TaxTMI Updates e-Newsletter
Aug 21,2021

Classification based on Harmonised System of Nomenclature (HSN) - Explanatory Notes to HSN - Exclusion from specific HSN heading where substance added renders product a food preparation - Predominant/essential character test (Rule 3(b) of General Rules for Interpretation) - Residuary entry: Food preparations not elsewhere specified or included (HSN 2106) - Binding effect of an Advance Ruling on the applicant (Section 103 CGST Act)

Classification based on Harmonised System of Nomenclature (HSN) - Explanatory Notes to HSN - Exclusion from specific HSN heading where substance added renders product a food preparation - Whether the applicant's Instant Mix Flours are classifiable under Chapter Heading 1102 (Cereal flours other than that of wheat or meslin). - HELD THAT: - The Authority examined the Explanatory Notes to HSN 1102 which permit only the addition of very small quantities of specified substances (e.g., mineral phosphates, anti-oxidants, emulsifiers, vitamins, prepared baking powders) without excluding the product from heading 1102. The applicant's products contain spices and other ingredients (listed in the record) in proportions ranging from 5% to 37%, and these ingredients have been added with a view to use as food preparations. On that basis and in light of the Explanatory Notes, the Instant Mix Flours fall outside the scope of heading 1102 because they are not mere flours improved by negligible additives but are flours combined with other substances to form food preparations, thereby triggering exclusion from 1102. [Paras 14, 15]

Excluded from Chapter Heading 1102.

Classification based on Harmonised System of Nomenclature (HSN) - Predominant/essential character test (Rule 3(b) of General Rules for Interpretation) - Applicability of CBIC Circular on 'Sattu' (1106) and requirement of 'very small amounts' of additives - Whether the applicant's Instant Mix Flours are classifiable under Chapter Heading 1106 (Flour, Meal and Powder of dried leguminous vegetables etc.). - HELD THAT: - Chapter Heading 1106 covers flours/meal/powders of dried leguminous vegetables and related products. The Authority considered the applicant's composition data and the CBIC circular on 'Sattu' which provides that flour of ground pulses/cereals with only very small amounts of additives remains classifiable under 1106. The instant mix products, however, contain spices and other ingredients in substantial and varying proportions (not 'very small' additives) and the substances added are not those contemplated by the explanatory material for 1106. Applying the relevant HSN headings, explanatory notes and interpretation rules, the Authority concluded that the products are not covered by heading 1106. [Paras 16, 17]

Not classifiable under Chapter Heading 1106.

Residuary entry: Food preparations not elsewhere specified or included (HSN 2106) - Classification based on Harmonised System of Nomenclature (HSN) - Explanatory Notes to HSN - Whether the applicant's Instant Mix Flours are classifiable under Chapter Heading 2106 (Food preparations not elsewhere specified or included) and the applicable GST rate. - HELD THAT: - Having excluded headings 1102 and 1106 on factual and explanatory-note grounds, the Authority examined HSN 2106 which covers preparations for use after processing (such as cooking) and mixtures of foodstuffs not covered elsewhere. The Instant Mix Flours are packed and labelled as 'Mix Flour' with cooking instructions and are food preparations that require further processing (cooking) before consumption. They are not specifically covered by any other tariff item and correspond to subheading 2106 90 (Others). Under the relevant notifications, goods classifiable under Chapter Heading 2106 (not otherwise excluded or specifically provided for) attract GST at 18% (9% CGST + 9% SGST). The Authority also noted that an Advance Ruling of another applicant is not binding on the present applicant under the statutory scheme. [Paras 18, 21, 23]

Classifiable under HSN 2106 90 (Others) and liable to GST at 18% (9% CGST + 9% SGST).

Final Conclusion: The Authority ruled that the applicant's Instant Mix/Mix Flours are not classifiable under HSN 1102 or 1106 because of the nature and proportion of added spices and ingredients and are instead classifiable under HSN 2106 90 (Food preparations not elsewhere specified), attracting GST at 18% (9% CGST + 9% SGST).

Classification under Harmonized System of Nomenclature (HSN) - Interpretative Rules of the Customs Tariff (Rule 1, Rule 2(b), Rule 3(b)) - Essential character test for mixtures - Explanatory Notes to HSN (exclusion where substances added as food preparations) - Food preparations not elsewhere specified or included (HSN 2106) - Composite supply and mixed supply (Section 8 of the GST Acts) - Determination of tax liability on mixed supplies - highest rate rule

Classification under Harmonized System of Nomenclature (HSN) - Explanatory Notes to HSN (exclusion where substances added as food preparations) - Essential character test for mixtures - Food preparations not elsewhere specified or included (HSN 2106) - Classification and applicable GST rate on supply of instant mix flours for gota, khaman, dalwada, dahiwada, idli, dhokla, dhosa, pizza, methi gota and handvo. - HELD THAT: - The Authority applied the General Rules for interpretation of the Customs Tariff and the Explanatory Notes to HSN. Examination of the product packets and ingredient composition showed spices and additives (other than the limited substances permitted by the explanatory notes for headings 1101/1102/1106) present in varying and substantial proportions and added with a view to use as food preparations. The CBIC circular on 'Sattu' (classification under 1106 where only very small amounts of additives are present) was held inapplicable because the instant mixes here contain spices/additives beyond 'very small amounts' and are described and marketed as 'Instant Mix' with recipes for cooking. Consequently the products do not retain classification under headings 1101/1102/1106 and fall within the residual description 'Food preparations not elsewhere specified or included' under HSN 2106 (specifically subheading 2106 90). The applicable GST rate is therefore the rate prescribed for that entry in Schedule III, namely 18% (9% CGST + 9% SGST). [Paras 18, 19, 23, 26, 29]

The ten instant mix/ready mix flour products are classifiable under HSN 2106 90 and attract GST at 18% (9% CGST + 9% SGST).

Composite supply and mixed supply (Section 8 of the GST Acts) - Determination of tax liability on mixed supplies - highest rate rule - Tax treatment where instant gota/methi gota flour is supplied together with chutney powder/kadhi chutney powder for a single price. - HELD THAT: - The Authority considered definitions of 'composite supply' and 'mixed supply' and the factual nature of the bundled supply. It held that the supplies of gota/methi gota with chutney powder/kadhi chutney powder are not naturally bundled in the ordinary course of business and therefore constitute a mixed supply. Under Section 8, a mixed supply comprising two or more supplies for a single price is treated as that supply which attracts the highest rate of tax. Since both components (instant flour and chutney powder) attract the same rate under the classification adopted (HSN 2106 90 at 18%), the mixed supply is to be treated as supply of the instant flour (HSN 2106 90) and taxed accordingly. [Paras 8, 28, 29]

The mixed supply of Instant Gota/Methi Gota with chutney powder/kadhi chutney powder shall be treated as supply of Instant Gota/Methi Gota (HSN 2106 90) and taxed at 18% (9% CGST + 9% SGST).

Composite supply and mixed supply (Section 8 of the GST Acts) - Determination of tax liability on mixed supplies - highest rate rule - Tax treatment where khaman instant mix flour is supplied together with a masala pack. - HELD THAT: - The Authority examined whether the khaman mix supplied with a masala pack is a composite or mixed supply. It concluded the supply is not naturally bundled and therefore constitutes a mixed supply supplied for a single price. Applying Section 8, a mixed supply is to be treated as the supply attracting the highest rate. Given the classification of the khaman mix under HSN 2106 90 at 18%, the mixed supply is to be treated as supply of Instant Khaman Mix Flour and taxed at that rate. [Paras 9, 28, 29]

The mixed supply of Instant Khaman Mix Flour with masala pack shall be treated as supply of Instant Khaman Mix Flour (HSN 2106 90) and taxed at 18% (9% CGST + 9% SGST).

Final Conclusion: Advance Ruling: The ten instant mix/ready mix flour products are classifiable under HSN 2106 90 and attract GST at 18% (9% CGST + 9% SGST). Mixed supplies of Instant Gota/Methi Gota with chutney powder and Instant Khaman with masala pack are to be treated as supplies of the respective instant flours (HSN 2106 90) and taxed at 18% (9% CGST + 9% SGST).

Declaration of advance ruling void ab initio under Section 104 - suppression of material facts / mis-declaration in Advance Ruling application - meaning of "any proceeding" in proviso to Section 98(2) - investigation initiated under Section 71 as a judicial proceeding - Form GST DRC-01A Part A as intimation of tax ascertained under Rule 142(1A) - proceedings pending on the same subject-matter

Meaning of "any proceeding" in proviso to Section 98(2) - investigation initiated under Section 71 as a judicial proceeding - Form GST DRC-01A Part A as intimation of tax ascertained under Rule 142(1A) - Whether the investigation under Section 71 and the issuance of Form GST DRC-01A Part A constitute "proceedings" within the meaning of the proviso to Section 98(2) of the CGST Act. - HELD THAT: - The Authority held that the term "proceeding" in the GST context is broad and encompasses audit, examination, investigation and related steps that culminate in adjudication. An inquiry initiated under Section 70(1) and, by statutory deeming, treated as judicial in character under Section 70(2), is a proceeding. Separately, FORM GST DRC-01A Part A issued under Rule 142(1A) is a mandatory intimation of ascertained tax which, by its terms, precedes service of a show cause notice and enables the taxpayer to discharge assessed liability; accordingly issuance of DRC-01A Part A is a proceeding for the purposes of proviso to Section 98(2). The Authority therefore concluded that both the investigation and the three DRC-01A Part A communications fall within "any proceeding" contemplated by Section 98(2). [Paras 11, 12, 15, 17]

Investigation under Section 71 and issuance of FORM GST DRC-01A Part A are proceedings within the scope of the proviso to Section 98(2).

Declaration of advance ruling void ab initio under Section 104 - suppression of material facts / mis-declaration in Advance Ruling application - proceedings pending on the same subject-matter - Whether the Advance Ruling dated 20-01-2021 should be declared void ab initio because the applicant did not disclose pending proceedings on the same subject-matter in its advance ruling application. - HELD THAT: - The Authority found that the questions in the applicant's advance ruling application were identical to issues under inquiry and to matters covered by the three DRC-01A Part A intimations dated 11-02-2020. The applicant had ticked the declaration in Form GST ARA-01 stating no proceedings were pending or decided, but the Authority observed that the applicant was aware of the investigation and the DRC-01A communications and failed to disclose them. While the Revenue had not brought the omission to the Authority's attention before pronouncement, non-disclosure by the applicant amounted to suppression of material facts. In consequence, the Authority exercised the power under Section 104 to declare the earlier Ruling void ab initio, noting that an advance ruling cannot be used to frustrate or nullify ongoing proceedings. [Paras 18, 19, 20, 21, 23]

Advance Ruling No. GUJ/GAAR/R/11/202 dated 20-01-2021 is declared void ab initio on the ground of suppression / mis-declaration of pending proceedings and same-subject-matter proceedings having been initiated earlier.

Final Conclusion: The Authority held that the investigation under Section 71 and the three FORM GST DRC-01A Part A intimations (dated 11-02-2020) constituted proceedings within the meaning of the proviso to Section 98(2); the applicant failed to disclose those proceedings in its ARA-01 application, thereby suppressing material facts, and accordingly Advance Ruling No. GUJ/GAAR/R/11/202 dated 20-01-2021 is declared void ab initio under Section 104 of the CGST Act.

Supply - Consideration - Service rendered without consideration - Levy of GST on amounts collected as agent/mediator - Canteen services supplied by a third party - Statutory obligation to provide canteen facility

Supply - Consideration - Service rendered without consideration - Levy of GST on amounts collected as agent/mediator - Canteen services supplied by a third party - Whether GST is leviable on the amount collected by the applicant from employees as their share of canteen charges and paid to the third party canteen service provider. - HELD THAT: - The applicant arranges a canteen run by a third party contractor and collects from employees the employees' share of canteen charges which it remits to the contractor. The applicant does not retain any profit margin and performs the collection and remittance as a facilitation without consideration. Because the activity involves collection and payment of the employees' portion to the service provider without any consideration retained by the applicant, it does not amount to a taxable supply by the applicant and GST is not attracted on the employees' portion collected and paid to the canteen service provider. [Paras 3]

GST is not leviable on the employees' portion of canteen charges collected by the applicant and paid to the canteen service provider.

Final Conclusion: The Authority ruled that the amount representing employees' share of canteen charges, collected by the applicant and paid to the third party canteen service provider without any profit or consideration to the applicant, is not liable to GST.

Summary order. Notice issued returnable in eight weeks on the petition; counter-affidavit to be filed within four weeks of service; Dasti service permitted.

Reopening of assessment u/s 147 - deemed dividend addition u/s 2(22)(e) -gap of more than four years - failure on the part of the petitioner to disclose fully and truly all material facts necessary for his assessment - second mode of payment envisaged under clause (e) of section 2(22) viz. to any concern in which such shareholder is a member or a partner and in which he has substantial interest - HC [2020 (3) TMI 1203 - GUJARAT HIGH COURT] held in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for his assessment, the reopening of assessment beyond a period of four years from the relevant assessment is without authority of law - HELD THAT:- SLP dismissed.

Bogus LTCG - addition on account of LTCG claimed as exempt u/s. 10(38) - transaction was pre-arranged as well as sham and was carried out through penny scripts companies / paper companies - whether the assessee earned long term capital gain through transactions with bogus companies? - HC [2020 (10) TMI 299 - GUJARAT HIGH COURT] deleted the addition - HELD THAT:- SLP dismissed.

