TaxTMI Updates e-Newsletter
Aug 06,2021

Classification of supply as goods (potable water) and not services - exemption for potable water under Notification No.2/2017-CT(R) - distinction between potable water and purified/distilled water - treatment processes do not convert potable water into purified water for tax purposes - taxability of ancillary charges (interest, late fee, cheque bounce) as part of value of supply - tax treatment of water distribution and related connection/reconnection/disconnection charges

Classification of supply as goods (potable water) and not services - treatment processes do not convert potable water into purified water for tax purposes - The appellant's activity of abstracting raw water, treating it to potable standards and supplying the same to purchasers is a supply of goods (potable water) and not a supply of services. - HELD THAT: - The concession agreement grants the appellant rights to abstract raw water (subject to royalty) and to treat and supply potable water to purchasers; potable water is the output after the appellant's treatment carried out on its own account and consideration is charged as water charges under the agreement. The agreement uniformly treats the supply to all purchasers as 'potable water' regardless of end-usage, and the treatment specified in the agreement is directed only to achieve potable quality. On this basis the Appellate Authority concluded that the appellant's activity is the supply of goods (potable water) and not of services. [Paras 7]

Supply is of goods (potable water), not services.

Exemption for potable water under Notification No.2/2017-CT(R) - distinction between potable water and purified/distilled water - Potable water supplied by the appellant qualifies for exemption under the notification entry for water and is not excluded as 'purified water'. - HELD THAT: - The Authority examined whether the appellant's treatment converts raw water into the excluded category of 'purified water'. Potable water-defined in the agreement and by its performance standards-is water fit for human consumption that retains dissolved minerals and is not equivalent to chemically purified or distilled water. The treatment in the agreement achieves potable quality and does not amount to purification of the nature excluded by the exemption. Consequently, the supply of such potable water falls within the exemption entry for water in the notification and is eligible for exemption. [Paras 7]

Supply of potable water by the appellant is exempt under the notification entry for water.

Taxability of ancillary charges (interest, late fee, cheque bounce) as part of value of supply - tax treatment of water distribution and related connection/reconnection/disconnection charges - treatment of new connection works and established assets - The Appellate Authority concurred with the AAR on ancillary and related charges: sewage treatment and certain consultancy services are exempt as held by the AAR; interest on delayed payments and cheque bounce charges are taxable; connection/reconnection/disconnection charges are taxable; new connection works accounted as established assets are not taxable as supplies. - HELD THAT: - The Appellate Authority considered the AAR's reasoning on the ancillary matters and expressly agreed with its conclusions. The AAR had held sewage offtake and treatment to the municipal corporation exempt under the relevant notification; consultancy services rendered to the municipal corporation for construction management and supervision exempt under the notification; interest on delayed payments and cheque bouncing charges classifiable under the specified SAC and held taxable; connection/reconnection/disconnection/permanent disconnection charges characterised as water distribution services and held taxable; and new connection works forming established assets of purchasers were held not to be taxable supplies. The Appellate Authority found these conclusions sustainable and recorded concurrence. [Paras 7]

Concur with and uphold the AAR's rulings on sewage treatment exemption, consultancy exemption, taxation of interest and cheque bounce charges, taxation of connection-related charges, and non-taxability of new connection works accounted as assets.

Final Conclusion: The appeal is disposed of by answering the reference and the question on supply of potable water in the appellant's concession arrangement in the affirmative: the supply is of goods (potable water) and qualifies for exemption under the notification entry for water; on the other questions the Appellate Authority concurs with and upholds the AAR's rulings.

Classification of goods - Tariff heading 0402 / 0404 v. 2202 (beverages containing milk) - General Rules for the Interpretation (GRI) - Rule 1 - HSN Explanatory Notes as guidance - Chapter Note 1 definition of "milk" - relevance of FSSAI Regulations to product characterisation

Classification of goods - Tariff heading 0402 / 0404 v. 2202 (beverages containing milk) - Chapter Note 1 definition of "milk" - General Rules for the Interpretation (GRI) - Rule 1 - HSN Explanatory Notes as guidance - relevance of FSSAI Regulations to product characterisation - Whether UHT Sterilized Flavoured Milk marketed as 'Britannia Winkin' Cow Thick Shake' is classifiable under CTH 0402/0404 or under CTH 2202 99 30 - HELD THAT: - The Appellate Authority examined the product composition, labelling and manufacturing process and applied GRI 1 read with the Chapter Notes and HSN explanatory notes. Chapter Note 1 limits the expression 'milk' for heading 0402 to 'full cream milk' or 'partially or completely skimmed milk'. The product contains 'standardised' or 'toned' milk (80-90%) and thus does not fall within the Chapter 4 definition of 'milk' for CTH 0402. Heading 0404 covers whey and products consisting of natural milk constituents which lack or have altered composition; the product does not fall within that description either. The goods are ready-to-drink, marketed and packaged as beverages; HSN explanatory notes to Chapter 22 expressly include beverages with a basis of milk (examples such as milk with cocoa) under subheading 2202, and a specific tariff item exists for 'beverages containing milk' (2202 99 30). The Authority treated HSN explanatory notes as permissible guidance and applied GRI 1 to prefer the specific entry applicable to a ready-to-drink milk-based beverage. While the appellant relied on FSSAI Regulations and several judicial precedents to characterise the product as a milk/milk product, the Authority found that (a) FSSAI categorisation does not alter the statutory tariff definitions where Chapter Notes determine coverage, and (b) the Chapter 4 Notes exclude the product because it is not 'full cream' or 'skimmed' milk as defined therein. For these reasons the Authority upheld the lower authority's classification of the product under subheading 2202 99 30 rather than under headings 0402 or 0404. [Paras 6, 8, 9, 10, 12]

UHT Sterilized Flavoured Milk ('Britannia Winkin' Cow Thick Shake') is not classifiable under CTH 0402/0404 but is classifiable under CTH 2202 99 30.

Final Conclusion: The Appellate Authority affirms the Authority for Advance Ruling: the ready-to-drink UHT flavoured milk at issue falls within the tariff description for 'beverages containing milk' and is classifiable under CTH 2202 99 30, and not under Chapter 4 headings 0402 or 0404.

Support services for agriculture - Classification of services by SAC - Exemption under Notification No.12/2017 - Sl.No.54 - End-use based classification (single activity, multiple headings) - Legislative/administrative intent (Fitment Committee/GST Council)

Support services for agriculture - Classification of services by SAC - Exemption under Notification No.12/2017 - Sl.No.54 - End-use based classification (single activity, multiple headings) - Drilling of borewells on agricultural land is not classifiable as 'Support service for agriculture' under SAC 9986 and therefore is not eligible for exemption at Sl.No.54 of Notification No.12/2017-C.T. (Rate). - HELD THAT: - The Appellate Authority agreed with the Advance Ruling that the same physical activity (borewell drilling) cannot be given different SAC classifications depending on end-use or location; the appellant itself had classified the activity under SAC 9954 when performed for non-agricultural purposes and cannot adopt a different classification for agricultural land. Practical difficulties in tax administration and the risk of tax evasion if end-use based classification were permitted were relied on. The Fitment Committee and GST Council deliberations, and their decision not to grant an exemption for borewell drilling, indicate that no exemption was intended for such drilling under GST. On these bases the Advance Ruling's conclusion that the activity does not fall under SAC 9986 and is not covered by Sl.No.54 was upheld. [Paras 7]

The ruling that drilling of borewells is not classifiable under SAC 9986 and not entitled to exemption under Sl.No.54 is affirmed.

Support services for agriculture - Classification of services by SAC - Exemption under Notification No.12/2017 - Sl.No.54 - Legislative/administrative intent (Fitment Committee/GST Council) - Letting out of compressors for pumping water from borewells to agricultural fields is not classifiable as 'Support service for agriculture' under SAC 9986 and therefore is not eligible for exemption at Sl.No.54 of Notification No.12/2017-C.T. (Rate). - HELD THAT: - The Appellate Authority did not find cause to differ from the Advance Ruling on compressors. The reasoning that equipment and activity classification cannot vary by end-use applies equally to letting out compressors; allowing different classification based on use would impede effective tax administration and risk misuse. The administrative record and prior deliberations did not support granting exemption for such services under GST, and accordingly the Advance Ruling's view that the letting out of compressors is outside SAC 9986 and Sl.No.54 was sustained. [Paras 7]

The ruling that letting out compressors for pumping water from borewells is not classifiable under SAC 9986 and not entitled to exemption under Sl.No.54 is affirmed.

Final Conclusion: The Appellate Authority dismissed the appeal and declined to interfere with the Advance Ruling; drilling of borewells and letting out compressors for pumping water to agricultural fields are not covered by SAC 9986 and are not exempt under Sl.No.54 of Notification No.12/2017-C.T.(Rate).

Exemption under Notification No.12/2017-C.T.(Rate) entry 54 - classification under SAC 9986 versus SAC 9954 - support services for agriculture - no dual classification based on end-use or location - legislative/administrative intent as reflected by Fitment Committee and GST Council - binding nature of advance ruling

Classification under SAC 9986 versus SAC 9954 - exemption under Notification No.12/2017-C.T.(Rate) entry 54 - no dual classification based on end-use or location - Drilling of borewells on agricultural land is not classifiable under SAC 9986 for the purpose of entry 54 of Notification No.12/2017 and therefore is not eligible for the exemption. - HELD THAT: - The Appellate Authority accepted the AAR's conclusion that the same physical activity (drilling) cannot be assigned different SAC headings depending on the end-use or the site of performance; the appellant itself had classified drilling under SAC 9954 when undertaken for non-agricultural purposes, and permitting a different classification merely because the drilling is done on agricultural land would permit multiple classifications for the same activity. The reasoning of the Fitment Committee and the GST Council-reflecting that the issue was considered and that no blanket exemption for borewell drilling was intended-was relied upon to show legislative/administrative intent against granting the exemption. Concerns about identification and potential tax evasion if classification varied by end-use reinforced sustaining the AAR's ruling. [Paras 7, 8]

The appeal against the AAR's ruling on borewell drilling is dismissed and the AAR's classification and denial of exemption is upheld.

Support services for agriculture - exemption under Notification No.12/2017-C.T.(Rate) entry 54 - classification under SAC 9986 versus SAC 9954 - Letting out compressors for pumping water from borewells to agricultural fields is not classifiable under SAC 9986 and is not covered by entry 54 of Notification No.12/2017 for exemption. - HELD THAT: - The Appellate Authority concurred with the AAR that the compressor-hiring activity cannot be reclassified as a support service falling under SAC 9986 merely because the compressors are used in agricultural watering. The same administrative and policy considerations that preclude adopting different classifications based on end-use apply to letting out compressors; the AAR's reasoning on classification and exemption was found to be sound and not warranting interference. [Paras 7, 8]

The appeal against the AAR's ruling on letting out compressors is dismissed and the AAR's classification and denial of exemption is upheld.

Final Conclusion: The Appellate Authority has upheld the Advance Ruling: the activities of drilling borewells and letting out compressors for pumping water to agricultural fields are not covered by entry 54 of Notification No.12/2017-C.T.(Rate) and the AAR's order is affirmed; the appeal is disposed of.

Essential character - article of vulcanized rubber other than hard rubber - parts and accessories of motor vehicles - Section XVII Note 2(a) exclusion - Rule 3(b) essential character test - commercial identity test - HSN Explanatory Notes as guide - classification under CTH 8708 - classification under CTH 4016

Essential character - Rule 3(b) essential character test - classification under CTH 4016 - HSN Explanatory Notes as guide - Whether the Air Springs are articles whose essential character derives from vulcanized rubber and therefore classifiable under CTH 4016 - HELD THAT: - The Appellate Authority accepted that the Chartered Engineer opined the essential character of the product is derived from vulcanized soft rubber and that the product's bellow and rubber component provide key functionality. The HSN Explanatory Notes and Chapter 40 scope were considered, and it was acknowledged that articles whose essential character derives from rubber may fall under Chapter 40 and residuary heading CTH 40169990. However, classification must also have regard to the Rules of Interpretation and the tests of functional utility, design, shape and predominant usage as explained in O.K. Play. Applying those tests, although the rubber component imparts essential characteristics, the product's design, predominant use and functional role are as a part specifically designed for motor vehicle suspension systems. On balance, the determinative classification was held to be governed by its character as a vehicle part rather than placement in the residuary rubber heading. Consequently, the Air Springs were not accepted for classification under CTH 4016 despite the rubber-derived essential character. [Paras 7, 8]

The product is not to be classified under CTH 4016 notwithstanding that its essential character derives from vulcanized rubber.

Parts and accessories of motor vehicles - Section XVII Note 2(a) exclusion - commercial identity test - classification under CTH 8708 - Whether, notwithstanding any rubber content, the Air Springs are excluded from Chapter 87 by Section XVII Note 2(a) and therefore cannot be classified under CTH 8708 - HELD THAT: - Section XVII Note 2(a) excludes certain articles of vulcanized rubber from being treated as 'parts' for the Section. The Authority examined the scope of Note 2(a) and relevant Supreme Court precedents on the scope and application of Section notes and the commercial identity test. It held that Note 2(a) excludes items such as joints, washers or the like and other articles of vulcanised rubber that are of general use; the proper inquiry is whether the goods are suitable solely or primarily for use with articles of Chapter 87. The Air Springs are bespoke, specific components designed and used solely or primarily in vehicle suspension systems; their commercial identity, design and predominant use point to classification as parts and accessories of motor vehicles. The explanatory note excluding 'springs' of base metal did not apply because the product is not a base-metal spring. Consequently, Note 2(a) did not operate to exclude these Air Springs from Chapter 87. [Paras 8, 9]

Section XVII Note 2(a) does not exclude the appellant's Air Springs from classification under Chapter 87; they are classifiable as parts and accessories of motor vehicles under CTH 8708.

Final Conclusion: The Appellate Authority affirmed the Advance Ruling that the Air Springs manufactured by the appellant are classifiable under CTH 8708 as parts and accessories of motor vehicles; they are not to be classified under CTH 4016 nor excluded from Chapter 87 by Section XVII Note 2(a).

