shell/cold shell to a co-developer and the Assessing Officer's contention regarding non-allocation of establishment expenses. - HELD THAT: - The Assessing Officer disallowed the deduction under section 80IAB on the ground that sale of bare shell and cold shell to the co-developer was not permitted under the SEZ Act and that the assessee had not allocated establishment and other expenses to the SEZ activity. The Commissioner (Appeals) allowed the deduction relying on his predecessor's order in the assessee's own case. The Tribunal has noted that the identical issue was earlier decided in favour of the assessee in assessment year 2008-09 (order dated 27.05.2019) and that this view was followed in assessment year 2011-12 (order dated 29.09.2020). Applying those consistent coordinate-bench decisions in the assessee's own case, the Tribunal upheld the Commissioner (Appeals)'s allowance of the deduction and rejected the Assessing Officer's contentions. [Paras 6, 7, 8, 9, 10]

The Commissioner (Appeals)'s deletion of the addition and allowance of the deduction under section 80IAB is upheld; Revenue's ground is dismissed.

Final Conclusion: Appeal dismissed; deduction under section 80IAB for assessment year 2013-14 upheld by reference to the Tribunal's earlier consistent decisions in the assessee's own case.

Revision under section 263 of the Income-tax Act - Explanation 2 to section 263 - order passed without making inquiries or verification which should have been made - adequacy of inquiry and application of mind by the Assessing Officer - evidentiary value of admissions recorded under section 132(4)

Revision under section 263 of the Income-tax Act - adequacy of inquiry and application of mind by the Assessing Officer - Whether the Principal Commissioner of Income Tax was justified in revising the assessment order for AY 2017-18 under section 263 on the ground that the Assessing Officer failed to make necessary inquiries and verifications. - HELD THAT: - The Tribunal examined the assessment order and the record of proceedings under section 143(3) read with section 153C. It found that the Assessing Officer had conducted a detailed examination: he called for and considered explanations and documents, confronted the assessee's submissions, noted earlier assessments and related findings (including that purchases in the name of a named supplier were offered to tax in AY 2018-19), and recorded clear conclusions on the issue of inflated purchases. The PCIT's principal ground for revision was that the AO had not made requisite verifications; however, the Tribunal held that the AO's order demonstrates adequate inquiry and application of mind and therefore cannot be characterised as erroneous and prejudicial on that basis. The Tribunal applied the settled twin conditions for exercise of section 263 - an order must be both erroneous and prejudicial to revenue - and concluded those conditions were not satisfied where the AO had made enquiries and taken a plausible view after verification. [Paras 26, 28]

The revisional order passed by the PCIT under section 263 setting aside the assessment was quashed; the AO's assessment was held not to be erroneous or prejudicial for want of inquiry.

Explanation 2 to section 263 - order passed without making inquiries or verification which should have been made - limits of revisional power where plausible view taken by AO - Whether Explanation 2 to section 263 could be invoked merely because the PCIT considered further verification desirable, notwithstanding that the AO had made enquiries and taken a plausible view. - HELD THAT: - The Tribunal considered precedent and statutory context and observed that Explanation 2 cannot be used to override the requirement that the Revisional Commissioner demonstrate that the AO's view was unsustainable in law or that there was a very gross inadequacy in the inquiry. Invocation of Explanation 2 to mandate fresh inquiry is permissible only in cases of manifest failure to make enquiries which should have been made. Where the AO has conducted enquiries, examined evidence and taken a plausible view after application of mind, revisional jurisdiction under section 263 (including by reference to Explanation 2) does not arise. Applying these principles to the facts, the Tribunal concluded that Explanation 2 did not justify the PCIT's action and that the PCIT had not established the requisite inadequacy. [Paras 27, 28]

Explanation 2 to section 263 could not be invoked to set aside the assessment in this case; the PCIT's reliance on that Explanation was unsustainable.

Final Conclusion: The Tribunal allowed the assessee's appeal, quashed the impugned order passed by the Principal Commissioner of Income Tax under section 263, holding that the Assessing Officer had conducted adequate inquiries and applied his mind and that Explanation 2 to section 263 did not justify revision in the facts of AY 2017-18.

Bogus or sham long term capital gains - exemption under section 10(38) - onus on revenue to prove cash trail and sham transactions - demat and banking records as evidence of genuineness - addition as unexplained expenditure under section 69 - reliance on investigation reports without specific material insufficient - precedential weight of similar ITAT decisions

Bogus or sham long term capital gains - exemption under section 10(38) - demat and banking records as evidence of genuineness - reliance on investigation reports without specific material insufficient - onus on revenue to prove cash trail and sham transactions - addition as unexplained expenditure under section 69 - precedential weight of similar ITAT decisions - Whether the sale proceeds of shares of M/s GCM Securities Ltd. could be treated as undisclosed income and added as income from other sources and whether commission @5% could be added as unexplained expenditure under section 69, or whether the assessee was entitled to exemption under section 10(38). - HELD THAT: - The Tribunal found that the Revenue's case rested primarily on a general investigation report identifying the scrip as tainted, without specific material linking the assessee to rigging or demonstrating a cash trail from the assessee to any entry operators. The assessee's transactions were supported by bank cheques/payment through bank account and demat records. Where documentary evidence such as contract notes, demat statements and bank statements exist and there is no specific adverse material against the assessee, allegations based on an investigation report alone cannot sustain a finding of sham transactions. The onus to establish that the transactions were bogus and that unaccounted money of the assessee was used lay on the Department; that onus was not discharged. The Tribunal also placed weight on earlier ITAT Kolkata decisions on identical shares and facts in which exemption under section 10(38) was allowed because purchase and sale were evidenced through banking and demat records and no inquiry had established falsity of those documents. In view of the above and following those precedents, the Tribunal held that the Assessing Officer and the CIT(A) erred in confirming the additions and the unexplained expenditure addition under section 69. [Paras 6, 7]

Assessee's appeal allowed; additions of sale proceeds as income from other sources and the unexplained expenditure addition under section 69 set aside and exemption under section 10(38) recognised in accordance with the reasoning and precedents relied upon.

Final Conclusion: Following earlier ITAT decisions on the same scrip and on the facts that the assessee's transactions were evidenced by bank and demat records and no specific material linked the assessee to the investigation's allegations, the Tribunal allowed the appeal and set aside the additions made by the Assessing Officer and confirmed by the CIT(A).