Special audit u/s 142(2A) - non-compliance to the principles of natural justice at the stage of making the proposal - whether the AO before sending a proposal for conducting special audit under Section 142(2A) of the Act, was required to provide an opportunity of hearing to the assessee and in absence of the same, can the proceedings conducted thereafter be held to be vitiated in law ? - as per HC [2020 (2) TMI 131 - BOMBAY HIGH COURT] in the absence of pre-decisional hearing, the decision to have special audit was invalid and consequentially, all the proceedings conducted thereafter stood vitiated - HELD THAT:- We are not inclined to exercise jurisdiction under Article 136 of the Constitution of India.The special leave petition is, accordingly, dismissed.

Pending application stands disposed of.

Reassessment under Section 147 - reopening of assessment - mere change of opinion - reason to believe - material available at original assessment

Reassessment under Section 147 - mere change of opinion - material available at original assessment - Whether the reassessment reopened under Section 147/148 was invalid as being based on a mere change of opinion when the Assessing Officer had the relevant material before him at the time of the original assessment. - HELD THAT: - The Court held that reopening was impermissible because the Assessing Officer had before him, at the time of original return and assessment, the computation and annexure showing both the interest received on government securities and the premium written off. Applying the established tests in the Apex Court's jurisprudence as explained in Kalyanji Mavji & Co. and subsequent authority summarized by the Full Bench in DELL INDIA PVT. LTD. , the power under Section 147 cannot be exercised on the basis of mere change of opinion where no new tangible material or external information has been discovered. The Court observed that the Assessing Officer had earlier considered and accepted the claim, and the record demonstrates that the reassessment proceeded from a change of conclusion on the same material; such change of opinion is an in-built check against abuse of power and cannot sustain reopening. The Court also relied on the principle, as applied in TECHSPANINDIAS PVT. LTD. , that the phrase 'reason to believe' must be read so as not to confer arbitrary power to reopen assessments merely on reappreciation of previously available facts. Having found that the requisite fresh material or external information justifying reopening was absent and that the Assessing Officer had already applied his mind to the claim, the Court agreed with the Tribunal's conclusion that the reassessment was vitiated by being founded on mere change of opinion. [Paras 5, 6, 7]

Reopening of the assessment was on mere change of opinion and therefore the reassessment proceedings under Section 147/148 were invalid; the Tribunal's order setting aside the reassessment is upheld.

Final Conclusion: The substantial question is answered against the revenue: the reassessment for Assessment Year 2005-06 was based on mere change of opinion in respect of a claim already placed before and considered by the Assessing Officer, hence the reopening was unlawful and the appeal is dismissed.

Revisionary jurisdiction under Section 263 - erroneous and prejudicial to revenue - incorrect application of law - failure to apply binding Supreme Court precedent - assessability of waived or unclaimed balances credited to profit and loss account - application of the ratio in T.V. Sundaram Iyengar and Sons Ltd.

Revisionary jurisdiction under Section 263 - erroneous and prejudicial to revenue - incorrect application of law - failure to apply binding Supreme Court precedent - application of the ratio in T.V. Sundaram Iyengar and Sons Ltd. - Whether the assessment orders for the Assessment Years 2005-06 and 2006-07 were erroneous and prejudicial to the revenue by reason of the Assessing Officer's incorrect application of law and failure to consider the ratio of T.V. Sundaram Iyengar and Sons Ltd., thereby justifying exercise of revisional jurisdiction under Section 263. - HELD THAT: - The Court applied the twin conditions for invoking Section 263: (i) the assessment order must be erroneous and (ii) the error must be prejudicial to the interests of the revenue. The Commissioner found, and this Court accepted, that the Assessing Officer accepted the assessee's claim without dealing with or applying the ratio of the Supreme Court decision in T.V. Sundaram Iyengar and Sons Ltd. regarding the assessability of unclaimed balances/waived amounts credited to profit and loss account. The record showed no discussion in the assessment orders of the applicability of the precedent relied upon by the assessee nor adequate consideration of contrary binding authority. An incorrect application of law or failure to apply a binding Supreme Court precedent renders an assessment order erroneous; accordingly that condition of Section 263 was fulfilled. Having held the order erroneous, and given that the error related to taxability of waived loan/principal amounts credited to profit and loss account, the Court concluded the order was prejudicial to the revenue and therefore amenable to revision under Section 263. The Court noted that subsequent High Court or other decisions relied upon by the assessee were not available or distinguishing in facts when the assessment was framed and that other Supreme Court authorities cited did not alter the conclusion on the facts of this case. [Paras 7, 9, 10]

The assessment orders were erroneous for having incorrectly applied the law by not considering the ratio of T.V. Sundaram Iyengar and Sons Ltd., and were prejudicial to the revenue; invocation of revisional jurisdiction under Section 263 was justified, answer to substantial questions of law is against the assessee.

Final Conclusion: The appeal is dismissed; the Commissioner was justified in exercising powers under Section 263 to set aside the assessments for failure by the Assessing Officer to apply the binding Supreme Court precedent, and the substantial questions of law are answered against the assessee.

Non-deduction under Section 40(a)(ia) where TDS paid before due date of filing return - payment before due date under Section 43B - cash system of accounting - disallowance for lack of vouchers - rejection on surmise and conjecture

Non-deduction under Section 40(a)(ia) where TDS paid before due date of filing return - payment before due date under Section 43B - cash system of accounting - Addition of TDS payable (on others and on salary) to returned income under Section 40(a)(ia) was not sustainable as TDS was paid before the due date for filing return under Section 139(1). - HELD THAT: - The Tribunal noted that the Assessing Officer did not dispute that the assessee follows cash system of accounting and that TDS had been deducted by the payer and shown credited in the assessee's Form 26AS. The assessee produced challans evidencing payment of the TDS before the due date for filing the return under Section 139(1). Applying the principles in the decisions relied upon, the Tribunal held that where TDS is deposited before the due date for filing the return, Section 40(a)(ia) cannot be invoked to disallow the expenditure; the statutory liabilities covered by Section 43B (as applied) were satisfied by payment before the filing deadline. On this basis the additions made by the AO under Section 40(a)(ia) were deleted. [Paras 7]

Grounds 4, 7(c) and 7(d) allowed; additions for TDS payable deleted.

Disallowance for lack of vouchers - rejection on surmise and conjecture - proof of expenditure and vouchers - Disallowance of one-tenth of staff welfare, conveyance, general and telephone expenses on the basis that proper vouchers were not produced was unsustainable. - HELD THAT: - The Tribunal examined the record and found that the assessee had produced vouchers and relevant details for the contested expenses, which the Assessing Officer did not properly consider. The AO's blanket rejection and one-tenth disallowance, made on conjecture without pointing out any specific defect in the accounts or particular items lacking evidence, was held to be unjustified. Consequently the disallowance was quashed. [Paras 10]

Ground No. 8 allowed; the one-tenth disallowance set aside.

Final Conclusion: The appeal is partly allowed: additions relating to TDS payable and the one-tenth disallowance of certain expenses are deleted; other contested items (service tax and professional tax) were not pressed/withdrawn and remaining grounds are dismissed.

Section 28(iv) of the Income Tax Act - value of any benefit or perquisite arising from business or the exercise of a profession - profits and gains of business or profession - nexus/proximate cause requirement for section 28(iv) - distinction between capital receipts and revenue receipts - partition of co-owned capital asset - postponement of incidence of taxation and loss of revenue

Section 28(iv) of the Income Tax Act - value of any benefit or perquisite arising from business or the exercise of a profession - nexus/proximate cause requirement for section 28(iv) - partition of co-owned capital asset - distinction between capital receipts and revenue receipts - Whether the excess area of land received by the assessee on partition of co-owned land is taxable as the value of a benefit or perquisite under section 28(iv). - HELD THAT: - The Tribunal accepted the CIT(A)'s reasoning that clause (iv) of section 28 taxes benefits or perquisites that arise from the actual conduct of business and therefore requires a real, immediate nexus between the alleged benefit and the business activity. The asset here was acquired and held as a capital asset jointly with an independent co-owner and subsequently partitioned; no cash or benefit was received on partition. Reliance was placed on precedent treating capital receipts as outside the scope of income chargeable under section 28(iv) unless they are in substance revenue receipts. The assessee did not carry on any joint business with the co-owner before partition, the land was shown as capital asset in the balance sheet and only later part of the land was converted into stock-in-trade and sold. On these facts, the excess area received on partition cannot be characterized as a business receipt or perquisite under section 28(iv), and the AO failed to establish the requisite proximate nexus to the business. The Tribunal therefore upheld the CIT(A)'s finding that the addition under section 28(iv) was not sustainable. [Paras 6]

Addition under section 28(iv) in respect of excess land received on partition is not chargeable to tax and is deleted; CIT(A)'s order on this point is upheld.

Postponement of incidence of taxation and loss of revenue - distinction between realization of future benefits and present taxable receipt - Whether taxing was merely postponed and whether the postponement caused any loss of revenue so as to justify invoking section 28(iv) at the date of partition. - HELD THAT: - The Tribunal accepted the CIT(A)'s view that no loss of revenue occurred because the assessee subsequently realised proceeds on sale (partly after development and partly as capital asset) and offered those proceeds to tax in the relevant years. The Court noted that future gains which are actually realised or accrued will be assessable when realised; mere expectation of future commercial advantage at the time of partition does not convert the partitioned capital asset into a present benefit taxable under section 28(iv). Consequently, the postponement of taxation did not result in any revenue loss that would warrant treating the partition receipt as presently taxable. [Paras 6]

There was no loss of revenue from postponement of taxation; the CIT(A)'s conclusion on this aspect is affirmed.

Final Conclusion: The Revenue's appeal is dismissed and the CIT(A)'s order deleting the addition under section 28(iv) is upheld; the assessee's cross-objections are disposed of as indicated and no interference is made with the CIT(A)'s findings.

Rejection of books of account - estimation of income - estimation of income based on comparable decisions - power of rectification under section 254(2) - mistake apparent from the record

Rejection of books of account - estimation of income - estimation of income based on comparable decisions - Assessee's challenge to the Tribunal's direction to reject books of account and to estimate income at 12.5% on main contracts and 5% on sub-contracts before depreciation, interest and remuneration to partners. - HELD THAT: - The Tribunal examined the material and found that the assessee had not maintained proper books, vouchers or pucca supporting documents and had given inconsistent explanations on production of vouchers; the assessee itself had, at various stages, admitted cash payments and deficiencies in vouchers. Having regard to these findings and taking guidance from comparable decisions of the Tribunal (notably KNR Constructions and Krishna Mohan Constructions), the Tribunal concluded that the case was fit for rejection of books and for estimation of income. The present Bench reviewed the Tribunal's reasoning (including the extract of para 7) and observed that the rate of estimation depends on facts and circumstances and that the Tribunal had considered the issues and taken a consistent view, holding that 12.5% (main) and 5% (sub) before specified deductions was a fair and reasonable estimate in the facts of this case. [Paras 6, 7]

Tribunal's direction to reject books and to estimate income at 12.5% on main contracts and 5% on sub-contracts before depreciation, interest and remuneration to partners is upheld.

Power of rectification under section 254(2) - mistake apparent from the record - Whether the assessee's Miscellaneous Applications seeking revision of the Tribunal's order could be entertained as rectification under the Tribunal's powers. - HELD THAT: - The Bench applied the settled principle that the Tribunal's rectification power is confined to correcting a mistake apparent on the record and does not extend to reappreciation of evidence or review of findings of fact or law which are debatable. The Court relied on the established tests that only patent, obvious errors or oversight of material facts having a decisive bearing justify rectification; mere disagreement with the Tribunal's conclusion or a request to adopt a lower percentage of estimation does not constitute a mistake apparent from the record. In the present case no such manifest error or overlooked material fact was shown; the Miscellaneous Applications amounted to a request for revision of the merits of the Tribunal's decision, which is impermissible under section 254(2). [Paras 6, 13, 14]

Miscellaneous Applications seeking recall or revision of the Tribunal's order cannot be entertained as rectification and are dismissed.

Final Conclusion: The Tribunal's order rejecting the assessee's books of account and directing estimation of income at 12.5% (main) and 5% (sub-contracts) before specified deductions is affirmed; the Miscellaneous Applications filed to recall or revise that order under the Tribunal's rectification power are dismissed.

Scope of assessment under section 153A/153C limited to incriminating material found during search - additions under section 68 not sustainable in absence of incriminating material pertaining to the assessment year - treatment of unexplained money under section 69 where no adverse seized material relates to the year under consideration - requirement that seized documents must pertain to the year under consideration to constitute incriminating material - assessment under section 153C can be initiated only if seized material bears on the total income of the person other than the searched party - ratio in Pr. CIT vs. Saumya Construction - additions only on basis of material collected during search or requisition

Scope of assessment under section 153A/153C limited to incriminating material found during search - requirement that seized documents must pertain to the year under consideration to constitute incriminating material - assessment under section 153C can be initiated only if seized material bears on the total income of the person other than the searched party - Assessments/reassessments under section 153C framed for assessment year 2009-2010 cannot sustain additions in absence of incriminating material seized during the search that pertains to that assessment year. - HELD THAT: - The Tribunal held that documents seized during search must have a direct bearing on the total income of the person whose assessment is being framed and must pertain to the year under consideration. An excel sheet found in the searched premises recorded transactions from 2 April 2010 to 26 August 2010, which the Tribunal observed relate to financial year 2010-11 (AY 2011-12) and therefore do not constitute incriminating material for AY 2009-10. Relying on the principle in Pr. CIT vs. Saumya Construction that additions in search-requisition cases can be made only on the basis of material collected during the search or requisition, the Tribunal concluded that no inference of undisclosed income for AY 2009-10 could be drawn from seized material that does not pertain to that year. Consequently the Revenue's appeal challenging the CIT(A)'s deletion of additions (ground nos.1 and 2) was dismissed. [Paras 10]

Revenue's grounds that additions could be sustained despite absence of incriminating material for AY 2009-10 dismissed and the CIT(A)'s deletion upheld.

