TaxTMI Updates e-Newsletter
Aug 10,2019

Summary order. The application for advance ruling filed by M/s. Eurofins Advinus Ltd. is disposed of as withdrawn.

Works Contract - transitional provision under Section 142(11)(b) of the CGST Act, 2017 - time of supply - transaction value - Schedule II/III para on completion certificate and first occupation

Works Contract - transitional provision under Section 142(11)(b) of the CGST Act, 2017 - Liability for tax on partially completed flats where customers were identified before the GST regime. - HELD THAT: - The activity of construction falls within the definition of Works Contract and is treated as a supply of service. Under the transitional provision embodied in Section 142(11)(b), service tax is payable for services rendered up to 30.06.2017 and GST is payable for services rendered from 01.07.2017. Accordingly, where an agreement with a customer was entered into prior to 01.07.2017, the applicant must discharge service tax proportionate to the services provided up to 30.06.2017 and pay GST proportionate to services provided from 01.07.2017. [Paras 5]

Service tax is payable for the pre-01.07.2017 portion and GST for the post-01.07.2017 portion, apportioned to the services rendered in each period.

Time of supply - transaction value - Works Contract - Liability for tax and value on partially completed flats where customers are identified after implementation of GST. - HELD THAT: - Where agreements are entered on or after 01.07.2017, there was no prior event of supply to any customer and the provisions of the CGST Act, including the time of supply (Section 13) and valuation (Section 15) apply. The value of supply for GST purposes is the transaction value - the price actually paid or payable as agreed between supplier and recipient. The applicant's contention that GST should be limited to the value of work executed after the appointed date is rejected because, in absence of earlier agreements, the taxable event and the transaction value arise under the GST regime when the agreement is entered. [Paras 5]

Where customers are identified post-01.07.2017, GST is payable on the transaction value of the supply as determined under the CGST Act.

Schedule II/III para on completion certificate and first occupation - Works Contract - Liability for tax on partially completed flats where no customers are identified. - HELD THAT: - If construction is completed and the applicant obtains the completion/occupancy certificate before entering into any transaction, the subsequent sale falls under the provision in Schedule II/III that treats such transaction as sale of immovable property and not a supply attracting GST. However, if a transaction (agreement with a customer) is entered into prior to issue of completion/occupancy certificate, the scenario is identical to agreements entered post-GST and GST is leviable on the transaction value as discussed earlier. [Paras 5]

No GST is leviable if the property is sold after completion/occupancy certificate is obtained; if supply is made before issuance of completion certificate, GST is payable on the transaction value.

Final Conclusion: The Authority ruled that (a) for flats with customers identified before 01.07.2017 service tax applies for the pre-appoint ment-day portion and GST for the post-appoint ment-day portion; (b) for flats where customers are identified after 01.07.2017 GST is payable on the transaction value determined under the CGST Act; and (c) where no customers are identified, no GST is leviable if sale occurs after completion/occupancy certificate, but if supply is made prior to such certificate GST is leviable on the transaction value.

Tool amortisation - transaction value - goods supplied free of cost on returnable basis - value of supply - contractual obligation to provide tools - CBIC Circular No 47/21/2018-GST

Tool amortisation - goods supplied free of cost on returnable basis - contractual obligation to provide tools - CBIC Circular No 47/21/2018-GST - Whether the amortised cost of moulds/dies/tools supplied by an OEM to the applicant on free of cost (FOC) returnable basis must be added to the transaction value of parts supplied by the applicant for GST valuation. - HELD THAT: - The Authority examined the applicant's purchase order and submissions and noted that the tools/moulds in question are supplied by the OEM on a free of cost and returnable basis and that the applicant is not under any contractual obligation to procure or supply its own tools for manufacture of the components. The CBIC Circular No 47/21/2018 GST dated 08.06.2018 clarifies that where moulds and dies owned by the OEM are provided to a component manufacturer on FOC basis and there is no contractual obligation on the component manufacturer to provide such tools, the value of those tools does not constitute consideration and therefore need not be added to the value of the components. Conversely, if the contract casts an obligation on the component manufacturer to provide the tools but the OEM nonetheless supplies them FOC, the amortised cost must be added. The Authority held that the facts and contract placed before it fall within the former category and that the Circular applies. The ruling is, however, confined to contracts having terms identical to those examined and will apply to other contracts of the applicant only if their terms are the same. [Paras 12, 13, 14, 15]

The amortised cost of tools supplied by the OEM on FOC and returnable basis, where the applicant has no contractual obligation to provide tools, is not required to be added to the value of parts supplied and is not liable to GST; the ruling applies to other contracts only if their terms are the same as those examined.

Final Conclusion: Advance Ruling: under the facts and contract before the Authority, tool amortisation supplied FOC by the OEM on returnable basis need not be included in the transaction value of parts for GST; applicability to other contracts is conditional on identical terms.

Validity of additions in search assessments where no fresh material was seized - requirement of fresh/seized material to sustain reassessment/additions in post search proceedings - application of the Kabul Chawla principle concerning search assessments - search under Section 132 and reassessment under Section 153A in search assessments - absence of substantial question of law where appellate tribunal applies settled precedent

Validity of additions in search assessments where no fresh material was seized - requirement of fresh/seized material to sustain reassessment/additions in post search proceedings - application of the Kabul Chawla principle concerning search assessments - Whether additions made in search related reassessment proceedings are sustainable where they are not based on any fresh material seized or discerned during the search - HELD THAT: - The Tribunal set aside the search assessment because the additions impugned were not founded on any fresh material discovered in the course of the search. The High Court holds that this approach is correct and conforms to the principle applied in Kabul Chawla, as accepted by other High Courts including this Court, that additions in post search assessments must be supported by material found during the search or other fresh material; absent such material, the additions cannot be sustained. Having endorsed the Tribunal's reasoning and its conclusion on the merits in favour of the assessee, the Court found no substantial question of law arising warranting interference.

The Tribunal's setting aside of the search assessment on the ground that no fresh material was seized or discerned is upheld; the additions are not sustained.

Final Conclusion: The Revenue's appeal is dismissed; the High Court affirms the Tribunal's order setting aside the search assessment and finds no question of law for interference.

Adoption of stamp duty valuation under Section 50C - Reference to District Valuation Officer under Section 50C(2)-(3) - Mandatory duty of Assessing Officer to await DVO report - Fair market value determination vis-a -vis stamp duty value

Reference to District Valuation Officer under Section 50C(2)-(3) - Mandatory duty of Assessing Officer to await DVO report - Adoption of stamp duty valuation under Section 50C - Whether the Assessing Officer was justified in making an addition based on stamp duty valuation without awaiting a DVO report after the assessee had requested a reference to the DVO within the assessment period. - HELD THAT: - The Court held that where the assessee made a request for reference to the District Valuation Officer more than one month before the statutory last date for completion of assessment, the Assessing Officer was obliged to make the reference and await the DVO's report. The language of Section 50C is mandatory and does not permit the AO to decline the reference on the presumption that the valuation report would not be received in time. The CIT(A) and the ITAT correctly applied the principle that the stamp duty value can be adopted as sale consideration only in the statutory manner, and that in the absence of a DVO report (where a reference was sought) an addition based on stamp duty valuation was not in accordance with the Act. The appellate authorities' consistent view and reliance on precedent were not shown to be perverse.

Addition based on stamp duty value deleted; Revenue's appeal dismissed.

Final Conclusion: The appeal is dismissed as the Assessing Officer erred in making the addition without referring the matter to the DVO and awaiting the report; no substantial question of law arises.

Penalty for concealment or furnishing inaccurate particulars under Section 271(1)(c) read with Explanation-7 - transfer pricing adjustment and the permissible use of multiple-year data versus current year data under Rule 10B(4) - clarificatory amendment to Rule 10B(4) regarding 'current year' data - standard deduction claim as a debatable issue - appellate deference to an arguable or plausible view taken by the ITAT

Penalty for concealment or furnishing inaccurate particulars under Section 271(1)(c) read with Explanation-7 - transfer pricing adjustment and the permissible use of multiple-year data versus current year data under Rule 10B(4) - clarificatory amendment to Rule 10B(4) regarding 'current year' data - appellate deference to an arguable or plausible view taken by the ITAT - Whether the penalty under Section 271(1)(c) could be sustained where the transfer pricing adjustment turned on the disputed question of use of multiple-year data versus current year data for determining ALP. - HELD THAT: - The ITAT found that the principal controversy - whether multiple-year data could be used by the assessee while the TPO adopted single-year data - was a debatable question during the AY in issue and, on that basis, held the penalty unsustainable. Although Rule 10B(4) indicates that data should relate to the financial year in which the international transaction occurred and was later clarified (by an insertion effective 19 October 2015) to refer to the 'current year', the court recognised that the clarification could be treated as clarificatory and that during the assessment year concerned the debate on the use of multiple-year data was legitimately alive. Given that the ITAT's conclusion treated the matter as arguable, the High Court held that the ITAT's view was not implausible and that penal consequences could not be imposed where the disputed question was reasonably debatable. [Paras 5, 6, 7, 8, 9]

Penalty set aside insofar as it rested on the transfer pricing adjustment founded on the contested issue of multiple-year versus current year data; the ITAT's view that the question was debatable is upheld.

Penalty for concealment or furnishing inaccurate particulars under Section 271(1)(c) read with Explanation-7 - standard deduction claim as a debatable issue - Whether the penalty could be sustained on the ground that the assessee claimed a standard deduction at 5%. - HELD THAT: - The ITAT treated the claim for standard deduction at 5% as a debatable issue and noted that a clarification was later issued in the Finance Bill, 2012. The High Court concurred with the ITAT's assessment that this was also a debatable question, and that penal consequences could not be justified where the matter was not free from controversy. [Paras 10, 11]

Penalty cannot be sustained insofar as it was imposed for claiming the 5% standard deduction; the ITAT's conclusion that the issue was debatable is affirmed.

Final Conclusion: The High Court finds no substantial question of law and dismisses the Revenue's appeal; the ITAT's orders setting aside the penalty are upheld on the ground that the contested transfer pricing methodology and the standard deduction claim were debatable issues, and the Revenue's challenge is therefore rejected.

Revision under Section 264 of the Income tax Act, 1961 - Ex parte assessment - Service of notice and change of address - Non appearance due to medical incapacity of spouse - Opportunity of being heard - Remand for reconsideration on merits

Revision under Section 264 of the Income tax Act, 1961 - Ex parte assessment - Service of notice and change of address - Non appearance due to medical incapacity of spouse - Remand for reconsideration on merits - Validity of the Commissioner's dismissal of the petitioner's revision petition without adjudication on merits in light of contested service of notices and the petitioner's non appearance due to her husband's illness, and the appropriate remedial course. - HELD THAT: - The Commissioner dismissed the revision petition solely on the ground that the assessee had been afforded multiple opportunities but failed to appear before the Assessing Officer, without examining the petitioner's factual and documentary contentions on merits. The High Court found sufficient cause for interference because there was confusion regarding service of earlier notices at the petitioner's prior address and accepted the petitioner's explanation that her husband - who managed financial affairs - was incapacitated by medical treatment, causing non participation. Although the petitioner's supporting material could not be verified at the assessment stage owing to non appearance, the Court held that the Commissioner can verify those contentions while reconsidering the revision. The Court directed that the Commissioner should examine the revision petition on merits and dispose of it in accordance with law; the Commissioner may either call for a remand report or remit the matter to the Assessing Officer for fresh assessment and verification of the petitioner's claim that the transactions involved a sale and a purchase undertaken jointly with her husband and not the purchase of two properties as recorded in the assessment order. [Paras 7, 8, 9]

Impugned order dismissing the revision petition is set aside and the Commissioner is directed to re examine and decide the revision petition on merits, by calling for a remand report or remitting to the Assessing Officer as appropriate.