Revisional jurisdiction under section 263 - Erroneous and prejudicial to the interest of revenue - Deduction under section 80P(2)(a)(i) - Interest income from deposits/investments with co-operative banks - Debatable issue / availability of two possible views

Revisional jurisdiction under section 263 - Erroneous and prejudicial to the interest of revenue - Debatable issue / availability of two possible views - Whether the Principal Commissioner was justified in invoking revisional jurisdiction under section 263 to set aside the assessment framed under section 143(3). - HELD THAT: - The Tribunal held that the Pr.CIT must establish that the assessment order was both erroneous and prejudicial to the revenue. The Assessing Officer had called for and verified details regarding the assessee's claim under section 80P and had disallowed the small amount of interest from Axis Bank, showing that inquiries were made and a view was taken on the eligibility of deduction. Where the AO has applied his mind and adopted a possible view on a debatable question, the exercise of revisional power by the Pr.CIT is ousted. Reliance was placed on authoritative exposition that an order cannot be branded erroneous merely because the Commissioner would have preferred a more elaborate record; the first limb of section 263 (erroneous order) is not fulfilled if the AO has acted in accordance with law and taken a tenable view. The Tribunal also noted binding/co ordinate decisions of its Benches which treated the availability of deduction under section 80P on interest from co operative banks as a matter where two views are possible and, therefore, not amenable to revision under section 263. [Paras 5, 6]

Pr.CIT was not justified in exercising revisionary powers under section 263; the assessment order cannot be treated as erroneous and prejudicial to the revenue.

Deduction under section 80P(2)(a)(i) - Interest income from deposits/investments with co-operative banks - Debatable issue / availability of two possible views - Whether the assessee's claim of deduction under section 80P(2)(a)(i) for interest earned on deposits with co operative banks was a matter fit for revisional interference. - HELD THAT: - The Tribunal observed that the assessee, a co operative credit society engaged in providing credit facilities to members, had its section 80P claim examined and allowed by the AO after verification. The question whether interest on deposits with co operative banks is deductible under section 80P(2)(a)(i) raises competing judicial views, and the AO's approach falls within the spectrum of possible and legally tenable views. Given this debatable nature, the Pr.CIT could not substitute his view by invoking section 263. The Tribunal followed coordinate bench decisions holding that where two views exist regarding the characterization of such interest, revisional jurisdiction is not exercisable. [Paras 5, 6]

The claim allowed by the AO under section 80P(2)(a)(i) involved a debatable question and did not warrant interference under section 263.

Final Conclusion: Appeal allowed. The order passed by the Principal Commissioner under section 263 setting aside the assessment for AY 2014-15 is quashed and the assessment stands restored.

Deduction under section 80P(2)(d) for interest income from investments in co-operative banks - Principle of mutuality - Interpretation of sub-section (4) of Section 80P (Finance Act, 2006 amendment) - Revision under Section 263 of the Income-tax Act

Deduction under section 80P(2)(d) for interest income from investments in co-operative banks - Principle of mutuality - Interpretation of sub-section (4) of Section 80P (Finance Act, 2006 amendment) - Revision under Section 263 of the Income-tax Act - Allowability of deduction under section 80P(2)(d) in respect of interest income earned on deposits placed with co-operative banks and validity of Pr. CIT's revision under Section 263 setting aside the assessment. - HELD THAT: - The Tribunal held that a co-operative bank, being a 'co-operative society' as defined, does not cease to be such for the purpose of Sec. 80P(2)(d) merely because sub-section (4) was inserted by the Finance Act, 2006; sub-section (4) excludes co-operative banks from claiming 80P for themselves but does not preclude another co-operative society from claiming deduction for interest earned on investments made with a co-operative bank. The Tribunal relied on its coordinate bench decision and allied High Court decisions that support the assessee's entitlement where it is established that the interest arises from investments with another co-operative society. Although the Pr. CIT had raised factual concerns - non-verification of the principle of mutuality, source of funds, and whether the recipient banks were registered with the RBI - the Tribunal found no substantial legal basis to conclude that the AO's order was so erroneous as to warrant revision under Section 263. Conflicting High Court authorities were noted, but the Tribunal followed the line of authorities favourable to the assessee and concluded that the revision directions were not sustainable. Accordingly, the Pr. CIT's directions under Section 263 were reversed and the assessment reinstated.

Pr. CIT's revision under Section 263 setting aside the assessment is reversed; the assessee's claim under section 80P(2)(d) in respect of interest from co-operative banks is not rejected by the Tribunal.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2017-18 by reversing the Pr. CIT's revision directions under Section 263 and holding that the deduction under section 80P(2)(d) for interest earned on deposits with co-operative banks is not impermissible as a matter of law in the circumstances considered.

Deduction under section 24(b) of the Income tax Act - Acquisition of property with borrowed capital - Loan document as evidence of purpose of borrowing - Temporal nexus between borrowing and acquisition - Payment to statutory tenant for relinquishment does not transform earlier acquisition into acquisition with borrowed capital

Deduction under section 24(b) of the Income tax Act - Loan document as evidence of purpose of borrowing - Temporal nexus between borrowing and acquisition - Claim for deduction of interest under section 24(b) in respect of interest on loan borrowed and paid to statutory tenant for obtaining possession of Flat No.11. - HELD THAT: - The Tribunal examined whether the interest claimed under section 24(b) was allowable as interest on capital borrowed for acquisition of the property in question. The loan agreement expressly identified a different property (Flat No.12 and Garage No.12G) as security and described the advance as a "TOP UP" loan; the assessee accepted that the loan document so stated. The impugned flat (Flat No.11) was acquired in 2001, whereas the loan was availed in 2011. On the basis of the written loan document and the absence of contemporaneous evidence that the borrowed capital was for acquisition of Flat No.11, the Tribunal held that mere assertion that the loan proceeds were used to pay the statutory tenant did not override the documentary record. In addition, the loan being taken long after the original acquisition meant there was no requisite temporal nexus showing the property was acquired with borrowed capital. The Tribunal also followed the coordinate bench decision in the assessee's own case and relevant High Court authority holding that a loan taken after purchase cannot be treated as borrowed capital for acquisition of that property. Applying these principles, the Tribunal concluded that the interest was not deductible under section 24(b). [Paras 5, 7, 12]

Interest on the Reliance Home Finance loan is not deductible under section 24(b) in respect of Flat No.11.

Final Conclusion: Appeal dismissed; the Tribunal upheld the disallowance of interest claimed under section 24(b) for A.Y.2014-15 on the ground that the loan documentation and timing show the borrowed capital was not for acquisition of the assessee's Flat No.11.