Additions under section 68 not sustainable in absence of incriminating material pertaining to the assessment year - treatment of unexplained money under section 69 where no adverse seized material relates to the year under consideration - ratio in Pr. CIT vs. Saumya Construction - additions only on basis of material collected during search or requisition - The additions made by the Assessing Officer under section 68 (unexplained cash credits) and section 69 (unexplained money) for AY 2009-2010 were not sustainable where no incriminating or seized material relating to those deposits or loans was found for that year. - HELD THAT: - The AO treated cash deposits and unsecured loans as unexplained under sections 69 and 68 respectively. The Tribunal found that there was no incriminating or seized material on record linking those transactions to undisclosed income for AY 2009-10. In particular, no seized documents were identified as evidencing the unsecured loans or cash deposits for the year under consideration. Applying the established principle that additions in search-requisition cases must be grounded on incriminating material pertaining to the specific year, the Tribunal sustained the CIT(A)'s deletion of the additions and declined to examine merit-based contentions given the technical disposal. [Paras 7, 10]

Additions under section 68 and section 69 for AY 2009-2010 deleted; Revenue's challenge to these additions dismissed.

Final Conclusion: The Revenue's appeal is dismissed and the CIT(A)'s deletion of additions under sections 68 and 69 for AY 2009-2010 is upheld on the ground that no incriminating material seized during the search pertained to the assessment year; the assessee's cross-objection is dismissed as infructuous.

Vague penalty notice - Specification of charge under penalty proceedings - Sustainability of penalty under section 271(1)(c)

Vague penalty notice - Concealment of income versus furnishing inaccurate particulars - Invalid initiation of penalty proceedings - Penalty under section 271(1)(c) could not be sustained where the notice issued under section 274 read with section 271 did not specify whether the charge was concealment of particulars of income or furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal found from the notice itself that the Assessing Officer had not made the charge clear and had left it uncertain whether penalty proceedings were initiated for concealment of income or for furnishing inaccurate particulars. It held that such a notice was vague and ambiguous and did not enable the assessee to meet the exact charge. Following the decisions in CIT Vs. SSA's Emerald Meadows , CIT v. Manjunatha Cotton & Ginning Factory and Pr. CIT vs. Sahara India Life Insurance Company Ltd. , the Tribunal held that where the very initiation of penalty proceedings is founded on an unspecified notice, the resulting penalty proceedings are unsustainable in law. [Paras 6, 7, 10, 11, 12]

The penalty levied by the Assessing Officer and confirmed by the Commissioner (Appeals) was directed to be deleted.

Final Conclusion: The Tribunal held that the penalty notice was legally defective for failure to specify the precise charge under section 271(1)(c). On that ground alone, without examining the other aspects of the case, the penalty was deleted and the assessee's appeal was allowed.

Revision under Section 263 of the Income Tax Act - Explanation 2 to Section 263 (scope of revision where inquiry/verification not made) - erroneous and prejudicial to the interests of revenue - application of mind by the Assessing Officer - distinction between lack of inquiry and perceived inadequacy of inquiry

Revision under Section 263 of the Income Tax Act - erroneous and prejudicial to the interests of revenue - application of mind by the Assessing Officer - distinction between lack of inquiry and perceived inadequacy of inquiry - Explanation 2 to Section 263 (scope of revision where inquiry/verification not made) - Validity of the Principal Commissioner's exercise of jurisdiction under Section 263 to set aside the assessment order dated 30.03.2015 for AY 2010-2011. - HELD THAT: - The Tribunal found that the Assessing Officer had made specific enquiries in the course of reassessment proceedings under Sections 153C/153A, confronted the assessee with the seized documents, sought and considered detailed replies, and recorded reasons for accepting the returned income. The PCIT's conclusion that further enquiries should have been made from third parties (co-owner and purchasers) amounted to a view that the AO's inquiries were inadequate, not that there was no inquiry at all. As explained by the Tribunal, Section 263 permits revision only where the order is shown to be erroneous in law and prejudicial to revenue; mere disagreement with an AO's conclusion or perceived inadequacy of inquiry does not suffice. The Tribunal relied on the principle that there must be prima facie material on record to show that a lawful assessment has resulted in short levy of tax, and that an AO's order made after applying his mind cannot be branded erroneous merely because a higher officer would have taken a different view. The seized materials were photocopies lacking the assessee's signatures and the original GPA was not produced; in those circumstances additions could not properly be directed. The Tribunal also noted that additions made in respect of co-owners had been deleted in separate proceedings, which weighed against sustaining the PCIT's action. Applying these legal principles (including the scope of Explanation 2 to Section 263), the Tribunal held that the PCIT had not demonstrated lack of inquiry or any non debatable legal error rendering the AO's order prejudicial to revenue. [Paras 6, 7]

The PCIT's order passed under Section 263 quashing the AO's assessment order dated 30.03.2015 is without jurisdiction and is quashed; the appeals are allowed.

Final Conclusion: The Tribunal, applying the principle that Section 263 cannot be invoked merely because a superior officer would have made further or different inquiries, held that the Assessing Officer had applied his mind and made adequate enquiries in the reassessment under Sections 153C/153A; the PCIT's revision under Section 263 was therefore unwarranted and is quashed.

Validity of reassessment under section 143(3) read with section 147 - Validity of notice under section 148 and time-limit under section 149(1) - Application of deemed full value for transfer of land and building under section 50C - Requirement to refer valuation to a DVO under section 50C(2) - Effect of ex-parte appellate order rendered infructuous by remand

Validity of reassessment under section 143(3) read with section 147 - Assessment framed under section 143(3) read with section 147 cannot be set aside on the ground that the notice under section 143(2) was issued beyond limitation. - HELD THAT: - The Assessing Officer had issued a notice under section 148 on 07.01.2010 and the assessee did not file a return in response to that notice. In that circumstance issuance of a subsequent notice under section 143(2) (dated 29.06.2010) was unnecessary and the absence of such notice for limitation purposes does not invalidate the reassessment. The notice under section 143(2) in the absence of a return has no consequence and the assessment framed under section 143(3) read with section 147 cannot be challenged on that ground. The ground of appeal alleging limitation in issuance of notice under section 143(2) is without merit and is dismissed. [Paras 4]

Ground no.1 dismissed; reassessment upheld against the limitation challenge to the section 143(2) notice.

Validity of notice under section 148 and time-limit under section 149(1) - Notice under section 148 issued within four years from the end of the assessment year is valid even if the reasons recorded did not quantify the escaped income at the time of recording. - HELD THAT: - The notice under section 148 was issued well within the four-year period from the end of the relevant assessment year, so the proviso in section 149(1) relating to quantification for notices issued after four years is not attracted. The reasons recorded identify the transaction, sale consideration as per deed, and stamp duty valuation, and primary facts (cost, sale consideration, stamp valuation) were available on record. Consequently the objections that the reasons failed to quantify escaped income and amounted to mere suspicion are unsustainable in the present factual and temporal context where section 149(1) is not applicable. Authorities cited by the assessee concerned notices issued after four years and are therefore distinguishable. [Paras 6, 7, 8, 9, 10]

Ground no.3 rejected; initiation of proceedings under section 148 held valid.

Application of deemed full value for transfer of land and building under section 50C - Requirement to refer valuation to a DVO under section 50C(2) - The matter of adoption of deemed full value under section 50C is not finally decided and is remitted to the Assessing Officer to obtain DVO valuation and decide after giving the assessee an opportunity of hearing. - HELD THAT: - Although the assessee claimed the sale consideration shown in the sale deed as actual fair market value and objected to adoption of deemed full value under section 50C, the Assessing Officer did not refer the matter to the DVO for determination of fair market value under section 50C(2) after the objection was raised. Where the assessee has objected, the Assessing Officer is duty bound to procure DVO valuation before final determination. Consequently the Tribunal has set aside the issue for action by the Assessing Officer to refer the question of fair market value to the DVO and decide the matter in accordance with law after affording an opportunity of hearing to the assessee. [Paras 11, 12]

Grounds no.4 and 5 set aside to the record of the Assessing Officer for referral to the DVO and fresh decision after hearing the assessee.

Effect of ex-parte appellate order rendered infructuous by remand - The challenge to the CIT(A)'s ex-parte order is rendered infructuous by the remand of the valuation issue and is therefore dismissed. - HELD THAT: - The assessee's contention that the CIT(A) decided the appeal ex-parte without affording a reasonable opportunity was raised, but since the Tribunal has set aside the valuation issue to the Assessing Officer for fresh consideration, the grievance regarding the ex-parte appellate order no longer has practical consequence. Accordingly the ground is dismissed as infructuous. [Paras 14]

Ground no.2 dismissed as infructuous in view of remand.

Final Conclusion: The appeal is allowed for statistical purposes: the reassessment and initiation under section 148 are sustained, the challenge to the section 143(2) notice is dismissed, the question of valuation under section 50C is remitted to the Assessing Officer for reference to the DVO and fresh decision after hearing the assessee, and the complaint about an ex-parte order before CIT(A) is dismissed as infructuous.

Validity of reopening of assessment under section 147/148 - Requirement to communicate recorded reasons for reopening - Principles of natural justice and transparency in reassessment proceedings - Vitiation and quashing of reassessment where reasons supplied differ from recorded reasons

Validity of reopening of assessment under section 147/148 - Requirement to communicate recorded reasons for reopening - Vitiation and quashing of reassessment where reasons supplied differ from recorded reasons - Reopening of assessment under section 147/148 was invalid and the reassessment proceedings were quashed because the reasons communicated to the assessee were not the same as the reasons recorded by the Assessing Officer. - HELD THAT: - The Tribunal found that the reasons supplied to the assessee were condensed extracts and materially different from the detailed reasons recorded in the assessment record. The Court applied the settled principle that the Assessing Officer must record reasons, communicate them to the assessee within a reasonable time, permit objections and pass a speaking order; these steps ensure transparency and adherence to natural justice and prevent arbitrary reopening. Where the 'actual' recorded reasons are different from the reasons communicated, and the assessee is not confronted with the recorded reasons to enable proper objections, the reassessment process is rendered a mockery of the procedure and must be quashed. Following the ratio of the coordinate Bench and the High Court decisions cited in the record (including the jurisprudence reflected in Wimco Seedlings and Haryana Acrylic Manufacturing Co.), the Tribunal held that the deviation in supplying only partial/bridge reasons vitiated the reopening under section 147/148 and accordingly quashed the reassessment. [Paras 7, 8, 9, 10, 11]

Reopening under section 147/148 quashed as reasons supplied to the assessee differed from the recorded reasons; reassessment invalid.

Final Conclusion: Appeal allowed; reassessment proceedings under section 147/148 for AY 2004-05 quashed for failure to communicate the recorded reasons to the assessee, and the additions sustained by reassessment were set aside.

Deemed gift under section 56(2)(vii)(b)(ii) - valuation based on stamp duty valuation - effect of failed or void transaction on applicability of deemed gift - admissibility and effect of additional evidence in appeal proceedings

Deemed gift under section 56(2)(vii)(b)(ii) - effect of failed or void transaction on applicability of deemed gift - valuation based on stamp duty valuation - admissibility and effect of additional evidence in appeal proceedings - Whether the addition of Rs. 51,65,600/- made under deemed gift under section 56(2)(vii)(b)(ii) based on stamp duty valuation is sustainable where the sale transaction did not, in fact, materialise. - HELD THAT: - The Assessing Officer treated the difference between stamp duty valuation and the declared sale consideration as a deemed gift. The assessee contended that the purported sale could not be consummated and was subject to antecedent and continuing litigation, and placed on record during the appellate proceedings orders of the High Court, a consequential order of the Mamlatdar and the District Collector's order rejecting the sale deed. The Tribunal examined the revenue record and the sequence of mutation errors and litigation which established that the property had earlier been sold to another person, that revenue entries were incorrectly mutated and later rectified, and that ultimately the sale deed relied upon by the assessee was rejected by competent authorities. On these findings the Tribunal concluded that the transaction did not, in reality, materialise and that the claimed purchase was therefore not a completed transfer attracting the deeming provision. The additional evidence admitted during the appellate stage demonstrating the non-materialisation and rejection of the sale deed was held to be material and dispositive of the issue. Applying these facts to the legal test, the Tribunal found that the condition precedent for invoking the deeming provision was absent and the addition could not be sustained. [Paras 9, 10]

Addition of Rs. 51,65,600/- made under deemed gift under section 56(2)(vii)(b)(ii) is deleted as the sale transaction did not materialise.

Final Conclusion: The appeal is allowed; the addition of Rs. 51,65,600/- under the deeming provision is deleted for Assessment Year 2014-15 as the transaction was found not to have materialised and the additional evidence demonstrating rejection of the sale deed was accepted.