Classification under heading 2106 (food preparations not elsewhere specified or included) - mixtures and composite goods - Rule 2(b) and Rule 3 principles of classification (essential character test) - inapplicability of Chapter 11 (CTH 1106) where additions render product a food preparation - exclusion from heading 1901 where product is not usable by simply mixing with water/boiling - residual character of CTH 2106 and applicability of Schedule III Entry No.23 (all kinds of food mixes including instant food mixes) - limited application of Circular No.80 (classification of 'Chhatua' / 'Sattu') - advance ruling binding only on the applicant and jurisdictional officer

Classification under heading 2106 (food preparations not elsewhere specified or included) - residual character of CTH 2106 - Classification of the applicant's ready-to-prepare mixes and powders - HELD THAT: - The Authority examined the composition, packaging and mode of use of the products (dosai mixes, idly mixes, tiffin mixes, health mixes and porridge mixes). The contents are sold in the form of flours/granules/strips that require subsequent mixing and cooking and are marketed as preparatory products for specific savories. The ingredients in each product are integral to the finished preparation and cannot be treated as mere additives or reduced to a single principal constituent. Applying the General Rules of Interpretation (including Rule 2(b) and Rule 3) and the Explanatory Notes, none of the products are properly classifiable under Chapter 11 (CTH 1106), Chapter 19 (CTH 1901) or Chapter 23 (CTH 2302) on the facts and evidence produced. As the products are food preparations for human consumption not specifically classifiable elsewhere in the Tariff, they fall within the residual description of Heading 2106. [Paras 8, 9]

All the products for which classification was sought are classifiable under CTH 2106.

Exclusion from Chapter 11 (CTH 1106) where additions render product a food preparation - limited application of Circular No.80 (classification of 'Chhatua' / 'Sattu') - Whether the products are classifiable under CTH 1106 (flour/meal of dried leguminous vegetables) or covered by Circular No.80 ('Sattu'/'Chhatua') - HELD THAT: - Chapter 11 (including CTH 1106) covers flours obtained by milling of specified raw materials without further addition for use as food preparations. The Authority found that the applicant's products either (i) contain mixed cereal and pulse flours with essential cereal components, or (ii) include additives and are formulated for specific dishes; therefore they are not simple milled flours as contemplated by CTH 1106. The dictionary/circular description of 'Sattu' as a mixture of ground pulses and cereals does not apply where the marketed products are preparatory mixes for specific savories and include non trivial additional ingredients. On the facts and absence of requisite test reports, classification under CTH 1106 could not be accepted. [Paras 9]

The products are not classifiable under CTH 1106 and Circular No.80 is not applicable to these products.

Exclusion from heading 1901 where product is not usable by simply mixing with water/boiling - Whether the products fall under CTH 1901 (food preparations of flour/meal/meal preparations usable by simple mixing) - HELD THAT: - Heading 1901 covers preparations that can normally be used by simply mixing with or boiling in water or milk (e.g., instant preparations). The Authority observed that the applicant's mixes require further processing and cooking (and are marketed as preparatory mixes for specific savories) and therefore do not fall within the category of products usable merely by simple mixing as envisaged under CTH 1901. Consequently, CTH 1901 was held inapplicable on the facts. [Paras 9]

The products do not merit classification under CTH 1901.

Inapplicability of CTH 2302 (bran, sharps and other residues) without evidentiary tests - Whether the products are classifiable under CTH 2302 as milling residues - HELD THAT: - CTH 2302 covers by products and residues of milling that do not meet Chapter 11 criteria (starch/ash content, sieve tests, etc.). The Authority noted the applicant produced no laboratory/test reports to demonstrate that the products are milling residues or fail Chapter 11 criteria. Reliance on another AAR lacking such tests was not accepted. The State jurisdictional authority also did not support classification under Chapter 23. Absent evidentiary proof, CTH 2302 could not be applied. [Paras 9]

The products are not classifiable under CTH 2302 on the material before the Authority.

Residual character of CTH 2106 and applicability of Schedule III Entry No.23 (all kinds of food mixes including instant food mixes) - applicable GST rate for heading 2106 - Entry No.23 of Schedule III - Applicable GST rate on the products classified under CTH 2106 - HELD THAT: - Having held the products classifiable under Heading 2106, the Authority applied the relevant notifications. Entry No.23 of Schedule III to Notification No.1/2017 C.T.(Rate) (as amended) covers 'All kinds of food mixes including instant food mixes' under Chapter 2106 and prescribes the GST rate applicable to those items. The applicant's products are pre packaged food mixes and do not fall within the separate entry for idli/dosa batter or other exclusions. Therefore the rate under Schedule III Entry No.23 applies. [Paras 9, 10, 11]

The applicable GST rate is 18% (9% CGST + 9% SGST) as per Entry No.23 of Schedule III for goods under CTH 2106.

Final Conclusion: The Authority ruled that the 49 ready-to-prepare food mixes supplied by the applicant are classifiable under HSN/CTH 2106 (food preparations not elsewhere specified or included) and, being covered by Entry No.23 of Schedule III to the relevant notification, attract GST at the rate of 18% (9% CGST + 9% SGST). The contentions for classification under CTH 1106, 1901 or 2302 were rejected on the material before the Authority and Circular No.80 (Sattu/Chhatua) was held inapplicable to these products.

Classification of supply as sale of goods - classification of recovered water under Heading 2201 - advance ruling admissibility limited to supplies undertaken or proposed by the applicant

Classification of supply as sale of goods - Classification of the outputs (recovered water, salts, brine) produced after treating purchased raw effluent as a sale of goods by the applicant. - HELD THAT: - The Authority examined the contractual terms, process flow, laboratory reports and the draft sale contract showing transfer of ownership, delivery of possession, and allocation of risks and rewards to the buyer on delivery. The applicant proposes to purchase raw effluent from member units, treat it on its own account through a ZLD process and sell the extracted outputs at market rates to members. The process yields identifiable, marketable products (R.O. water, sodium sulphate/Glauber salt, brine solution, mixed salt) which are extracted and sold. On these facts and in this modus operandi, the activity constitutes purchase, manufacture/processing and sale of goods rather than merely supply of treatment services. The Authority therefore held that classification of the supply of outputs as sale of goods is correct in the proposed mode of operation. [Paras 8]

In the proposed modus of purchasing raw effluent, treating it on own account and supplying the extracted outputs at market rates, the supply of outputs is correctly classified as sale of goods.

Classification of recovered water under Heading 2201 - Classification of the recovered R.O. water (partly de-mineralized, for industrial use) produced by the applicant. - HELD THAT: - Laboratory reports (applicant's and SITRA) establish that the recovered water is obtained by multi-stage reverse osmosis, is largely de-mineralized with low TDS and is dispatched for industrial process use. The product description does not match the exclusionary wording in the Notification entry relied upon by the applicant for exempt water. The Authority thus placed the recovered water under the tariff heading for waters (CTH 2201) and specifically under the description appearing at S.No.24 of Annexure-III of Notification No. 01/2017-C.T.(Rate) dated 28.06.2017, which carries the applicable rate indicated there. [Paras 9]

Recovered, de-mineralized water for industrial use is classifiable under CTH 2201 and corresponds to the entry at S.No.24 of Annexure-III of Notification No. 01/2017-C.T.(Rate) dated 28.06.2017.

Advance ruling admissibility limited to supplies undertaken or proposed by the applicant - classification of raw effluent as goods and valuation by net realization method - Admissibility of questions on classification of raw effluent purchased by the applicant and the method of arriving at its value. - HELD THAT: - Section 95(a) and the scope of advance ruling permit rulings only in relation to supplies of goods or services undertaken or proposed to be undertaken by the applicant. The questions framed at Q.No.3 (classification of the effluent purchased by them) and Q.No.4 (method of arriving value for effluent using net realization price) concern the characterisation and valuation of inputs as received by the applicant, i.e., matters as recipient rather than supplies made by the applicant. These aspects therefore fall outside the permissible scope for an advance ruling to the applicant under the GST provisions. The Authority accordingly did not decide these questions and recorded that they are not admitted for ruling for the reasons stated. [Paras 7]

Questions on classification of the raw effluent purchased by the applicant and the valuation method for such effluent are not answered because they are not admissible for advance ruling as they pertain to goods received by the applicant rather than supplies undertaken or proposed by the applicant.

Final Conclusion: The Authority ruled that (i) in the proposed model of buying raw effluent, treating it on own account and selling the extracted products, the outputs are correctly classified as sale of goods; (ii) the recovered de-mineralized water is classifiable under CTH 2201 as per S.No.24 of Annexure-III of Notification No.01/2017-C.T.(Rate); and (iii) the questions on classification and valuation of the raw effluent purchased by the applicant are not answered as they are not admissible for advance ruling under the GST provisions.

Government Entity - Tax deduction at source under Section 51 - Reverse Charge Mechanism under Section 9(3) - Admissibility of advance ruling by a recipient made liable under RCM - Notification No.50/2018 - inclusion of bodies set up by Act for TDS - Notification No.13/2017 - RCM entries for security services and legal services

Government Entity - Notification No.50/2018 - inclusion of bodies set up by Act for TDS - Whether National Institute of Technology, Tiruchirappalli (NITT) is a Government Entity under GST law. - HELD THAT: - The Authority examined the NIT Act, 2007 and the institute's constitutional and funding structure, noting that NITT was specified in the Schedule to the Act, is set up by an Act of Parliament, receives central government funds in excess of the threshold and its governance and statutory provisions demonstrate central control and participation. Applying the definition of "Government Entity" in the relevant notification, the Authority concluded that NITT satisfies the conditions to be held a Government Entity under the GST law. [Paras 8]

NITT is a Government Entity under GST law.

Tax deduction at source under Section 51 - Notification No.50/2018 - inclusion of bodies set up by Act for TDS - Whether the applicant is liable to deduct tax at source (TDS) under Section 51 of the CGST Act, 2017. - HELD THAT: - Section 51 and Notification No.50/2018 empower the Government to notify persons required to deduct tax at source; the notification expressly includes authorities or bodies set up by an Act of Parliament. Having determined that NITT is a body set up by an Act of Parliament and satisfies the participation/funding criteria, the Authority held that NITT falls within the category notified and is therefore liable to deduct tax at source under Section 51 read with Notification No.50/2018. [Paras 8]

The applicant is liable to deduct TDS under Section 51 read with Notification No.50/2018.

Reverse Charge Mechanism under Section 9(3) - Notification No.13/2017 - RCM entries for security services and legal services - Whether the applicant is required to discharge liability on reverse charge basis under Section 9(3) for services received. - HELD THAT: - Section 9(3) enables notification of categories of supplies where the recipient is made liable to pay tax. The Authority examined Notification No.13/2017 and the documentary evidence furnished. For legal services, the invoices produced showed supplies by individual advocates/firms falling within the notification entry, and therefore NITT, as recipient, is liable to pay tax under RCM. For security services, the invoice submitted was from a body corporate; Notification No.13/2017 makes RCM applicable only where the supplier is a person other than a body corporate, hence on the documentary record before the Authority RCM does not apply to the security services supplied by the body corporate. The Authority also noted that the applicant did not furnish a complete list of service providers to establish RCM liability more broadly for security services. [Paras 8]

Applicant must discharge RCM for legal services evidenced; RCM does not apply to the security services evidenced as supplied by a body corporate.

Admissibility of advance ruling by a recipient made liable under RCM - Admissibility of the applicant's question on eligibility of entries Sl. No.3/3A of Notification No.12/2017 and Sl. No.3(vi) of Notification No.11/2017 (preferential/exempt entries) when sought by a recipient. - HELD THAT: - The Authority interpreted the scheme of advance ruling and Section 9(3), observing that advance rulings are admissible in relation to supplies 'being undertaken or proposed to be undertaken by the applicant.' A recipient made liable under RCM may seek a ruling on whether it is liable to pay tax, but a recipient cannot seek an advance ruling on the applicability of exemption or preferential rate notifications to supplies received by them except insofar as determination of their liability to pay under RCM is concerned. Consequently, the applicant's questions seeking a determination of entitlement to entries Sl. No.3/3A and Sl. No.3(vi) (which concern exemption/preferential rates) are not admissible and were not admitted for consideration. [Paras 7]

Questions on entitlement to Sl. No.3/3A of Notification No.12/2017 and Sl. No.3(vi) of Notification No.11/2017 are not admissible and are not admitted.

Final Conclusion: The Authority ruled that NITT is a Government Entity; NITT is required to deduct TDS under Section 51 read with Notification No.50/2018; NITT is liable to discharge tax under RCM for the legal services evidenced, but RCM does not apply to the security services evidenced as supplied by a body corporate; and the applicant's questions on entitlement to entries Sl. No.3/3A of Notification No.12/2017 and Sl. No.3(vi) of Notification No.11/2017 are inadmissible and not admitted.

Reopening of assessment under Section 148 - extension of limitation by executive notifications - ultra vires challenge to statutory notifications - interim relief restraining action on notices

Reopening of assessment under Section 148 - extension of limitation by executive notifications - ultra vires challenge to statutory notifications - interim relief restraining action on notices - Petitions challenging notices issued under Section 148 and the notifications extending time limits were admitted and interim protection was granted against further action on the impugned notices. - HELD THAT: - The Court admitted multiple petitions which challenge the issuance of notices under Section 148 of the Income Tax Act and the validity of notifications/circulars that extended statutory time-limits under The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. The petitions were listed with a lead matter for consolidated consideration. Pending adjudication, the Court directed that no further action be taken on the impugned notices/circulars insofar as they relate to the petitioners, and ordered issuance of notice to the respondents including the office of the Attorney General for India. Timelines were fixed for filing of respondents' reply and rejoinder to enable expeditious hearing of the admitted matters. The order is interlocutory and does not decide the merits of the ultra vires challenge to the notifications; it preserves the petitioners' position until the next date. [Paras 3, 4, 5, 6]

Petitions admitted; notice issued; interim restraint placed on taking further action on the impugned notices/circulars against the petitioners; reply and rejoinder timelines fixed.

Final Conclusion: The High Court admitted the petitions challenging the extended time-limits and reopening notices, issued notice to respondents including the Attorney General, and granted interim protection by restraining further action on the impugned notices/circulars until the next date with a timetable for pleadings.

Validity of notice under Section 148 - Prior notice under Section 148A - Effect of amendment to procedural provisions - Delegated legislation cannot alter commencement date of statutory provision - Extension of time-limits by Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 - Stay of operation of assessment notices - Principle of statutory interpretation governing retrospective application of procedural changes

Validity of notice under Section 148 - Prior notice under Section 148A - Effect of amendment to procedural provisions - Principle of statutory interpretation governing retrospective application of procedural changes - Prima facie validity of notices issued under Section 148 where the amended procedural regime (requiring prior notice under Section 148A) had come into force. - HELD THAT: - The Court took a prima facie view that once procedural provisions in the Act have been amended, actions taken thereafter must conform to the new procedures enacted by Parliament. The impugned notices, having been issued without following the procedure introduced by the amended law, were prima facie contrary to the settled rule that post-amendment actions must abide by the amended procedure. On this basis the Court found sufficient grounds to stay the operation of the impugned notices pending further adjudication. The Court treated the matter at the interim stage and did not undertake final adjudication on merits, instead directing pleadings and listing the matter for further hearing.