Assessable value - Demurrage charges - Binding precedent - Dismissal for default in filing

Assessable value - Demurrage charges - Binding precedent - Demurrage charges do not form part of the assessable value as held in the earlier decision of this Court. - HELD THAT: - The Court applied and followed its earlier decision in Civil Appeal Nos. 2691-2728 of 2009 (Commissioner of Central Excise, Mangalore v. M/s. Mangalore Refinery and Petrochemicals Ltd.), wherein the question whether demurrage charges could be included in the assessable value was decided in favour of the assessee. On that basis the Court treated the issue in the present appeals as covered by the binding precedent and confirmed the order of the Tribunal.

The appeals are dismissed insofar as the inclusion of demurrage charges in the assessable value is concerned, following the prior decision of this Court.

Dismissal for default in filing - Filing requirements - Civil Appeal No. 8452 of 2014 was dismissed for failure to file the affidavit of valuation as required. - HELD THAT: - The Office report recorded non-filing of the affidavit of valuation in Civil Appeal No. 8452 of 2014. The Court noted this default and, in addition to applying the precedential ruling, dismissed the appeal on that ground of non-compliance with filing requirements.

Civil Appeal No. 8452 of 2014 is dismissed for default in filing the affidavit of valuation.

Final Conclusion: The appeals are dismissed: the substantive question on demurrage charges was decided in favour of the assessee by following the Court's earlier precedent, and Civil Appeal No. 8452 of 2014 was dismissed for non filing of the affidavit of valuation.

Project Import benefit - post-importation conditions - binding effect of a higher authority's communication - Heading 98.01 of the Tariff Act - duty drawback - Regulation 7 of the Project Import Regulations 1986 - estoppel by final judicial order - delay and laches - natural justice and prejudice from long delay

Binding effect of a higher authority's communication - estoppel by final judicial order - Project Import benefit - Heading 98.01 of the Tariff Act - duty drawback - Order de-registering the contracts and directing assessment on merits without benefit of Project Import was impermissible in view of the earlier CBEC communication and the prior final High Court orders which had certified entitlement to project import benefit. - HELD THAT: - The court recorded that CBEC (Board) had, by its communication of 18th October 1984, confirmed that the goods imported by the petitioner were entitled to concessional treatment under the notification and could avail duty drawback. The earlier writ (Writ Petition No.116 of 1988) was finally disposed by this Court (order dated 12th August 2008) which quashed the two show-cause notices, restrained enforcement of bonds and guarantees and certified entitlement to project import treatment relying on Toyo Engineering. Having regard to the CBEC communication and the earlier final order, respondent no.2 could not, by the impugned order, de-register the contracts and deny the benefit of project import. The attempt to re-open or circumvent the earlier judicial and administrative determinations was held impermissible. [Paras 5, 15, 19]

Impugned de-registration and denial of Project Import benefit set aside; earlier CBEC communication and final court order are binding and preclude respondent no.2's action.

Post-importation conditions - Regulation 7 of the Project Import Regulations 1986 - delay and laches - natural justice and prejudice from long delay - Belated initiation of adjudication and requisitioning of documents after decades was barred by delay and would violate principles of natural justice; respondents could not, after long omission and after representations and undertakings to return guarantees, suddenly require compliance with post-import conditions. - HELD THAT: - The Court observed that the requirements under Regulation 7 (submission of reconciliation statement and supporting documents within the prescribed time) could and should have been raised contemporaneously; they were not raised in earlier proceedings nor when the petitioner's bank guarantees were being returned despite respondents' opportunities. Commencing adjudication proceedings some 20-30 years after re-export would unfairly prejudice the petitioner by rendering documents and witnesses unavailable and the department elected not to press these points earlier. On that basis the impugned demand and de-registration were treated as an impermissible belated attempt to reopen settled matters. [Paras 16, 17, 18, 19]

Belated demand and enforcement steps held barred by laches; respondents restrained from insisting on post-import requisitions or enforcing guarantees in respect of the matters covered by the earlier orders.

Final Conclusion: Rule made absolute. Petition allowed: respondents' impugned order of 21st June 2013 (deregistration and assessment on merits without Project Import benefit) set aside and respondents restrained from calling for revival or enforcement of bank guarantees and from insisting on the post-import requisitions in respect of the matters already determined in the prior proceedings, in accordance with the reliefs claimed in prayers (a) and (b).

Section 28 - recovery of duties and six months limitation from relevant date - Section 153 - modes of service and deemed date of service - Section 27, General Clauses Act - service by registered post deemed effected - service by dispatch/despatch date versus date of receipt for limitation - doctrine of substantial compliance

Section 28 - recovery of duties and six months limitation from relevant date - Section 153 - modes of service and deemed date of service - Section 27, General Clauses Act - service by registered post deemed effected - service by dispatch/despatch date versus date of receipt for limitation - doctrine of substantial compliance - Whether the show cause / demand notices in respect of Bill of Entry Nos.12032 and 25633 were barred by limitation - HELD THAT: - The Court considered Sections 28 and 153 of the Customs Act read with Section 27 of the General Clauses Act and the authorities relied upon by the parties. The statutory scheme requires a demand notice for recovery to be served within six months from the relevant date (date of payment). Section 153 prescribes modes of service and provides that when sent by registered post the communication shall be deemed to have been received at the expiry of the normal transit period; Section 27 of the General Clauses Act treats the expressions 'serve' and 'give' alike and deems service by properly addressing, prepaying and posting by registered post to be effected at the time the letter would be delivered in the ordinary course. Applying these provisions, the Court found no dispute as to payment dates or that the notices were despatched within the limitation period. The factual matrix showed that (i) for Bill No.12032 the notice was dispatched by registered post within limitation and, although delivered one day after expiry, service was complete and deemed within period in law; (ii) for Bill No.25633 the notice was despatched within limitation but returned by post because the addressee was out of station and subsequently served personally - the initial despatch is dispositive since non-delivery was due to the addressee's absence and not departmental fault. The Court endorsed the CESTAT's reliance on previous High Court rulings that the date of despatch by registered post is material for limitation purposes and applied the doctrine of substantial compliance where appropriate, concluding that the Department had substantially complied with statutory requirements for service. Hence the notices were not time-barred and the CESTAT's dismissal of the appeals was affirmed. [Paras 11, 12, 15]

The show cause / demand notices for Bill of Entry Nos.12032 and 25633 were not barred by limitation; the CESTAT's dismissal of the appeals was upheld.

Final Conclusion: Writ petitions dismissed; the court upheld the CESTAT's finding that the notices were validly served within the statutory limitation in terms of Sections 28 and 153 read with Section 27 of the General Clauses Act, and there is no interference with the impugned order.