Final Conclusion: The impugned order dated 12.3.2019 is set aside; the Commissioner is directed to examine and dispose of the revision petition on merits in accordance with law (either by seeking a remand report or remitting proceedings to the Assessing Officer). Writ petition disposed.

Rejection of books of account - addition on account of suppression of profit - application of preceding year's gross profit rate - remand report - appreciation of evidence

Addition on account of suppression of profit - application of preceding year's gross profit rate - rejection of books of account - remand report - appreciation of evidence - Tribunal was correct in deleting the addition of Rs. 1,38,47,120/- made by the Assessing Officer on the ground of suppression of profit and in declining to apply the preceding year's gross profit rate to the assessee's turnover. - HELD THAT: - The Tribunal found that the Assessing Officer had applied the preceding year's gross profit margin to the impugned year's sales without pointing to any cogent defect in the assessee's audited books. The assessee explained that lower sale prices to its sister concern arose from differences in components of charged price (such as exclusion of installation/commissioning, excise duty and sales tax for export-sale transactions) and that certain sales of spares were at cost due to a merger-contentions which were considered in remand report proceedings. The AO conceded in the remand report that only material costs had been used in computing gross profit and that other manufacturing costs had not been included; the remand proceedings also verified commission expenses. The Tribunal held that mere fall in gross profit ratio, absent any demonstrated manipulation or specific discrepancies in the books of account, does not justify rejecting audited accounts and applying a prior year's gross profit margin. On appreciation of the evidence and the remand report, there was no cogent material to sustain the addition, and the Tribunal rightly deleted it.

Deletion of the addition upheld; the Assessing Officer's application of the preceding year's gross profit rate to compute income is not sustainable.

Final Conclusion: The Revenue's appeal is dismissed. The Tribunal's deletion of the addition is sustained on appreciation of evidence and remand findings; no question of law arises.

Registration under section 80G(5) - Explanation 3 to section 80G(5) - charitable purpose does not include religious purpose - registration under section 12A and its consequence for 80G - rule of consistency / res judicata principle in tax proceedings - remand for fresh examination of activities

Registration under section 80G(5) - Explanation 3 to section 80G(5) - charitable purpose does not include religious purpose - Appellate Tribunal was justified in allowing registration under section 80G(5) despite Explanation 3, on the record before it. - HELD THAT: - The Tribunal applied Explanation 3 to section 80G(5) which excludes from 'charitable purpose' activities that are wholly or substantially religious, and concluded that the Revenue had not pointed to any specific instances showing the assessee's activities to be religious in nature. The Tribunal further relied on the assessee's continuous prior 80G registration from 1993 to 31 March 2006 and the absence of any change in objects or activities, invoking the rule of consistency as explained in Radhasoami Satsang. The High Court found no error of law in the Tribunal's approach and noted that the assessee was registered under section 12A, which ordinarily supports grant of 80G registration. The Court also referred to the Supreme Court authority in Lok Sewa Sansthan Samiti as covering the issue. Having regard to the absence of material demonstrating that the activities were religious in nature and the consistent past position, the Tribunal's allowance of registration was upheld. [Paras 4, 5]

Tribunal's grant of registration under section 80G(5) is upheld.

Remand for fresh examination of activities - rule of consistency / res judicata principle in tax proceedings - Tribunal was justified in not remanding the matter to the Commissioner for fresh examination and in allowing the appeal of the assessee. - HELD THAT: - The Tribunal declined to remit the matter because the Commissioner had not produced any specific instances indicating that the assessee's activities were religious in nature. The Tribunal relied on the absence of any change in the trust's objects or activities and its long-standing registration history, applying the rule of consistency to prevent reopening an accepted factual position without material change. The High Court found this approach lawful, observing that where the assessee is registered under section 12A and no fresh material is pointed out, remand was unnecessary and the allowance of 80G registration was appropriate. [Paras 3, 4]

No remand required; Tribunal permissibly allowed the appeal without directing fresh examination.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's order allowing registration under section 80G(5) is affirmed and the Commissioner is directed to grant the registration certificate.

Disallowance under section 40(a)(ia) of the Income Tax Act, 1961 - obligation to deduct tax at source under section 195 of the Income Tax Act, 1961 - income not chargeable to tax in India absolves payer from TDS obligation - deletion of addition for nondeduction of tax

Disallowance under section 40(a)(ia) of the Income Tax Act, 1961 - obligation to deduct tax at source under section 195 of the Income Tax Act, 1961 - income not chargeable to tax in India absolves payer from TDS obligation - deletion of addition for nondeduction of tax - Whether the addition made under section 40(a)(ia) for nondeduction of tax on commission payable to a foreign agent was correctly deleted on the ground that the commission income was not chargeable to tax in India and therefore no TDS under section 195 was exigible. - HELD THAT: - The Tribunal applied the ratio of this Court's decision in PR CIT v. MGM Exports and concluded that the foreign agent's commission was not chargeable to tax in India on the facts before it. The Tribunal reasoned that where a sum payable to a non-resident is not chargeable to tax in India, the payer has no obligation to deduct tax under section 195 and consequently no disallowance under section 40(a)(ia) arises. The High Court, having regard to the Tribunal's reliance on the cited precedent and its factual conclusion that the commission was not taxable in India, found no error of law in the Tribunal's order and accepted its conclusion to delete the addition. The Court therefore held that there was no substantial question of law warranting interference. [Paras 4, 5]

The deletion of the addition under section 40(a)(ia) was upheld as the commission was held not chargeable to tax in India and no obligation to deduct tax under section 195 arose.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's order deleting the addition for nondeduction of tax is upheld and no substantial question of law arises.

Maintainability of appeal under Section 260A of the Income Tax Act - jurisdiction of High Court under Chapter XX read with Section 269/260A - seat of the Income Tax Appellate Tribunal determines appellate jurisdiction - transfer of Assessing Officer under Section 127 does not determine High Court jurisdiction

Maintainability of appeal under Section 260A of the Income Tax Act - seat of the Income Tax Appellate Tribunal determines appellate jurisdiction - transfer of Assessing Officer under Section 127 does not determine High Court jurisdiction - Appeal against an order of the Mumbai Bench of the Income Tax Appellate Tribunal is not maintainable before the Gujarat High Court. - HELD THAT: - Relying on the reasoning in the decision of the Bombay High Court (reproduced in paras 11-14 of the cited case), the Court held that the provisions governing appeals (Chapter XX read with Section 269/260A) mean that the High Court competent to hear an appeal is the High Court exercising jurisdiction over the seat of the Tribunal which passed the order. The seat of the Tribunal, and not the place of the Assessing Officer by virtue of transfer under Section 127, determines which High Court is competent. Consequently, an order passed by the Mumbai Bench of the Tribunal must be challenged before the High Court of Bombay and not before the Gujarat High Court. The court therefore declined to adjudicate the substantive legal questions on merits and disposed of the appeal on the ground of want of jurisdiction before this Court. [Paras 4, 5]

Tax Appeal dismissed as not maintainable before this Court; Revenue granted liberty to approach the High Court of Bombay.

Final Conclusion: The Tax Appeal is dismissed for want of maintainability before the Gujarat High Court; the Revenue is at liberty to file its appeal before the High Court of Bombay (the High Court having jurisdiction over the seat of the Tribunal which passed the impugned order).

Carry forward of unabsorbed depreciation - limitation of eight assessment years - application of section 32(2) as amended by Finance (No.2) Act, 1996 - binding effect of earlier High Court precedents

Carry forward of unabsorbed depreciation - limitation of eight assessment years - application of section 32(2) as amended by Finance (No.2) Act, 1996 - Validity of ITAT's allowance of carry forward of unabsorbed depreciation for A.Ys. 1996-97, 1997-98 and 1998-99 beyond a period of eight assessment years - HELD THAT: - The Court held that the questions raised by the Revenue are no longer res integra in view of the Court's earlier decision in General Motors India Pvt. Ltd., where paragraph 32 records that unabsorbed depreciation pertaining to the assessment year 1997-98 is subject to the eight-year carry forward limitation introduced by the amendment to section 32(2) effective from assessment year 1997-98. That decision was subsequently followed in Principal Commissioner of Income-tax v. Panchmahal Steel Ltd. and the Revenue's special leave petition against Panchmahal Steel Ltd. was dismissed. Having regard to those precedents, the Tribunal's view permitting carry forward beyond the eight-year period cannot be sustained. [Paras 3, 4, 5, 6]

Tribunal's allowance of carry forward beyond eight assessment years rejected; appeal dismissed.

Final Conclusion: The Tax Appeal is dismissed; the High Court follows its earlier decisions (including General Motors and Panchmahal Steel) that unabsorbed depreciation is subject to the eight-year carry forward limitation as per the amendment to section 32(2), and the Revenue's challenge to the ITAT order fails.

Validity of notices issued under Section 153C of the Income-tax Act - Application of amended Section 153C prospectively from 01.06.2015 - Computation of the six assessment years for notices under Section 153A - Effect of alternative period of limitation where statute prescribes one - Maintainability of writ petitions challenging notices under Section 153C

Maintainability of writ petitions challenging notices under Section 153C - Writ petitions challenging the issue of notices under Section 153C are maintainable. - HELD THAT: - The coordinate bench considered maintainability as the first question and took the view that the writ-applications were maintainable. The present bench applied the same principle to the facts of this petition and proceeded to adjudicate the merits on that basis, treating the challenge to issuance of notices under Section 153C as properly maintainable before the High Court.

Petition maintained and proceeded with on merits; writ petition allowed.

Application of amended Section 153C prospectively from 01.06.2015 - The amendment to Section 153C made effective from 01.06.2015 operates prospectively and cannot be applied to searches initiated prior to that date so as to affect substantive rights. - HELD THAT: - The coordinate bench examined whether the amended provisions of Section 153C (effective 01.06.2015) applied to searches conducted before that date and held that the Legislature intended the amendment to have prospective effect. Applying that view, the Court observed that applying the amended provisions retrospectively to searches prior to 01.06.2015 would affect substantive rights of persons brought within the amended provision, and therefore such retrospective application is impermissible.

Amendment to Section 153C is prospective from 01.06.2015 and not applicable to searches initiated before that date.

Effect of alternative period of limitation where statute prescribes one - Where the statute provides an alternative period of limitation, expiry of the first period does not by itself render a notice barred if the alternative period is available under the statutory scheme. - HELD THAT: - The coordinate bench addressed limitation as to notices under the relevant provisions and held that the statute's provision for an alternative period of limitation must be given effect. Therefore, merely because the first-mentioned period has elapsed, notices cannot be declared time-barred where the statutory alternative period applies. This principle was accepted and applied in the present petition.