Rejection of books of accounts - best judgment assessment - estimation of income after rejection of books - use of past declared net profit as comparable - net profit rate after depreciation - reasonableness of adopted profit rate - remand for recomputation

Rejection of books of accounts - estimation of income after rejection of books - use of past declared net profit as comparable - net profit rate after depreciation - remand for recomputation - Whether the addition made by the Assessing Officer in respect of Singh Transport by applying a net profit rate of 4.5% (before depreciation) was justified, and the proper basis for estimating income after rejection of books. - HELD THAT: - The Tribunal held that after rejection of books the Assessing Officer must make a best judgment assessment on the basis of reasonable and proper criteria. Where the assessee's past declared net profit (accepted by the Revenue) is available, that past history is a proper comparable for estimating the current year. The Assessing Officer had applied a net profit rate of 4.5% (before depreciation) without furnishing a reasonable basis and had also used an incorrect figure for depreciation. The Tribunal concluded that the net profit declared by the assessee for preceding years (average of three years) - taken after depreciation - represents a reasonable basis. Accordingly, the Assessing Officer's arbitrary adoption of 4.5% was not justified and the income should be recomputed by applying a net profit rate of 1.34% (average of the preceding three years) after depreciation; the matter was remitted to the Assessing Officer for recomputation on those terms. [Paras 5, 7]

The addition made by applying 4.5% is deleted; income to be recomputed by the Assessing Officer applying net profit rate of 1.34% after depreciation (remand for recomputation).

Rejection of books of accounts - best judgment assessment - reasonableness of adopted profit rate - Whether the Assessing Officer's addition in respect of trading activity (purchase and sale of bricks) by applying a net profit rate of 1% was justified. - HELD THAT: - The Tribunal noted that the Assessing Officer estimated net profit only in respect of purchase and sale of bricks and adopted a 1% net profit rate. The assessee relied on an explanation of low profits due to higher purchase costs for sand, but did not produce past history of net profits or any comparable data to rebut the reasonableness of the 1% rate applied after rejection of books. In the absence of material demonstrating that the rate was unreasonable, the Tribunal found no merit in the assessee's challenge and upheld the estimation made by the Assessing Officer. [Paras 12]

The addition by applying 1% net profit in respect of the brick trading activity is sustained.

Final Conclusion: Appeal partly allowed: the addition in respect of Singh Transport is set aside and the Assessing Officer is directed to recompute income applying a net profit rate of 1.34% after depreciation; the addition in respect of the brick trading activity is upheld.

Bar on jurisdiction of civil courts in respect of grant of permit - benami transaction - rejection of plaint under Order 7 Rule 11 CPC - mixed question of fact and law

Bar on jurisdiction of civil courts in respect of grant of permit - rejection of plaint under Order 7 Rule 11 CPC - Whether the suit is barred by Section 94 of the Motor Vehicles Act and therefore liable to be rejected under Order 7 Rule 11 CPC. - HELD THAT: - The plaintiffs had initially impleaded transport authorities and claimed injunctions in respect of the route permit, but subsequently abandoned those claims and recorded a memo conceding that relief against the transport authorities was given up. The Trial Court found, and this Court agrees, that once the reliefs against the transport authorities were relinquished and only claims against the first defendant remained, Section 94 (which prevents civil courts from entertaining questions relating to grant of permits or injunctions against actions of constituted authorities under the Motor Vehicles Act) did not operate to bar the suit. On that basis the ground for rejection under Order 7 Rule 11 founded on Section 94 does not arise. [Paras 9]

Section 94 of the Motor Vehicles Act does not bar the suit as the claims against the transport authorities were given up; the plaint cannot be rejected on that ground.

Benami transaction - mixed question of fact and law - rejection of plaint under Order 7 Rule 11 CPC - Whether the plaint is liable to be rejected under Order 7 Rule 11 CPC on the ground that the transaction pleaded is a benami transaction and barred by Section 4 of the Benami Transactions (Prohibition) Act, 1988. - HELD THAT: - The plaintiffs assert they purchased the bus and route permit out of their own funds and held them in the name of their mother; the first defendant asserts title and permissive occupation. The Court observed that application of the Benami Transactions (Prohibition) Act involves examination of facts and evidence, and that earlier authorities and statutory amendments bear on the legal concept but do not render the issue a pure question of law. The Trial Court had found the petition for rejection to be an attempt to prolong proceedings when the trial was at an advanced stage and rejected it. This Court concurred that the question whether the transactions are benami is a mixed question of fact and law requiring full trial and appreciation of oral and documentary evidence, and therefore is not amenable to disposal by summary rejection under Order 7 Rule 11. [Paras 17, 18, 19]

The contention that the suit is barred by Section 4 of the Benami Transactions (Prohibition) Act is a mixed question of fact and law and cannot be decided by rejecting the plaint under Order 7 Rule 11; the Trial Court's decision to dismiss the petition is upheld.

Final Conclusion: The High Court found no merit in the revision; the Trial Court correctly dismissed the petition under Order 7 Rule 11 - Section 94 MVA does not bar the suit after abandonment of claims against transport authorities, and the benami contention raises mixed questions of fact and law requiring trial. The Civil Revision Petition is dismissed.

Maintainability of writ petition vis-a -vis statutory appellate remedy - right to cross-examination in quasi-judicial adjudication under the Customs Act - voluntary statement under Section 108 of the Customs Act binds the declarant - availability and efficacy of remedy before the Customs, Excise and Service Tax Appellate Tribunal - principles of natural justice

Maintainability of writ petition vis-a -vis statutory appellate remedy - availability and efficacy of remedy before the Customs, Excise and Service Tax Appellate Tribunal - Whether the writ petition was maintainable in view of the availability of an efficacious statutory appeal to the Tribunal - HELD THAT: - The Court held that an effective statutory remedy existed before the Customs, Excise and Service Tax Appellate Tribunal and that the High Court should be slow to permit bypass of the statutory appeal in taxation matters. Although the writ petition was filed after expiry of the three month period for appeal, the possibility of seeking condonation of delay before the Tribunal was available, and the remedy before the Tribunal is both effective and efficacious because it can re-appreciate facts and law and furnish final factual findings. The learned Writ Court had not considered the issue of maintainability; its setting aside of the appellate order without addressing availability of the alternative remedy was therefore erroneous. The writ appeal was allowed on this ground and the writ court's order was set aside. The Court left open the respondent's right to prefer an appeal to the Tribunal and directed that the Tribunal may, while computing limitation, exclude the period from filing of the writ to receipt of certified copy of the High Court judgment. [Paras 24, 25, 26, 28, 29]

The writ petition was not maintainable in view of the effective statutory remedy before the Tribunal; the writ court's order was set aside and the respondent may pursue the appellate remedy.

Right to cross-examination in quasi-judicial adjudication under the Customs Act - voluntary statement under Section 108 of the Customs Act binds the declarant - principles of natural justice - Whether denial of the respondent's request to cross-examine three witnesses was violative of principles of natural justice or otherwise impermissible - HELD THAT: - Applying the circumstances of the case, the Court found that the request to cross-examine the three co-noticees was properly considered and rejected by the adjudicating authority and upheld on appeal. The authorities recorded cogent reasons that the statements in question were voluntary statements under Section 108, not retracted by the declarants, and that the request appeared to be a device to delay proceedings. The Court emphasised that cross-examination is not invariably mandatory in adjudicatory proceedings under the Act and that denial of cross-examination does not automatically render the process unfair where reasons are recorded and the statements bind the declarants. Having reviewed the adjudicating authority's reasons and the appellate confirmation, the High Court's direction to permit cross-examination was interfered with and the denial was confirmed. [Paras 19, 20, 21, 22, 29]

The denial of the request to cross-examine the three named persons was lawful and not a violation of natural justice; the findings of the adjudicating and first appellate authorities on this point are confirmed.

Final Conclusion: The writ appeal is allowed; the High Court order directing cross-examination is set aside. The findings of the adjudicating and first appellate authorities denying cross-examination are affirmed. The respondent remains free to prefer an appeal to the Tribunal, and the Tribunal may exclude the period from 27.02.2017 until receipt of the certified copy of this judgment when computing limitation.

Condonation of delay - refund of terminal excise duty for deemed exports - Foreign Trade Policy para 8.3(c) - applicability of earlier Division Bench precedent

Condonation of delay - The application for condonation of delay in filing the appeal - HELD THAT: - The Court noted a delay of 332 days and recorded that the State failed to give a day-to-day explanation, offering only a bald statement about obtaining approval from the Advocate General. On that basis the Court found no sufficient reason to condone the delay. Nevertheless, the Court proceeded to consider the merits of the appeal despite refusing to condone the delay. [Paras 2]

Delay not condoned; however, the Court proceeded to consider the merits.

Refund of terminal excise duty for deemed exports - Foreign Trade Policy para 8.3(c) - applicability of earlier Division Bench precedent - Entitlement to refund of terminal excise duty where supplies to Export Oriented Units qualify as deemed exports under the Foreign Trade Policy - HELD THAT: - The Court examined the writ petitioner's claim for refund of terminal excise duty under para 8.3(c) of the Foreign Trade Policy and observed that the question was already authoritatively decided by the Division Bench in ACER INDIA PVT. LTD., where it was held that supplies to Export Oriented Units which qualify as deemed exports were eligible for refund of terminal excise duty. The Court found that the present controversy is covered by that precedent; the Solicitor General was unable to distinguish the earlier decision. Although a Special Leave Petition has been filed in the earlier matter, no interim order was in force. Applying the Division Bench's reasoning mutatis mutandis, the Court held that the respondents could not retain the tax wrongfully paid and dismissed the appeal. [Paras 5, 6]

The appeal is dismissed on the basis that supplies to EOUs qualifying as deemed exports are entitled to refund under para 8.3(c) of the FTP as held by the Division Bench in ACER INDIA PVT. LTD.; the earlier precedent applies.

Final Conclusion: The application for condonation of delay is refused, but on examination of the merits the Court applied the Division Bench precedent in ACER INDIA PVT. LTD. and dismissed the appeal; no order as to costs.

Section 18 of the Limitation Act - acknowledgement and extension of limitation - One Time Settlement (OTS) proposal as acknowledgment - Certificate of Recovery issued by DRT gives rise to fresh cause of action under IBC - Limitation for filing proceedings under Section 7 of the Insolvency and Bankruptcy Code - Section 23 of the Indian Evidence Act - inadmissibility of admissions (not attracted) - Section 19 of the Limitation Act - payments and their effect on limitation - Amendment of pleadings and filing of additional documents in Section 7 proceedings

One Time Settlement (OTS) proposal as acknowledgment - Section 18 of the Limitation Act - acknowledgement and extension of limitation - OTS proposals and communications from the corporate debtor constituted acknowledgement of debt for limitation purposes and extended the period within which Section 7 proceedings could be filed. - HELD THAT: - The Tribunal accepted the respondent Bank's case that the corporate debtor had, by making OTS proposals and related communications within the relevant period, acknowledged its liability such that the limitation period would be extended. The Tribunal relied on the Supreme Court's reasoning in Dena Bank v. C. Shivakumar Reddy (paras 141-144 reproduced) which recognises that an offer of one time settlement of a live claim, made within the period of limitation, may be treated as an acknowledgment under Section 18 of the Limitation Act, thereby attracting an extended period of limitation. Applying that principle to the OTS letters and proposals before it, the Tribunal held that the IBC petition was not barred by limitation on that ground. [Paras 12, 15]

OTS proposals amounted to acknowledgement extending limitation; the Section 7 petition was not time barred on that basis.

Certificate of Recovery issued by DRT gives rise to fresh cause of action under IBC - Limitation for filing proceedings under Section 7 of the Insolvency and Bankruptcy Code - A final judgment, decree or Certificate of Recovery issued by the DRT gives rise to a fresh cause of action for initiating Section 7 proceedings within three years from the date thereof. - HELD THAT: - Relying on the Supreme Court's exposition in Dena Bank (paras 142-143), the Tribunal recorded that where a judgment/decree or a Certificate of Recovery in favour of a financial creditor exists and dues remain unpaid, such instruments create a fresh cause of action, permitting initiation of proceedings under Section 7 within three years from the date of that judgment/decree or certificate. The Tribunal applied this principle to the admitted fact that recovery proceedings before the DRT had resulted in issuance of a Recovery Certificate, which was relevant for computing limitation. [Paras 14, 15]

A DRT Recovery Certificate gives rise to a fresh cause of action; limitation for Section 7 runs from that instrument where dues remain unpaid.

Section 23 of the Indian Evidence Act - inadmissibility of admissions (not attracted) - Section 23 of the Indian Evidence Act does not render the OTS proposals inadmissible evidence in the present proceedings. - HELD THAT: - The Appellant contended that OTS proposals were made on condition that they would not be used as evidence and therefore inadmissible under Section 23. The Tribunal found that no such express condition or circumstances from which an agreement to exclude evidence could be inferred was shown. Further, the ground under Section 23 was not taken before the Adjudicating Authority. On the facts before the Tribunal there was nothing to indicate that the OTS communications were made subject to an agreed bar on their admissibility; accordingly Section 23 was not attracted and the OTS documents could be considered. [Paras 5, 8, 12]

Section 23 Evidence Act is not attracted; OTS communications are admissible and were rightly relied upon.