Show cause notice - personal hearing - suspension and cancellation of Import Export Code - mandatory procedural requirement under Section 8 of the Foreign Trade (Development and Regulation) Act, 1992 - export obligation - status quo pending fresh adjudication

Show cause notice - personal hearing - mandatory procedural requirement under Section 8 of the Foreign Trade (Development and Regulation) Act, 1992 - Whether the Import Export Code (IEC) could be cancelled or suspended without issuance of a show cause notice and opportunity of personal hearing as contemplated under the Act. - HELD THAT: - The Court recorded that although a show cause notice dated November 2013 had proposed penalty and suspension under Section 11(7), no separate show cause notice as envisaged by Section 8 of the Act was issued and no opportunity of hearing was afforded before the IEC was suspended/cancelled. The High Court correctly treated the absence of the statutorily mandated notice and hearing as a defect in the impugned action and directed that the jurisdictional officer issue an appropriate show cause notice, afford the appellant an opportunity to reply and a personal hearing, and thereafter pass an order in accordance with law. The Court accepted the respondents' concession that no separate show cause had been issued prior to cancellation and held that fresh compliance with the statutory procedure was necessary. [Paras 6, 7]

Cancellation/suspension of the IEC without issuance of the statutory show cause and personal hearing was contrary to the Act; the authority must issue fresh show cause and afford hearing before deciding on IEC.

Status quo pending fresh adjudication - suspension and cancellation of Import Export Code - Whether the High Court's directions to issue show cause, permit reply, adjudicate within fixed timelines, and maintain status quo for 90 days were appropriate and require interference. - HELD THAT: - Having found that statutory procedure had not been complied with, the High Court directed the jurisdictional officer to issue a show cause notice within 30 days, permit a 30 day reply period, decide the matter within 90 days after hearing, and directed that the then status quo be maintained for 90 days. The present Court observed these directions remedied the procedural lapse and preserved the appellant's interest pending fresh adjudication. The Court further noted that pursuant to the High Court's order a show cause notice was in fact issued on 11 August 2021, and that the appellant remains entitled to raise all contentions before the authority. [Paras 7, 8]

The High Court's directions were proper; the writ appeal is dismissed and no interference is warranted with the order directing fresh show cause, opportunity of hearing, and temporary status quo.

Final Conclusion: The writ appeal is dismissed. The Court upheld the High Court's direction that, due to absence of the statutory show cause and hearing, the jurisdictional officer must issue a fresh show cause, afford opportunity to reply and personal hearing, decide the matter within the stipulated time and that the status quo shall continue for the limited period; no interference with that order is warranted.

Challenge to show cause notice - interference at show cause notice stage - violation of principles of natural justice - jurisdiction to issue show cause notice under Section 124 of the Customs Act, 1962 - confiscation proceedings

Challenge to show cause notice - interference at show cause notice stage - violation of principles of natural justice - Assailability of the impugned show cause notice at the stage of show cause notice. - HELD THAT: - Applying settled principles and the ratio in Coastal Container (excerpted and relied upon by the Court), writ jurisdiction to entertain challenges at the show cause notice stage is exceptional and is permissible only where the notice is issued without jurisdiction or there is a breach of principles of natural justice or a clear disregard of binding higher-court law. The Court examined the averments and submissions and found that the challenge in the petition was factual in character; there was no demonstrable lack of jurisdiction nor any pleaded violation of natural justice, nor any showing that settled law had been disregarded. Consequently, there were no exceptional grounds to interfere with the impugned show cause notice at this stage. [Paras 6, 7, 8]

Challenge to the show cause notice is not maintainable at this stage in the absence of lack of jurisdiction, breach of natural justice, or disregard of settled law.

Confiscation proceedings - jurisdiction to issue show cause notice under Section 124 of the Customs Act, 1962 - Consequences of refusing to quash the show cause notice and the course open to the petitioner and the respondent. - HELD THAT: - The Court declined to quash or set aside the impugned show cause notice issued under Section 124 of the Customs Act, 1962, noting that the respondent plainly has the power to issue such notices in confiscation proceedings. While the writ petition was dismissed, the petitioner was permitted to participate in the statutory proceedings by filing a response to the show cause notice and to cooperate with the respondent so that the matter may be concluded on merits in accordance with law and expeditiously. [Paras 9, 10]

Writ petition dismissed; petitioner permitted to respond to the show cause notice and respondent may proceed expeditiously with the confiscation proceedings.

Final Conclusion: Writ petition dismissed for lack of exceptional grounds to interfere with the show cause notice; petitioner is allowed to respond to the notice and the respondent may proceed with confiscation proceedings in accordance with law.

Determination of Fe content on exported gross weight including moisture - Rectification of assessment under Section 154 of the Customs Act, 1962 - Application of binding Supreme Court precedent (Gangadhar Narsingdas Aggarwal) in assessment - Finalisation of provisional assessments - Grant of relief under Notification No.62/2007-Cus dated 03.05.2007

Determination of Fe content on exported gross weight including moisture - Rectification of assessment under Section 154 of the Customs Act, 1962 - Application of binding Supreme Court precedent (Gangadhar Narsingdas Aggarwal) in assessment - The Assistant Commissioner's refusal to rectify the assessment was incorrect and the assessment required determination of Fe content on the basis of exported gross weight (including moisture) in accordance with the Supreme Court's decision, such that the error was rectifiable under Section 154. - HELD THAT: - The Tribunal accepted the Commissioner (Appeals)'s conclusion that the assessing officer determined Fe content on a dry basis rather than on the gross exported weight including moisture, contrary to the ratio in Gangadhar Narsingdas Aggarwal. That failure to apply the binding Supreme Court precedent and to determine Fe content on gross weight amounted to a mistake or error correctable under the statutory rectification power. The Assistant Commissioner's repeated rejection of the rectification request was therefore not in order. The Tribunal noted that the Commissioner (Appeals) had previously directed fresh consideration and that the Department did not appeal that decision, reinforcing that the earlier appellate direction had attained finality. The determinative legal principle applied is that an assessment not following a binding decision of the High Court or Supreme Court is a rectifiable error under Section 154 and must be corrected by applying the authoritative ratio to the available records and test reports. [Paras 4, 5, 6]

Rectification was warranted; the Assistant Commissioner's rejection set aside and the assessment must be revisited applying the Gangadhar ratio of computing Fe content on exported gross weight including moisture.