Notices are not barred merely because the initial period referred to in the statute has elapsed where an alternative statutory period is available.

Computation of the six assessment years for notices under Section 153A - Validity of notices issued under Section 153C of the Income-tax Act - The relevant assessment years for issuance of notices under Section 153A (and thus the scope of consequent notices under Section 153C) are the six assessment years immediately preceding the assessment year relevant to the previous year in which the search under Section 132 or requisition under Section 132A is conducted; notices issued for assessment years beyond those six years are beyond jurisdiction. - HELD THAT: - The coordinate bench analysed Section 153A and held that the trigger for issuance of notice is a search under Section 132 or a requisition under Section 132A, and that the notice must call for return of income for the six assessment years immediately preceding the assessment year relevant to the previous year in which such search or requisition is made. Applying that rule to example searches, the Court identified the six assessment years applicable in the cases there considered and concluded that any notices under Section 153C issued for assessment years beyond those six would be beyond jurisdiction. The present bench applied this determinative interpretation and quashed notices and any assessment orders which fell outside the six-year window as being issued without jurisdiction.

Notices under Section 153C (and assessment orders based thereon) issued for assessment years beyond the six assessment years computed under Section 153A are beyond jurisdiction and are quashed.

Final Conclusion: The petition is allowed; the impugned notice at Annexure A is quashed and set aside and, consequently, any assessment order passed under Section 153C pursuant to such notice is also quashed. Rule is made absolute to that extent.

Validity of notice under Section 153C - Computation of the six assessment years under Section 153A - Prospective applicability of amendment to Section 153C from 01.06.2015 - Limitation where statute provides an alternative period - Jurisdictional competence to initiate proceedings under Section 153C

Validity of notice under Section 153C - Computation of the six assessment years under Section 153A - Jurisdictional competence to initiate proceedings under Section 153C - Limitation where statute provides an alternative period - Prospective applicability of amendment to Section 153C from 01.06.2015 - The impugned notice issued under Section 153C and any assessment orders passed thereunder are without jurisdiction and are quashed. - HELD THAT: - The Court applied the principles laid down by the coordinate bench in the batch of writs (as set out in the quoted reasoning) and held that those principles govern the present petition. The coordinate bench had held that the amended provisions of Section 153C operate prospectively from 01.06.2015, that maintainability of the writs was established, and that where the statute itself prescribes an alternative period of limitation the mere lapse of the earlier period does not bar issuance of notices. Critically, the coordinate bench interpreted Section 153A to fix the relevant assessment years by reference to the assessment year relevant to the previous year in which the search under Section 132 (or requisition under Section 132A) was conducted; notices under Section 153C issued for assessment years outside the six assessment years so computed are beyond jurisdiction. Applying those conclusions to the facts before it, this Court held that the impugned notice (Annexure 'A') and any assessment orders founded on initiation under Section 153C were issued without jurisdiction and therefore liable to be quashed. [Paras 6, 7, 8]

Impugned notice at Annexure 'A' quashed and set aside; any assessment order passed under Section 153C also quashed; rule made absolute.

Final Conclusion: The petition is allowed; the impugned notice under Section 153C is quashed and set aside and any assessment order passed under Section 153C is likewise quashed; rule made absolute to that extent.

Reopening of assessment under Section 147 read with reasons recorded - unexplained cash credit under Section 68 - scope of reassessment where return accepted under Section 143(1) - reliance on material from subsequent assessment year for forming belief

Reopening of assessment under Section 147 read with reasons recorded - unexplained cash credit under Section 68 - scope of reassessment where return accepted under Section 143(1) - Validity of the notice reopening assessment for AY 2012-2013 based on the Assessing Officer's reasons that unsecured loans shown in the books amounted to unexplained cash credits under Section 68. - HELD THAT: - The Court examined the reasons recorded by the Assessing Officer, who noted that the return for AY 2012-13 was filed and accepted under Section 143(1), that the assessee's books disclosed substantial unsecured loans, and that enquiries in the scrutiny of the subsequent year (AY 2013-14) showed non-responses to notices issued to loan creditors. The Assessing Officer verified that unsecured loans totalling the amount shown in the balance sheet for AY 2012-13 existed and concluded they constituted unexplained cash credits under Section 68, thereby giving him a reason to believe income chargeable to tax had escaped assessment. The Court held that these recorded materials furnished tangible material on which the Assessing Officer could form a belief and that the reasons recorded were not vitiated for want of validity. The Court applied the settled principle that where a return has been accepted under Section 143(1), the Assessing Officer has wider latitude to reopen if there is tangible material to form such belief (as reflected in precedents cited by the Court). [Paras 4, 5, 7]

Notice of reopening for AY 2012-2013 was validly issued on the basis of the reasons recorded alleging unexplained cash credits.

Reliance on material from subsequent assessment year for forming belief - effect of disclosure in return and pendency of appeal/assessment for subsequent year on reopening - Whether the assessee's disclosure of unsecured loans in the return, or the pendency of appeal/assessment for the subsequent year (AY 2013-14), precluded issuance of the reassessment notice for AY 2012-13. - HELD THAT: - The Court rejected the contentions that mere disclosure of receipt of unsecured loans in the return or the non-finality of assessment proceedings for the subsequent year barred reassessment. It observed that disclosure in a return accepted under Section 143(1) does not automatically eliminate the Assessing Officer's power to reopen where he has tangible material to form a belief that income escaped assessment. Further, the Court held there is no requirement that the Assessing Officer await the finality of a subsequent year's assessment before issuing a notice of reassessment for an earlier year; the material observed in the scrutiny of the subsequent year may legitimately inform the belief leading to reopening. [Paras 5, 6, 7]

Disclosure in the return and the pendency of appeal/assessment for the subsequent year did not invalidate the reassessment notice.

Final Conclusion: Petition dismissed; the reassessment notice dated 29.2.2019 for Assessment Year 2012-2013 was found to be validly issued on the recorded reasons alleging unexplained cash credits and the objections based on disclosure and pendency of the subsequent year's proceedings were rejected.

Jurisdiction under Section 263 of the Income Tax Act, 1961 - requirement of both conditions for revisional jurisdiction - adequacy of enquiry by the assessing officer - change of stand between showcause notice and revisional order - disallowance under Rule 8D read with Section 14A - limited scope of judicial interference with tribunal's plausible view

Jurisdiction under Section 263 of the Income Tax Act, 1961 - change of stand between showcause notice and revisional order - adequacy of enquiry by the assessing officer - Validity of the Commissioner's exercise of revisional jurisdiction in relation to alleged discrepancy in addition of fixed assets. - HELD THAT: - The Tribunal found that the showcause notice targeted a specific reconciliation of fixed assets but the Commissioner, after receipt of the assessee's written explanation and reconciliation, treated the matter on a different basis in the final revisional order. The Tribunal recorded that the assessing officer had in fact made enquiries (including issuing a notice under Section 142(1) and considering the assessee's reply) so that the order could not be said to be erroneous or prejudicial to revenue. On the facts this Court held that the Tribunal's conclusion that the Commissioner impermissibly changed the basis of exercise of jurisdiction and that the assessing officer had carried out adequate enquiries was a plausible view and did not warrant interference.

The Tribunal rightly set aside the revisional exercise in respect of the fixed assets discrepancy; the Commissioner's order under Section 263 was not sustained.

Disallowance under Rule 8D read with Section 14A - adequacy of enquiry by the assessing officer - jurisdiction under Section 263 of the Income Tax Act, 1961 - Whether the Commissioner could invoke revisional jurisdiction on the ground that no enquiry had been made by the assessing officer in relation to disallowance under Rule 8D read with Section 14A. - HELD THAT: - The Tribunal found that the assessing officer had applied his mind by netting off interest paid against interest income when computing the disallowance under Rule 8D, and therefore the matter had not escaped the assessing officer's attention. The Commissioner's assumption of jurisdiction under Section 263 on the basis that no enquiry had been made was thus unsustainable on the material before the Tribunal. The High Court accepted that the Tribunal's conclusion was a reasonable view supported by the record and precedent and declined to supplant it.

The revisional action in respect of the Rule 8D/Section 14A disallowance was correctly set aside by the Tribunal.

Change of stand between showcause notice and revisional order - adequacy of enquiry by the assessing officer - jurisdiction under Section 263 of the Income Tax Act, 1961 - Validity of revisional order insofar as addition for alleged improper claim of trade discount. - HELD THAT: - The Tribunal noted that details of trade discount had been furnished to the assessing officer during assessment proceedings and were part of the material before it. The Commissioner had issued a showcause notice on one footing but in the revisional order altered the basis of his conclusion. The Tribunal relied on authorities holding that exercising revisional jurisdiction on a different basis than that disclosed by the notice is impermissible. The High Court found the Tribunal's reasoning and reliance on precedent to be a plausible and adequate basis to interfere with the revisional order.

The Tribunal correctly quashed the revisional action in respect of the trade discount matter.

Change of stand between showcause notice and revisional order - adequacy of enquiry by the assessing officer - jurisdiction under Section 263 of the Income Tax Act, 1961 - Sustainability of the Commissioner's revisional order challenging depreciation claimed as excessive. - HELD THAT: - The Tribunal observed that the Commissioner raised excess depreciation in the showcause notice but concluded in the revisional order that proper enquiries had not been made by the assessing officer, thereby changing the basis of exercise of jurisdiction. The Tribunal concluded that the assessing officer had in fact conducted enquiries and that the Commissioner's revision was not justified. The High Court held that the Tribunal's conclusion constituted a plausible view on the material and was not vitiated by legal error.

The revisional order in relation to depreciation was rightly set aside by the Tribunal and upheld by this Court.

Final Conclusion: All questions of law framed were answered in the negative; the High Court dismissed the appeal, upholding the Tribunal's decision that the Commissioner's exercise of revisional jurisdiction under Section 263 was unsustainable on the record in respect of the matters challenged.

Section 64(1)(iii) of the Income Tax Act - applicability of amendment to assessment year - date of accrual of income - new tax liability versus rate prescribed by Finance Act - retrospective operation of tax legislation

Section 64(1)(iii) of the Income Tax Act - date of accrual of income - applicability of amendment to assessment year - Whether share income of minor sons from partnership, credited in accounting year ended before 1.4.1976, was assessable in the hands of their father under Section 64(1)(iii) in Assessment year 1976-77. - HELD THAT: - The Court held that the determinative question is the date of accrual of the liability created by the Amending Act. Reliance on the Apex Court decisions in Kesoram Industries and Karimtharuvi Tea Estate was applied to distinguish between (a) changes that merely prescribe the rate (Finance Act) which may be operative for an assessment year beginning 1st April, and (b) an amendment which creates a new chargeable liability under the Income Tax Act. Section 64(1)(iii), introduced with effect from 1.4.1976, imposed a new liability and therefore could not be given retrospective operation to an accounting year which had ended before that date. Applying the principle that tax liability depends on accrual (a present obligation as of the last day of the accounting year), the Court concluded that an amendment coming into force on 1.4.1976 applies to assessments for the financial year beginning 1.4.1976 (i.e. assessment year 1977-78) and cannot be applied to the previous accounting year (accounting year 1975-76 corresponding to assessment year 1976-77). Consequently, the Tribunal and the Division Bench were in error to apply Section 64(1)(iii) to assess minor sons' share in the fathers' hands for Assessment year 1976-77. [Paras 16, 17, 18, 19, 20]

Section 64(1)(iii) could not be applied to include the minor sons' share in the fathers' income for Assessment year 1976-77 where the relevant accounting year ended prior to 1.4.1976; the amendment applies to assessments for the financial year commencing 1.4.1976 (assessment year 1977-78).