Interim stay of the operation of the impugned notices dated 09th June, 2021, 30th June, 2020 and 28th June, 2020 on the prima facie ground that the amended procedural regime applies and the notices were issued without following it.

Delegated legislation cannot alter commencement date of statutory provision - Extension of time-limits by Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 - Prima facie validity of the notifications issued by the revenue (the 'Explanation' in the impugned notifications) which purported to continue the application of pre-amended provisions after their statutory commencement date by way of clarification/delegated legislation. - HELD THAT: - The Court expressed a prima facie view that a notification or delegated legislation cannot be employed to vary or change the date of implementation prescribed by Parliament for a statutory provision. While the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 extends certain time-limits, the revenue's explanatory notifications attempting to render the old procedural regime operative beyond the statutory commencement date were prima facie contrary to the rule of statutory interpretation and impermissible as delegated legislation. The Court therefore found cogent grounds to stay reliance on such notifications at the interlocutory stage. The Court recorded that final adjudication would follow after filing of affidavits.

Interim stay of the operation of the impugned explanatory notifications insofar as they are relied upon to sustain the impugned notices, on the prima facie ground that delegated legislation cannot alter the statutory commencement or required procedure.

Final Conclusion: On a prima facie consideration the Court stayed the operation of the impugned Section 148 notices and the explanatory notifications invoked to justify them, directed filing of counter-affidavits and rejoinders, and listed the matters for further hearing on 28th September, 2021.

Stay of reassessment notice issued under Section 148 - applicability of amended reassessment procedure under Section 148A and amended Section 149 - parity of interim relief where identical issue is pending before another High Court

Stay of reassessment notice issued under Section 148 - parity of interim relief where identical issue is pending before another High Court - Interim stay granted on the operation of the notice dated 07.06.2021 issued under Section 148 for AY 2003-2004 and procedural directions issued. - HELD THAT: - The petition challenges the notice dated 07.06.2021 issued under Section 148 for AY 2003-2004. The petitioner contends that reassessment proceedings must conform to the newly inserted provisions of Section 148A and the amendments to Section 149, an issue which is also pending before the Bombay High Court where interim relief has been granted. Having regard to the identity of the question and the pendency of similar proceedings in another High Court, the court considered it appropriate to grant similar interim protection in respect of the impugned notice for AY 2003-2004. Consequently, the court issued notice, directed the respondents to file a counter-affidavit within three weeks (with liberty for rejoinder), and stayed the operation of the impugned notice pending further orders.

Notice issued; counter-affidavit directed; interim stay on operation of the notice dated 07.06.2021 granted; matter listed for further hearing.

Final Conclusion: Interim relief granted: the operation of the reassessment notice dated 07.06.2021 (AY 2003-2004) is stayed; respondents to file counter-affidavit and the matter is listed for further hearing.

Validity of notice issued under section 148 of the Income tax Act - Substitution of income tax provisions by the Finance Act, 2021 and its effect on pre enforcement actions - Constitutional challenge to notifications issued under The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 - Interim stay of action pursuant to reassessment notice

Validity of notice issued under section 148 of the Income tax Act - Substitution of income tax provisions by the Finance Act, 2021 and its effect on pre enforcement actions - Constitutional challenge to notifications issued under The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 - Interim relief in respect of challenge to the impugned notice dated 21/05/2021 and issuance of notice on the petitioners' constitutional and statutory contentions - HELD THAT: - The petitioner challenged the impugned notice dated 21/05/2021 issued purportedly under section 148, contending that provisions of the Income tax Act (notably sections including 147 and 148) had been substituted by the Finance Act, 2021 with effect from 01/04/2021 and that the notice relied upon pre substitution provisions and notifications under The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 which are ultra vires and unconstitutional. The Court recorded the contention and issued notice to the respondents and the Attorney General of India for consideration of those challenges. While the merits of the statutory and constitutional contentions were not adjudicated, the Court granted interim protection by directing that no further action be taken on the impugned notice until the next date, thereby preserving the petitioners' position pending adjudication. The respondents were granted time to file their reply and service was waived by respondents' counsel. [Paras 1, 2, 3, 5]

Notice issued to respondents and Attorney General; respondents granted four weeks to file reply; till the next date (02/08/2021) no further action shall be taken based on the impugned notice.

Final Conclusion: Petition notices issued; interim restraint granted preventing any further action on the reassessment notice dated 21/05/2021 until the next listed date, and respondents directed to file their reply.

Deduction of depreciation under Section 32(1)(ii) of the Income Tax Act as applicable to intangible assets - treatment of non compete fee as an intangible asset eligible for depreciation - disallowance under Section 40(a)(ia) for failure to deduct tax at source on payments - jurisdiction of the Income Tax Appellate Tribunal to adjudicate grounds raised in appeal - binding effect of High Court precedent on identical questions of law

Jurisdiction of the Income Tax Appellate Tribunal to adjudicate grounds raised in appeal - disallowance under Section 40(a)(ia) for failure to deduct tax at source on payments - Whether the learned ITAT exceeded its jurisdiction in entertaining and deciding the question of entitlement to depreciation on the non compete fee when the Assessing Officer had disallowed the payment only on account of non deduction of TDS under Section 40(a)(ia). - HELD THAT: - The Assessing Officer's assessment order recorded disallowance on the ground of non deduction of TDS and did not decide whether the non compete fee qualified as an intangible asset for depreciation. The CIT(A) thereafter directed allowance of depreciation treating the non compete fee as an intangible asset, a direction which the Revenue challenged before the ITAT. The High Court held that since the question whether the non compete fee qualified as an intangible asset was not concluded by the Assessing Officer, the ITAT was entitled to consider and decide that issue as it arose on appeal. Accordingly the ITAT did not exceed jurisdiction in entertaining the question of depreciation on the non compete fee. [Paras 9, 12, 13]

ITAT did not exceed its jurisdiction in deciding the entitlement to depreciation on the non compete fee; the matter was properly open on appeal.

Treatment of non compete fee as an intangible asset eligible for depreciation - deduction of depreciation under Section 32(1)(ii) of the Income Tax Act as applicable to intangible assets - binding effect of High Court precedent on identical questions of law - Whether a non compete fee of the kind paid by the appellant is a depreciable intangible asset under the statutory provision governing depreciation on intangible assets. - HELD THAT: - Applying the reasoning in the High Court's decision in Sharp Business Systems, the Court observed that the species of rights contemplated by the statutory provision (know how, patent, copyright, trademark, license, franchise or similar rights) carry an element of exclusivity enforceable in rem and are ordinarily alienable. A non compete covenant, being personal, time limited and enforceable in personam, does not confer an exclusive proprietary right against the world and therefore does not fall within the ambit of an 'intangible asset' for depreciation under the provision. Although an appeal against Sharp Business Systems is pending in the Supreme Court, no stay of its operation was shown; consequently the High Court considered itself bound to follow that precedent and upheld the ITAT's conclusion disallowing depreciation on the non compete fee. [Paras 14, 15]

Non compete fee does not qualify as a depreciable intangible asset under the statutory provision; depreciation claim on the non compete fee is accordingly not allowable.

Final Conclusion: Delay in filing the appeal was condoned; on merits the appeal was dismissed-the ITAT's conclusion denying depreciation on the non compete fee was upheld and the High Court followed existing High Court precedent; no order as to costs.

Mandate of Rule 28AA for determining TDS withholding rate - certificate under Section 197 for deduction of tax at lower rate or no deduction - judicial review of decision making process/non application of mind - interim continuation of earlier withholding certificate - availability of alternate remedy by way of revision under Section 264 - application of DTAA Article 8 to income from operation of aircraft in international traffic

Mandate of Rule 28AA for determining TDS withholding rate - certificate under Section 197 for deduction of tax at lower rate or no deduction - judicial review of decision making process/non application of mind - Impugned speaking order and certificate were passed without compliance with the mandatory considerations of Rule 28AA and therefore liable to be quashed. - HELD THAT: - The Court examined the Impugned Order and found no record of any computation or reference to the four mandatory parameters set out in Rule 28AA for determining existing and estimated tax liability. Relying on the principle that the Government must follow rules and standards it prescribes, the Court held that a decision making process that omits the mandatory Rule 28AA considerations amounts to non application of mind and is contrary to law. In these circumstances the certificate issued under Section 197 and the speaking order were susceptible to judicial review and had to be set aside for failure to follow the prescribed procedure. [Paras 11, 13]

Impugned speaking order and the certificate dated 02.06.2021 quashed for non compliance with Rule 28AA.

Availability of alternate remedy by way of revision under Section 264 - Existence of an alternate remedy under Section 264 does not preclude writ challenge to a Section 197 certificate where the decision making process is unlawful. - HELD THAT: - The Court followed its prior conclusion in Manpowergroup Services India Pvt. Ltd. that when the decision making process is contrary to law (here, omission to apply mandatory Rule 28AA criteria), the availability of an alternative statutory remedy does not oust the jurisdiction of the writ court to quash the order. Accordingly, the contention that the petitioner should be relegated to a revision petition under Section 264 was rejected. [Paras 15]

Alternate remedy under Section 264 is not a bar to writ jurisdiction in the facts of this case; the petition is maintainable.

Interim continuation of earlier withholding certificate - mandate of Rule 28AA for determining TDS withholding rate - Direction for fresh decision and interim treatment of receipts until a fresh certificate is issued. - HELD THAT: - Having quashed the Impugned Order for procedural infirmity, the Court directed the respondents to pass a fresh order in accordance with law (which necessarily entails application of Rule 28AA). Pending such fresh decision, the Court ordered that the petitioner's receipts shall be governed by the preceding withholding tax certificates at the rate previously applied (0.01%), thereby granting interim protection while reserving the substantive re adjudication to the assessing authority in compliance with the statutory procedure. [Paras 16]

Respondents to pass a fresh order in accordance with law; meanwhile petitioner's receipts to abide by the preceding withholding certificate rate of 0.01% until fresh certificate is issued.

Final Conclusion: The certificate dated 02.06.2021 and the accompanying speaking order are quashed for failure to apply the mandatory Rule 28AA considerations; the petitioner's challenge by way of writ is maintainable notwithstanding the availability of revision under Section 264; respondents to pass a fresh order in accordance with law, and until then the petitioner's receipts shall be governed by the prior withholding certificate at the rate of 0.01%.

Violation of principle of natural justice - Remand for fresh assessment after opportunity of hearing - Withdrawal and deletion of unverified allegations of perjury - Recall of investigative direction

Withdrawal and deletion of unverified allegations of perjury - Recall of investigative direction - Allegations in the respondent's counter-affidavit that the petitioner had prima facie committed offences under the IPC were withdrawn and the earlier direction to the CBI was recalled. - HELD THAT: - The respondent, through its deponent, acknowledged that allegations of perjury and criminality were made without adequate verification. The deponent unconditionally withdrew those specific paragraphs of the counter-affidavit, expressed regret, and undertook greater care in future. On this basis the Court accepted the unconditional apology, ordered deletion of the offending allegations, and recalled the earlier order directing the CBI to enquire into whether the department had issued the disputed email.

The apology was accepted; the allegations of penal offences were deleted and the order directing the CBI enquiry was recalled.

Violation of principle of natural justice - Remand for fresh assessment after opportunity of hearing - The impugned assessment order and notice of demand were passed in violation of the principle of natural justice and therefore set aside, with the matter remanded for fresh determination after affording the petitioner an opportunity of hearing. - HELD THAT: - On instructions, the respondent admitted that the assessment order and notice of demand were issued in breach of natural justice. The Court accepted this admission and concluded that the appropriate remedy was to set aside the impugned orders and remand the matter to the respondent. The remand directs the respondent to pass a fresh assessment order in accordance with law, after giving the petitioner an opportunity to be heard.

Impugned assessment order and notice of demand set aside; matter remanded for fresh assessment after hearing.

Final Conclusion: The Court accepted the respondent's withdrawal of unverified criminal allegations and recalled the CBI inquiry direction; further, on admission of breach of natural justice the assessment order and demand were set aside and the matter remanded for fresh determination after affording the petitioner an opportunity of hearing.

Re-opening of assessment - reason to believe - audit objection as source for re-opening - survey under Section 133A - application of mind - change of opinion - scope of Section 147 within four years - rights to participate in reassessment proceedings - GKN principles on reasons for reopening

Audit objection as source for re-opening - reason to believe - re-opening of assessment - Whether an audit objection (including materials gathered on survey) can be a source for re-opening assessment under Section 147/148. - HELD THAT: - The Court held that Section 147 is triggered when the Assessing Officer 'has reason to believe' that income chargeable to tax has escaped assessment and that the statute does not narrowly restrict the sources from which such reason may arise. Materials originating from departmental processes, including audit objections based on inspections or surveys under Section 133A, may furnish a 'reason to believe' sufficient to initiate proceedings under Section 147/148 provided the materials are such as to give the Assessing Officer a basis to form that belief. The availability of contra-evidence to the assessee does not invalidate the use of audit objections as a source; the assessee is entitled to produce such evidence during reassessment. The Court emphasised the wider scope of re-opening within four years and rejected the submission that audit objections per se cannot be a source for reopening. [Paras 15, 16, 18, 19, 20]

Audit objections, including materials derived from a survey under Section 133A, can validly constitute a source for forming 'reason to believe' and for re-opening assessment under Section 147/148.

Application of mind - change of opinion - GKN principles on reasons for reopening - Whether the impugned re-opening and the order rejecting objections suffer from non-application of mind or amount to impermissible change of opinion. - HELD THAT: - The Court examined the record and found that the Assessing Officer had spelt out reasons for re-opening and had considered the objections filed by the assessee, applying the principles laid down by higher courts including the GKN direction on furnishing reasons. The mere fact that the initiating material was an audit objection did not demonstrate a want of application of mind. The Court observed that where reasons are furnished and objections are dealt with, the appropriate remedy is to participate in the reassessment proceedings rather than to quash the reopening at the interlocutory stage on the ground of change of opinion. [Paras 4, 5, 21, 22]

The disposal rejecting objections did not exhibit non-application of mind nor amount to an impermissible change of opinion; the assessee must contest the merits in reassessment proceedings.