Finalisation of provisional assessments - Grant of relief under Notification No.62/2007-Cus dated 03.05.2007 - The matter was remanded to the original authority to finalise the provisional assessments by passing a speaking order, applying the correct legal test and granting relief as per Notification No.62/2007-Cus having regard to the test reports, with consequential benefits to the appellant as per law. - HELD THAT: - The Tribunal found that the Shipping Bills had remained provisionally assessed and therefore required final assessment in accordance with the correct legal principle. It directed the original authority to pass a speaking order finalising the assessments in line with the Supreme Court's guidance, to consider the test reports, and to extend the relief available under the specified notification; consequential benefits, if any, were to be given as per law. The direction constitutes a remand for fresh consideration and finalisation rather than a complete adjudication on the merits by the Tribunal. [Paras 7, 8]

Impugned order set aside; appeal allowed by remand to the original authority to finalise assessments, pass a speaking order applying the Gangadhar ratio, and grant relief under Notification No.62/2007-Cus with consequential benefits as appropriate.

Final Conclusion: The impugned appellate order is set aside. The matter is remanded to the original authority to finalise the provisional assessments by applying the Supreme Court's ratio on Fe content (including moisture), to pass a speaking order, and to grant relief under Notification No.62/2007-Cus with consequential benefits as per law.

Computation of demand in show cause notice under Section 73 of the Finance Act, 1994 - validity of quashing of a show cause notice - exercise of discretion to condone delay - remand for fresh adjudication and interim protection from coercive action

Exercise of discretion to condone delay - condonation of delay - Delay of 1365 days in filing the intra Court appeal was condoned. - HELD THAT: - Although the affidavit in support of the condonation application did not fully satisfy the Court, the Bench exercised its discretionary jurisdiction to condone the delay because the appeal involved the correct statement of a legal position that ought to be settled to avoid an erroneous precedent. In view of that public law importance and the need to decide the legal question on its merits, the Court allowed the application and condoned the delay. [Paras 3, 4, 5]

I.A. CAN 1 of 2022 allowed; delay in filing the appeal condoned.

Computation of demand in show cause notice under Section 73 of the Finance Act, 1994 - scope of show cause notice - validity of quashing of a show cause notice - The Single Bench's finding that the department must first determine classification as a 'support service' before issuing a show cause notice is incorrect; Section 73 requires that the notice specify amounts demanded and therefore the officer must compute the amount at the time of issuance. - HELD THAT: - Section 73(1) deals with recovery where service tax has not been levied or paid, or has been short levied/short paid or erroneously refunded, and contemplates that the Central Excise Officer shall serve a notice requiring the person to show cause why he should not pay the amounts specified in the notice. The Court held that the crucial statutory language is 'pay the amounts specified in the notice', which entails that the officer must compute the amount sought to be recovered and afford the assessee an opportunity to object to that computed demand. The earlier Single Bench's formulation that a prior determination on classification must precede issuance of any show cause notice was found to be contrary to the statutory scheme and not a correct exposition of law; the Division Bench's disposal of the department's earlier appeal did not amount to an affirmation of that Single Bench observation. [Paras 9, 10, 11, 12]

The order in W.P. No.17001(W) of 2016 quashing the show cause notice is not tenable and is set aside; the appeal is allowed on this ground.

Remand for fresh adjudication - opportunity of personal hearing and reasoned adjudication - interim protection from coercive action - The matter is remitted to the adjudicating authority for fresh consideration on merits after the assessee files its reply; interim coercive action is stayed until conclusion of the proceedings. - HELD THAT: - Having set aside the writ Court's order, the Court directed the respondent/assessee to submit its reply to the show cause notice within three weeks of receipt of a served copy of the judgment. Thereafter the concerned authority is to afford personal hearing to the authorised representative and adjudicate the show cause notice on merits and in accordance with law by passing a reasoned order. Meanwhile, no coercive action shall be taken against the respondent/assessee until the proceedings conclude. These directions effect a remand for fresh adjudication subject to procedural safeguards. [Paras 13, 14, 15]

Writ petition dismissed; respondent to file reply within three weeks; authority to hear and adjudicate on merits and pass a reasoned order; no coercive action till conclusion.

Final Conclusion: The Court condoned the delay in filing the appeal, allowed the intra Court appeal, set aside the writ Court's order quashing the show cause notice as founded on an incorrect view of Section 73, and remitted the matter for fresh adjudication with directions for filing of reply, personal hearing and reasoned decision while protecting the assessee from coercive action pending conclusion of the proceedings.

Judicial review of administrative decision - remand for decision on merits - status quo - interim relief - SVLDR Scheme benefit - affidavit-in-opposition - technical glitches in official portal

Remand for decision on merits - judicial review of administrative decision - affidavit-in-opposition - The writ petition restored for fresh hearing and decision on merits; the order directing mere disposal of representation set aside. - HELD THAT: - The Single Judge earlier directed filing of affidavit-in-opposition and consideration of the appellant's representations. The Division Bench recorded that, since the respondents had filed their affidavit-in-opposition and the parties had exchanged pleadings, simple disposal by directing consideration of the representation would be ineffectual. The appellate court concluded that the controversy required adjudication on merits rather than further procedural referral, and therefore set aside the order dated 29.06.2022 and restored the writ petition to the original file and number for hearing and disposal on merits and in accordance with law.

Order dated 29.06.2022 is set aside; writ petition restored for adjudication on merits by the learned Single Judge.

Status quo - interim relief - Continuation of interim protection and prohibition on coercive action pending rehearing. - HELD THAT: - The appellant had been benefitted by an earlier order of status quo in the writ proceedings. Having restored the writ petition for fresh hearing, the Court directed that respondent authorities shall not take any coercive action against the appellant while the writ petition is pending. The previously granted interim order is continued for a limited period to preserve the position of the parties until the petition is heard.

Respondents restrained from taking coercive action; interim order to remain in force for eight weeks or until the writ petition is heard, whichever is earlier.

SVLDR Scheme benefit - technical glitches in official portal - Allegations concerning inability to avail benefit under the SVLDR Scheme due to technical glitches and the respondents' treatment of the appellant's representations to be adjudicated on merits. - HELD THAT: - The writ Court had recorded the appellant's contention that technical glitches on the department's portal prevented availing the SVLDRS benefit and had permitted supplementary filings. The Division Bench noted that the respondents disputed the existence of such technical glitches in their affidavit-in-opposition. Given the opposing factual contentions and the existence of pleadings and affidavits, the correctness of the appellant's claim to acceptance of tax payment and entitlement to benefit under the SVLDR Scheme must be determined by adjudication on the merits rather than by interlocutory direction to merely consider the representation.

The question of whether the appellant was prevented by technical glitches from availing SVLDRS relief and whether her payment/representation ought to be accepted is remitted to the Single Judge for decision on merits.