Retrospective operation of tax legislation - new tax liability versus rate prescribed by Finance Act - Whether the decision in Badri Prasad (Division Bench) correctly applied the law on the temporal operation of amendments introducing new tax liabilities. - HELD THAT: - Having examined Badri Prasad in the light of the Constitution Bench and earlier Apex Court decisions, the Court found that Badri Prasad did not state the correct legal position. The Full Bench emphasised that an amendment creating a new chargeable head cannot be applied to a previous accounting year merely because the amendment came into force on 1st April of the assessment year; only amendments that operate as to rates under the Finance Act are appropriately applied by reference to the assessment year's commencement. Thus Badri Prasad was disapproved to the extent it held otherwise. [Paras 20]

Badri Prasad does not lay down the correct law and is not to be followed insofar as it applies Section 64(1)(iii) to Assessment year 1976-77.

Remand for disposal in terms of Full Bench law - Disposition of the pending references and further proceedings in the Tax Cases before the Division Bench. - HELD THAT: - The Full Bench answered the referred question in accordance with the legal conclusions recorded and directed that the matters be remanded to the Division Bench for disposal in conformity with the law as declared by this Full Bench. The direction contemplates application of the holding that the amendment operates for assessments of the financial year beginning 1.4.1976 and not for earlier accounting years. [Paras 21]

Reference answered; matters remanded to the Division Bench for disposal in terms of the law declared by this Full Bench.

Final Conclusion: The Full Bench held that Section 64(1)(iii), introduced with effect from 1.4.1976, could not be applied to include minors' partnership income in the fathers' income for Assessment year 1976-77 where the accounting year ended before 1.4.1976; the amendment applies to assessments for the financial year commencing 1.4.1976 (assessment year 1977-78). Badri Prasad was disapproved on this point and the matters were remanded to the Division Bench for disposal in accordance with this law.

Jurisdiction of the Appellate Tribunal to modify or rectify its own stay orders - incidental and necessary powers vested in the Tribunal to make its statutory powers fully effective - maintainability of miscellaneous applications under Section 254(2) of the Income tax Act, 1961 - stay of recovery of tax pending disposal of appeal - balance of convenience in grant of stay where tax demand has been paid but interest remains unpaid

Maintainability of miscellaneous applications under Section 254(2) of the Income tax Act, 1961 - jurisdiction of the Appellate Tribunal to modify or rectify its own stay orders - The Tribunal erred in holding that applications under Section 254(2) seeking modification/rectification of its stay order were not maintainable. - HELD THAT: - Relying on the principle that the powers conferred on the Tribunal by Section 254 must be given the widest amplitude, the Court held that by necessary implication the Tribunal possesses all powers incidental and necessary to make exercise of its statutory powers effective. The Tribunal's conclusion that a stay order could not be treated as an order under Section 254(1) such that Section 254(2) would not lie was incorrect. The decision in ITO v. M.K. Mohammed Kunhi was applied to reject the narrow construction that would deny the Tribunal power to grant or modify stay of recovery in aid of the appellate process. Consequently, the Tribunal had jurisdiction to entertain the petitions for modification/rectification of its earlier conditional stay order and its refusal on the ground of non maintainability was set aside. [Paras 10, 11]

Tribunal's finding of non maintainability of the Section 254(2) petitions was incorrect and set aside.

Stay of recovery of tax pending disposal of appeal - balance of convenience in grant of interim relief - On the facts, having regard to payment of the tax component and the substantial nature of the demand, the remaining demanded amount (excluding unpaid interest) was ordered to be stayed pending disposal of the appeals. - HELD THAT: - Although the Court observed that normally it would remit the matter to the Tribunal for decision on merits, subsequent events - in particular the assessee's payment of the entire tax demand post November 2018 - warranted immediate interference. The Court distinguished the tax component (which had been paid by the assessee) from interest/penalty demands, noting that while interest may not stand on the same footing as tax, the substantial demand and the assessee's compliance with the Tribunal's directions justified an order preserving the balance of convenience in favour of the assessee. Having found that the Tribunal's order required interference, the Court set aside the impugned order and directed a stay of the remaining amount as demanded for the seven assessment years until the appeals are heard and disposed of. [Paras 13, 15, 16, 17, 18]

The common order of the Tribunal was set aside and the remaining demanded amount (in respect of the seven assessment years) was stayed until disposal of the appeals.

Final Conclusion: The appeals are allowed; the Tribunal's order dismissing the petitions for modification/rectification under Section 254(2) is set aside, the Tribunal has jurisdiction to modify its stay orders, and the remaining demanded amount in respect of the seven assessment years is stayed pending disposal of the appeals.

Benami transaction - beneficial owner - provisional attachment - continuation of attachment - prima facie evidence - removal from list of beneficial owners

Benami transaction - beneficial owner - prima facie evidence - Whether the appellant is a beneficial owner within the meaning of the PBPT Act and whether the adjudicating authority's order should be modified to remove the appellant as a beneficial owner. - HELD THAT: - The Tribunal examined the material and the findings recorded by the Adjudicating Authority and found that the Initiating Officer had not produced any substantial material specifically against the appellant. The appellant's case-that amounts received by RTGS were returned promptly after inquiries into the counterparty and that it did not claim the attached amount-was accepted on a prima facie basis. The Tribunal held that presumption-based allegations unsupported by proof do not constitute evidence sufficient to treat the transaction as a benami transaction or to declare the appellant a beneficial owner. In view of the Adjudicating Authority's own observation that nothing substantial was said against the appellant, and in the absence of prima facie proof that the appellant was the source or ultimate beneficiary of the seized funds, the Tribunal concluded that the appellant is not a beneficial owner for the purposes of the present proceedings and varied the impugned order accordingly. The Tribunal nevertheless left the attachment in place because the appellant did not claim the attached amount. [Paras 8, 10, 11, 12, 13]

The appellant is not a beneficial owner for the purposes of these proceedings; the impugned order is modified to remove the appellant's name as a beneficial owner, while the attachment continues as the appellant has not claimed the amount.

Final Conclusion: Appeal allowed; impugned order modified to record that the appellant is not a beneficial owner and its name is removed from the list of beneficial owners for the present proceedings; attachment to continue as the appellant has not claimed the attached amount.

Direction to public authority to decide representation within a specified time - remand for consideration and decision - liberty to prefer appeal against administrative order

Direction to public authority to decide representation within a specified time - remand for consideration and decision - The 3rd respondent was directed to consider and decide the proposal/representation recorded as Ext.P7 within a specified short timeframe. - HELD THAT: - The Court noted the petitioner's grievance that decision on Ext.P7 (and related correspondence Ext.P8) had not been taken and that the petitioner was forced to pursue repetitive litigation. In view of this, the Court exercised its supervisory jurisdiction to require the 3rd respondent to consider and take a decision on Ext.P7 at the earliest and preferably within two weeks from receipt of a copy of the judgment. The direction is confined to deciding the pending proposal and does not pre-empt the merits of any decision the 3rd respondent may reach. [Paras 2]

The 3rd respondent shall consider and decide Ext.P7 preferably within two weeks from receipt of a copy of this judgment.

Liberty to prefer appeal against administrative order - The petitioner was permitted to invoke the statutory appellate remedy against the order dated 20.07.2019. - HELD THAT: - On perusal of the record, including the order dated 20.07.2019 placed on record by the first respondent, the Court observed alleged illegalities in that order and advised that the petitioner may challenge it. Rather than adjudicating on the merits of that order, the Court granted the petitioner liberty to pursue an appeal and to press all contentions available in law before the appropriate appellate forum. [Paras 2]

Liberty granted to the petitioner to prefer an appeal against the order dated 20.07.2019 with all contentions available in law.

Final Conclusion: Writ petition disposed of by directing the 3rd respondent to decide Ext.P7 preferably within two weeks and by granting the petitioner liberty to challenge the order dated 20.07.2019 by filing an appeal.

Stay of Tribunal order pending appeal - applicability of post-notification time limit for refund claims - effect of admission of appeal on interim relief - benefits conferred by appellate order

Stay of Tribunal order pending appeal - effect of admission of appeal on interim relief - benefits conferred by appellate order - Whether the motion for stay of the Tribunal's order should be granted pending disposal of the appeal - HELD THAT: - The appeal was admitted on a substantial question concerning the applicability of the Notification dated 11.05.2007 prescribing a six month limitation for refund claims, but admission alone does not justify an automatic stay of the impugned order. The Court observed that admission indicates the issue requires consideration at final hearing and does not reflect on the merits of the Tribunal's order. No exceptional circumstances were shown by the Revenue that would justify denying the respondent the benefits of the Tribunal's order pending final disposal. Consequently, the stay application was refused and the Tribunal's order continues to operate until the appeal is finally decided. [Paras 3, 6, 7]

Motion for stay dismissed; the impugned order of the Tribunal shall remain in operation pending final hearing of the appeal.

Final Conclusion: The application for stay of the Tribunal's order is dismissed; admission of the appeal on a substantial question of law does not itself warrant interim suspension of the Tribunal's direction in the absence of circumstances justifying denial of the benefits conferred by that order.

Coercive recovery - threat of arrest - reversal and re-credit of Cenvat Credit - adjudication of show cause notice - rule of law - extralegal steps by revenue officers

Coercive recovery - threat of arrest - reversal and re-credit of Cenvat Credit - adjudication of show cause notice - rule of law - extralegal steps by revenue officers - Respondents coerced the petitioners to reverse Cenvat Credit under threat of arrest and whether such coercive recovery before adjudication is permissible. - HELD THAT: - The petitioner-assessee reversed Cenvat Credit during investigation prior to adjudication, alleging coercion by Revenue officers threatening arrest; the petitioners contemporaneously furnished legal opinions and a letter dated 7 May 2018 recording continuing pressure, which the Revenue did not dispute at that time. The affidavits filed by the Revenue later denied any threat but did not contradict the contemporaneous record. Applying the principles in the cited precedents, coercive or extralegal collection of amounts before issuance and adjudication of a show cause notice is impermissible and subverts the rule of law. The officers' subjective view of whether the petitioner would yield cannot licence high-handed action. Having found on the material that the reversal was compelled by coercion, the court directed restoration of the reversed Cenvat Credit to the petitioners' account, while safeguarding the Revenue's right to adjudicate the pending show cause notice and pursue lawful remedies thereafter. The court also prohibited utilisation of the recredited amount until the show cause notice is adjudicated and recorded the respondent's undertaking to adjudicate the notice expeditiously (within five weeks) subject to cooperation. [Paras 5, 6, 7]

Petition allowed: respondents directed to permit re-credit of the reversed Cenvat Credit; petitioners prohibited from utilising the recredited amount until adjudication of the show cause notice; respondents to adjudicate the show cause notice expeditiously.