Rights to participate in reassessment proceedings - re-opening of assessment - Whether the writ petition challenging the rejection of objections is maintainable at this stage or the assessee should participate in the reassessment process. - HELD THAT: - The Court held that when reasons have been furnished and objections considered, the assessee has the statutory opportunity to participate in the reassessment process and to ventilate its contentions before the Assessing Officer. The Court noted that the assessing authority had considered the objections and that the proper course for the assessee is to engage in reassessment proceedings and, if aggrieved by the final reassessment order, pursue appropriate remedies. In view of this, the Court declined to interfere by way of writ at the present interlocutory stage. [Paras 11, 12, 21, 23]

The writ petition is not maintainable at this stage to stay or quash the reassessment process; the assessee must participate in reassessment and may seek remedies after completion.

Final Conclusion: The writ petition challenging the rejection of objections to the re-opening was dismissed. The Court held that audit objections (including materials from a Section 133A survey) can furnish 'reason to believe' under Section 147, that the assessing authority had furnished reasons and applied its mind, and that the assessee must participate in the reassessment proceedings; liberty was left to the assessee to defend its case during reassessment.

Reopening assessment under Section 148 of the Income Tax Act - reasons recorded for reopening - disposal of objections by speaking order - obligation to furnish reasons and decide objections as laid down in GKN Driveshaft - borrowed satisfaction - escapement of income

Disposal of objections by speaking order - obligation to furnish reasons and decide objections as laid down in GKN Driveshaft - Whether the order disposing of the objections to the notice under Section 148 is a speaking order in accordance with law - HELD THAT: - The Court examined the order disposing of objections and found that the Assessing Officer did not deal with specific objections raised by the assessee concerning the nature of the transaction with M/s Chetan Enterprises and supporting material produced. Para 6.1 of the disposal order does not reflect application of mind to those objections and is therefore not a reasoned or speaking order. Reliance is placed on the procedure mandated by the Supreme Court in GKN Driveshaft, which requires the Assessing Officer to furnish reasons, entertain objections and dispose of them by a speaking order before proceeding with reassessment. The absence of adequate reasoning amounts to mechanical disposal contrary to that mandate. [Paras 16, 17, 18]

Order disposing of objections dated 04.10.2019 is set aside for failure to record a speaking reasoned disposal and to reflect application of mind.

Reopening assessment under Section 148 of the Income Tax Act - reasons recorded for reopening - escapement of income - borrowed satisfaction - Whether the matter should be remitted to the Assessing Officer for reconsideration in view of defective disposal of objections - HELD THAT: - Having set aside the disposal order, the Court remitted the matter to the Assessing Officer to take into consideration the objections filed by the assessee and to pass a fresh speaking order in accordance with law. The Court expressly refrained from expressing any view on the merits of the reopening (including the questions of genuineness of the transaction, alleged escapement of income, or whether the satisfaction was borrowed), leaving those issues to be decided afresh by the Assessing Officer after proper consideration. The Court imposed a time frame for this exercise and provided that if the fresh order is adverse, the assessee may pursue statutory remedies with a minimum period afforded for that purpose. [Paras 19, 20, 21]

Matter remitted to the Assessing Officer to consider the objections and pass a fresh speaking order within six weeks; no expression of opinion on merits.

Final Conclusion: Writ partly allowed: the order disposing of objections to the notice under Section 148 is quashed for want of a speaking disposal and the matter is remitted to the Assessing Officer to decide the objections afresh and pass a reasoned speaking order within six weeks; the Court makes no adjudication on the merits of reassessment.

Reopening of assessment under section 147/148 on account of retrospective amendment to computation of book profits - retrospective amendment to the provision for computing book profit under Section 115JB to give effect to judicial decision - failure to disclose truly and fully all material facts for assessment - jurisdictional scope for reopening completed assessments where law is subsequently amended

Reopening of assessment under section 147/148 on account of retrospective amendment to computation of book profits - retrospective amendment to the provision for computing book profit under Section 115JB to give effect to judicial decision - jurisdictional scope for reopening completed assessments where law is subsequently amended - Validity of reopening the assessment for AY 2006-2007 on the basis of a retrospective amendment to the computation of book profit under Section 115JB - HELD THAT: - The petitioner's return and the completed assessment for AY 2006-2007 were made in the context of the law as it then stood. The Finance Act, 2009 amended the Explanation to Section 115JB retrospectively to give effect to the Supreme Court decision in HCL Comnet Systems & Services Ltd. Even though the statutory provision was later amended with retrospective effect, the court held that such amendment did not render the Assessing Officer's exercise of jurisdiction under Section 148 valid in the present case. The Assessee had filed returns and the assessment was completed based on the prevailing understanding of law; the later legislative change to give effect to a judicial pronouncement does not itself justify reopening where there was no failure to disclose material facts at the time of filing and assessment was concluded accordingly. Applying the Supreme Court's examination of the Explanation (as set out in the judgment reproduced), the court emphasised that retrospective amendment cannot be used as a ground to reopen an assessment that was completed on bona fide understanding of the law. [Paras 13, 14, 16]

The reopening of assessment for AY 2006-2007 on the basis of the retrospective amendment to Section 115JB is without merit and is quashed.

Failure to disclose truly and fully all material facts for assessment - application of judicial interpretation to facts disclosed in return - Whether the petitioner failed to truly and fully disclose material facts justifying reopening - HELD THAT: - The petitioner filed returns and computed book profits in accordance with the law as it existed when the return was filed and when assessment was completed. The court found that there was a bona fide stand taken by the assessee that the provision for bad and doubtful debts was not includible under Section 115JB as then interpreted, and that the assessment was completed on that basis. Consequently, there was no failure to disclose truly and fully all material facts which would justify invoking Section 147/148. The mere fact that the law was subsequently amended retrospectively does not convert an honest, reasonable position taken at the time into nondisclosure. [Paras 13, 15, 16]

There was no failure to truly and fully disclose material facts; the objection to reopening succeeds and the reopening is impermissible.

Final Conclusion: Writ petition allowed; the impugned order reopening assessment for AY 2006-2007 is set aside as without merit, and connected miscellaneous petition closed.

Power under Section 264 to pass or modify orders after inquiry - Entitlement to deduction under Section 80JJAA despite procedural non compliance - Re assessment under Section 147/Explanation 3 and its effect on substantive benefits - Condonation of delay in filing revised return under Section 139(5) in exercise of Section 264 powers - Requirement of accountant's certificate under Section 80JJAA(2) as directory rather than mandatory for denial of substantive relief

Entitlement to deduction under Section 80JJAA despite procedural non compliance - Requirement of accountant's certificate under Section 80JJAA(2) as directory rather than mandatory for denial of substantive relief - Petitioner entitled to benefit of deduction under Section 80JJAA for Assessment Year 2004-05 notwithstanding delay in filing revised return and non furnishing of the accountant's report with the original return. - HELD THAT: - The Court found that the assessment originally completed and modified by rectification was subsequently put in jeopardy by issue of notice under Section 148 and reassessment proceedings. While sub section (2) of the provision contemplates furnishing an accountant's certificate/report with the return, the denial of substantive benefit on account of such procedural failure would be disproportionate where the assessment itself was reopened by the Revenue. The Court applied the principle that procedural requirements are handmaids of justice and should not defeat substantive rights; revenue officers must act fairly and cannot deny reliefs legitimately due merely on technical grounds. Given that the reassessment proceedings could and should have taken into account benefits available to the assessee, the superior officer in exercise of powers under Section 264 could and ought to condone the delay and permit consideration of the substantive claim. On these grounds the impugned order rejecting the petition under Section 264 was set aside and the petitioner was held entitled to the claimed deduction subject to adjudication on merits by the assessing authority. [Paras 28, 31, 33, 34, 35]

Impugned order under Section 264 rejecting the application was set aside; delay in filing the return is condoned and the petitioner is entitled to the benefit of Section 80JJAA, with the assessing authority directed to decide the claim on merits ignoring the delay and failure to furnish the accountant's report.

Power under Section 264 to pass or modify orders after inquiry - Re assessment under Section 147/Explanation 3 and its effect on substantive benefits - Condonation of delay in filing revised return under Section 139(5) in exercise of Section 264 powers - Appropriate exercise of Section 264 powers to condone delay and remit the matter to the assessing officer for fresh speaking orders on merits. - HELD THAT: - The Court held that Section 264 confers broader powers on the Commissioner to pass such orders as he thinks fit after inquiry, and those powers can be invoked to remedy situations where substantive benefits have been denied on procedural grounds occasioned or rendered irrelevant by subsequent reassessment. Given the reassessment under Section 147/Explanation 3 placed the assessment in jeopardy, the Commissioner ought to have exercised Section 264 to allow the petitioner to claim the substantive deduction despite the lapse of the period for filing a revised return under Section 139(5). Accordingly, the Court set aside the order passed under Section 264 and directed the assessing officer to pass a speaking order within three months, hearing the petitioner, and deciding the claim on merits while ignoring the delay and non furnishing of the accountant's report. [Paras 27, 29, 30, 34, 35]

Order under Section 264 set aside; matter remitted to the 2nd respondent to pass a fresh speaking order on merits within three months, condoning the delay and directing hearing of the petitioner.

Final Conclusion: Writ petition allowed in part: the impugned order dated 26.03.2008 under Section 264 for Assessment Year 2004-05 is set aside; delay in filing the return and failure to furnish the accountant's report are condoned for purposes of adjudicating the Section 80JJAA claim, and the assessing officer is directed to pass a speaking order on merits within three months after hearing the petitioner.

Genuineness, identity and creditworthiness of creditors and advance holders - confirmations obtained under section 133(6) of the Income tax Act - bank confirmation establishing credit balance in current account - evidentiary sufficiency of director's explanation for stock/shortage - vouchers and documentary proof establishing discounts and expenses

Genuineness, identity and creditworthiness of creditors and advance holders - confirmations obtained under section 133(6) of the Income tax Act - Addition of Rs. 1,28,02,536 as sundry creditors upheld by the Assessing Officer and CIT(A). - HELD THAT: - The assessee furnished complete addresses and PANs for the sundry creditors during remand proceedings, and the Assessing Officer obtained confirmations directly from those creditors along with their ITR details. The Tribunal found that identity and creditworthiness were thereby established and that the assessee demonstrated the genuineness of the creditors. The CIT(A)'s confirmation of the addition was held to be contrary to the evidentiary material on record. [Paras 7]

Addition disallowed and Ground No.1 allowed.

Genuineness, identity and creditworthiness of creditors and advance holders - confirmations obtained under section 133(6) of the Income tax Act - Addition of Rs. 24,13,787 as advances from customers under section 68. - HELD THAT: - The remand report did not dispute the confirmations received from customers; the Assessing Officer acknowledged the materials relevant to genuineness, identity and source of funds. The Tribunal held that the assessee had filed documents establishing these three factors and that the CIT(A) erred in disregarding that evidence when confirming the addition. [Paras 8]

Addition disallowed and Ground No.2 allowed.

Bank confirmation establishing credit balance in current account - Addition of Rs. 19,78,909 as credit balance in ICICI Bank current account. - HELD THAT: - The bank had confirmed the credit balance by letter and the Assessing Officer recorded the same in his remand report dated 18/7/2012. On that basis the Tribunal held that the credit balance was established by proper evidence and the addition was not sustainable. [Paras 9]

Addition disallowed and Ground No.3 allowed.

Evidentiary sufficiency of director's explanation for stock/shortage - Addition of Rs. 13,89,000 on account of gold shortage. - HELD THAT: - The assessee furnished details of gold transactions and the director's clarifications, and the Assessing Officer did not dispute these in the remand report dated 16/7/2012. The Tribunal observed that the CIT(A)'s finding was contrary to the evidences on record and accepted the explanations produced by the assessee. [Paras 10]

Addition disallowed and Ground No.4 allowed.

Vouchers and documentary proof establishing discounts and expenses - Disallowance of Rs. 5,67,287 as discount. - HELD THAT: - The assessee produced evidences and the director's clarifications which were not disputed by the Assessing Officer in the remand report. The Tribunal held that the documentary material sufficed to establish the discount claimed and the disallowance could not be sustained. [Paras 11]

Disallowance set aside and Ground No.5 allowed.

Vouchers and documentary proof establishing discounts and expenses - Disallowance of Rs. 3,13,682 out of expenses claimed. - HELD THAT: - Vouchers for the expenses for A.Y. 2007-08 were produced before the authorities and the director's explanations were accepted in the remand proceedings. The Tribunal held that the assessee had established the expenses by documentary proof and therefore the disallowance was not sustainable. [Paras 11]

Disallowance set aside and Ground No.6 allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal in full, setting aside the additions and disallowances challenged in Grounds Nos.1 to 6 for A.Y. 2007-08, on the basis that identity, genuineness, creditworthiness and source of funds were established by confirmations, bank letter, director's explanations and vouchers produced during remand proceedings.

Deduction under section 80IB(10) - proportionate deduction for eligible units within a composite housing project - completion certificate as proof of project/unit completion - time limit for completion measured from date of sanction/approval

Deduction under section 80IB(10) - completion certificate as proof of project/unit completion - proportionate deduction for eligible units within a composite housing project - Whether the assessee was entitled to deduction under section 80IB(10) in respect of sale of Flat No. 002 in 'B' Wing (and two flats in 'A' Wing) despite CIT(A)'s denial for the 'B' Wing flat. - HELD THAT: - The Tribunal found on the record that the Pune Municipal Corporation approved the project as two wings and issued Completion Certificate Part 1 dated 23 03 2011 covering the flats in question, including Flat No. 002 in 'B' Wing. The AO denied deduction on the ground that the project was not completed within five years from sanction; however, the completion certificate for the specific flats was on record and the Revenue did not produce any contrary evidence. The Tribunal further relied on its earlier decision in the assessee's own case for AY 2012 13 and on precedent permitting pro rata deduction for eligible units in a composite housing project, concluding that eligible units covered by the completion certificate are entitled to proportionate deduction. Applying that principle, the Tribunal held the assessee entitled to claim deduction under section 80IB(10) in respect of Flat Nos. 904 and 1001 in 'A' Wing and Flat No. 002 in 'B' Wing. [Paras 4, 5, 6]

Assessee entitled to deduction under section 80IB(10) for the specified flats; CIT(A)'s denial in respect of Flat No. 002 in 'B' Wing set aside and appeal allowed.

Final Conclusion: The ITAT allowed the assessee's appeal for AY 2014 15, holding that the flats covered by the Completion Certificate Part 1 are eligible for proportionate deduction under section 80IB(10), and directed grant of deduction for the three specified flats.