Final Conclusion: The intra-court appeal is allowed: the order of 29.06.2022 is set aside, the writ petition is restored for hearing and decision on merits, respondents are restrained from coercive action and the interim protection is continued for eight weeks or until final disposal, and factual-contention issues including the appellant's claim under the SVLDR Scheme are to be adjudicated by the Single Judge.

Penalty under Section 78 - reverse charge mechanism - failure to discharge tax under RCM - deliberate non-compliance - revenue neutrality - entitlement to Cenvat credit

Penalty under Section 78 - deliberate non-compliance - reverse charge mechanism - revenue neutrality - entitlement to Cenvat credit - Whether penalty under Section 78 could be validly imposed for non-payment of service tax under the reverse charge mechanism on certain legal services invoices. - HELD THAT: - The Tribunal recorded that the appellant, a hotel and restaurant service provider, failed to discharge service tax under RCM on three legal-services invoices detected in audit for the period July 2012 to March 2016, and the tax was later admitted and paid by the appellant. The Court found the omission to be a clerical oversight and not deliberate non-compliance. It further observed that the appellant pays output tax and the legal services in question constitute input service for which Cenvat credit is available, rendering the situation revenue neutral and removing any motive to evade tax. In view of the absence of deliberate default and the revenue-neutral character of the omission, imposition of penalty under Section 78 was not justified. [Paras 7]

Penalty under Section 78 set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the omission to discharge tax under the reverse charge mechanism was not deliberate and was revenue neutral due to entitlement to Cenvat credit; consequently the penalty under Section 78 was quashed.

Applicability of Rule 6 of Cenvat Credit Rules to non-excisable goods - Bagasse as non-excisable/not a manufacture - Inapplicability of Cenvat reversal provisions to non-excisable by products - Validity of administrative circulars interpreting Rule 6

Applicability of Rule 6 of Cenvat Credit Rules to non-excisable goods - Bagasse as non-excisable/not a manufacture - Inapplicability of Cenvat reversal provisions to non-excisable by products - Whether Rule 6 of the Cenvat Credit Rules, 2004 applies to Bagasse (and similar by products) produced and cleared for consideration from the factory for the period May, 2011 to 28.02.2015. - HELD THAT: - The Tribunal held that the issue was foreclosed by higher judicial decisions which treat Bagasse as an agricultural residue and not the result of manufacture, and therefore not an excisable product to which Rule 6 would apply. The Supreme Court decision in UOI v. DSCL Sugar Ltd. establishes that, in the absence of any process specified in the Section or Chapter notices rendering Bagasse a manufactured excisable good, the deeming fiction cannot be invoked and Rule 6 has no application. The Allahabad High Court's observation and the Supreme Court's dismissal of the SLP against that view reinforce that a departmental circular seeking to treat Bagasse as a non excisable good subject to reversal under Rule 6 is unsustainable. Applying these precedents to the facts for the stated period, the Tribunal concluded that the demand founded on Rule 6 for Bagasse (and like non excisable by products) could not be sustained and therefore the impugned order upholding the demand was liable to be set aside. [Paras 5, 6, 7, 8]

The impugned order sustaining the demand under Rule 6 for the period May, 2011 to 28.02.2015 is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appellant's appeal, holding that Bagasse (and analogous non excisable by products) are not subject to Rule 6 reversal for the period May, 2011 to 28.02.2015; the impugned demand and related order were set aside.

Principles of natural justice - return of seized documents not relied upon - procedure under Section 9D of the Central Excise Act - right to cross-examination of witnesses and experts - remand for fresh adjudication with opportunity of hearing

Principles of natural justice - return of seized documents not relied upon - There was violation of principles of natural justice by not returning documents seized from the appellant which were not relied upon in the show cause notice. - HELD THAT: - The Tribunal found that a large number of documents seized by the Department were not relied upon in Annexure IV to the show cause notice, yet the non-relied upon documents were not returned to the appellant. The non-return of such documents impeded the appellant's ability to mount an effective defence. Having recorded a breach of procedural fairness, the Tribunal directed that all documents seized from the appellant which were not relied upon must be returned to it. [Paras 2]

All documents seized from the appellant which were not relied upon in the show cause notice must be returned to the appellant.

Procedure under Section 9D of the Central Excise Act - right to cross-examination of witnesses and experts - remand for fresh adjudication with opportunity of hearing - Statements relied upon in the show cause notice and expert opinions must be processed in accordance with the statutory procedure and the appellant must be allowed cross-examination; the matter is remanded for fresh consideration. - HELD THAT: - The Tribunal held that where any statement made before a Central Excise officer is relied upon in the show cause notice, the statutory procedure under Section 9D must be followed. Further, if the appellant seeks cross-examination of persons who made such statements, that request must be allowed. Similarly, the appellant must be permitted to cross-examine any expert whose opinion was relied upon in the show cause notice. On this basis, and without adjudicating the merits, the Tribunal remanded the matter to the original authority to pass a reasoned order after affording the appellant the opportunity of being heard and complying with the procedural directions. [Paras 2, 3]

Matter remitted to the original authority to follow Section 9D procedure where applicable, allow cross-examination of witnesses and experts relied upon, and pass a reasoned order after giving the appellant an opportunity of hearing.

Final Conclusion: The Tribunal found breach of natural justice and remanded the matter to the original authority with directions to return non-relied seized documents, to comply with the Section 9D procedure and permit cross-examination of witnesses and experts relied upon, leaving all questions on merits open for fresh adjudication.

Classification of goods - interpretation in commercial and trade parlance - principle of consistency in taxation - tin containers - scope including tin-coated metal containers - classification under Entry 129 of List-C of the rate chart - residual taxable entry

Tin containers - scope including tin-coated metal containers - interpretation in commercial and trade parlance - classification under Entry 129 of List-C of the rate chart - Containers made of steel plates coated with tin fall within the description of 'tin containers' as understood in trade and common parlance and are classifiable under Entry 129 of List-C of the rate chart. - HELD THAT: - The Court held that the expression 'tin containers' must be understood in normal commercial and trade parlance and not restricted to containers manufactured entirely out of tin. The essential character required is that of a metal container as understood in trade; therefore metal containers with a coating of tin satisfy the description of 'tin containers' and are properly classifiable under Entry 129 of List-C of the rate chart appended to the OST Act. The Court rejected the Department's insistence that only wholly tin-manufactured containers qualify, adopting a trade-practical interpretation. This reasoning supports the assessee's plea for classification under Entry 129. [Paras 6, 7]

Assessee's containers are 'tin containers' in trade parlance and are classifiable under Entry 129 of List-C.