Final Conclusion: The petition is allowed: the court found that the Revenue coerced reversal of Cenvat Credit under threat of arrest, ordered re-credit of the amount to the petitioners' Cenvat account, prohibited utilisation of the recredited amount until adjudication of the show cause notice, and directed expeditious adjudication of the notice.

Rejection of declared value - contemporaneous imports - transaction value - Customs valuation - burden of proof for valuation - precedential application of Sanjivani Non Ferrous Trading

Rejection of declared value - contemporaneous imports - transaction value - Whether the adjudicating authority was justified in rejecting the assessee's declared value and enhancing it on the basis of alleged contemporaneous imports without production of supporting import particulars. - HELD THAT: - The adjudication proceeded on the assertion that contemporaneous imports established a higher price, but the order-in-original did not identify any importer, bills of entry, quantities, prices or documentary material constituting contemporaneous import evidence. The Tribunal found the absence of any such corroborative material fatal to reliance on the asserted contemporaneous price. Applying the principle in the decision relied upon by the respondent (Sanjivani Non Ferrous Trading), which sets aside valuation enhancements made solely on external price bulletins or unsubstantiated references to contemporaneous imports, the Tribunal held that enhancement of declared transaction value without specific contemporaneous import evidence was impermissible. The Revenue's reliance on the assessee's alleged waiver and on earlier tribunal decisions did not cure the lack of evidentiary material establishing the contemporaneous import price. For these reasons the Commissioner (Appeals) correctly set aside the demand created by the original order.

Enhancement of the declared value on the basis of unsubstantiated assertions of contemporaneous imports is not justified; the Commissioner (Appeals) correctly set aside the demand.

Final Conclusion: The Revenue appeal is dismissed; the order enhancing the assessee's declared value was set aside for lack of any specific contemporaneous import evidence supporting the higher price.

Rejection of declared value under Rule 12 of the Customs Valuation Rules, 2007 - Reasonable doubt about the truth or accuracy of the declared transaction value - Use of NIDB database for valuation enhancement - Transaction value under Rule 3 of the Customs Valuation Rules, 2007 - Sequential determination of value under Rules 4 to 9 where declared value is rejected

Rejection of declared value under Rule 12 of the Customs Valuation Rules, 2007 - Use of NIDB database for valuation enhancement - Reasonable doubt about the truth or accuracy of the declared transaction value - Whether the department could reject the invoice transaction value and enhance the declared value solely by comparing it with values in the NIDB database - HELD THAT: - The Tribunal examined the assessing authority's decision to enhance the declared FOB unit price by reference to prevailing values in the NIDB database. Rule 12 provides a procedure for rejection of a declared value when the proper officer has reasonable doubt about its truth or accuracy, and lists illustrative grounds for raising such doubt. The Tribunal found no material in the order of the Assistant Commissioner to establish that the invoice value declared by the appellant was incorrect or untrue. A mere disparity between the declared price and values in the NIDB, without additional evidence tending to show that the transaction value is not genuine (such as fraudulent or manipulated documents, misdeclaration of essential parameters, or abnormal discounts), does not by itself create the reasonable doubt required by Rule 12. Consequently, the enhancement based solely on NIDB comparisons was held to be improper and the impugned assessment set aside. [Paras 5, 9]

The declared transaction value is to be accepted; the enhancement based solely on comparison with NIDB data is unjustified and the impugned order is quashed.

Final Conclusion: Appeal allowed; order of assessment upheld by lower authorities set aside for lack of any material establishing reasonable doubt about the declared transaction value, with consequential relief as appropriate.

Moratorium under Corporate Insolvency Resolution Process - Enforcement of security interest during moratorium - Right of lien of a financial creditor under a factoring arrangement - Factoring agreement with recourse - Prohibition on recovery of receivables during moratorium

Moratorium under Corporate Insolvency Resolution Process - Enforcement of security interest during moratorium - Right of lien of a financial creditor under a factoring arrangement - Whether the appellant could enforce its lien and recover amounts from the corporate debtor's receivables after institution of the corporate insolvency resolution process and during the moratorium. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's finding that once the insolvency resolution process was initiated and the moratorium declared, no creditor could enforce a security interest against the corporate debtor's property, including receivables. Although the appellant relied on pre-existing factoring documents, power of attorney and letters asserting a lien created in 2017, the Tribunal held that such prior assertions did not permit coercive recovery after the moratorium began on 28th February, 2018. The appellant's alternate contention that the amounts were recovered prior to the moratorium was not accepted: the appellant failed to produce bank account records demonstrating receipt of the funds before the moratorium, and the account statements supplied were in the form of a balance sheet rather than bank records admissible to establish pre-moratorium recovery. The appellant's inconsistent contentions (that recovery was lawful during moratorium and that recovery occurred before moratorium) undermined its case, and the Tribunal found no reason to interfere with the Adjudicating Authority's order directing refund of the amounts collected during the moratorium.

The appellant was not entitled to enforce its lien or retain amounts recovered in respect of receivables after initiation of the insolvency resolution process; the Adjudicating Authority's order was upheld.

Final Conclusion: Appeal dismissed. The Adjudicating Authority's order holding that recovery/enforcement of security over the corporate debtor's receivables during the moratorium was impermissible, and directing refund of the amounts collected, is affirmed.

Service tax levy on minerals - Effect of repeal by Central Goods and Services Tax Act, 2017 - Saving of liability incurred prior to enactment under Section 174(2)(c) - Maintainability of writ against show cause notice - Opportunity of adjudicating authority to consider contentions in reasoned order

Service tax levy on minerals - Effect of repeal by Central Goods and Services Tax Act, 2017 - Saving of liability incurred prior to enactment under Section 174(2)(c) - Maintainability of writ against show cause notice - Maintainability of the writ petition challenging a show cause notice seeking service tax following repeal of the Finance Act by the Central Goods and Services Tax Act, 2017. - HELD THAT: - The Court noted that service tax had been levied on minerals with effect from 1.4.2016 and that the Finance Act, 1994 was repealed w.e.f. 1.7.2017 by the Central Goods and Services Tax Act, 2017. Citing its earlier decision in Udaipur Chambers of Commerce and Industry & Ors. (D.B. Civil Writ Petition No.14578/2016) dated 24.10.2017, the Court observed that the levy and collection of service tax on the activity had been upheld. The Court further observed that Section 174(2)(c) of the CGST Act prima facie preserves any liability to pay tax incurred prior to the enactment, and on that basis held that the present writ petition could not be maintained as a direct challenge to the show cause notice in this forum.

Writ petition not maintainable; challenge to the show cause notice dismissed.

Opportunity of adjudicating authority to consider contentions in reasoned order - Whether the petitioner may press contentions before the adjudicating authority and the manner in which those contentions are to be dealt with. - HELD THAT: - Although the writ petition was not entertained, the Court permitted the petitioner to present all substantive and legal contentions, including challenges to the levy and its extent, before the concerned adjudicating officer. The Court directed that the adjudicating authority shall grant proper and reasonable opportunity of hearing and examine each contention, dealing with them in a reasoned order in accordance with law.

Petitioner permitted to raise all contentions before the adjudicating authority which mustgrant a reasonable opportunity and decide the issues in a reasoned order.

Final Conclusion: Writ petition dismissed as not maintainable in view of earlier decision upholding the service tax levy and the saving provision in the CGST Act; petitioner permitted to raise all contentions before the adjudicating authority which is directed to provide opportunity and dispose of the matter by a reasoned order.

Rule 6(3)(c) - exempted service - trading activity - CENVAT credit utilisation limit - Rule 6(5) exception - extended period of limitation - suppression - penalty - reasonable cause - Section 80 of the Finance Act 1994 - interest on demands

Rule 6(3)(c) - exempted service - trading activity - CENVAT credit utilisation limit - Applicability of Rule 6(3)(c) to CENVAT credit utilised for trading activity and resultant restriction on utilisation. - HELD THAT: - The Tribunal held that trading activity falls within the ambit of an exempted service for the relevant period and therefore a manufacturer/provider who has not complied with Rule 6(1) or maintained separate accounts under Rule 6(2) is governed by Rule 6(3)(c). Consequently the appellant cannot utilise CENVAT credit in excess of 20% of the service tax payable on taxable output services. The introduction of explanation (3) to Rule 6(1) by Notification No.13/2016 does not alter the position retrospectively; trading was an exempted service both before and after the amendment. Prior judgments of the High Court and the Apex Court were noted as settling this question. [Paras 4, 9]

Appellant covered by Rule 6(3)(c); demand on this count upheld.

Rule 6(5) exception - full CENVAT credit - Whether certain services claimed by the appellant fall within Rule 6(5) and are therefore excluded from the restriction in Rule 6(3). - HELD THAT: - The Tribunal observed that Rule 6(5) expressly preserves full credit for specified services unless used exclusively in relation to exempted goods or services. The appellant's contention that banking and financial services, insurance/auxiliary services and security agency services may be covered by Rule 6(5) was accepted in principle, but entitlement to full credit in respect of any service covered by Rule 6(5) required factual verification. Accordingly the question of applicability of Rule 6(5) was left open for examination on facts and quantification. [Paras 6, 9]

Applicability of Rule 6(5) to claimed services remanded for factual verification and requantification; if established, full credit to be allowed to that extent.

Extended period of limitation - suppression - Validity of invocation of the extended period of limitation in the first show-cause notice (September 2004 to March 2008). - HELD THAT: - The Tribunal found that the department had conducted an audit for July 2004 to November 2005 and had access to the appellant's records; the allegation of suppression was not sustained. Given that the appellant was not required to furnish breakup of CENVAT in ST-3 returns for the period, the Tribunal concluded that extended period of limitation could not be invoked for the first show-cause notice and set aside the invocation of extended limitation for that period. [Paras 7, 9]

Extended period of limitation set aside; demand sustained only within the normal limitation period for the first show-cause notice.

Penalty - reasonable cause - Section 80 of the Finance Act 1994 - Whether penalties under the relevant provisions should be imposed despite a disputed legal question on the classification of trading activity. - HELD THAT: - The Tribunal accepted the appellant's contention that the matter involved a bona fide and arguable question of law on whether trading constituted an exempted service and on entitlement to CENVAT credit. On that basis the appellant was held to have had reasonable cause for the shortfall in discharge of service tax by over-utilisation of CENVAT credit. Invoking the discretion under Section 80 of the Finance Act 1994, the Tribunal set aside the penalties. [Paras 8, 9]

Penalties set aside by invoking Section 80; appellant held to have reasonable cause.

Interest on demands - Adjustment of interest consequent to allowance/disallowance and requantification of credit. - HELD THAT: - The Tribunal directed modification of interest on the demands in accordance with its directions on acceptance of liability under Rule 6(3)(c), the remand on Rule 6(5) entitlements and the setting aside of extended limitation for the first notice. Interest is to be recalculated consistent with the corrected demands. [Paras 9]

Interest on the demands modified accordingly.