Revision under section 263 - Principles of natural justice - opportunity of hearing - Remand for fresh decision - Assessment under section 143(3) - Anonymous donations and application of section 115BBC - Exemption under section 11 and obligation under section 13(7) - Assessment of unexplained deposits under section 68 - Charging of interest under sections 234A and 234B

Revision under section 263 - Principles of natural justice - opportunity of hearing - Validity of the revision order passed by the Commissioner under section 263 where the assessee was not given an effective opportunity of hearing - HELD THAT: - The Tribunal found that although a show-cause notice dated 21.02.2018 fixing hearing on 28.02.2018 was issued, no further notice was given and the impugned revision order was passed ex parte on the same date when the assessee did not appear. The Tribunal held that effective and proper opportunity of hearing is a condition precedent before finalising an order under section 263 and, on the facts, the assessee was not afforded such opportunity. For these reasons the Tribunal concluded that the ex parte revision order was procedurally infirm and could not stand. [Paras 6]

Impugned order under section 263 set aside for want of effective opportunity of hearing; matter remanded for fresh decision after giving appropriate opportunity to the assessee.

Remand for fresh decision - Revision under section 263 - Assessment under section 143(3) - Anonymous donations and application of section 115BBC - Exemption under section 11 and obligation under section 13(7) - Assessment of unexplained deposits under section 68 - Charging of interest under sections 234A and 234B - Scope of reconsideration on remand and treatment of objections not previously considered by the Commissioner - HELD THAT: - Because the revision order was set aside as having been passed ex parte, the Tribunal did not decide the substantive merits of the Commissioner's contentions (including whether the AO failed to apply section 13(7), whether anonymous donations warranted charge under section 115BBC or section 68, or whether interest under sections 234A/234B should have been levied). The Tribunal directed that these objections, and any contention that jurisdiction under section 263 was improperly invoked, may be raised before and considered afresh by the Commissioner in the set-aside proceedings after the assessee is given an effective hearing. [Paras 6]

Matter remanded to the Commissioner for fresh adjudication on the issues identified in the revision proceedings after affording the assessee an appropriate opportunity of hearing; objections on jurisdiction may be raised and decided afresh.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes by setting aside the ex parte revision order dated 28.02.2018 passed under section 263 for want of effective hearing and remitted the matter to the Commissioner for fresh consideration after giving the assessee an appropriate opportunity to be heard; substantive objections may be raised and adjudicated in the set-aside proceedings.

Validity of reassessment in absence of notice under section 143(2) - Issuance and service of notice as a jurisdictional requirement for reassessment - Section 292BB deeming fiction and its limits - Effect of assessee's participation on jurisdictional defects - Admissibility of additional ground before the Commissioner (Appeals)

Validity of reassessment in absence of notice under section 143(2) - Issuance and service of notice as a jurisdictional requirement for reassessment - Reassessment completed under section 143(3) read with section 147 is without jurisdiction and liable to be annulled where no notice under section 143(2) was issued and served. - HELD THAT: - The Tribunal found on the materials (proceedings sheet and assessment order) that there was no evidence of a valid issuance and service of notice under section 143(2) prior to completion of reassessment. A notice purportedly recorded as issued on 29.03.2012 could not sustain the reassessment because there was no return before the Assessing Officer at that time and the records were internally contradictory. The Tribunal endorsed the CIT(A)'s conclusion that issuance and service of notice under section 143(2) is a foundational, jurisdictional requirement for framing assessment under section 143(3) r.w.s. 147, and in its absence the reassessment order is without legal sanctity. The Tribunal accordingly declined to interfere with the CIT(A)'s annulment of the reassessment order. [Paras 7, 9, 10]

Impugned reassessment order quashed for want of issuance and service of notice under section 143(2); appeal dismissed.

Section 292BB deeming fiction and its limits - Section 292BB cannot cure the jurisdictional defect arising from non-issuance/non-service of notice under section 143(2) in reassessment proceedings. - HELD THAT: - The Tribunal agreed with the CIT(A) and cited judicial precedents that the deeming fiction under section 292BB operates only in limited circumstances and does not validate an assessment where the mandatory notice under section 143(2) was not issued before finalising reassessment. The Tribunal observed that service or mere participation by the assessee does not retrospectively confer jurisdiction where statutory issuance/service of the notice is absent, and therefore section 292BB could not be availed by the revenue to save the reassessment. [Paras 9]

Section 292BB held inapplicable to cure non-issuance/non-service of section 143(2) notice; reassessment invalid.

Admissibility of additional ground before the Commissioner (Appeals) - Admission of the assessee's additional ground before the CIT(A) challenging non-issuance of section 143(2) notice was proper. - HELD THAT: - The Tribunal sustained the CIT(A)'s exercise of admitting the additional ground because it raised an important question of law and the appellate proceedings are a continuation of assessment proceedings; the ground could require reference to some facts but was not barred from admission. The Tribunal found no infirmity in the CIT(A)'s decision to entertain the ground and decide the jurisdictional issue. [Paras 8]

Admission of the additional ground by the CIT(A) upheld.

Effect of assessee's participation on jurisdictional defects - Assessee's participation in reassessment proceedings does not cure absence of jurisdiction when mandatory notice under section 143(2) was not issued and served. - HELD THAT: - While acknowledging that the assessee participated in the reassessment, the Tribunal rejected the revenue's contention that such participation validates the reassessment. The Tribunal held that participation cannot supply the foundational requirement of issuance/service of the statutory notice which alone confers jurisdiction; thus cooperation by the assessee cannot cure the legal defect in assumption of jurisdiction. [Paras 8, 9]

Assessee's participation does not validate reassessment lacking a section 143(2) notice.

Final Conclusion: The CIT(A)'s annulment of the reassessment was affirmed: the reassessment under section 143(3) r.w.s. 147 for AY 2007-08 is quashed for want of issuance/service of notice under section 143(2); section 292BB does not cure that defect; admission of the additional ground before the CIT(A) was proper; the revenue's appeal is dismissed.

Classification of goods by essential character - advance ruling - continuation of transferred application under section 28F(3) - binding effect of an advance ruling on the Principal Commissioner/Commissioner and subordinate customs authorities - single port/point of import contemplated by the advance-ruling scheme - legitimate expectation / promissory estoppel in advance-ruling proceedings

Advance ruling - continuation of transferred application under section 28F(3) - legitimate expectation / promissory estoppel in advance-ruling proceedings - Whether the application filed before the erstwhile AAR on 26.12.2017 had lapsed on account of non-disposal within the prescribed period, or whether the transferred proceedings before CAAR should be treated as a continuation of the earlier proceedings. - HELD THAT: - The Authority examined the statutory scheme governing advance rulings, the transitional provisions effecting transfer of pending applications to the Customs Authority for Advance Rulings, and the consequences of delay in disposal. Although an earlier view treated applications where no ruling was rendered within the statutory time-limit as lapsed, on reconsideration the Authority declined to adopt a restrictive approach that would penalise an applicant for administrative delay. The definition of "advance ruling" contemplates a decision in respect of goods prior to importation; therefore, where an application was filed with the erstwhile AAR and transferred to CAAR, the proceedings will be deemed a continuation of the earlier proceedings rather than a fresh application, so that the applicant remains entitled to receive an advance ruling in respect of goods imported after filing the application. The Authority accordingly treated the transferred application as continuing proceedings and not as a new application. [Paras 6]

The transferred application is deemed a continuation of the earlier proceedings and not a fresh application; the applicant remains eligible to receive an advance ruling despite imports made after filing the original application.

Single port/point of import contemplated by the advance-ruling scheme - binding effect of an advance ruling on the Principal Commissioner/Commissioner and subordinate customs authorities - Whether an applicant may indicate multiple ports/points of import in an advance-ruling application. - HELD THAT: - Reading the provisions that require forwarding the application to the Principal Commissioner/Commissioner and making the advance ruling binding on that office and its subordinates together with the statutory requirement of a three-month disposal period, the Authority concluded that the legislative scheme contemplates identification of a specific port/point of entry rather than multiple ports. The use of the definite article and the practical difficulties in obtaining and reconciling comments from multiple Principal Commissioners/Commissioners within the prescribed time support this interpretation. Notwithstanding this view, given the transferred nature of the present application and that comments from four of the five cited commissionerates were on record, the Authority did not pursue the objection in the present proceedings. [Paras 7]

The advance-ruling scheme contemplates a single specified port/point of import; however, the objection was not pressed in these transferred proceedings because requisite commissionerate comments were already available.

Classification of goods by essential character - classification under Customs Tariff Heading 8517.62.90 - Classification of Apple HomePod under the First Schedule to the Customs Tariff Act. - HELD THAT: - The Authority analysed the product's technical features and primary functions: ability to receive voice commands, convert voice to text, process and retrieve information from the internet, regenerate audio/speech, stream music via Wi Fi/Bluetooth or from another device, and perform home automation control via a digital assistant. These multifunctional attributes distinguish the device from a mere loudspeaker and show it to be a convergence device that receives, converts and regenerates voice or other data. Applying the essential-character approach and the descriptions in heading 8517 and subheading 8517.62 (machines for reception, conversion and transmission or regeneration of voice, images or other data), the Authority found the HomePod to fall within the residuary sub heading 8517.62.90. [Paras 11]

Apple HomePod is classifiable under sub-heading 8517.62.90 of the First Schedule to the Customs Tariff Act, 1975.

Final Conclusion: The Customs Authority for Advance Rulings treated the transferred application as a continuation of the earlier proceedings and, on merits, held that the Apple HomePod, by reason of its essential character as a device that receives, converts and regenerates voice and other data, is classifiable under sub-heading 8517.62.90; the Authority further observed that the advance ruling scheme contemplates specification of a single port of import, but did not press that objection in these transferred proceedings.

Proper officer - jurisdiction to issue show cause notice - reopening/reassessment under Section 28 - availability of alternative statutory remedy vs. discretionary writ relief - res judicata in taxation/assessment proceedings - setting aside assessment proceedings for lack of jurisdiction

Proper officer - jurisdiction to issue show cause notice - setting aside assessment proceedings for lack of jurisdiction - Order in Original dated 27.02.2017 set aside as having been passed pursuant to a show cause notice issued by an officer who was not 'the proper officer'. - HELD THAT: - Applying the law laid down by the Supreme Court in M/s. Canon India Private Limited (Civil Appeal No.1827/2018 and connected matters), the court held that Section 28(4) confers the power of reopening/recovery only on 'the proper officer' - meaning the officer who did the assessment, his successor or an officer specifically entrusted with assessment functions under Section 6. Notifications issued under Section 2(34) by the Board do not suffice to entrust adjudicatory functions and cannot convert an officer of the DRI into 'the proper officer'. The show cause notice dated 07.01.2008 was issued by the Additional Director General, DRI, an officer who had not been validly entrusted with the functions of a customs proper officer; consequently the proceedings initiated thereunder and the consequential Order in Original are invalid and liable to be set aside. The court declined to re open or revisit the correctness of Canon India, treating its ratio as binding and directly applicable to the facts of these petitions. [Paras 22, 26]

Order in Original Sl.No.BLR CUSTM AIR 003/16 17 dated 27.02.2017 set aside as based on a show cause notice not issued by 'the proper officer'.

Availability of alternative statutory remedy vs. discretionary writ relief - res judicata in taxation/assessment proceedings - Petitions entertained despite availability of statutory appeal and objections of res judicata and suppression; petitioners not relegated to statutory remedy in view of lack of jurisdiction of issuing officer and distinct nature of prior litigation. - HELD THAT: - The court observed that entertainment of a writ petition despite an alternative statutory remedy is discretionary and permitted where proceedings are wholly without jurisdiction. The question whether officers of DRI were 'proper officers' went to the root of jurisdiction and, in light of Canon India, required no fresh adjudication; hence relegation to appeal was inappropriate. On res judicata, the court distinguished the earlier litigation (which concerned tariff/classification and mis declaration of alcohol content) from the present proceedings (which relate to valuation/undervaluation), and accepted that assessment proceedings for different periods constitute separate adjudications; therefore earlier decisions did not preclude the present challenge. Allegations of suppression or misconduct were rejected as a bar to discretionary relief since they pertained to different rounds and would impermissibly prejudice issues still pending adjudication.

Objections based on alternative remedy, res judicata and suppression of facts rejected; writ petitions entertained on merits in view of lack of jurisdiction to initiate the proceedings.

Reopening/reassessment under Section 28 - setting aside assessment proceedings for lack of jurisdiction - Authorities are at liberty to initiate fresh proceedings in accordance with law after setting aside the impugned proceedings. - HELD THAT: - Having set aside the impugned Order in Original on jurisdictional grounds, the court made clear that the decision nullifies only the proceedings founded on the invalid show cause notice; it did not preclude the revenue from initiating fresh proceedings compliant with statutory requirements and entrustment of functions. The court refused to keep its order in abeyance despite the respondents' request, noting that Canon India is binding law. [Paras 26]

Proceedings set aside on jurisdictional ground; authorities permitted to commence fresh proceedings as per law.

Final Conclusion: Writ petitions allowed; the Order in Original dated 27.02.2017 is set aside because the show cause notice of 07.01.2008 was not issued by 'the proper officer' as required under Section 28; the revenue is free to initiate fresh proceedings in accordance with law.

Restoration of company name under Section 252 - Striking off from Register under Section 248(5) - Requirement to demonstrate company was carrying on business or in operation - Discretionary scope of 'or otherwise' in Section 252 limited where company was not in operation - Obligation to file financial statements and income tax returns as indicia of operation - Irrelevance of post strike off documents for restoration

Striking off from Register under Section 248(5) - Restoration of company name under Section 252 - Validity of the Registrar's action in striking off the company's name and whether restoration under Section 252 should be ordered - HELD THAT: - The Tribunal examined the material placed by the appellant and the RoC's records and found that the company had not filed financial statements since incorporation and that balance sheets annexed for earlier years showed nil revenue for multiple years. The NCLAT precedent was applied to the effect that the Tribunal's power to restore under Section 252 depends on satisfaction that the company was carrying on business or was in operation, or that it is otherwise just to restore; the 'or otherwise' limb cannot be used to permit restoration where there is a specific finding that the company was not in operation. Applying these principles, and noting the absence of satisfactory evidence of business activity at the time of striking off, the Tribunal declined to exercise restorative jurisdiction and upheld the strike off. [Paras 8, 12, 13, 14]

The Registrar's action in striking off is not interfered with; restoration under Section 252 is refused.