Section 19 of the Limitation Act - payments and their effect on limitation - One Time Settlement (OTS) proposal as acknowledgment - Payments made by the corporate debtor in connection with OTS proposals do not defeat the applicability of limitation extending principles and are relevant for extending limitation. - HELD THAT: - The Appellant argued that payments were made only to procure consideration of OTS proposals and therefore Section 19 should not be relied upon. The Tribunal recorded that payments were in fact made while submitting OTS offers and that such payments/part payments, together with the OTS proposals and other acknowledgments, operate to extend limitation. The Tribunal did not accept the submission that the purpose behind the payments nullified their legal effect for limitation purposes. [Paras 9, 16]

Payments made in connection with OTS proposals were not rendered ineffective for limitation purposes; they support extension of limitation.

Amendment of pleadings and filing of additional documents in Section 7 proceedings - Limitation for filing proceedings under Section 7 of the Insolvency and Bankruptcy Code - There is no bar in law to the amendment of pleadings or filing of additional documents in a petition under Section 7 of the IBC; the Adjudicating Authority may allow such filings subject to its discretion. - HELD THAT: - The Tribunal reproduced the Supreme Court's view that in the absence of any express provision prohibiting or time limiting the filing of additional documents in Section 7 proceedings, the Adjudicating Authority may permit amendments or additional documents and consider them. The Tribunal noted that discretion remains to refuse such filings where there is inordinate delay, but that allowance of additional documents per se is not impermissible. Applying this, the Tribunal found no illegality in the Adjudicating Authority considering the additional materials relied upon by the Bank. [Paras 14]

Permissible to amend pleadings and file additional documents in Section 7 proceedings; Adjudicating Authority's discretion to allow same is preserved.

Final Conclusion: Appeal dismissed; the Adjudicating Authority correctly held that the Section 7 petition was not barred by limitation in view of OTS acknowledgments, payments and the DRT Recovery Certificate, Section 23 Evidence Act did not render OTS inadmissible, and the Authority properly considered additional documents; no costs awarded.

Limitation under the Limitation Act - Default as defined under Section 3(12) of the Code - Effect of a restructuring agreement on accrual of cause of action - Rights of an assignee of debt post-assignment - Interaction between SARFAESI/DRT proceedings and invocation of CIRP

Limitation under the Limitation Act - Effect of a restructuring agreement on accrual of cause of action - Whether the petition is barred by limitation - HELD THAT: - The Bench found that the cause of action arose on the dates of earlier default (recorded as 31.03.2009 and alternatively 28.06.2012) and that the petition filed on 06.08.2020 was beyond three years from those dates. Reliance on subsequent events including restructuring and recovery proceedings before the DRT did not revive or postpone the accrual of the right to sue for purposes of the Limitation Act. Applying the principle in B.K. Educational Services (as cited in the order), the Bench held that the Article of limitation runs from the date of default and, on the facts, the petition is time barred. [Paras 28, 30, 35]

The petition is barred by limitation and therefore not maintainable.

Effect of a restructuring agreement on accrual of cause of action - Rights of an assignee of debt post-assignment - Whether the Petitioner waived its statutory right by entering into restructuring and can now enforce CIRP rights - HELD THAT: - The Bench recorded that the Petitioner, as assignee, had entered into restructuring packages (07.11.2014 and 30.06.2017) which prescribed a contractual mechanism for repayment (notably repayment from operational cash flows). Having contractually agreed to those terms and later unilaterally revoked the restructuring, the Petitioner could not, in circumstances where no default was shown under the restructuring modality, turn around to enforce statutory insolvency remedies. The lack of consensus (consensus ad idem) on unilateral revocation and the subsequent objections by the Corporate Debtor weighed against treating the restructuring as having been validly terminated so as to create a fresh cause of action. [Paras 18, 29, 31, 33]

By entering into the restructuring and given the circumstances of its alleged unilateral revocation, the Petitioner cannot validly treat the restructuring as creating a fresh enforceable default for CIRP purposes.

Default as defined under Section 3(12) of the Code - Interaction between SARFAESI/DRT proceedings and invocation of CIRP - Whether there was a demonstrable default by the Corporate Debtor for triggering CIRP - HELD THAT: - Applying the statutory definition of 'default' under Section 3(12) of the Code, the Bench examined contemporaneous records including balance confirmations, auditor's reports and CIBIL/Information Utility entries. The Corporate Debtor's balance sheets and auditor's opinion indicated non default in certain years and the information utility recorded the account as standard. Given the restructuring terms that linked repayment to operational cash flows, absence of allegation or evidence of diversion of funds, part payments made under the package, and the Corporate Debtor's contemporaneous compliance steps (transfer of assets, allotment of equity, payments toward statutory dues), the Bench concluded that the Petitioner failed to demonstrate a present default capable of attracting initiation of CIRP. [Paras 29, 31, 32, 34]

No demonstrable default by the Corporate Debtor was established for the purpose of initiating CIRP.

Final Conclusion: The petition for initiation of CIRP is dismissed: the claim is time barred under the Limitation Act and, on the contractual and evidentiary record, the Petitioner has not demonstrated a present default under the restructuring arrangements to justify invoking the Code.

Maintainability of insolvency application against a personal guarantor - scope of section 60(2) - non-obstante clause restricting petitions against personal guarantors to cases where CIRP/liquidation of the corporate debtor is pending - co extensive but separate liability of principal debtor and surety - simultaneous initiation of CIRP against corporate debtor and guarantor - jurisdictional overlap between NCLT and Debt Recovery Tribunal

Maintainability of insolvency application against a personal guarantor - scope of section 60(2) - non-obstante clause restricting petitions against personal guarantors to cases where CIRP/liquidation of the corporate debtor is pending - Whether a financial creditor can initiate CIRP under Section 95 of the Code against a personal guarantor in the absence of an ongoing CIRP or liquidation proceeding against the corporate debtor. - HELD THAT: - On a conjoint reading of Section 60 of the Code and the principle of co extensive liability under Section 128 of the Contract Act, the Tribunal observed that although the creditor's rights against principal and surety are co extensive and the creditor may proceed against either or both, Section 60(2) contains a non obstante provision which restricts initiation of insolvency proceedings against a personal guarantor to situations where a CIRP or liquidation proceeding of the corporate debtor is pending before the NCLT. The Bench held that while Section 7 proceedings may be filed against corporate debtors and Section 95 applies to personal guarantors, Section 60(2) confines the Adjudicating Authority's jurisdiction to admit petitions against personal guarantors to cases linked to an ongoing CIRP or liquidation of the corporate debtor. The Tribunal therefore read the statutory scheme as not permitting a stand alone insolvency application under Section 95 against a personal guarantor when no CIRP or liquidation is pending against the corporate debtor. [Paras 17, 18]

An insolvency application against a personal guarantor is not maintainable unless a CIRP or liquidation proceeding against the corporate debtor is pending before the NCLT.

Co extensive but separate liability of principal debtor and surety - simultaneous initiation of CIRP against corporate debtor and guarantor - jurisdictional overlap between NCLT and Debt Recovery Tribunal - Whether the creditor may proceed simultaneously against the corporate debtor and the personal guarantor and the jurisdictional consequences of permitting petitions against guarantors absent corporate proceedings. - HELD THAT: - The Tribunal noted precedents recognising that liability of principal and surety is co extensive and that some authorities have permitted simultaneous initiation of CIRP against borrowers and guarantors. However, given the statutory restriction in Section 60(2), permitting initiation of standalone insolvency petitions against personal guarantors without the corporate debtor undergoing CIRP would create parallel fora and effectively vest concurrent jurisdiction in the NCLT and the Debt Recovery Tribunal. The Bench considered this outcome inconsistent with the statutory scheme and concluded that the possibility of simultaneous proceedings cannot override the specific jurisdictional limitation imposed by Section 60(2). [Paras 13, 18]

Though liability is co extensive and some authorities allow concurrent actions in principle, petitions against personal guarantors cannot be entertained in the absence of a pending CIRP/liquidation against the corporate debtor as that would produce impermissible jurisdictional overlap.

Final Conclusion: The petition under Section 95 was dismissed as not maintainable because no CIRP or liquidation proceeding was pending against the corporate debtor; consequently, the Adjudicating Authority lacked jurisdiction to admit a standalone insolvency application against the personal guarantor.

Requirement of a reasoned order - obligation to record and answer objections in SVLDRS proceedings - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - credit for payments made by third parties (lessees) - opportunity of personal hearing in SVLDRS procedure - verification of deposits and documentary proof

Requirement of a reasoned order - obligation to record and answer objections in SVLDRS proceedings - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Validity of Form SVLDRS-III issued without reasons where the Designated Committee did not accept the declarant's objections to the estimate - HELD THAT: - The Scheme prescribes a sequence culminating in issuance of Form SVLDRS-II (estimate) followed by an opportunity of personal hearing and then Form SVLDRS-III indicating the final amount. Where the authority does not agree with the declarant's objections to the estimate, it is incumbent on the authority to pass a reasoned order setting out the points of difference and the rationale for rejecting the declarant's contentions. An order which merely records a determination without stating cogent reasons for variation from the declarant's estimate is deficient. Reliance on the principle that an administrative order must speak for itself supports the requirement that Form SVLDRS-III should contain reasons when objections are not accepted. [Paras 9, 12, 14]

Impugned Form SVLDRS-III is deficient for lack of reasoning; the Designated Committee must consider and record reasons when it does not accept the declarant's objections.

Credit for payments made by third parties (lessees) - verification of deposits and documentary proof - opportunity of personal hearing in SVLDRS procedure - Claim of the petitioner for credit of deposits allegedly made by its lessees and the proper course to determine that claim - HELD THAT: - The petitioner claimed that its lessees had remitted amounts which ought to be credited against the petitioner's liability under the Scheme. The impugned order granted only a limited credit without explaining the basis for restricting the credit and the respondent's counter-assertion that there was no proof was not reflected in the order. The court directed that the petitioner be afforded an opportunity to place proof of the lessees' payments and that the Designated Committee is at liberty to verify the veracity of such proof and take a view in accordance with law, including accepting adjustments and undertaking any verification process necessary before quantification. Consequently the matter of entitlement to credit for third-party payments is not finally adjudicated on merits by this court but remitted for fresh consideration in accordance with the Scheme and the clarifications in the Board's Circular. [Paras 5, 9, 10, 18]

Claim for credit of remittances by lessees is remitted to the Designated Committee for fresh consideration and verification after affording the petitioner an opportunity to produce proof; respondent to pass a reasoned order thereafter.

Final Conclusion: The impugned SVLDRS-III order is set aside for failure to record reasons; the petitioner shall appear before the Designated Committee to produce proof of lessees' payments and the Committee may verify and decide the claim in accordance with law. The Committee is directed to pass a reasoned order within four weeks from 19.08.2021. The writ petition is disposed accordingly.

Refund of unutilized CENVAT credit under Rule 5 of CENVAT Credit Rules, 2004 - nexus between input services and exported output services - eligibility of CENVAT credit cannot be questioned at refund stage - exclusion clause to input service - entitlement to interest on refund (Ranbaxy principle)

Refund of unutilized CENVAT credit under Rule 5 of CENVAT Credit Rules, 2004 - nexus between input services and exported output services - Refund claims were not liable to be rejected for lack of 'nexus' or for not being 'essential' to the exported output service. - HELD THAT: - The Tribunal held that the correct test for eligibility under Rule 5 is whether the input service was used by the provider of the taxable service for providing the output service and whether the input service is excluded by the exclusion clause. The Commissioner (Appeals) erred in rejecting refund claims solely because the input services were not shown to be essential or to affect quality/efficiency of the exported service. The Tribunal relied on precedents recognising the impugned services as input services and on administrative clarification that amended Rule 5 does not require correlation between specific input services and exported output services. [Paras 7]

Refunds allowed on merits; lack of nexus/essentiality not a ground to deny refund.

Eligibility of CENVAT credit cannot be questioned at refund stage - refund of unutilized CENVAT credit under Rule 5 of CENVAT Credit Rules, 2004 - Department cannot re-open or question the eligibility of CENVAT credit at the refund stage where credit was earlier availed. - HELD THAT: - Relying on the Tribunal's decision in K Line Ship Management and consistent judicial practice cited by the appellant, the Tribunal held that once CENVAT credit has been taken (and not previously disallowed), the department is not permitted to contest eligibility solely when refund is claimed. The impugned orders failed to recognise this principle and therefore could not sustain denial of refund on that basis. [Paras 7]

Denial of refund on the ground of post-facto questioning of credit eligibility set aside.

Entitlement to interest on refund (Ranbaxy principle) - Appellant is entitled to interest on the refunded amount. - HELD THAT: - The Tribunal applied the ratio of the Supreme Court decision in Ranbaxy Laboratories Ltd. and held that interest on the refund is payable. Having allowed the refund claims, the Tribunal directed that interest be paid in accordance with the precedent. [Paras 7]

Refund to be paid along with interest as per Ranbaxy principle.

Refund of unutilized CENVAT credit under Rule 5 of CENVAT Credit Rules, 2004 - Quantification and payment of refund to be re-computed by the original authority after excluding amounts not pressed by the appellant. - HELD THAT: - While allowing the substantive entitlement to refund (and interest), the Tribunal noted that certain small-amount claims listed in Table - 2 were not pressed by the appellant. The Tribunal therefore directed the original authority to re-quantify the refund amount after deducting those amounts, and to carry out any necessary computation to give effect to the Tribunal's order. [Paras 7, 8]

Matter remitted to original authority for re-quantification and computation of refund after deducting amounts not pressed.