Final Conclusion: Appeals disposed: Rule 6(3)(c) applies to trading activity and demand upheld subject to verification of services falling under Rule 6(5); extended limitation for the first show-cause notice set aside; interest to be recalculated and penalties set aside under Section 80 of the Finance Act 1994.

Refund claim and limitation - remand for re-quantification of demand - pre-deposit made during pendency of litigation - appropriation of deposits pending adjudication - non-application of Section 11B to pre-deposits (Board Circular)

Refund claim and limitation - remand for re-quantification of demand - appropriation of deposits pending adjudication - Whether the refund claim was barred by limitation or was timely when computed from the date of adjudication by the Additional Commissioner after remand by the Tribunal. - HELD THAT: - The Tribunal set aside the demand insofar as it related to the extended period and remanded the matter to the original authority for re-quantification of the demand for the normal period. The adjudication mandated by the Tribunal was a necessary precursor to any entitlement to refund because only after re-quantification could it be determined whether an excess amount existed. The appellant had deposited amounts during the pendency of litigation which were subsequently appropriated against the re-quantified tax and interest liabilities. The refund application (filed after appropriation following the Additional Commissioner's re-quantification) was therefore within time when limitation was computed from the date of the adjudication pursuant to the remand. On this basis the denial of refund as time-barred was set aside. [Paras 5]

Refund claim held not barred by limitation when limitation is computed from the date of re-quantification by the adjudicating authority after Tribunal's remand; impugned denial set aside.

Pre-deposit made during pendency of litigation - non-application of Section 11B to pre-deposits (Board Circular) - Whether amounts deposited during the pendency of litigation qualify as pre-deposit and whether Section 11B applies to bar refund of such deposits. - HELD THAT: - The Tribunal's remand and subsequent adjudication showed that the amounts deposited during litigation were pre-deposits made pending adjudication. Having regard to the Board's clarification that Section 11B does not apply to pre-deposits made during pendency of litigation, the denial of refund on the ground that Section 11B curtailed refund rights was not sustainable. The Court accepted that characterization of the deposits as pre-deposit and allowed refund on that ground as well. [Paras 5]

Amounts deposited during the litigation are pre-deposits; Section 11B does not operate to deny refund of such pre-deposits as clarified by the Board; refund sustained on this ground.

Final Conclusion: The appeal is allowed: the impugned order refusing refund is set aside as the refund claim was timely when reckoned from the adjudication following remand and, alternatively, the deposits qualify as pre-deposits not barred by Section 11B; consequential relief to follow as per law.

Transfer of right to use goods - effective control - deemed sale under Article 366(29A)(d) - supply of tangible goods service - negative list of services

Transfer of right to use goods - effective control - deemed sale under Article 366(29A)(d) - Whether the leasing/rental of work wear by the appellant prior to 01/07/2012 amounted to transfer of the right to use goods (a deemed sale) and not a taxable service - HELD THAT: - The Tribunal examined the contractual terms and applied the attributes laid down in Bharat Sanchar Nigam Ltd. (BSNL) and explanatory guidance in Rashtriya Ispat Nigam to conclude that delivery of personalised work wear to identified employees, exclusive use by the user, and the absence of any continuing control that prevents the user from using the garments established transfer of effective control and the right to use. The fact that the owner retained title and contractual obligations to repair/clean did not negate the transferee's possession and effective control; sending garments for washing/repair does not defeat the transferee's effective control. Reliance on the Tribunal and High Court precedents (including Gimmco/G.S. Lamba) supported the view that maintenance or restrictions in the contract do not invariably negate transfer of the right to use. The Adjudicating Authority's conclusion that the appellant retained effective control because it had exclusive rights to wash/maintain was therefore incorrect. On these findings, the transaction prior to the negative list regime was a deemed sale and not a taxable service. [Paras 25, 26]

The leasing/rental of work wear prior to 01/07/2012 constituted transfer of the right to use goods (deemed sale) and was not a taxable service; the impugned finding to the contrary was set aside.

Supply of tangible goods service - negative list of services - effective control - Whether the same leasing/rental arrangements after 01/07/2012 (post introduction of the negative list) were taxable as 'supply of tangible goods' service or fell outside service tax due to transfer of right to use - HELD THAT: - Applying the same contractual construction and legal tests to the post 01/07/2012 period, the Tribunal held that the appellant's transactions vested exclusive possession and effective control in the clients; maintenance and periodic collection for servicing did not amount to retention of effective control by the appellant. Consequently, the activity did not fall within the taxable entry for supply of tangible goods without transfer of effective control under the negative list regime. The adjudicating authority's reliance on clauses granting the appellant exclusive rights to wash/repair as determinative of continuing control was rejected in light of binding principles that possession and effective control rest with the user once items are delivered for exclusive use. [Paras 25, 26]

The leasing/rental arrangements after 01/07/2012 did not amount to a taxable 'supply of tangible goods' service because the right to use and effective control lay with the clients; the impugned order for this period was set aside.

Final Conclusion: The appeal is allowed; the Order in Original confirming service tax demand for the period 2010 11 to 2014 15 (up to October 2014) is set aside, the transactions being held to constitute transfer of the right to use goods (deemed sale) and not taxable services in both the pre and post negative list periods.

Condonation of delay - computation of limitation - revisional jurisdiction under Section 35EE - service and communication of orders - deemed receipt under Section 37C - burden of proof as to receipt of order - restoration of application for consideration on merits

Condonation of delay - computation of limitation - service and communication of orders - deemed receipt under Section 37C - burden of proof as to receipt of order - Whether the revision application under Section 35EE was time barred and whether the revisional authority was justified in rejecting the condonation application. - HELD THAT: - The Court accepted the Petitioner's sworn statement that the impugned Commissioner (Appeals) order dated 15 March 2011 was received by the Petitioner only on 18 December 2013 and observed that no evidence was produced by the Revenue to show service or communication of that order earlier or that it was to be deemed received under the mechanism contemplated by Section 37C. On these facts the three month period for filing a revision under Section 35EE must be computed from the date the order was communicated to the Petitioner (18 December 2013). It was held to be unfair to require the Petitioner to prove the negative of earlier receipt; the onus lay on the Revenue to establish earlier service or deemed receipt. In the absence of such evidence, the revisional application was not time barred and the revisional authority erred in rejecting the condonation application and dismissing the revision on that ground.

The revisional authority's rejection of the condonation application was set aside; the revision application is in time when limitation is computed from 18 December 2013 and is restored for consideration on merits.

Final Conclusion: Writ petition allowed; impugned order dated 20 December 2018 set aside and the Petitioner's revision application restored to the revisional authority for adjudication on merits.

Valuation of excisable goods supplied to Armed Forces - Valuation under Section 4 of the Central Excise Act - Valuation under Section 4A of the Central Excise Act - Precedent in appellant's own case upheld by the Supreme Court

Valuation of excisable goods supplied to Armed Forces - Valuation under Section 4 of the Central Excise Act - Valuation under Section 4A of the Central Excise Act - Precedent in appellant's own case upheld by the Supreme Court - Whether the impugned demand for differential duty should be adjudicated afresh in the light of the appellant's earlier decision upheld by the Supreme Court, and the matter remanded to the adjudicating authority for fresh decision. - HELD THAT: - The Tribunal observed that the identical valuation issue in the appellant's own earlier case has been decided in favour of the appellant and that decision was upheld by the Hon'ble Supreme Court by dismissal of the Revenue's appeal. Given that position, the Tribunal considered it appropriate to set aside the impugned order and remit the matter to the adjudicating authority so that facts are verified and valuation is determined afresh in the light of the appellant's own binding precedent. The Revenue did not oppose remand. No final adjudication on the substantive question of whether valuation should be under Section 4 or Section 4A is made by the Tribunal; the adjudicating authority is directed to apply the cited decision and requantify duty if necessary after factual verification. [Paras 4]

Impugned order set aside; appeals allowed by remand to the adjudicating authority to decide afresh in light of the appellant's own case as upheld by the Supreme Court.

Final Conclusion: The Tribunal allowed the appeals by setting aside the impugned order and remanding the matter to the adjudicating authority for fresh adjudication and quantification of duty in accordance with the appellant's earlier decision which was upheld by the Supreme Court.

Liability of supplier of electricity for recipient's false claim - Penalty for aiding and abetting - Requirement of evidence of connivance - Leasing and independent operation of premises - Misuse of area-based exemption

Liability of supplier of electricity for recipient's false claim - Penalty for aiding and abetting - Requirement of evidence of connivance - Leasing and independent operation of premises - Whether penalty could be imposed on the appellant (supplier of electricity) for allegedly aiding and abetting M/s S.G. Steel in fraudulently availing area-based exemption by installing an additional furnace though appellant lacked capacity to supply the requisite electricity - HELD THAT: - The Tribunal found that the appel lant's interest in the ingot-manufacturing plant was limited to leasing part of its factory and supplying excess electricity; the steel plant was leased to and operated by M/s S.G. Steel and not directly controlled by the appellant. The adjudicating authorities' conclusion rested on the fact that the appellant did not have capacity to supply the additional quantum of power and had not undertaken enlargement of its power generation facilities. However, mere inability or failure to supply sufficient electricity does not, by itself, constitute aiding and abetting the recipient's claim for exemption. In the absence of evidence demonstrating active connivance, agreement, or conduct by the appellant to facilitate a fraudulent claim-beyond the commercial act of supplying power-penal action is not justified. The Tribunal therefore held that the penalty imposed on the appellant lacked a supporting evidential foundation and could not be sustained.

Penalty imposed on the appellant set aside and the appeal allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal and set aside the penalty imposed on M/s Kashipur Sugar Mills Ltd., holding that merely supplying inadequate electricity to a lessee who claimed an exemption, without evidence of connivance or active facilitation, does not justify penal liability.

Clandestine production and clearance - norms of electricity consumption for production assessment - temporal applicability of technical norms - reliance on historical private records seized during search - trial production test as evidence of actual consumption - circumstantial evidence for duty evasion

Norms of electricity consumption for production assessment - temporal applicability of technical norms - reliance on historical private records seized during search - trial production test as evidence of actual consumption - Validity of using electricity-consumption norms and seized older production slips to compute alleged clandestine production for the disputed period. - HELD THAT: - The Tribunal held that the average power-consumption figures applied by the original authorities were derived from a study and private production slips that pre-dated the dispute period. The IIT Kanpur study and the technical report relied upon were not shown to be directly applicable to the Central Excise Rules, 2002 regime for 2003-04 to 2007-08. The private production slips seized related to 2001 and 2002 and therefore could not be accepted as a reliable basis for computing production in subsequent years. Further, officers conducted trial productions on 18.02.2006, recorded in a panchnama, which produced electricity-consumption figures (around 1200-1254 units per tonne) substantially higher than the norms adopted for the demand; rejecting those empirical trial results in favour of older private records was not tenable. The Tribunal also noted that the same power source powered incidental activities which were not directly attributable to ingot manufacture, undermining the premise that raw electricity consumption could be straightforwardly equated to ingot output for the period in question.

The application of the challenged electricity-consumption norms, and reliance on earlier private slips, is not acceptable for computing clandestine production for 2003-04 to 2007-08; the trial production results could not be disregarded.