Principle of consistency in taxation - classification under Entry 129 of List-C of the rate chart - residual taxable entry - The Assessing Authority's acceptance in Assessment Year 2004-05 that the same goods are classifiable under Entry 129 governs the earlier Assessment Year 2003-04 on principles of consistency; they cannot be taxed under the residuary entry at a higher rate for 2003-04. - HELD THAT: - The Court noted that for the subsequent year (2004-05) the Assessing Officer had treated the tin containers as falling under Entry 129 and taxed them accordingly at the lower rate, and that order was not challenged by the Revenue. Applying the principle of consistency, the Court found no reason why the accepted treatment for 2004-05 should not govern the earlier year 2003-04. Consequently, the Department could not permissibly treat the products as taxable under the residuary entry at a higher rate for 2003-04 after having accepted a contrary classification in the subsequent year. [Paras 5, 7]

The accepted classification for 2004-05 applies to 2003-04; the goods cannot be taxed under the residuary entry at a higher rate for 2003-04.

Final Conclusion: The impugned orders of the Tribunal and the assessing authority are set aside; the Assessing Officer's order (ACST) treating the goods as 'tin containers' under Entry 129 is restored and the revision petition is disposed of in favour of the assessee.

Inter-State sale - sale in the course of import - tests for determining inter-State trade under Section 3 - Special Economic Zone deemed territory outside the customs territory - overriding effect of the SEZ Act - permission under Customs Act for movement of warehoused goods

Inter-State sale - tests for determining inter-State trade under Section 3 - Whether the movement of capital goods from the petitioner's bonded warehouse in CSEZ, Cochin to the 6th respondent at Udaipur, Rajasthan constituted an inter-State sale exigible to Central Sales Tax - HELD THAT: - The Court applied the settled tests for inter-State trade - movement of goods from one State to another, whether such movement was occasioned by a contract of sale or purchase, and whether the sale was effected by transfer of documents of title during the movement. The contemporaneous documents (permission for transfer, bills of entry and invoices) described the 6th respondent as consignee and the invoices were raised in its name. The plea that the transfer was by way of lease was found not convincing on the record. On these facts the transaction satisfied the criteria under Section 3 and was therefore an inter-State transfer subject to CST. The Court rejected the petitioner's contention that Customs/EXIM formalities determined the tax character of the transaction, adopting the principle that clearance or permission under customs statutes does not by itself convert a transaction into an export/import for CST purposes. [Paras 15, 22]

The movement is an inter-State sale attracting Central Sales Tax.

Sale in the course of import - permission under Customs Act for movement of warehoused goods - Whether the movement of the capital goods could be treated as a sale in the course of import (and hence exempt under Section 5) - HELD THAT: - The Court examined whether the sale occasioned import as required for a sale to be in the course of import. Reliance on permissions, bills of entry and clearance under the Customs Act was held insufficient to establish that the sale occasioned import. The Court followed authorities holding that mere clearance under customs provisions or warehousing permissions does not convert a sale into one in the course of import unless the sale itself occasions the import. Given the contemporaneous invoices and documents and absence of proof that the sale occasioned import, the claim of exemption under Section 5 was rejected. [Paras 19, 22]

The transaction is not a sale in the course of import; exemption under Section 5 is unavailable.

Special Economic Zone deemed territory outside the customs territory - overriding effect of the SEZ Act - Whether the SEZ / SEZ Act status or the proposition that SEZ is to be treated as foreign territory (and therefore outside customs frontiers) precluded levy of Central Sales Tax on the movement to the 6th respondent - HELD THAT: - The impugned judgment had relied on EXIM policy and provisions of the SEZ Act to treat the movement as not crossing customs frontiers. On the material before this Court it was established that the 6th respondent was a 100% EOU but not located in a notified SEZ at Udaipur. In those circumstances the Court found it unnecessary to uphold the impugned reasoning based on SEZ status, and held that the SEZ Act provisions were not attracted to the incident in question. The Court also recorded that permissions or customs formalities cannot be invoked to negate State tax liability where the statutory tests under the CST Act are otherwise satisfied. [Paras 8, 9]

Findings based on SEZ status/SEZ Act are unsustainable; SEZ-based exemption not available on the facts.

Final Conclusion: The writ appeal is allowed. The judgment under appeal is set aside: the transaction is an inter-State sale attracting Central Sales Tax and the contentions that the movement was in the course of import or exempt by reason of SEZ/status or customs permissions are rejected; no order as to costs.

Curative and declaratory amendment - retrospective effect of amendment - right to Input Tax Credit - interpretation of statutory amendment to restore original position

Curative and declaratory amendment - retrospective effect of amendment - interpretation of statutory amendment to restore original position - Amendment to Section 19(2)(v) of the Tamil Nadu Value Added Tax Act, 2006 is curative and declaratory and relates back to the earlier date, thereby restoring the original position - HELD THAT: - The Court accepted the Division Bench's categorical finding that the 2015 amendment to Section 19(2) was enacted to cure defects caused by the earlier amendment and to restore the original statutory position. The amendment was held to be curative/declaratory in nature and therefore to have retrospective effect (to relate back to the earlier date), such that the legislative intention was to reinstate the prior entitlement. The Court relied upon the reasoning that the subsequent amendment operated as a declaration that the provision be read as it stood before the 2013 amendment and thus removed the adverse effect caused by the interim change. [Paras 1]

The amendment to Section 19(2)(v) is curative and declaratory and has retrospective effect, restoring the prior legal position.

Right to Input Tax Credit - interpretation of statutory amendment to restore original position - Petitioner entitled to Input Tax Credit which was disallowed in the assessment; impugned assessment order set aside - HELD THAT: - Having accepted that the amendment is curative and declaratory and that it restores the original entitlement under Section 19(2)(v), the Court held that the petitioner's claim for Input Tax Credit could not be lawfully reversed by the assessment dated 31.12.2018. The respondent's counsel conceded that the legal issue should be decided in favour of the petitioner. In consequence of the legal conclusion on the character and effect of the amendment, the assessment order denying ITC was set aside. [Paras 3]

The petitioner is entitled to the Input Tax Credit and the impugned assessment order is set aside.

Final Conclusion: Writ petition allowed; the assessment denying Input Tax Credit is quashed in light of the finding that the amendment to Section 19(2)(v) is curative/declaratory and restores the prior entitlement. No costs.