Final Conclusion: Appeals allowed; refunds of unutilized CENVAT credit under Rule 5 granted (except amounts not pressed as per Table - 2), with interest; original authority directed to re-quantify the refund after excluding unpressed amounts.

CENVAT credit on capital goods - output service under CENVAT Credit Rules - artificial bifurcation of material and service portions - classification at supplier's end - works contract as composite contract - eligibility conditions in Rule 2(a)(A) of CENVAT Credit Rules, 2004

CENVAT credit on capital goods - output service under CENVAT Credit Rules - eligibility conditions in Rule 2(a)(A) of CENVAT Credit Rules, 2004 - artificial bifurcation of material and service portions - Entitlement of the appellant to avail CENVAT credit on imported passenger lifts treated as capital goods - HELD THAT: - The Tribunal held that the imported passenger lifts were classified under Chapter 84 and that accepted classification cannot be altered at the receiver's end by the Department. The authorities below impermissibly resorted to an artificial bifurcation of the works contract into material and service portions to deny credit. The lifts were used for construction and in providing the appellant's output service as defined in the CENVAT Credit Rules, and were not used for a service in the negative list nor was the whole of service tax paid by the recipient; accordingly the appellant satisfied the conditions for claiming credit under the definition of output service and the eligibility conditions in Rule 2(a)(A). The fact that the lifts were installed in the building did not change their character as capital goods covered by Chapter 84. Decisions cited by the appellant supporting classification and credit entitlement were relied upon, and the Authority for Advance Ruling decision invoked by the revenue was held inapplicable on the facts. For these reasons the denial of CENVAT credit was held legally unsustainable.

Appellant entitled to CENVAT credit on the imported passenger lifts; denial of credit by the authorities set aside.

Final Conclusion: The appeal is allowed; the impugned order rejecting CENVAT credit on the imported passenger lifts is set aside and the appellant is held entitled to claim the CENVAT credit.

CENVAT credit reversal on unsold flats - Application of Rule 6(3A) of the CENVAT Credit Rules - eligibility of credit at the time of receipt - adjustment of short paid service tax against excess CENVAT reversal - interest on delayed payment and utilization of CENVAT credit against tax liability

CENVAT credit reversal on unsold flats - Application of Rule 6(3A) of the CENVAT Credit Rules - eligibility of credit at the time of receipt - Quantum and propriety of reversal of CENVAT credit in respect of unsold flats at project completion - HELD THAT: - The Tribunal found that the Department confirmed a demand computed on the basis of unsold area but the appellant contends that eligibility must be tested at the time of availing credit and that, if any reversal is required, it ought to be in terms of the formula in Rule 6(3A) as inserted w.e.f. 01.04.2016. The Tribunal observed that the amended Rule 6 was not invoked in the show cause notice, that the appellant claims to have debited its CENVAT register (voluntary reversal) and furnished details to the Department, and that prior decisions and Circular No.962/05/2012 support acceptance of claimed reversals. Because the authorities and parties differ on the correct legal basis and computation of the reversal (departmental quantification versus reversal under Rule 6(3A) producing a materially different figure), the Tribunal refrained from deciding the quantum on merits and directed remand for verification of credits shown in the books and of the reversal already effected, and for determination of any tax demand thereafter. [Paras 6, 7]

Remanded to the Original Authority to verify the quantum of credit and the reversal recorded by the appellant and to determine the correct demand (if any) applying the mechanism under Rule 6(3A) where applicable.

Adjustment of short paid service tax against excess CENVAT reversal - CENVAT credit reversal on unsold flats - Whether the short paid service tax for October 2015 to March 2016 can be adjusted against the appellant's asserted excess CENVAT reversal/closing credit balance - HELD THAT: - The appellant accepted the short-payment demand but submitted that it can be discharged by adjustment against the unutilized/ excess reversed CENVAT credit (including amounts voluntarily debited in the CENVAT register) and relied on Circular No.962/05/2012 which permits such treatment in relevant circumstances. The Tribunal held that acceptance of this adjustment depends on verification of the actual closing balance and the reversal effected by the appellant and therefore directed the Original Authority to consider the adjustment while verifying the quantum of credit and reversal on remand. [Paras 6, 7]

Remanded to the Original Authority to verify the appellant's claimed credit/reversal and, if established, permit adjustment of the short paid service tax accordingly.

Interest on delayed payment and utilization of CENVAT credit against tax liability - interest on delayed payment - Liability to pay interest on the delayed payment of service tax - HELD THAT: - Having examined the records and the appellant's contention that sufficient CENVAT balance was available during the relevant period, and applying the precedents relied upon, the Tribunal found that there was an adequate closing balance in the appellant's CENVAT account and accordingly held that interest on delayed payment does not arise. The Tribunal invoked the ratio of earlier decisions to conclude that utilization of available CENVAT credit precludes imposition of interest for delay. [Paras 6]

Appellant is not liable to pay interest on the delayed payment for the relevant period.

Final Conclusion: The appeal is allowed in part by way of remand: the matter is remitted to the Original Authority to verify the quantum of CENVAT credit and the reversal recorded by the appellant and to determine the correct tax demand (and any permissible adjustment of the short-paid service tax) within two months after affording hearing; the appellant is held not liable to pay interest on the delayed payment for the period in question.

Refund of service tax on input services for export of goods - use of taxable services beyond factory or place of production - correlation of courier charges with exports/shipping bills - refund of Swachh Bharat Cess and Krishi Kalyan Cess as part of service tax refund

Refund of service tax on input services for export of goods - use of taxable services beyond factory or place of production - Denial of refund in respect of certain input services on the ground that they were not used beyond the factory of production. - HELD THAT: - The Tribunal found that the services disallowed by the Adjudicating Authority (such as tailoring units, corporate office services, clearing and forwarding, advertisement, legal and accounting services) were in fact used in places beyond the factory or place of manufacture and therefore fall within the scope of services used beyond the factory or any other place or premises of production or manufacture for export, as substituted in Notification No. 41/2012 by Notification No. 01/2016. Revenue did not contest the nature or locus of these services. Since the statutory condition requiring use beyond the factory/place of production is satisfied, the basis for denial cannot be sustained and the impugned rejections in respect of those services are set aside with consequential benefits as per law. [Paras 4]

Rejection of refund for the listed input services on the ground that they were not used beyond the factory is set aside and the appeals allowed insofar as those services.

Correlation of courier charges with exports/shipping bills - Claim for refund of courier charges rejected for want of correlation with exports/shipping bills. - HELD THAT: - The appellant contended that a Chartered Accountant's certificate correlating the courier bills with the relevant exports/shipping bills had been submitted, a matter not considered by the lower authorities. The Tribunal held that this factual and evidential question requires re-adjudication: the file is restored to the Adjudicating Authority to cross-verify correlation with the assistance of the appellant/its representative and to pass an appropriate order in accordance with law. All contentions on this issue were left open for fresh consideration. [Paras 5]

Impugned order set aside on this issue; matter remanded to the Adjudicating Authority for verification of correlation and fresh decision.

Refund of Swachh Bharat Cess and Krishi Kalyan Cess as part of service tax refund - Rejection of refund of Swachh Bharat Cess (SBC) and Krishi Kalyan Cess (KKC) claimed as part of service tax on input services. - HELD THAT: - The Tribunal noted the settled legal position that SBC and KKC form part of the service tax paid on input services used in or in relation to export of goods. Because the question of correlation of courier charges with exports (which affects entitlement) was remanded for fresh adjudication, the issue of refund of SBC and KKC is also remitted to the Adjudicating Authority for reconsideration. All contentions of the appellant on this issue were left open. [Paras 6]

Issue remanded to the Adjudicating Authority for determination in the light of re-adjudication on correlation; contentions left open.

Final Conclusion: The appeals are partly allowed and partly remanded: the Tribunal set aside the denial of refund for input services found to be used beyond the factory and allowed those aspects of the appeals; claims relating to courier charge correlation and the consequent refunds of SBC and KKC are remitted to the Adjudicating Authority for fresh verification and decision.

Definition of input service under the CENVAT Credit Rules - nexus between input service and output service as test for refund eligibility - amended Rule 5 of the CENVAT Credit Rules does not require correlation between exported output service and input service - acceptance of CENVAT credit at the availment stage cannot be re-opened in refund proceedings (no double yardstick) - entitlement to refund of accumulated CENVAT credit under Rule 5 read with applicable notifications - entitlement to interest on delayed refund under Section 11BB of the Central Excise Act read with Section 83 of the Finance Act

Definition of input service under the CENVAT Credit Rules - nexus between input service and output service as test for refund eligibility - amended Rule 5 of the CENVAT Credit Rules does not require correlation between exported output service and input service - entitlement to refund of accumulated CENVAT credit under Rule 5 read with applicable notifications - acceptance of CENVAT credit at the availment stage cannot be re-opened in refund proceedings (no double yardstick) - Refund claims in respect of specified input services disallowed by lower authorities were held to be admissible as CENVAT credit refundable under Rule 5. - HELD THAT: - The Tribunal found that the disputed services (sponsorship, event management, outdoor catering, rent-a-cab, pandal and shamiana/mandap keeper, life insurance and insurance auxiliary services) fall within the inclusive ambit of the definition of input service and have been used in relation to the appellant's taxable output services. The Commissioner(A)'s reasoning was held incorrect as the proper test is whether the input service is used by the provider of taxable service for providing the output service and is not excluded by the exclusion clause. The Tribunal relied on the principle that once CENVAT credit was accepted at the availment stage, the Department cannot apply a different yardstick at the refund stage; consequently the impugned services, consistently treated as input services in earlier decisions relied upon by the appellant, qualify for refund. The Tribunal further took into account the CBEC clarification and the effect of the amendment to Rule 5, holding that correlation between particular exported output services and particular input services is not a precondition for refund under the amended Rule 5. Applying these principles, the Tribunal allowed the refund claims for the periods both Pre April 2011 and Post April 2011. [Paras 5, 6]

Refunds of accumulated CENVAT credit in respect of the disputed input services are allowed.

Entitlement to interest on delayed refund under Section 11BB of the Central Excise Act read with Section 83 of the Finance Act - prejudice from non-refund within statutory period - Appellant entitled to interest on delayed sanction of the refunds. - HELD THAT: - The Tribunal held that interest is payable where refund is not sanctioned within the statutory time as prescribed by Section 11BB read with Section 83, and applied the apex court authority relied upon by the appellant to award interest on the delayed refunds. The Tribunal did not accept the department's contention that requested documents withheld the entitlement to interest, noting the appellant's claim and the legal position that delay in sanction attracts interest as per the cited decisions. [Paras 5, 6]

Interest on the delayed refund is payable to the appellant; appeals allowed on this ground as well.

Final Conclusion: Both appeals are allowed: the Tribunal set aside the rejections and directed refund of the accumulated CENVAT credit in respect of the specified input services (Pre April 2011 and Post April 2011 periods) together with interest for delayed payment.

Refund of service tax - limitation-six months - condonation of delay - bona fide assessee - pass-on of tax to purchaser and remittance to ultimate payer

Refund of service tax - limitation-six months - condonation of delay - Whether the one day delayed refund claim filed after the six month period prescribed by Section 102(3) of the Finance Act, 2016 (as enacted) should be condoned and the claim admitted for adjudication on merits. - HELD THAT: - The Tribunal noted that the Finance Bill 2016 received Presidential assent on 14.05.2016 and that the statutory window for filing refund claims closed on 14.11.2016; the appellant filed on 15.11.2016, one day late. The Tribunal accepted the factual position that service tax had been paid and that the incidence of tax was passed on to the buyer, the Ministry of Defence. Observing the legislative purpose of restoring exemption and refunding tax paid, and having regard to the bona fide nature of the appellant's conduct and the minimal delay, the Tribunal exercised discretion to condone the one day delay so that the claim could be considered on merits. The Tribunal emphasised that the appellant had acted diligently in paying tax and that denying relief would penalise the ultimate payer despite the short delay attributable to the appellant. [Paras 3, 5, 6, 7]

Delay of one day in filing the refund claim is condoned and the refund claim is to be considered on merits.

Refund of service tax - pass-on of tax to purchaser and remittance to ultimate payer - Whether, upon allowance of the refund, the appellant must remit the refunded amount to the Ministry of Defence (the buyer) who bore the incidence of tax. - HELD THAT: - The Tribunal recorded that the incidence of the tax had been passed on to the Ministry of Defence and observed that it would be unjust to permit the appellant to retain a refund which in substance belongs to the buyer. Consequently, the Tribunal directed that in the event the refund is found admissible on merits, the appellant shall forthwith remit the refund amount to the Ministry of Defence. [Paras 5, 7]

If the refund is granted on merits, the appellant must remit the refunded amount to the Ministry of Defence.

Final Conclusion: The impugned order rejecting the refund claim is set aside; the one day delay is condoned, the refund claim shall be decided on merits, and, if allowed, the appellant is directed to remit the refund to the Ministry of Defence. The appeal is allowed on these terms.