Circumstantial evidence for duty evasion - reliance on historical private records seized during search - Whether the combination of raw-material shortages, seized private records, and alleged manipulation of financial receipts established evasion of duty. - HELD THAT: - The Tribunal found that the circumstances relied upon by the adjudicating authority did not furnish conclusive proof of clandestine manufacture and clearance. Shortages in raw materials, without reliable linkage to undeclared production for the disputed period, and private production slips from an earlier period could not, by themselves, establish evasion. The Tribunal observed absence of evidence of payments received from customers for the allegedly clandestinely manufactured goods. Given that the computation norms were inapplicable and supplementary evidence was insufficiently established, the circumstantial case for duty evasion failed.

The circumstances relied upon do not establish evasion of duty; the findings based on that evidence are not maintainable.

Clandestine production and clearance - circumstantial evidence for duty evasion - Whether the impugned orders confirming duty demands for clandestine production and clearance are supported by factual evidence. - HELD THAT: - Weighing the evidence, the Tribunal concluded that the impugned orders lacked factual support. The determinative evidentiary pillars-application of consumption norms, reliance on older private slips, and rejection of contemporaneous trial production results-were flawed. In absence of established payments from customers and with inapplicable norms, the inference of clandestine production and resultant duty liability could not be sustained.

Impugned orders lack factual support and must be set aside.

Final Conclusion: The appeals are allowed: the computation of alleged clandestine production based on the applied electricity-consumption norms and earlier private records was unsustainable for the period 2003-04 to 2007-08; circumstantial evidence did not establish duty evasion and the impugned orders are set aside.

Restriction on utilisation of CENVAT credit for prior periods - indefeasibility of CENVAT credit - proviso to sub-rule (4) of Rule 3 of CENVAT Credit Rules, 2004 - utilisation of credit on capital goods

Proviso to sub-rule (4) of Rule 3 of CENVAT Credit Rules, 2004 - restriction on utilisation of CENVAT credit for prior periods - utilisation of credit on capital goods - indefeasibility of CENVAT credit - Liability to pay demand, interest and penalty for alleged contravention of the proviso to sub-rule (4) of Rule 3 of the CENVAT Credit Rules, 2004 by utilising credit availed in a later month to discharge earlier excise duty defaults. - HELD THAT: - The appellant had availed CENVAT credit on capital goods in February 2016 which, according to the appellant, was eligible prior to February 2016 but was not availed earlier. There is no statutory time limit for availing credit on capital goods. The impugned demand was founded on the proviso to sub-rule (4) of Rule 3 which restricts utilisation of CENVAT credit to the extent available on the last day of the relevant month or quarter for payment of duty relating to that period. The Tribunal followed the decision of the High Court of Gujarat in Advance Surfactants India Ltd., which held that the proviso is ultra vires Rule 3(1) and contrary to the CENVAT scheme and the doctrine that legally availed CENVAT credit is indefeasible; utilization of legally availed credit is a right vested in the manufacturer when the credit becomes available and there is no one-to-one correlation between inputs and final products. Applying that principle, the proviso cannot disentitle a manufacturer from utilising legally available credit for earlier duty defaults merely because the credit was availed in a subsequent month. Consequently, the demand, interest and penalty founded on the proviso cannot be sustained.

Demand, interest and penalty confirmed under the proviso to sub-rule (4) of Rule 3 are set aside; appeal allowed with consequential relief as per law.

Final Conclusion: The order confirming recovery of CENVAT credit utilised to discharge earlier duty defaults, and the consequential interest and penalty invoked under the proviso to sub-rule (4) of Rule 3 of the CENVAT Credit Rules, 2004, is set aside; the appeal is allowed.

Manufacture - definition of manufacture under section 2(f)(iii) of the Central Excise Act, 1944 - slitting/cutting and packing/repacking of jumbo rolls - Third Schedule - Chapter heading 4818 - test for manufacture (category (4) - transformation into a different/marketable article) - extended limitation under the proviso to section 11A(4) of the Central Excise Act, 1944 - assessment under section 4A vs section 4 - retail sale price/Institutional consumers

Manufacture - definition of manufacture under section 2(f)(iii) of the Central Excise Act, 1944 - slitting/cutting and packing/repacking of jumbo rolls - test for manufacture (category (4) - transformation into a different/marketable article) - Activity of cutting/slitting jumbo rolls into smaller sizes and packing/repacking into consumer packs amounts to manufacture. - HELD THAT: - The Tribunal held that the amendment to the definition of manufacture by insertion of clause 2(f)(iii) (effective 1 March 2003) brought within the scope processes such as cutting, slitting and packing/repacking of products falling under the Tariff entry for cleansing or facial tissues etc. (Chapter heading 4818 of the Third Schedule). Applying the tests formulated by the Supreme Court (including the category (4) test where goods are transformed into marketable articles different in character or use), the Tribunal concluded that conversion of jumbo rolls into napkins, facial tissues, towels or similar packs produces distinct, marketable articles and therefore constitutes a process of manufacture liable to excise duty. [Paras 6, 7, 8, 9, 14]

The activity undertaken by the respondent-assessee amounts to manufacture and is subject to Central Excise duty.

Extended limitation under the proviso to section 11A(4) of the Central Excise Act, 1944 - prior departmental knowledge / previous adjudication - Extended time limit under the proviso to section 11A(4) could not be invoked for the impugned demand. - HELD THAT: - The Tribunal recorded that the Department had earlier issued and adjudicated a show cause notice on the same activity (order dated 22 March 2007) and therefore was aware of the nature of the respondent's operations. Given that awareness, the Tribunal held the Department could not invoke the extended limitation provision by merely alleging suppression or mis-declaration; absence of a finding that the assessee had concealed material facts precluded application of the extended period. The Tribunal, however, left open confirmation of duty for the normal limitation period and directed de novo adjudication on that basis. [Paras 11, 12, 14]

Proviso to section 11A(4) cannot be invoked; extended-period demand set aside while normal-period demand may be reconsidered de novo by the adjudicating authority.

Assessment under section 4A vs section 4 - Legal Metrology / Institutional consumers - verification by field formation - Whether assessment is under section 4A (retail sale price) or section 4 must be decided after factual verification of supplies to Institutional consumers and the nature of packing. - HELD THAT: - The Tribunal observed that the Commissioner (Appeals) had accepted the respondent's claim that majority supplies were to Institutional consumers, thereby excluding application of Chapter II of Legal Metrology and section 4A in respect of such supplies. The Tribunal found that this factual claim requires verification by the field formation through production of orders, invoices and determination of quantities supplied in institutional (bulk) packs versus retail packs. Consequently the question of assessment basis (section 4A based on MRP with abatement or section 4) was remitted to the adjudicating authority for de novo determination after factual enquiry. [Paras 13, 14]

Issue remanded for factual verification and de novo adjudication whether clearances were to Institutional consumers and, if so, whether packing was retail in nature to attract section 4A.

Final Conclusion: Appeal allowed in part: (i) processes of slitting/cutting and packing/repacking jumbo rolls into consumer packs constitute manufacture; (ii) extended-period demand under the proviso to section 11A(4) is not sustainable and is set aside, though duty for the normal period may be reexamined; (iii) the question whether assessment is under section 4A or section 4 is remitted for factual verification and de novo decision by the adjudicating authority within three months.

Applicability of Rule 6 of the CENVAT Credit Rules, 2004 to waste/non-excisable goods - reversal of CENVAT credit on account of clearance of non-excisable goods for consideration - goods 'manufactured' within the meaning of the Central Excise enactment (test of manufacture) - effect of Explanation inserted w.e.f. 01.03.2015 in sub rule (1) of Rule 6 - precedential value of Tribunal/Division Bench decisions on identical issue

Applicability of Rule 6 of the CENVAT Credit Rules, 2004 to waste/non-excisable goods - goods 'manufactured' within the meaning of the Central Excise enactment (test of manufacture) - effect of Explanation inserted w.e.f. 01.03.2015 in sub rule (1) of Rule 6 - Whether Rule 6 of the CENVAT Credit Rules, 2004 requires reversal of credit in respect of zinc dross/cyclone/ash arising incidentally in the manufacture of pipes and cleared for consideration, on the basis that such material is not goods 'manufactured' by the assessee and therefore not covered as exempted goods. - HELD THAT: - The Tribunal examined whether zinc waste (dross/cyclone/ash) generated incidentally in the manufacture of galvanized pipes falls within the concept of 'goods manufactured' so as to attract the obligation to reverse credit under Rule 6. It noted that the Explanation inserted w.e.f. 01.03.2015 creates a deeming provision treating non excisable goods cleared for consideration as exempted goods but there is no corresponding amendment in sub rule (1) of Rule 6 to treat goods that merely emerge in the process of manufacture as goods 'manufactured' by the assessee. The Tribunal, following earlier Tribunal and Division Bench decisions in cases on identical facts (including the appellant's own unit in APL Apollo Tubes Ltd.), held that waste or residue arising incidentally in the manufacturing process which is not consciously manufactured by the assessee cannot be treated as goods manufactured by the assessee and therefore is not to be equated with exempted goods for the purpose of Rule 6. Applying that ratio to the present facts where zinc waste arises during manufacture of pipes/tubes, the demand under Rule 6 read with the revenue provisions was found unsustainable and the impugned order was set aside. [Paras 6]

Demand under Rule 6 of the CENVAT Credit Rules, 2004 in respect of zinc dross/cyclone/ash arising incidentally during manufacture is unsustainable; impugned order set aside and appeal allowed.

Final Conclusion: The Tribunal, following earlier decisions on identical facts, held that zinc waste incidentally arising in the manufacture of pipes is not 'manufactured' goods for the purposes of Rule 6 and therefore the reversal/demand cannot be sustained; the impugned order is set aside and the appeal is allowed.

Application of Rule 6 of Cenvat Credit Rules to clearances of by products - Explanation 1 to Rule 6 (2015 amendment) and its scope - distinction between manufacture and agricultural waste/by product - treatment of bagasse as non excisable agricultural residue - absence of excise liability where there is no manufacture

Application of Rule 6 of Cenvat Credit Rules to clearances of by products - Explanation 1 to Rule 6 (2015 amendment) and its scope - distinction between manufacture and agricultural waste/by product - Whether the appellant is liable to pay amounts under Rule 6 (and the Explanation inserted in 2015) on clearances of bagasse generated during sugar manufacture - HELD THAT: - The Tribunal applied the ratio of the Apex Court in Union of India v. DSCL Sugar Ltd., holding that bagasse and press mud are agricultural waste/residues and do not qualify as manufacture under the statute; consequently Rule 6, which operates in relation to inputs used in or in relation to the manufacture of exempted goods or final products, is inapplicable where there is no manufacture of the by product. The 2015 insertion of Explanation 1, which includes non excisable goods cleared for consideration within the ambit of exempted goods or final products, does not alter the fundamental requirement that Rule 6 is directed at activities of a manufacturer/producer of final products. Where bagasse is a residue emerging incidentally in the process of producing sugar and is not itself the product of a manufacturing activity, it cannot be treated as an excisable manufactured final product attracting liability under Rule 6. Following the Tribunal decision in M/s. Kichha Sugar Company Ltd. and the Allahabad High Court's approval in M/s. Balrampur Chini Mills Ltd., the demand based on treating bagasse as exempted/final product and invoking Rule 6 is unsustainable.