Constitutional validity of statutory compensation provision - Just compensation / market value versus statutory formula - Article 31C and protection for legislation implementing Directive Principles - Lapsing of acquisition by efflux of time - Applicability of special acquisition power for slum rehabilitation - Remand for fresh consideration

Constitutional validity of statutory compensation provision - Just compensation / market value versus statutory formula - Article 31C and protection for legislation implementing Directive Principles - Validity of Section 20 of the Karnataka Slum Areas (Improvement and Clearance) Act, 1973 - HELD THAT: - The question whether payment fixed by Section 20 (three hundred times the property tax) amounts to an illusory, arbitrary or unconstitutional denial of just compensation and whether the 1973 Act attracts protection under Article 31C was not finally adjudicated by this Court. The Court held that the High Court dealt with the challenge in a cursory manner and failed to examine the Act's scheme, objects and the permissible methods of valuation; and observed that if the Act is referable to Article 39(b) it may attract Article 31C protection. Given these deficiencies in reasoning and the absence of comprehensive consideration of relevant aspects (including demonstration by the State that the formula is not illusory), the matter requires fresh consideration by the High Court. Accordingly, the High Court's declaration striking down Section 20 is set aside and the issue is remitted for reconsideration, with liberty to parties to amend pleadings and place material before the High Court for a full adjudication. [Paras 16, 17, 21, 22, 24]

High Court's declaration that Section 20 is ultra vires is set aside; the constitutional challenge to Section 20 is remanded to the High Court for fresh consideration on merits with leave to amend pleadings.

Lapsing of acquisition by efflux of time - Applicability of special acquisition power for slum rehabilitation - Question whether the acquisition initiated by preliminary notification dated 14.10.1982 had lapsed and whether the objections to the final notification were adequately considered - HELD THAT: - The High Court had held that, unlike the Land Acquisition Acts, the 1973 Act contains no express lapsing provision and that a time gap between preliminary and final notifications, by itself, does not automatically result in lapse because the need to rehabilitate slum dwellers may be a continuing obligation. The Supreme Court found that these contentions were not finally adjudicated because the Division Bench did not examine them in detail (and one cross-appeal was withdrawn). The Supreme Court therefore directed that these matters be gone into afresh by the High Court; the writ petitions are restored to its file for reconsideration of these factual and legal contentions with opportunity to amend and lead evidence or affidavits. [Paras 3, 20, 21, 22, 24]

Issues of lapse by efflux of time and adequacy of consideration of objections are remitted to the High Court for fresh adjudication.

Applicability of special acquisition power for slum rehabilitation - Maintainability of writ challenging acquisition - Whether Section 17 of the 1973 Act was properly invoked in respect of the land (i.e., whether the land had been declared a slum area or slum clearance area) - HELD THAT: - The Supreme Court noted that the question whether the land in question had been declared a slum area under Section 3 or a slum clearance area under Section 11 (and hence could be acquired under Section 17) was not pleaded before the High Court and was raised for the first time before this Court. The Court directed that the High Court on remand may allow amendment of writ petitions or filing of better affidavits to raise and decide the preliminary question of applicability of Section 17; if the High Court answers that question in favour of the petitioners, it may render consideration of Section 20 unnecessary. [Paras 12, 19, 21, 22]

Preliminary question on applicability of Section 17 is remitted to the High Court for determination with liberty to amend pleadings.

Remand for fresh consideration - Disposition of High Court judgments and future course of proceedings - HELD THAT: - The Supreme Court found that the High Court's Single Judge and Division Bench judgments require full reconsideration. It set aside the impugned orders dated 17.8.2012, 28.8.2012 and 20.9.2007 and restored the writ petitions to the file of the High Court for fresh hearing on merits. The parties are granted six weeks to amend pleadings or file further affidavits; the matter is directed to be placed for hearing in the first week of September 2022. The Court left all contentions open and permitted the learned Single Judge to await resolution by the larger Bench on the scope of "material resources of the community" under Article 39(b) if necessary. [Paras 21, 22, 23, 24, 25]

Impugned High Court judgments set aside; writ petitions restored for fresh disposal in accordance with law with liberty to amend pleadings; all contentions left open.

Final Conclusion: The Supreme Court set aside the High Court's orders, effaced the declaration striking down Section 20 and restored the writ petitions for fresh adjudication; the constitutional challenge to Section 20, the question of lapse by efflux of time, and the applicability of Section 17 are remitted to the High Court for reconsideration with liberty to parties to amend pleadings and place material, all contentions being left open and without any final determination by this Court.

Liability of independent/non-executive director - vicarious liability under Section 141 of the Negotiable Instruments Act - knowledge, attributable through board processes, consent or connivance, or failure to act diligently - requirement of being in charge and responsible for conduct of business of the company - quashing of criminal proceedings under inherent powers of the High Court (Section 482 Cr.P.C.)

Liability of independent/non-executive director - vicarious liability under Section 141 of the Negotiable Instruments Act - knowledge, attributable through board processes, consent or connivance, or failure to act diligently - requirement of being in charge and responsible for conduct of business of the company - Whether the criminal proceedings under Section 138 read with Section 141 of the Negotiable Instruments Act against the applicants, who are independent non-executive directors, are maintainable or liable to be quashed. - HELD THAT: - The Court examined the complaint and the documents on record which denote the applicants as independent non-executive directors and noted that the complaint contains only general averments attributing responsibility to "Accused Nos.2 to 12" for day-to-day affairs, without any overt act specifically ascribed to the applicants. The Court relied on the statutory scheme in the Companies Act that an independent or non-executive director shall be held liable only in respect of acts or omissions that occurred with his knowledge, are attributable through board processes, with his consent or connivance, or where he failed to act diligently. The Court referred to precedents holding that to fasten vicarious or criminal liability under Section 141 NI Act a person must, at the relevant time, have been in charge of and responsible for the conduct of the company's business; mere directorship or general allegations are insufficient. Applying these principles to the material before it, and having regard to the applicants' status as independent non-executive directors and absence of specific averments of knowledge, consent, connivance or failure to act diligently, the Court concluded that prosecuting the applicants under Section 141 would not be justified. Exercising its inherent jurisdiction under Section 482 Cr.P.C., the Court held that the proceedings against the applicants should be quashed while leaving the trial against other accused to proceed and be expedited. [Paras 5, 7, 8, 12, 13]

Proceedings against the applicants, who are independent non-executive directors, are quashed and set aside.

Final Conclusion: The High Court allowed the petition and, exercising its inherent jurisdiction, quashed and set aside the criminal proceedings and order for issuance of process against the applicants (independent non-executive directors) in CC.No.3461 of 2013, while directing that trial against the remaining accused be expedited.