Exemption under Notification No.25/2012-ST Serial No.13(d) for construction of pollution control or effluent treatment plants - definition of "factory" under section 2(e) of the Central Excise Act and its application by reference under section 65B of the Finance Act - distinction between "production" and "manufacture" for characterisation of premises as factory - scope of "effluent" to include sewage and coverage of sewage treatment plants within effluent treatment plants

Definition of "factory" under section 2(e) of the Central Excise Act and its application by reference under section 65B of the Finance Act - distinction between "production" and "manufacture" for characterisation of premises as factory - exemption under Notification No.25/2012-ST Serial No.13(d) for construction of pollution control or effluent treatment plants - Whether ETPs constructed by the appellant at ONGC oil fields are excluded from the Notification exemption because the oil fields qualify as a "factory" - HELD THAT: - The Tribunal applied section 65B of the Finance Act to refer to section 2(e) of the Central Excise Act for the undefined term "factory". The Court analysed the two limbs of section 2(e): premises where excisable goods are manufactured, and premises where a manufacturing process connected with production of such goods is carried on. It held that extraction of crude oil is "production" and not "manufacture" and that the second limb contemplates post-production processes integrally connected with manufacture (for example, refining) rather than mere extraction. Applying these principles, the Tribunal concluded that premises where only extraction/production of natural resources occurs (as in the ONGC onshore oil fields) do not qualify as a "factory" for the purpose of the Notification. Consequently, the bar in Serial No.13(d) (which denies exemption if the plant is located as part of a factory) did not apply to the ETPs constructed at the ONGC oil fields, and denial of exemption by the Commissioner was held to be erroneous. [Paras 35, 36]

Benefit of Serial No.13(d) of Notification No.25/2012-ST cannot be denied on the ground that ONGC oil fields are a "factory"; the ETPs constructed there are eligible for exemption.

Scope of "effluent" to include sewage and coverage of sewage treatment plants within effluent treatment plants - exemption under Notification No.25/2012-ST Serial No.13(d) for construction of pollution control or effluent treatment plants - Whether sewage treatment plants (STPs) constructed by the appellant for NBCC fall within the scope of "effluent treatment plant" under Serial No.13(d) and are therefore exempt - HELD THAT: - The Tribunal examined the ordinary meanings of "sewage" and "effluent" from standard dictionaries and observed that "effluent" includes waste material discharged into the environment, including sewage. Because an STP is designed to remove pollutants and contaminants from wastewater and manage effluent (i.e., sewage), an STP falls within the concept of an effluent treatment plant. The Commissioner's conclusion that the NBCC contracts for STPs did not fulfil the requirement of the Notification was therefore found to be incorrect, and the exemption under Serial No.13(d) was held applicable to the STP projects. [Paras 46]

Sewage treatment plants constructed for NBCC are covered by Serial No.13(d) as effluent treatment plants and are entitled to the exemption.

Final Conclusion: The Tribunal set aside the Commissioner's order dated 27.10.2015 and allowed the appeal: the ETPs constructed at ONGC oil fields are not excluded from exemption on the ground that the oil fields are a "factory", and the STPs constructed for NBCC qualify as effluent treatment plants and are exempt under Serial No.13(d) of Notification No.25/2012-ST.

Construction of complex service - self-service (builder as owner prior to execution of sale deed) - service provider-service recipient relationship - CBEC Circular No.108/2 of 2009-ST - distinction between sale and works contract - works contract service and its temporal applicability - binding nature of Board circular on Revenue - abatement under construction of complex services

Construction of complex service - self-service (builder as owner prior to execution of sale deed) - service provider-service recipient relationship - CBEC Circular No.108/2 of 2009-ST - binding nature of Board circular on Revenue - Whether the appellant was liable to service tax under the category of construction of complex service for the period April, 2005 to February, 2008 - HELD THAT: - The Tribunal found on the record that the appellant constructed flats on its own land and executed sale deeds to allottees only upon completion of the flats. Prior to execution of the sale deeds the ownership remained with the builder and the activities undertaken were therefore self-service. Reliance was placed on CBEC Circular No.108/2 of 2009-ST which clarifies that construction by a builder prior to sale deed execution is to be regarded as self-service and not a service provided to the allottee; the circular is binding on the Revenue. The Tribunal also noted earlier decisions of the Tribunal taking the same view. Applying these principles to the established facts, the Tribunal held that there was no service provider-service recipient relationship with the allottees prior to sale deed execution and hence no exigibility of service tax under the construction of complex service for the period in question.

Demand of service tax under construction of complex service for April, 2005 to February, 2008 set aside.

Distinction between sale and works contract - works contract service and its temporal applicability - abatement under construction of complex services - Whether the Revenue's reliance on decisions treating such transactions as works contract (and liability thereunder) sustains the demand under the facts and period adjudicated - HELD THAT: - The Tribunal observed that the Supreme Court decision relied upon by the Revenue was not determinative in light of the Board circular and subsequent judicial developments. It further noted that even if the contractual nature were characterized as a works contract, the category of "Works Contract Service" was made exigible only from 1.7.2007; the present demand was framed under "construction of complex services" with an abatement and not under works contract service. The Tribunal therefore concluded that the Revenue's reliance on earlier authorities did not justify sustaining the demand under the construction of complex services for the period before and during the tax period considered.

Revenue's alternative contention based on works contract or earlier case law rejected; demand not sustainable on those grounds.

Final Conclusion: The appeal is allowed and the impugned demand of service tax for the period April, 2005 to February, 2008 under construction of complex services is set aside, with consequential relief, if any.

Determination of any question having a relation to the rate of duty of excise - appeal to High Court under Section 35G of the Central Excise Act - exclusive jurisdiction of the Supreme Court under Section 35L of the Central Excise Act - Circular not to override statute

Determination of any question having a relation to the rate of duty of excise - appeal to High Court under Section 35G of the Central Excise Act - exclusive jurisdiction of the Supreme Court under Section 35L of the Central Excise Act - Whether the appeal under Section 35G is maintainable where the Tribunal's order involves determination of the rate of duty to be paid (SKO v. MS/HSD) and whether the High Court has jurisdiction to entertain the Revenue's appeal. - HELD THAT: - The core controversy is the rate at which excise duty was payable - whether on SKO as assessed on removal or at the higher rates applicable to MS/HSD as urged by the Revenue by reference to a departmental Circular. Sub section (1) of Section 35G excludes from High Court appeals those orders relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for assessment. The Court applied the settled principle that questions as to rate of duty, classification, and whether goods are covered by an exemption notification are directly and proximately related to the rate of duty for purposes of assessment and therefore fall outside the scope of appeals under Section 35G. Consequently, where the Tribunal's decision turns on the rate of duty payable, the exclusive remedy is an appeal to the Supreme Court under Section 35L, and the High Court cannot entertain the appeal under Section 35G. The Court noted that a departmental Circular cannot displace the statutory scheme and that the question whether duty was payable at the higher rate is, in substance, a rate/value/assessment issue falling within Section 35L jurisdiction. [Paras 8, 9, 10]

Appeal under Section 35G is not maintainable because the dispute concerns determination of the rate of excise duty; the Revenue's remedy is an appeal to the Supreme Court under Section 35L.

Final Conclusion: The preliminary objection is allowed and the appeal is dismissed as not maintainable before the High Court under Section 35G; the Revenue remains free to pursue remedy before the Supreme Court under Section 35L.

Option to claim special rate under Clause 3(1) of Notification No.20/2008-Central Excise - refund of excise duty under Northeast Industrial Policy - restoration of Notification No.20/2008-Central Excise by the Supreme Court - pre-condition of consideration before initiating recovery

Option to claim special rate under Clause 3(1) of Notification No.20/2008-Central Excise - restoration of Notification No.20/2008-Central Excise by the Supreme Court - Petitioner's application dated 01.04.2021 under Clause 3(1) claiming fixation of a special rate must be considered on merits before applying the Table rates in the Notification. - HELD THAT: - The petitioner filed an application under Clause 3(1) of Notification No.20/2008-Central Excise seeking fixation of a special rate on the basis of add-ons to the manufactured goods. Following the Supreme Court's decision restoring the Notification, the statutory scheme confers an option on a manufacturer to seek a special rate if the actual value addition ratio warrants it. The Court concluded that, given this legal right, the department must examine and decide the petitioner's claim for a special rate rather than proceed straightaway to apply the Table rates prescribed in the Notification. The petition was disposed directing the Principal Commissioner to consider the application and arrive at a rate, if any, in accordance with law. [Paras 7]

Principal Commissioner of GST is directed to consider and decide the petitioner's application under Clause 3(1) of the Notification dated 27.03.2008 on merits.

Pre-condition of consideration before initiating recovery - requirement of administrative decision prior to coercive measures - Whether coercive recovery measures may be initiated against the petitioner pending decision on the Clause 3(1) application. - HELD THAT: - The Court held that it would be inappropriate for the department to initiate recovery or pursue prior communications when the petitioner has a live statutory claim for a special rate which has not been adjudicated. In the circumstances, the Court restrained coercive measures and pursuit of the communication dated 22.03.2021 until the Principal Commissioner decides the application. A timeline of six weeks from receipt of the certified copy of the order was fixed for the said decision. [Paras 8, 9]

No coercive action for recovery shall be taken and the communication dated 22.03.2021 shall not be pursued until the Principal Commissioner decides the petitioner's application; decision to be taken within six weeks.

Final Conclusion: Writ petition allowed to the extent that the Principal Commissioner of GST is directed to consider and decide the petitioner's application under Clause 3(1) of Notification No.20/2008-Central Excise within six weeks, and no coercive recovery or pursuit of the specified communication shall be undertaken until such decision is rendered.

Refund of unutilized cenvat credit of Education Cess and Secondary and Higher Education Cess under Section 11B of the Central Excise Act - non-transition of cesses into GST due to restriction under Section 140(1) of the CGST Act - vested right to carry forward cenvat credit and entitlement to refund on change of law - binding effect of jurisdictional High Court and Division Bench precedents - limitation/time bar and scope of show cause notice

Refund of unutilized cenvat credit of Education Cess and Secondary and Higher Education Cess under Section 11B of the Central Excise Act - non-transition of cesses into GST due to restriction under Section 140(1) of the CGST Act - vested right to carry forward cenvat credit and entitlement to refund on change of law - binding effect of jurisdictional High Court and Division Bench precedents - Appellant entitled to cash refund of accumulated unutilized Education Cess and Secondary and Higher Education Cess not transitioned into GST. - HELD THAT: - The Tribunal found that the appellant filed a refund claim under Section 11B of the Central Excise Act within one year from introduction of GST and did not transition the cesses into GST due to the specific restriction in Section 140(1). Applying the ratio of the Division Bench of CESTAT, New Delhi in Bharat Heavy Electricals Ltd., and the decision of the Karnataka High Court in Slovak India Trading Co. Pvt. Ltd., the Tribunal held that credits validly standing in the assessee's account as on the cut off date constituted a vested right which does not extinguish merely by change of law unless a specific provision so provides. In view of contradictory authorities, the Tribunal followed the jurisdictional High Court precedent and the Division Bench ruling that an assessee who could not carry forward or utilize such cenvat credits due to the changeover to GST is eligible for cash refund of the unutilized cesses that could not be transitioned. The Tribunal distinguished authorities addressing only transition of cesses into GST and noted that single member contrary decisions do not override the Division Bench and jurisdictional High Court precedents relied upon. [Paras 6]

Refund claim under Section 11B of the Central Excise Act for unutilized Education Cess and Secondary and Higher Education Cess not carried forward into GST is allowable; appeal allowed on this ground.

Limitation/time bar and scope of show cause notice - reliance on findings beyond original adjudication - Findings in the impugned order treating the refund claim as time barred beyond the scope of the original show cause notice are unsustainable. - HELD THAT: - The Tribunal observed that the impugned order's conclusion on limitation went beyond matters raised in the show cause notice and the order in original, and that the original authority had not given any findings on limitation. Therefore the time bar finding in the appellate order could not be sustained. The Tribunal followed earlier authorities holding that such new grounds cannot be introduced at the appellate stage if not considered by the original authority. [Paras 6]

Time bar finding in the impugned order is not sustainable; appeal allowed insofar as the limitation point was concerned.

Final Conclusion: The appeal is allowed: the Tribunal granted refund of the appellant's unutilized Education Cess and Secondary and Higher Education Cess credits which could not be transitioned into GST, and held the appellate authority's time bar finding to be unsustainable for being beyond the scope of the original proceedings.

Transition of unutilised input tax credit - transition of CENVAT credit of Education Cess and Secondary and Higher Education Cess to GST - Explanation 3 to Section 140 of the CGST Act and its scope - recovery of irregularly transitioned CENVAT credit with interest and penalty

Transition of CENVAT credit of Education Cess and Secondary and Higher Education Cess to GST - transition of unutilised input tax credit - Explanation 3 to Section 140 of the CGST Act and its scope - The appellant was not entitled to transition or carry forward unutilised CENVAT credit of Education Cess and Secondary and Higher Education Cess into the GST regime. - HELD THAT: - The Tribunal applied the decision of the Division Bench of the Madras High Court in Sutherland Global Services Pvt. Ltd., which held that only taxes and duties subsumed in GST could be transitioned as unutilised input tax credit. Education Cess and Secondary and Higher Education Cess were not subsumed in GST; Explanation 3 to Section 140 of the CGST Act applies to the entire Section 140 and excludes Cess of any kind (other than specified Cess such as NCCD) from transition. Accordingly, the transition of such CENVAT credit into TRAN-1/ electronic credit ledger could not be permitted and the transfer was irregular, giving rise to recoverable demand with interest and penalty. [Paras 6, 7]

The transfer of Education Cess and Secondary and Higher Education Cess into GST was held impermissible and liable to be recovered with interest and penalty.