Demand based on treating bagasse as exempted goods attracting liability under Rule 6 (including the 2015 Explanation) is set aside; appeals allowed.

Final Conclusion: The appeals succeed: bagasse, being an agricultural residue/by product not constituting manufacture, does not attract liability under Rule 6 as amended in 2015; the demand confirmed on that basis is set aside with consequential relief.

CENVAT credit admissibility under CCR, 2004 - payment of 6% under Rule 6(3)(i) of the CENVAT Credit Rules, 2004 - non-applicability of Rule 6 to captive/surplus electricity sales - electrical energy (generated from bagasse) not excisable or exempted

Payment of 6% under Rule 6(3)(i) of the CENVAT Credit Rules, 2004 - non-applicability of Rule 6 to captive/surplus electricity sales - electrical energy (generated from bagasse) not excisable or exempted - Whether the demand for payment equal to 6% of the sale value of electricity sold to outsiders under Rule 6(3)(i) CCR, 2004 is sustainable. - HELD THAT: - The Tribunal examined earlier precedents including the Bench decision in M/s. Venkateshwara Power Project Ltd. which applied the reasoning of the Allahabad High Court (as approved by the Supreme Court in the cited authorities) that where electricity is generated from bagasse no other input or input service is used and therefore the resultant electrical energy is neither excisable under Section 2(d) nor an exempted good for the purposes of Rule 6. Applying that ratio and following the Tribunal's earlier Final Order in the appellant's own case for an earlier period, the Bench held that Rule 6(3)(i) does not apply to the sale of surplus/captive electricity generated from bagasse and accordingly the demand of 6% on the sale value is not sustainable in law.

Demand under Rule 6(3)(i) for 6% of sale value of electricity sold to outsiders is set aside and the appeal is allowed.

Final Conclusion: The impugned order rejecting the appellant's appeal is set aside; the demand of 6% on sale of electricity for the period November 2015 to June 2017 is held unsustainable and the appeal is allowed.

Input tax credit - Amnesty Scheme - set off - recovery from defaulting selling dealers - refund on recovery - proportionate disbursement - assurance given to the Court

Assurance given to the Court - recovery from defaulting selling dealers - refund on recovery - State is bound by the assurance recorded in Mahalakshmi Cotton Ginning Pressing and Oil Industries Ltd. that amounts recovered from defaulting selling dealers will be disbursed to dealers denied set off. - HELD THAT: - The Court accepted the State's concession that it is bound by the assurance made earlier to this Court regarding steps to be taken against defaulting selling dealers and the mechanism for refunding dealers denied set off once recovery is effected. The State undertook that when amounts are recovered from defaulting dealers, the portion proportionate to the set off denied to the petitioner will be disbursed to the petitioner in accordance with the assurance in Mahalakshmi Cotton Ginning Pressing and Oil Industries Ltd., including reconciliation and pro rata refund where applicable. The Court recorded that such disbursement will be made even without any separate refund application by the dealer, consistent with the prior assurance. [Paras 5]

State is bound to disburse to the petitioner the amounts recovered from defaulting selling dealers proportionate to the set off denied, in terms of the earlier assurance.

Amnesty Scheme - input tax credit - proportionate disbursement - Petitioner's election to opt for the Amnesty Scheme will not preclude receipt of amounts recovered from defaulting dealers, but disbursement will be adjusted for any tax waiver obtained under the Amnesty Scheme. - HELD THAT: - The petitioner expressed apprehension that opting into the Amnesty Scheme would foreclose its entitlement to refunds arising from recoveries from defaulting selling dealers pursuant to the earlier assurance. The State acknowledged the obligation under the assurance and clarified that any disbursement to the petitioner will be made after taking into account the extent of tax waived under the Amnesty Scheme. Thus, amounts recovered from defaulting sellers will not be paid as a refund under the Amnesty Scheme but will be disbursed separately and proportionately, reduced by the benefit (if any) obtained by the petitioner under the Amnesty Scheme. [Paras 6, 7]

Opting for the Amnesty Scheme does not defeat the petitioner's entitlement to proportionate disbursement from recoveries of defaulting sellers; the disbursement will be limited after accounting for any waiver under the Amnesty Scheme.

Alternative remedy - maintenance of petition - Although an efficacious alternative remedy of appeal under the Act exists, the petition was disposed of on the basis of the State's undertaking. - HELD THAT: - The Court indicated at the outset that it was not inclined to entertain the petition because an appeal remedy was available under the Act. Despite that, in view of the specific assurance and the clarification given by the State in court about its obligations concerning recoveries and disbursements, the Court proceeded to record the undertaking and disposed of the petition accordingly. [Paras 2, 8]

Petition disposed of on the basis of the State's undertaking, notwithstanding availability of an alternate remedy of appeal.

Final Conclusion: The petition is disposed of recording that the State is bound by the prior assurance: amounts recovered from defaulting selling dealers will be disbursed to the petitioner proportionately to the set off denied and after adjusting for any tax waiver obtained under the Amnesty Scheme; such disbursement will not be treated as a refund under the Amnesty Scheme.

Entitlement to composition scheme despite concluded assessment - interpretation of scheme clause permitting benefit where appeal is pending - effect of extension of scheme with retrospective operation - non-arbitrariness and requirement of reasoned exercise of administrative discretion - eligibility of civil works contractors under composition scheme

Entitlement to composition scheme despite concluded assessment - interpretation of scheme clause permitting benefit where appeal is pending - eligibility of civil works contractors under composition scheme - The petitioner is entitled to the benefit of the composition scheme for the years 2009-10 and 2010-11 notwithstanding that assessment had been framed prior to payment under the scheme. - HELD THAT: - The court examined the scheme as a whole and held that Clause 10, which makes the benefit available where an "appeal" is pending, must be understood in context with the eligibility and negative covenants. A conjoint reading shows the scheme confers benefit on "eligible traders" for "eligible transactions" and additionally provides that benefit may be availed where assessment, reassessment or revision proceedings are pending; that additional provision cannot be read to limit the core entitlement only to cases where assessment is pending. The scheme does not expressly exclude traders whose assessments have been concluded. Therefore the authority erred in rejecting the petitioner's application solely on the ground that assessment had been framed prior to payment under the scheme. The rejection was arbitrary and contrary to the policy and objects of the scheme and the principles constraining administrative discretion. [Paras 3, 4, 5, 6, 8]

Impugned order rejecting the application on the ground that assessment had been framed is quashed; the petitioner is entitled to the scheme benefit.

Effect of extension of scheme with retrospective operation - interpretation of operative period for availing scheme - The petitioner was entitled to avail the benefit because the scheme was extended and the application and deposit fell within the operative period as extended (including retrospective effect). - HELD THAT: - The court noted the scheme was originally operative for 180 days and was thereafter extended. The Circular dated 26.05.2015 extended the period from 12.04.15 to 11.08.15; there was no intervening gap. The petitioner's application fell within the operative period once the extension with retrospective effect is taken into account. The respondent's contention that deposits were beyond the operative period is thus without merit. In these circumstances, denial of benefit on the ground of non-compliance with the original unextended timeline was unsustainable. [Paras 6, 8]

Denial of the scheme benefit on the ground of deposit/timing is set aside and the petitioner is entitled to the benefit in view of the extension.

Final Conclusion: The writ petition is allowed: the order dated 04/07/2018 rejecting the petitioner's application for composition-scheme benefits for 2009-10 and 2010-11 is quashed and the respondent authority is directed to grant the benefits to the petitioner within four weeks.

Ultra vires - objects of company / memorandum of association - abuse of corporate form - locus to complain / standing - role of complainant in disciplinary proceedings - disciplinary proceedings of professional body - scope of judicial review over disciplinary authority

Objects of company / memorandum of association - ultra vires - abuse of corporate form - locus to complain / standing - Petitioner-company's organised activity of filing and pursuing complaints against chartered accountants is ultra vires the Memorandum and constitutes misuse of the corporate fac ade. - HELD THAT: - The petitioner's main objects, as set out in Part A of the Memorandum, relate to wholesale trading and allied commercial activities; Clauses 4 and 32 relied upon by the petitioner are contained in Part B as objects incidental or ancillary to the main objects and cannot be pursued independently. While incidental powers may permit a company to file a complaint discovered in the course of its business, they do not authorise an organised, standalone vocation of routinely filing complaints unconnected with the company's main business. The petitioner's repeated and organised pursuit of complaints against members of ICAI therefore falls outside the scope of its stated objects and indicates misuse of the corporate form, which cannot be permitted. [Paras 18, 19, 20, 21, 22]

The organised activity of filing and pursuing complaints by the petitioner is ultra vires its Memorandum and amounts to misuse of the corporate fac ade; the petitioner lacks a proper basis to pursue such organised complaints.

Disciplinary proceedings of professional body - role of complainant in disciplinary proceedings - scope of judicial review over disciplinary authority - The Board of Discipline's prima facie opinion that the member was not guilty of professional misconduct was not interfered with; disciplinary proceedings are primarily between ICAI and its members and are not private disputes amenable to substitution by the Court. - HELD THAT: - The object of disciplinary proceedings is to ensure members of ICAI adhere to professional standards; a complainant acts as a relator by furnishing information but the disciplinary process is essentially between ICAI and its member. The petitioner failed to produce material establishing that Hasham, as at the relevant time, controlled the composition of the boards of the alleged subsidiaries or that the forms verified by the member were falsely certified in a manner amounting to gross negligence. Given the absence of material showing control (no articles or instruments binding appointment/removal of directors) and that the alleged resolution post-dates the relevant financial year, it was not appropriate for the Court to supplant the disciplinary authority's view. Consequently, the Board of Discipline's concurrence with the Director (Discipline) that the member was not guilty was sustained. [Paras 25, 26, 27, 28, 29]

No interference with the Board of Discipline's conclusion; the disciplinary authorities' view that the member was not guilty of professional misconduct is maintained and judicial substitution is unwarranted.

Scope of judicial review over disciplinary authority - role of complainant in disciplinary proceedings - Court declined to exercise supervisory jurisdiction to overturn the disciplinary finding and dismissed the petition with costs. - HELD THAT: - The Court emphasised that it is not appropriate to supplant the views of the disciplinary authorities of ICAI and noted the petitioner's pattern of repeatedly filing complaints and related litigation as an organised vocation, which wastes judicial time. Considering these factors, the petition was dismissed and costs were imposed to discourage such conduct. [Paras 29, 30, 31]

Petition dismissed; costs awarded to discourage litigants who make litigation their vocation.

Final Conclusion: Writ petition dismissed. The court held the petitioner's organised practice of filing complaints was ultra vires its Memorandum and an abuse of corporate form, refused to interfere with the disciplinary authorities' finding that the member was not guilty of professional misconduct, and awarded costs to the petitioner to be deposited with the Delhi High Court Legal Services Committee.

Summary order. Petitioner to produce Memorandum and Articles of Association on next date; matter listed for 01.08.2019.