Requirement to demonstrate company was carrying on business or in operation - Obligation to file financial statements and income tax returns as indicia of operation - Whether the appellant established that the company was carrying on business or in operation at the relevant time - HELD THAT: - The Tribunal found that the appellant failed to produce financial statements for the period required and that the balance sheets on record for earlier years showed 'NIL' revenue for the financial years indicated. The company also did not produce any income tax returns for the assessment years, despite the statutory obligation to file returns. The alleged 2016 17 transactions were not supported by an auditor's report and bank statement entries did not appear to arise from business operations. On this basis the appellant did not discharge the burden to show the company was in operation when struck off. [Paras 8, 9, 10, 12]

The appellant has failed to establish that the company was carrying on business or in operation at the relevant time.

Irrelevance of post strike off documents for restoration - Restoration of company name under Section 252 - Admissibility and relevance of documents dated after the strike off for the purpose of restoration - HELD THAT: - The Tribunal held that documents and registrations obtained after the company was struck off (specifically the 2017 18 balance sheet and the GST certificate dated 17.07.2018) pertain to the post strike off period and therefore have no relevance in establishing the company's status at the time its name was removed from the register. Restoration cannot be predicated on evidence arising after the impugned striking off. [Paras 11]

Post strike off documents are irrelevant for deciding restoration and cannot support the appellant's claim.

Discretionary scope of 'or otherwise' in Section 252 limited and not to permit arbitrary restoration - Whether the Tribunal may invoke the 'or otherwise' limb of Section 252 to order restoration despite absence of proof of operation - HELD THAT: - Relying on the NCLAT decision, the Tribunal observed that the legislative phrase 'or otherwise' equips the Tribunal to order restoration in situations where it would be just and fair, but it does not permit arbitrary exercise of power to restore companies that were not in operation or were non compliant, such as shell entities or those used for siphoning funds or evading tax. Given the findings that the company was not shown to be in operation and had statutory non compliances, the discretionary limb could not be invoked to justify restoration. [Paras 13]

The 'or otherwise' discretion in Section 252 cannot be employed to order restoration where the company was not in operation; it does not justify restoration in this case.

Final Conclusion: The appeal is dismissed and the Registrar's action of striking off the company's name is upheld; restoration under Section 252 is refused.

Power of Tribunal to direct calling of annual general meeting under Section 97 of the Companies Act, 2013 - Mandatory obligation to hold annual general meeting under Section 96 of the Companies Act, 2013 - Effect of suspension/extension of limitation on execution of orders - Compliance with statutory circulars permitting conduct of AGMs through video conferencing - Execution of tribunal orders and contempt for non-compliance

Mandatory obligation to hold annual general meeting under Section 96 of the Companies Act, 2013 - Power of Tribunal to direct calling of annual general meeting under Section 97 of the Companies Act, 2013 - Respondent directors' obligation to comply with the Tribunal's order dated 19.03.2020 directing convening of the AGM - HELD THAT: - The Tribunal recorded that respondent directors did not deny the mandatory obligation of the company to hold its AGM within the prescribed period and had not complied with the earlier direction to convene the AGM. In view of the statutory mandate under Section 96 and the Tribunal's power under Section 97 to call or direct calling of an AGM and give ancillary directions, the Tribunal held the earlier order valid and enforceable and emphasised that the order is executable from the date of its passing. The Tribunal therefore found non-compliance to be unjustified and contemptuous in the absence of any persuasive cause preventing appeal or implementation. [Paras 6, 7, 10]

The earlier directions to convene, hold and conduct the AGM remain binding and the respondents cannot avoid execution of the Tribunal's order dated 19.03.2020.

Effect of suspension/extension of limitation on execution of orders - Execution of tribunal orders and contempt for non-compliance - Whether respondents could defer execution of the Tribunal's order on the ground that the period of limitation for filing an appeal was extended due to COVID-19 - HELD THAT: - The respondents relied on the Supreme Court's orders extending limitation periods during the COVID-19 pandemic and contended that until expiry of the limitation period no execution/compliance proceedings were maintainable. The Tribunal observed that courts and tribunals resumed functioning (including by virtual mode) after Unlock measures and that the respondents were able to file applications before the Tribunal, which undermined their claim of inability to appeal. The Tribunal held that the extension of limitation does not suspend the enforceability of an order; an order is executable from the date of its passing and a party aggrieved by the order must seek appropriate remedies without using the limitation extension as a licence to disobey the order. The respondents' conduct in not complying for over a year was held to be not bonafide. [Paras 8, 9, 10]

The plea that extension of limitation prevents execution or contempt proceedings is unacceptable; respondents must comply with the Tribunal's order and cannot lawfully defer implementation on that ground.

Compliance with statutory circulars permitting conduct of AGMs through video conferencing - Power of Tribunal to give ancillary or consequential directions under Section 97 - Mode and timeline for compliance with the Tribunal's direction to hold the AGM - HELD THAT: - Having found non-compliance unjustified but taking the facts of the case into account, the Tribunal granted a limited opportunity for implementation. It noted that the Ministry of Corporate Affairs had issued circulars enabling holding AGMs through video conferencing or other audio-visual means and that such modes are available to ensure statutory compliance despite COVID-related concerns. Accordingly, the Tribunal directed that the respondents shall convene and hold the AGM within 30 days from receipt of the present order, either physically or through video conferencing/other audio visual means in accordance with MCA circulars, and file a compliance report before the next date of hearing. [Paras 11, 12]

Respondents are directed to convene and conduct the AGM within 30 days of receipt of this order, by physical or virtual means as per MCA circulars, and file compliance report.

Final Conclusion: The Tribunal refused to accept respondents' contention that limitation extension precluded execution of its prior order; holding non-compliance to be unjustified, it directed the respondents to convene and hold the AGM within 30 days of receipt of this order (physically or via video conferencing in terms of MCA circulars) and to file a compliance report, and listed the matter for further hearing.

Financial Debt - Financial Creditor - Financial Contract as required by Rule 3(1)(d) of the Insolvency Rules - admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 and initiation of CIRP - record of default / evidence of default under Section 7(3)(a) - duty of the adjudicating authority to investigate the real nature of the transaction - oral agreement and enforceability under general contract law

Financial Debt - Financial Contract as required by Rule 3(1)(d) of the Insolvency Rules - oral agreement and enforceability under general contract law - Whether the transactions between the parties constitute a Financial Debt - HELD THAT: - The Tribunal accepted that the Financial Creditor disbursed the amount to the Corporate Debtor (bank transfers proved). However, mere disbursal and an undisputed payment of interest (with TDS deducted) does not, by itself, establish that the transaction was a Financial Debt. The Rules require a 'Financial Contract' as set out in Rule 3(1)(d) to record terms such as tenure, interest payable and date of repayment. In the absence of any written financial contract or documentary terms evidencing the time-value-of-money character and repayment terms, and having regard to the IBC as a complete code (with overriding effect under Section 238), the Tribunal held that the Financial Creditor failed to establish that the transaction was a Financial Debt. Reliance on general principles of contract law or on oral agreement was insufficient to cure the lack of a financial contract under the insolvency regime. [Paras 14, 16, 18, 21, 22]

Transaction does not qualify as a Financial Debt because the Financial Creditor failed to produce a Financial Contract setting out requisite terms and the payment of interest/TDS alone is insufficient to establish financial debt.

Record of default / evidence of default under Section 7(3)(a) - admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 and initiation of CIRP - duty of the adjudicating authority to investigate the real nature of the transaction - Whether the Financial Creditor established that the debt became due and payable and that the Corporate Debtor committed a default so as to justify admission under Section 7 - HELD THAT: - The Financial Creditor did not furnish any clear documentary record specifying when the debt became due or a record of default as required to accompany a Section 7 application. The demand notice and the application were vague as to the date on which the loan and interest became due. Given the absence of a written financial contract specifying tenure and repayment dates, and the failure to produce specified evidence of default, the Adjudicating Authority could not be satisfied of a committed default. Further, the Tribunal emphasised the adjudicating authority's duty to scrutinise the real nature of transactions to prevent misuse of the insolvency process and to protect corporate debtors from mala fide initiation; on the material before it the Tribunal found that the Adjudicating Authority had erred in admitting the Section 7 application. [Paras 24, 25, 26, 29, 33]

The Financial Creditor failed to establish that the debt was due and payable and that default had occurred; admission under Section 7 was therefore unsustainable.

Final Conclusion: The impugned order admitting the Section 7 application and initiating CIRP was set aside: the Section 7 application is dismissed, the orders appointing the IRP and consequent actions are declared illegal and set aside, the corporate debtor is released to function through its board, and the Adjudicating Authority is directed to fix and regulate payment of the IRP/RP fees in accordance with the IBC and Regulations.

Section 18 of the A.P. Societies Registration Act, 2001 - repeal and savings under Section 32 of the A.P. Societies Registration Act, 2001 - application clause of Section 2 of the Insolvency and Bankruptcy Code, 2016 - definition of "corporate person" under Section 3(7) of the Insolvency and Bankruptcy Code, 2016 - requirement of incorporation with limited liability for coverage under the I&B Code

Repeal and savings under Section 32 of the A.P. Societies Registration Act, 2001 - Section 18 of the A.P. Societies Registration Act, 2001 - Effect of repeal and savings under the A.P. Act and whether societies registered earlier under the Societies Registration Act, 1860 are to be treated as deemed registered under the A.P. Act and thereby rendered a body corporate under Section 18. - HELD THAT: - The Court accepted that by Section 32(2) of the A.P. Act acts done under the 1860 Act are to be deemed as done under the A.P. Act and noted authority holding that registration under the earlier enactment is treated as registration under the A.P. Act. It further observed that Section 18 of the A.P. Act expressly renders a society registered under that Act a "body corporate" with perpetual succession, common seal and capacity to acquire, hold and dispose of property and to institute and defend suits, i.e., conferring legal capacities and procedural standing. However, the Court emphasized that Section 18 creates this corporate status for the purposes specified in the A.P. Act and does not equate the society to a company incorporated under company law or by itself make it a person "incorporated with limited liability." The determinative conclusion was that even if the societies are to be treated as deemed registered under the A.P. Act and thereby conferred the status described in Section 18, that status is for the limited statutory purposes articulated in the A.P. Act and does not ipso facto satisfy the prerequisites of incorporation with limited liability required for certain classifications under the I&B Code. [Paras 6, 14, 18, 31]

Societies originally registered under the 1860 Act may be deemed registered under the A.P. Act by virtue of Section 32(2), and Section 18 confers upon such societies the statutory status and capacities described therein, but that status is confined to the purposes of the A.P. Act and does not by itself constitute incorporation with limited liability.

Application clause of Section 2 of the Insolvency and Bankruptcy Code, 2016 - definition of "corporate person" under Section 3(7) of the Insolvency and Bankruptcy Code, 2016 - requirement of incorporation with limited liability for coverage under the I&B Code - Whether societies rendered a body corporate under Section 18 of the A.P. Act fall within the scope of the I&B Code as "corporate persons" or otherwise as entities covered by Section 2 and Section 3(7). - HELD THAT: - The Court examined Section 2 of the I&B Code which enumerates classes of entities to which the Code applies and Section 3(7) which defines a "corporate person" as companies under company law, LLPs, or "any other person incorporated with limited liability under any law for the time being in force." The Court held that the Respondent societies are not companies within the meaning of company law nor LLPs, and nothing showed that they are "incorporated with limited liability." Further, Section 2(d) requires the Central Government to specify by notification any other body incorporated under any law for the Code to apply; no such notification was shown. Read as a whole, the statutory scheme indicates that the Code applies to entities that satisfy incorporation-with-limited-liability criteria or otherwise fall within the express categories of Section 2. The Court therefore rejected the contention that the statutory conferment of body corporate status under the A.P. Act is sufficient to bring such societies within the definition of "corporate person" under Section 3(7) or within the applicability clause of Section 2 absent incorporation with limited liability or a Central Government notification. [Paras 19, 20, 21, 32]

Societies rendered body corporate under Section 18 of the A.P. Act do not qualify as "corporate persons" under Section 3(7) of the I&B Code, nor do they fall within Section 2's application of the Code, because they are not persons "incorporated with limited liability" and no Central Government notification has specified them as covered entities; consequently the I&B Code does not apply to them.

Final Conclusion: The appeals are dismissed. The Appellate Tribunal affirmed that the respondent societies are not "corporate persons" for the purpose of the Insolvency and Bankruptcy Code, 2016: the statutory status conferred by Section 18 of the A.P. Act is limited to the purposes of that Act and does not satisfy the I&B Code's requirement of incorporation with limited liability or the express categories in Section 2; accordingly the petitions under Section 7 were not maintainable and both appeals fail. No order as to costs.

Liquidation as consequence of expiry of the corporate insolvency resolution process - adherence to timelines fixed by the adjudicating authority in CIRP and effect of unilateral extension - maximisation of value of the corporate debtor vis-a -vis the statutory timeframe under the IBC - discretion of the adjudicating authority whether to pass liquidation order despite non-compliance with timeline - role and decision-making of the Committee of Creditors in approval of a resolution plan - judicial interference with commercial/administrative discretion where resolution plan is under consideration

Liquidation as consequence of expiry of the corporate insolvency resolution process - adherence to timelines fixed by the adjudicating authority in CIRP and effect of unilateral extension - maximisation of value of the corporate debtor vis-a -vis the statutory timeframe under the IBC - Whether non-adherence by the Resolution Professional and majority members of the Committee of Creditors to the timetable prescribed by the Adjudicating Authority entitled the Adjudicating Authority to pass an order of liquidation. - HELD THAT: - The Tribunal recorded strong disapproval of the RP and majority COC members for not following the timelines set out in the Adjudicating Authority's order of 16.03.2021 and for effectively extending the decision-date unilaterally, but held that such breach, although deprecated, did not mandate immediate liquidation. The Tribunal accepted the Adjudicating Authority's view that maximisation of value cannot be pursued at the cost of the statutory timeframe; nevertheless, where voting on the resolution plan had already occurred and a decision-process was in motion, the Adjudicating Authority exercised its discretion to refrain from directing liquidation at that stage. The Tribunal declined to substitute its view for that discretionary conclusion, noting liquidation is a last resort and the IBC's objective of value maximisation must be balanced with prescribed time limits. [Paras 13, 14, 15, 16, 17]

Breach of the timetable by RP and COC was deprecated but was not held to require immediate liquidation; the Adjudicating Authority's decision not to order liquidation was sustained.

Role and decision-making of the Committee of Creditors in approval of a resolution plan - discretion of the adjudicating authority whether to pass liquidation order despite non-compliance with timeline - judicial interference with commercial/administrative discretion where resolution plan is under consideration - Whether the Appellate Tribunal should interfere with the Adjudicating Authority's exercise of discretion in not ordering liquidation and in allowing consideration of the resolution plan placed before it. - HELD THAT: - Given that the COC had placed and voted upon a resolution plan and an application for its approval was pending before the Adjudicating Authority, the Tribunal concluded that it would not interfere with the Adjudicating Authority's discretion to await consideration of that plan. The Tribunal emphasised the central objective of the IBC to facilitate resolution where possible and observed that a short extension at the verge of acceptance or rejection of a plan would not materially alter outcomes. Consequently, the Tribunal declined to admit the appeal and directed that the Adjudicating Authority consider the resolution plan on its merits. [Paras 7, 8]

Appellate interference was declined; the Adjudicating Authority's discretion to consider the resolution plan was upheld and the appeal dismissed.

Final Conclusion: The appeal was dismissed: although the Tribunal censured the RP and majority COC for not adhering to the Adjudicating Authority's timeline, it upheld the Adjudicating Authority's discretion not to order liquidation where the resolution plan had been placed before and voted upon by the COC, directing the Adjudicating Authority to consider the plan on its merits.

Approval of resolution plan under Section 31 - Compliance with Section 30(2) - Eligibility of resolution applicant under Section 29A - Committee of Creditors' approval and voting - Extension of CIRP period under Section 12(2) - Moratorium under Section 14 - Compliance certificate under Regulation 39(4) / Form H

Approval of resolution plan under Section 31 - Compliance with Section 30(2) - Compliance certificate under Regulation 39(4) / Form H - Committee of Creditors' approval and voting - Moratorium under Section 14 - Resolution Plan approved by the Adjudicating Authority under Section 31 - HELD THAT: - The Tribunal examined whether the Resolution Plan, as approved by the Committee of Creditors (CoC), satisfied the requirements of Section 30(2) and could be sanctioned under Section 31. The record showed that the Plan had been approved by the CoC with 100% voting (recorded before this Bench), the Resolution Professional filed the Compliance Certificate in Form H as required by Regulation 39(4), and the Plan contained provisions addressing CIRP costs, treatment of operational creditors and supervision/implementation mechanisms as set out in the Plan's schedules. On that basis the Tribunal held that the Plan met the statutory criteria under Section 30(2) and was liable to be approved under Section 31. Consequential orders flowing from approval were also directed: the Plan was declared binding on the corporate debtor and its stakeholders, the moratorium under Section 14 was directed to cease, the Plan was to become effective from the date of the order, and the Resolution Professional was to forward records to the IBBI for recording. [Paras 17, 18, 20, 21, 22]

Resolution Plan approved under Section 31; Plan declared binding; moratorium under Section 14 to cease; Plan effective from date of order; RP to forward records to IBBI.

Eligibility of resolution applicant under Section 29A - Compliance certificate under Regulation 39(4) / Form H - Resolution Applicant held not disqualified under Section 29A - HELD THAT: - The Tribunal recorded that the Resolution Applicant submitted the requisite undertaking and affidavits confirming eligibility under Section 29A and that the Resolution Professional's due diligence had found the applicant eligible. The Compliance Certificate in Form H was placed on record. In light of these material particulars and the CoC's approval, the Tribunal concluded that the Resolution Applicant was not disqualified under Section 29A and therefore eligible to have its plan sanctioned. [Paras 10, 11, 16]

Resolution Applicant is not disqualified under Section 29A; eligibility accepted for sanction of the Plan.

Extension of CIRP period under Section 12(2) - Committee of Creditors' approval and voting - Validity of CIRP timeline and filing after the extended period - HELD THAT: - The Tribunal noted the chronology: the original 180-day CIRP expiry date, the CoC decision to seek extension, and the Adjudicating Authority's order granting a 90-day extension (effective from expiry of 180 days). The resolution plan was filed after those events (filed on 13.01.2021 as recorded). Having recorded that the extension had been granted and that the CoC had validly approved the Plan within the extended regime, the Tribunal treated the filing and subsequent approval as compliant with the extended CIRP timeline and did not find any infirmity in entertaining and sanctioning the Plan post-extension. [Paras 4, 15]

Extension of CIRP period granted as recorded; filing and sanction of the Plan after the extended period are valid.

Final Conclusion: The Tribunal sanctioned the Resolution Plan submitted by the successful Resolution Applicant after recording compliance with the statutory and regulatory requirements, held the Resolution Applicant to be eligible, declared the Plan binding on all stakeholders, ordered cessation of the moratorium, directed filing of records with the IBBI, and disposed of I.A. No. 404/2021 accordingly.

Costs of the interim resolution professional - Liability of the applicant under Regulation 33(1)-(4) - Reimbursement by the Committee of Creditors to the extent ratified - Ratification of expenses by the Committee of Creditors - Fixation of IRP's fee pending appointment of Resolution Professional

Costs of the interim resolution professional - Liability of the applicant under Regulation 33(1)-(4) - Reimbursement by the Committee of Creditors to the extent ratified - Ratification of expenses by the Committee of Creditors - Responsibility for payment of IRP's fees and expenses incurred during CIRP and extent to which such amounts are reimbursable by the Committee of Creditors - HELD THAT: - The Tribunal considered Regulation 33 of the Insolvency Resolution Process Costs (Chapter IX) and the NCLAT precedent cited to determine which party bears the IRP's expenses. Regulation 33(1) and (3) contemplate that the applicant who files the insolvency application initially bears the expenses, and such expenses may be reimbursed by the Committee of Creditors to the extent it ratifies them. Applying that principle to the facts, the Tribunal noted that initial expenses and a fee of Rs. 1,25,000 were paid from the amount deposited by the applicant and that subsequent expenses for the periods 17.10.2019-11.12.2019 were ratified by the CoC on 13.12.2019. Although further expenses for 12.12.2019-07.01.2020 were placed on record, they could not be ratified because the CIRP was set aside by the NCLAT and no CoC meeting occurred thereafter. The Tribunal followed the NCLAT view that the applicant is liable to incur and initially bear the expenses under Regulation 33 and may seek reimbursement from the CoC to the extent of ratification. On this basis the Tribunal held that the IRP is entitled to the ratified fee and expenses for the stated period and that the applicant (operational creditor who filed the insolvency petition) is liable to bear those costs, subject to reimbursement by the CoC to the extent ratified. [Paras 11, 12, 13, 16]

The applicant who filed the insolvency application shall bear the IRP's costs as per Regulation 33 and may be reimbursed by the Committee of Creditors to the extent ratified; the IRP is entitled to a professional fee of Rs. 1,25,000 per month plus taxes and the ratified expenses for the period 17.10.2019 to 07.01.2020.

Final Conclusion: Application I.A. No. 1192/2020 is allowed: the applicant (operational creditor who filed the Section 9 application) is liable to bear the IRP's costs and may seek reimbursement from the CoC to the extent ratified; the IRP shall be paid the ratified fee of Rs. 1,25,000 per month plus taxes and the ratified expenses for the period 17.10.2019 to 07.01.2020.

Initiation of Corporate Insolvency Resolution Process - moratorium - appointment of Interim Resolution Professional - operational debt and default - acknowledgement of debt by settlement agreement - prospective effect of notification enhancing minimum amount of default - ex parte admission on valid service - duties of Interim Resolution Professional and public announcement - prohibition on actions during moratorium - payment towards IRP expenses recoverable as CIRP cost

Initiation of Corporate Insolvency Resolution Process - operational debt and default - acknowledgement of debt by settlement agreement - ex parte admission on valid service - The Section 9 petition by the operational creditor is admitted and CIRP is initiated against the corporate debtor. - HELD THAT: - The Tribunal found that the corporate debtor had executed agreements for diagnostic services and defaulted in payment. The parties entered into a settlement agreement signed by the authorised signatory of the corporate debtor which the Tribunal treated as an acknowledgment of debt. The petition was held to be within limitation because arbitration/mediation proceedings preceded the filing. Service on the corporate debtor was found to be satisfactorily effected and, in view of non appearance, the matter was proceeded with ex parte. On these foundations the Tribunal was inclined to admit the application under the IBC, 2016 and initiate CIRP.

Section 9 petition admitted and CIRP initiated; Interim Resolution Professional appointed.

Moratorium - prohibition on actions during moratorium - A moratorium is declared and its statutory prohibitions are imposed for the duration of the CIRP. - HELD THAT: - Upon initiation of CIRP the Tribunal directed that the moratorium operate from the date of the order until completion of the CIRP. The moratorium was held to bar institution or continuation of suits or proceedings against the corporate debtor (including execution of any decree), bar transfer, encumbrance or disposal of assets by the corporate debtor, bar enforcement of security interests (including under SARFAESI Act) and bar recovery of property by owners/lessors in possession of the corporate debtor. The Tribunal also clarified that supply of essential goods or services shall not be terminated, suspended or interrupted during the moratorium period, and the statutory exception for such transactions applies.

Moratorium declared with specified prohibitions and with exception protecting supply of essential goods or services.

Appointment of Interim Resolution Professional - duties of Interim Resolution Professional and public announcement - payment towards IRP expenses recoverable as CIRP cost - An Interim Resolution Professional (IRP) is appointed to take charge, make the public announcement and perform statutory duties; the petitioner is directed to pay an advance to meet IRP's expenses which is recoverable as CIRP cost. - HELD THAT: - The Tribunal appointed an IRP from the IBBI list and directed him to take immediate charge of the corporate debtor's management, cause the public announcement as prescribed, call for submission of claims and comply with the statutory duties applicable to an IRP. The directors, promoters and persons associated with management were directed to extend cooperation. The petitioner was directed to pay an advance to the IRP to meet initial expenses; that amount is to be accountable and reimbursable by the Committee of Creditors and recoverable as CIRP cost.

IRP appointed and directed to take charge and make public announcement; petitioner to pay advance to IRP to be accounted for and reimbursed as CIRP cost.

Prospective effect of notification enhancing minimum amount of default - The government notification dated 24 March 2020 enhancing the minimum amount of default is not applicable to this petition. - HELD THAT: - The Tribunal observed that the alleged default and the filing of the petition predated the notification. As notifications of that nature are generally prospective unless expressly stated otherwise, the Tribunal held that the notification increasing the minimum default threshold to Rs. one crore did not apply to the present case.

Notification of 24 March 2020 held not applicable to the petition which was filed earlier.

Final Conclusion: The Tribunal admitted the Section 9 petition, initiated CIRP against the corporate debtor, declared moratorium, appointed an Interim Resolution Professional with directions to take charge and make the statutory public announcement, directed cooperation by management, and ordered an advance payment to the IRP recoverable as CIRP cost; the post filing notification increasing the minimum default threshold was held not to apply.

Extension of limitation by retrospective amendment - relevant date for issuance of notice - liability for renting of immovable property vis-a -vis Negative List - service tax recovery under section 73(1) of the Finance Act - effect of amendment on time barred claims

Service tax recovery under section 73(1) of the Finance Act - extension of limitation by retrospective amendment - relevant date for issuance of notice - Validity of the show cause notice dated 08.05.2014 in view of amendment to the limitation period and whether the demand for the period 1.4.2012 to 30.6.2012 was time barred. - HELD THAT: - Section 73(1) originally permitted issuance of notice within one year from the relevant date; it was amended w.e.f. 28.05.2012 to provide eighteen months from the relevant date. The relevant date in this case was 25.11.2012. The amendment extending the limitation to eighteen months applied so that a notice issued on 08.05.2014 falls within the extended period counted from 25.11.2012. Consequently the demand for the period 1.4.2012 to 30.6.2012 was within the statutory limitation as extended by the amendment and not barred by time. [Paras 11, 12]

The show cause notice dated 08.05.2014 was within the extended limitation period and the demand for 1.4.2012 to 30.6.2012 is not time barred.

Liability for renting of immovable property vis-a -vis Negative List - effect of amendment on time barred claims - Whether renting of immovable property services provided by the appellant to brokers/traders after 1.7.2012 attracted service tax. - HELD THAT: - The Commissioner (Appeals) accepted the Tribunal's jurisprudence that renting of immovable property services provided to brokers/traders for agricultural purposes fall under clause (d) of the Negative List (Section 66(D)) and hence are not taxable after 1.7.2012. The appellate order dropped the demand for periods after 1.7.2012 on that basis and refrained from imposing penalty, treating the issue as one of interpretation covered by precedent. [Paras 5, 12]

The demand for periods after 1.7.2012 was correctly dropped as the renting services to brokers/traders fell within the Negative List and were not liable to service tax.

Final Conclusion: The appeal is dismissed. The order of the Commissioner (Appeals) is upheld: the demand with statutory interest for 1.4.2012 to 30.6.2012 is confirmed as within time, and the demand for periods after 1.7.2012 is rightly dropped.

Refund under a special provision - independence of a special statutory exemption from general provisions - requirement of documentary proof for refund of tax - substantial compliance with documentary requirements

Refund under a special provision - independence of a special statutory exemption from general provisions - Applicability and effect of Section 104 of the Finance Act in relation to general provisions relied upon by revenue. - HELD THAT: - The Tribunal accepted the appellant's contention that Section 104 is a standalone, special provision conferring entitlement to refund for specified services for the period stated in the Notification. The Tribunal observed that Section 104 provided an exemption/entitlement to refund for the period 01.06.2007 to 21.09.2016 and that the refund claims were filed within the time prescribed. In these circumstances the special provision could not be nullified or restricted by reference to a general provision read into the enactment. Having noted the legislative scheme and that the claims arose consequent to introduction of Section 104, the Tribunal held that the special statutory provision governs the refund entitlement. [Paras 6]

Section 104 being a special provision governs the refund entitlement and cannot be constrained by the general provision invoked by the revenue.

Requirement of documentary proof for refund of tax - substantial compliance with documentary requirements - Whether the appellants had produced sufficient documentary evidence to establish payment of service tax and entitlement to refund despite initial non-production before the original authority. - HELD THAT: - The Tribunal examined the material on record and found that during pendency of the appeals the appellants produced invoices/bills issued by KINFRA showing payment of service tax by the appellants and a certificate from KINFRA dated 02.02.2021 confirming that it had not availed CENVAT credit. The Tribunal noted that challans and worksheets showing payment were already on record and that the subsequently produced invoices/bills corroborated payment by the appellant and remittance by KINFRA to the Government. On this basis the Tribunal concluded that sufficient documentary evidence exists to establish the payment of service tax and that there was no justification for rejecting the refund claims solely for non-production of those documents before the original authority. [Paras 6, 7]

The appellants produced sufficient documentary evidence to establish payment of service tax and entitlement to refund; the impugned orders rejecting the refund claims are set aside.

Final Conclusion: Appeals allowed; impugned orders dated 29.07.2020 and 13.08.2020 set aside and refund claims allowed as appellants have established entitlement under Section 104 and produced sufficient documentary proof.

Extended period of limitation - CENVAT credit reversal - exempted service (trading) - penalty and interest not leviable where credit reversed prior to utilisation - remand for quantification and adjustment/re credit

Extended period of limitation - exempted service (trading) - Invocation of the extended period of limitation in respect of CENVAT credit availed on input services attributable to trading for the period prior to the amendment of Rule 2(e). - HELD THAT: - The Tribunal restricted its consideration to limitation since the appellant did not press merits. It found that the Department was aware of the trading activity because trading details were furnished and returns (ST-3) were regularly filed. Having regard to contemporaneous confusion in law and conflicting judicial decisions, and following the ratio of higher courts and tribunals cited (including the Madras High Court decision in Shriram Value Services and supportive CESTAT decisions), the Tribunal held that the extended period cannot be invoked in the absence of suppression with intent to evade duty. Consequently, only demands limited to the normal period can be sustained for the period prior to the amendment of Rule 2(e). [Paras 8, 9]

Extended period of limitation cannot be invoked; demand restricted to the normal period.

CENVAT credit reversal - penalty and interest not leviable where credit reversed prior to utilisation - Whether interest and penalty are sustainable where proportionate CENVAT credit attributable to trading was reversed prior to utilisation. - HELD THAT: - The Tribunal noted the appellant's contention and record that proportionate credit attributable to trading was reversed before utilisation. Applying precedents where reversal prior to utilisation negates levy of interest and penalty, and having found bona fide belief and absence of wrongful utilisation, the Tribunal concluded that interest and penalties are not sustainable. The Tribunal therefore set aside demands of interest and penalty insofar as they relate to the normal period and where reversal has already been effected. [Paras 8, 9]

Interest and penalty not to be imposed where proportionate credit was reversed prior to utilisation; related penalties set aside.

Remand for quantification and adjustment/re credit - Quantification of demand for the normal period and adjustment/re credit of any already reversed CENVAT credit. - HELD THAT: - Having confined findings to limitation and reversal, the Tribunal remanded the matter to the Original Authority for computation of the demand limited to the normal period. The Original Authority is directed to verify whether the appellant has already reversed the CENVAT credit; if so, that reversed credit is to be adjusted and any remaining eligible credit re credited to the appellant. The remand is solely for quantification and adjustment consistent with the Tribunal's limitation and reversal findings. [Paras 9]

Matter remanded to the Original Authority for quantification of the demand for the normal period and for examination/adjustment or re credit of any reversed CENVAT credit.

Final Conclusion: Appeals partly allowed: extended period of limitation held barred and demand confined to the normal period; interest and penalties not sustained where proportionate credit was reversed prior to utilisation; matter remanded to the Original Authority for quantification of the normal period demand and for adjustment or re credit of any reversed credit.

Reversal of cenvat credit - disallowance under Rule 6(3) of the Cenvat Credit Rules, 2004 - treatment of reversed credit as not availed - precedential effect of the Tribunal's earlier decision in the appellant's own case

Reversal of cenvat credit - disallowance under Rule 6(3) of the Cenvat Credit Rules, 2004 - treatment of reversed credit as not availed - precedential effect of the Tribunal's earlier decision in the appellant's own case - Whether the appellant was liable to pay 10% of the value of exempted goods by invoking Rule 6(3) of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal found that there was no dispute that credit attributable to exempted goods, including credit on input services, had been reversed by the appellant and that, where reversal was delayed, interest had been paid. In those circumstances the appellant must be treated as if it had not availed the Cenvat credit. Consequently the specialised charge under Rule 6(3) need not be invoked. The Tribunal relied on and followed its earlier decision in the appellant's own case dated 26.08.2010, holding the issue to be settled and no longer res-integra. Applying that precedent, the impugned order was set aside and the appeal allowed. [Paras 4, 5]

Impugned order set aside; appeal allowed on the ground that reversed credit (with interest where applicable) precludes invocation of Rule 6(3).

Final Conclusion: The appeal is allowed: having reversed the credit (and paid interest where reversal was delayed), the appellant cannot be subjected to the 10% levy under Rule 6(3), and the Tribunal sets aside the impugned order following its earlier decision in the appellant's own case.

Reversal of cenvat credit prior to utilization - Non-imposability of interest under Rule 14 where credit reversed before utilization - Non-imposability of penalty under Rule 15(2) read with Section 11AC where credit reversed before utilization - Audit objection and absence of suppression - Binding precedential value of earlier decisions followed by the Tribunal

Reversal of cenvat credit prior to utilization - Non-imposability of interest under Rule 14 where credit reversed before utilization - Non-imposability of penalty under Rule 15(2) read with Section 11AC where credit reversed before utilization - Binding precedential value of earlier decisions followed by the Tribunal - Whether interest under Rule 14 and penalty under Rule 15(2) read with Section 11AC are exigible where cenvat credit wrongly availed was reversed prior to its utilization and prior to issuance of show-cause notice. - HELD THAT: - It was undisputed that the appellant had reversed the entire cenvat credit prior to its utilization and before issuance of the show-cause notice. The Tribunal applied the settled principle that where wrongly availed cenvat credit is reversed prior to utilization, levy of interest under Rule 14 and penalty under Rule 15(2) read with Section 11AC is not sustainable. The Tribunal noted that this position has been judicially affirmed by the Karnataka High Court in Commissioner of C. Ex. & S.T., LTU, Bangalore v. Bill Forge Pvt. Ltd., and subsequently followed by this Tribunal and other High Courts and decisions (including Strategic Engineering and J.K. Tyre & Industries Ltd.), as well as by consistent appellate orders in the appellant's own cases. Having regard to those precedents and the undisputed fact of reversal before utilization and before notice, the Tribunal held the impugned demand of interest and imposition of penalty to be unsustainable and set aside the order under appeal. [Paras 6]

Impugned order rejecting the appellant's appeal is set aside; demand of interest and penalty deleted as the credit was reversed prior to utilization and before issuance of show-cause notice.

Final Conclusion: Appeal allowed; demand of interest under Rule 14 and penalty under Rule 15(2) read with Section 11AC set aside insofar as the reversed cenvat credit was concerned, following binding precedents and the undisputed fact of reversal prior to utilization and prior to show-cause notice.

Interest on delayed refunds - date of receipt of application for refund under Section 11B - deeming fiction in the Explanation to Section 11BB - refund ordered pursuant to appellate order treated as order under Section 11B

Interest on delayed refunds - date of receipt of application for refund under Section 11B - refund ordered pursuant to appellate order treated as order under Section 11B - deeming fiction in the Explanation to Section 11BB - Whether interest under Section 11BB is payable from the dates of the original refund applications filed in 2015-16 or from the subsequent application dated 16.11.2017 made after the Commissioner (Appeals) allowed the refund. - HELD THAT: - The Tribunal held that the three-month period for triggering interest under Section 11BB is to be reckoned from the date of receipt of the original application filed under Section 11B. The Explanation to Section 11BB creates a deeming fiction that an order allowing refund by the Commissioner (Appeals), Appellate Tribunal or court is to be treated as an order under sub-section (2) of Section 11B, and therefore does not postpone the date from which interest runs; interest becomes payable on expiry of three months from the date of the original application if refund is not made within that period. The Tribunal relied on earlier High Court decisions to the same effect, observing that those authorities support the proposition that a subsequent appellate order allowing refund does not shift the commencement date for interest to the date of the appellate application or the date of the appellate order. Given that the appellants' original applications were filed in September-December 2015 and a later application was filed on 16.11.2017 only after appellate allowance, the liability to pay interest accrued from the respective original application dates; the denial of interest on the ground that the refund was sanctioned within three months of the 16.11.2017 application was therefore unsustainable. Consequently the order refusing interest was set aside and the Department was directed to sanction interest along with the sanctioned refund. [Paras 6, 7, 11]

Interest under Section 11BB is payable from the dates of the original refund applications filed in 2015-16; the order denying interest on the basis of the later application dated 16.11.2017 is set aside and interest is to be sanctioned.

Final Conclusion: The appeal is allowed; the order refusing sanction of interest is set aside and the Department is directed to pay interest on the sanctioned refund from the dates of the original refund applications specified in the record.

Writ against show cause notice - Opportunity of personal hearing - Remand for fresh consideration - Authority's competence to decide merits - Duty to disclose prior proceedings / suppression of facts - Abuse of process by serial litigation

Writ against show cause notice - Authority's competence to decide merits - Challenge to notices calling for objections and offering personal hearing is not maintainable as a routine writ; merits must be determined by the assessing authority. - HELD THAT: - The Court held that ordinarily a writ against a show cause notice will not be entertained in a routine manner and may be permitted only in exceptional circumstances such as incompetence of the issuing authority or demonstrable malafides, which must be specifically pleaded and, where relevant, the official alleged to be mala fide impleaded in personal capacity. The petitioner's substantive complaints on merits were held to be matters for the assessing authority to decide after examination of original documents and evidence; therefore the High Court declined to adjudicate merits at the writ stage and directed that the statutory adjudicatory process be followed. [Paras 4]

Writ petitions challenging the notices are not entertained on merits; the assessing authority is to consider and decide the proposals after affording opportunity of hearing.

Duty to disclose prior proceedings / suppression of facts - Abuse of process by serial litigation - Petitioner suppressed earlier writ petitions and thereby exhibited conduct amounting to prolongation of proceedings; such conduct disentitles the petitioner to relief at the writ stage. - HELD THAT: - The Court recorded that the petitioner had earlier challenged assessment orders for the same periods in W.P.Nos.15635 and 15636 of 2016, which resulted in the setting aside of the assessment orders and remand for fresh consideration. The present petitions failed to disclose those subsequent proceedings and thus amounted to suppression of material facts. The Court observed that iterated filing of writ petitions to delay adjudication is an abuse of process and cannot be encouraged; where an opportunity had been given by the authority pursuant to earlier orders, the petitioner should avail that opportunity rather than filing fresh writs to prolong the dispute. [Paras 7, 8]

Petitioner's suppression of prior writs and conduct in filing successive writ petitions amounted to improper prolongation; the petitions are dismissed on that basis while leaving open the statutory opportunity to defend before the authority.

Remand for fresh consideration - Opportunity of personal hearing - Direction to afford one final opportunity of personal hearing and to proceed with assessment if the petitioner fails to appear. - HELD THAT: - Noting the earlier order setting aside assessment orders and remanding the matter, and having regard to the calendar of actions showing issuance of notices and attempts at cross verification, the Court directed that the respondents shall grant one more final personal hearing to the petitioner to submit objections and documentary evidence. If the petitioner fails to avail the final opportunity, the assessing authority is at liberty to proceed with the assessment and pass final orders on merits and in accordance with law. The Court thereby left the merits to be determined by the competent authority after allowing the petitioner a last chance to be heard. [Paras 5, 8]

Respondents to give one final personal hearing to the petitioner; if petitioner does not avail it, respondents may proceed to pass final assessment orders on merits and in accordance with law.

Final Conclusion: Writ petitions challenging the notices are dismissed; the petitioner is permitted one final personal hearing to submit objections for assessment in respect of AY 2010-11 and AY 2011-12, failing which the assessing authority may proceed to pass final orders on merits and in accordance with law.

Retrospective operation of taxation statute - Waiver of retrospective demand by executive notification - Validity of demand notice issued pursuant to retrospective amendment - Quashing of demand notice

Retrospective operation of taxation statute - Waiver of retrospective demand by executive notification - Quashing of demand notice - The demand made on the petitioner pursuant to retrospective operation of the Tamil Nadu Value Added Tax (5th Amendment) Act, 2013 is unsustainable in view of the Government notification dated 21.04.2015 and the impugned demand notice is quashed. - HELD THAT: - The Court applied the reasoning recorded by the Division Bench in W.P.No.995 of 2014 that the Revenue had accepted the effect of the Government notification dated 21.04.2015 and represented that retrospective demands stood waived. The present petition challenged only the demand made on account of retrospective operation of the 5th Amendment Act, 2013. Having regard to the subsequent notification of the Government which removes/waives retrospective demands, the demand issued by the fourth respondent in proceedings Na.Ka.No.316-2013-A4 dated 27.11.2013 could not be sustained. The Division Bench's conclusion that the demand was rendered unsustainable by the notification was followed and applied to quash the impugned notice.

Writ petition allowed; impugned demand notice Na.Ka.No.316-2013-A4 dated 27.11.2013 quashed; no costs; connected Miscellaneous Petition closed.

Final Conclusion: The writ petition is allowed and the demand on the petitioner arising from the retrospective operation of the Tamil Nadu VAT (5th Amendment) Act, 2013 is quashed in view of the Government notification dated 21.04.2015; no costs and connected miscellaneous petition closed.

International exhaustion of trademark rights - Lawful acquisition of goods bearing a registered trade mark - Non-infringement by reason only of further sale of goods put on the market - Trade Marks Act, 1999 - Section 30(3)(a) and (b)

International exhaustion of trademark rights - Lawful acquisition of goods bearing a registered trade mark - Non-infringement by reason only of further sale of goods put on the market - Application of the ratio in Kapil Wadhwa v. Samsung (Delhi High Court) regarding exhaustion of trademark rights and lawful acquisition to the petitioner's case and disposal of the writ petition. - HELD THAT: - The Court accepted and applied the principles laid down by the Division Bench of the Delhi High Court in Kapil Wadhwa v. Samsung, namely that where goods bearing a registered trade mark are lawfully acquired by a person, the sale of those goods in the market by that person is not an infringement merely because the registered trade mark was assigned thereafter; and that where goods bearing a registered trade mark are put on the market with the proprietor's consent and are lawfully acquired, further sale in the market does not constitute infringement. The Court noted the Delhi Bench's observations that these principles apply whether the market is international or domestic, so long as the goods are not impaired or their condition changed, and that concerns about after-sales service or warranty can be addressed by directions such as prominent disclosure by the reseller. Having found that the ratio is applicable and that the Civil Appeal mentioned is pending without any interim order, the Court directed that the cited principles govern the petitioner's case and disposed of the writ petition accordingly.

The Delhi High Court's ratio on international exhaustion and lawful acquisition is applied to the petitioner's case; the writ petition is disposed of with the above clarifications and no order as to costs.

Final Conclusion: The High Court disposed of the writ petition by adopting the Delhi Division Bench's ratio on international exhaustion and lawful acquisition of goods bearing registered trade marks, directing that those principles govern the petitioner's case; there shall be no order as to costs.