Quantification of irregularly transitioned CENVAT credit - verification of claimed CENVAT credits carried forward from PLA and freight inward - remand for fresh consideration and compliance with principles of natural justice - The quantification of the demanded amount required fresh examination as there was no finding on two specific claims made by the appellant. - HELD THAT: - The Tribunal noted the appellant's assertion that part of the impugned amount related to CENVAT credit carried forward from PLA and CENVAT credit of freight inward, and found that neither the adjudicating authority nor the first appellate authority recorded any findings on these contentions. In the absence of adjudicatory findings on the nature and admissibility of these claimed amounts, the Tribunal remanded the matter to the original authority for verification of the evidences submitted by the appellant and for passing a fresh order quantifying the demand and imposing interest and penalty, after affording opportunity in accordance with the principles of natural justice. [Paras 7]

Matter remanded to the original authority for verification of the appellant's claims regarding the two components of the disputed amount and for fresh adjudication in accordance with natural justice.

Final Conclusion: Appeal disposed of by remand: the Tribunal upheld that transition of Education Cess and Secondary and Higher Education Cess into GST was impermissible and recoverable with interest and penalty, but directed remand to the original authority for verification and fresh quantification of the specific claimed CENVAT credits before finalising demand, interest and penalty.

Prohibition on CENVAT credit where capital goods are used exclusively in the manufacture of exempted goods - simultaneous availment of exemption notifications - option to choose applicable exemption notification - requirement of separate accounts for dual notifications (inputs versus capital goods) - no time limit for availing CENVAT credit on capital goods - application of Rule 6(4) of the Cenvat Credit Rules, 2004 to capital goods

Prohibition on CENVAT credit where capital goods are used exclusively in the manufacture of exempted goods - simultaneous availment of exemption notifications - Whether CENVAT credit on capital goods can be denied where the manufacturer cleared some goods without payment of duty under one exemption notification and some on payment under another during the same period. - HELD THAT: - The Tribunal found on the facts that the appellant cleared goods both on payment of duty and at nil rate under two notifications and produced invoices evidencing duty-paid clearances. Applying the legal test that Rule 6(4) operates only where capital goods are used exclusively for manufacture of exempted goods, the Tribunal accepted earlier decisions of this Tribunal (Winsome Yarns) and held that capital goods used for manufacturing both dutiable and exempted clearances cannot be treated as exclusively used for exempted goods. The Tribunal also observed that Notification No. 29/2004 is an unconditional concessional-rate notification and an assessee not availing input credit may still opt to pay duty under it; therefore simultaneous availment of different notifications for different clearances does not automatically disentitle the assessee to capital goods credit. On these grounds the denial of CENVAT credit under Rule 6(4) was held not sustainable. [Paras 14, 16, 17, 18]

CENVAT credit on capital goods cannot be denied where the capital goods were used in manufacture of both dutiable and exempted goods; impugned denial under Rule 6(4) set aside.

Requirement of separate accounts for dual notifications (inputs versus capital goods) - simultaneous availment of exemption notifications - Whether failure to maintain separate books of account for goods cleared under two different notifications disentitles the appellant to CENVAT credit on capital goods. - HELD THAT: - The Tribunal noted that the statutory requirement to maintain separate records under Rule 6(2) pertains to inputs and input services for appropriate and proportionate availment of credit, and that denial of capital goods credit arises only when capital goods are used exclusively for exempted goods. The Revenue's plea that simultaneous availment required separate accounts was not shown to apply to capital goods in a manner that would establish exclusive use for exempted goods. The Tribunal further observed that the Department had accepted, in later proceedings, allowance of credit, and that the Revenue had not disproved the appellant's duty-paid clearances. [Paras 10, 12, 19]

Failure to maintain separate accounts did not disentitle the appellant to CENVAT credit on capital goods in the absence of a finding of exclusive use for exempted goods.

No time limit for availing CENVAT credit on capital goods - application of Rule 6(4) of the Cenvat Credit Rules, 2004 to capital goods - Whether CENVAT credit may be availed on capital goods received during an earlier unconditional exemption period once the goods manufactured therefrom become dutiable. - HELD THAT: - The Tribunal held that even if capital goods were procured during a period when Notification No. 29/2004 read with Notification No. 58/2008 provided full exemption, nothing prevented the assessee from availing CENVAT credit later when the goods produced by those capital goods became dutiable after 7.7.2009. The Tribunal noted that no time-limit is prescribed for availing credit on capital goods and that credit can be taken so long as the capital goods are used in manufacture of dutiable goods post the date when duty becomes payable. [Paras 20]

Assessee entitled to avail CENVAT credit on capital goods used for manufacture of dutiable goods after the exemption period; no time-limit bars such availment.

Final Conclusion: The impugned order denying CENVAT credit on capital goods is set aside; the appeal is allowed and the appellant is entitled to CENVAT credit on capital goods for the impugned period, with consequential relief as applicable.

Utilisation of CENVAT credit - Rule 8(3A) of the Central Excise Rules, 2002 - penalty under Rule 25 of the Central Excise Rules, 2002 - recovery of duty under Section 11A of the Central Excise Act, 1944 - interest under Section 11AB of the Central Excise Act, 1944

Utilisation of CENVAT credit - Rule 8(3A) of the Central Excise Rules, 2002 - recovery of duty under Section 11A of the Central Excise Act, 1944 - Validity of treating payments made by utilizing CENVAT credit as improper and sustaining demands under Section 11A where Rule 8(3A) restricted such utilisation. - HELD THAT: - The Tribunal applied the decision of the Gujarat High Court in Indsur Global Ltd. holding that the portion of Rule 8(3A) which required payment of duty "without utilizing the Cenvat credit" is unconstitutional. In consequence, the foundational restriction in Rule 8(3A) which formed the basis for treating the appellant's utilisation of CENVAT credit as impermissible no longer survives. Payments made by the appellant by utilising CENVAT credit for the month of October 2009 and for clearances in the period Nov 09 to July 2010 therefore could not be treated as defaults attracting recovery under Section 11A. The Tribunal recorded that, in view of the High Court ruling invalidating the prohibition on utilisation of CENVAT credit, the Commissioner correctly accepted that the appellant had paid duty by utilising CENVAT credit and that the demands framed on that ground could not be sustained. [Paras 4]

Demands under Section 11A predicated on denial of CENVAT utilisation are not maintainable; the revenue appeal against dropping of such demands is dismissed.

Penalty under Rule 25 of the Central Excise Rules, 2002 - Rule 8(1), 8(3) & 8(3A) of the Central Excise Rules, 2002 - Sustainability of penalty imposed under Rule 25 for alleged contravention of Rules 4, 8(1), 8(3) and 8(3A) where duty was paid by utilising CENVAT credit. - HELD THAT: - Since the prohibition in Rule 8(3A) against utilising CENVAT credit during the period of default has been declared unconstitutional to the extent challenged, the premise for imposing penalty under Rule 25 for contravention of the cited rules collapses. The Tribunal observed that payment of duty by utilising CENVAT credit was a proper mode of payment in the circumstances and, accordingly, the penalty equivalent to the demand was unsustainable. The Tribunal set aside the penalty imposed by the Commissioner. [Paras 4]

Penalty imposed under Rule 25 is set aside.

Interest under Section 11AB of the Central Excise Act, 1944 - Whether interest under Section 11AB could be recovered on delayed payment when duty was paid by utilising CENVAT credit. - HELD THAT: - The impugned order had directed recovery of interest under Section 11AB for default in payment for October 2009, appropriating amounts already paid. The Tribunal's conclusion that the appellant's payments by utilisation of CENVAT credit were proper (in view of the invalidation of the prohibition in Rule 8(3A)) affects the basis for treating the payments as defaults. While the Tribunal noted the Commissioner had ordered recovery of interest and appropriated amounts, its disposal of the primary question of correctness of utilising CENVAT credit undermines the footing for interest recovery to the extent premised on denial of CENVAT utilisation. [Paras 4]

Interest recovery premised on denial of CENVAT utilisation cannot be sustained to the extent it depended on Rule 8(3A)'s prohibition; the appellate disposal rejects the revenue's challenge.

Final Conclusion: Appeal by the assessee allowed and penalty set aside; appeal by the revenue dismissed insofar as demands and penalties were founded on the disallowance of utilisation of CENVAT credit under the struck down portion of Rule 8(3A).

Interlocutory order - bar on revisional jurisdiction under Section 397(2) of the Code of Criminal Procedure - recall and re-examination under Section 311 - adjournment and right to fair opportunity at trial - quashing of impugned interlocutory orders

Interlocutory order - bar on revisional jurisdiction under Section 397(2) of the Code of Criminal Procedure - Whether the order rejecting the application for adjournment and closing the cross examination of PW1 is an interlocutory order barring revisional jurisdiction and whether the criminal writ petition is the competent remedy. - HELD THAT: - The Court examined authorities on the meaning of "interlocutory order" and the scope of Section 397(2) of the Code. Orders of a purely interim or procedural nature, such as granting or refusing adjournments, ordinarily fall within the restricted conception of interlocutory orders which are excluded from revisional jurisdiction. Applying those principles to the facts, the Court found that the order rejecting adjournment and closing the cross of PW1 was interlocutory in nature and thus not amenable to revision under Section 397(2). Consequently, the challenge by way of criminal writ petition was held to be a competent remedy to impugn that interlocutory order. [Paras 10]

The order rejecting adjournment and closing cross examination is interlocutory; revision is barred under Section 397(2) and the petition is a maintainable remedy to challenge the order.

Adjournment and right to fair opportunity at trial - recall and re-examination under Section 311 - quashing of impugned interlocutory orders - Whether the impugned order of the Judicial Magistrate First Class dated 16.08.2019 rejecting adjournment and closing the complainant's cross examination should be interfered with and what relief, if any, should follow. - HELD THAT: - On the factual record (roznama) the Court noted multiple earlier adjournments sought by the accused and counsel, illness of the accused's advocate, non compliance earlier with an order for interim compensation, and that the accused had not been diligent in availing the last opportunity. Those facts weighed against interference. Nonetheless, to afford a fair opportunity and in the interest of justice the Court exercised its supervisory jurisdiction: it found that interference was warranted to enable conclusion of the trial fairly while balancing inconvenience to the complainant. Accordingly, the Court quashed and set aside the impugned order rejecting adjournment and closing cross examination, subject to conditions to compensate the complainant and to expedite conclusion of proceedings. The Court directed payment of costs, appearance before the trial court on a specified date, and completion of the accused's cross within a limited period, and ordered expedition of the trial court proceedings. [Paras 18, 23]

Impugned order of 16.08.2019 is quashed and set aside; relief granted subject to payment of costs, appearance before the trial court on the directed date, and completion of cross examination within the stipulated time with directions to expedite the trial.

Final Conclusion: The criminal writ petition is allowed: the order dated 16.08.2019 rejecting adjournment and closing the cross examination of PW1 is quashed and set aside as an interlocutory order; relief is granted subject to conditions of costs and directions for prompt conclusion of the trial.

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttable presumption and standard of proof by preponderance of probabilities - Existence of a legally enforceable debt as an element of the offence under Section 138 N.I. Act - Permissibility of reliance on prosecution materials by accused to rebut presumption

Presumption under Section 139 of the Negotiable Instruments Act - Existence of a legally enforceable debt as an element of the offence under Section 138 N.I. Act - Rebuttable presumption and standard of proof by preponderance of probabilities - Permissibility of reliance on prosecution materials by accused to rebut presumption - Whether the trial court's acquittal was vitiated by misapplication of the presumption under Section 139 or by improper appreciation of evidence so as to warrant interference - HELD THAT: - The Court held that although Section 139 creates an initial statutory presumption in favour of the holder of a dishonoured cheque, that presumption is rebuttable and the accused may rebut it on the preponderance of probabilities, including by relying on prosecution material. The trial court found material contradictions and omissions in the complainant's case: absence of specific date of advancement of the alleged loan, failure to mention earlier alleged transactions in the complaint or legal notice, improvement and inconsistencies in the evidence of prosecution witnesses regarding dates and the sequence of payments, encashment of a second cheque for a lesser amount shortly after the disputed cheque, and absence of references to the alleged transactions in the complainant's income-tax returns. Evaluating these facts, the court concluded the defence version-that the cheques related to furniture work and that a subsequent cheque for the lesser amount was encashed after adjustment-was more probable. Reliance by the accused on prosecution materials and on oral testimony sufficed to rebut the Section 139 presumption, shifting the onus back to the complainant to prove existence of a legally enforceable debt, which he failed to do. The Court applied the principles in Rangappa Vs Sri Mohan and Basalingappa Vs Mudibasappa to reaffirm that the accused need only meet the standard of preponderance of probabilities to rebut the statutory presumption, whereas the prosecution must ultimately prove its case beyond reasonable doubt. [Paras 12, 13, 14, 16, 19]

The trial court correctly found that the presumption under Section 139 was rebutted and that the complainant failed to prove a legally enforceable debt; the acquittal is unimpeachable and requires no interference.

Final Conclusion: The appeal is dismissed and the judgment and order of acquittal dated 21.10.2011 in C.C.No.691/2009 is confirmed.

Power to make orders detaining certain persons under the PITNDPS Act - Authority of State officers specially empowered to pass preventive detention orders - Concept of appropriate Government in confirmation of detention orders - Constitution and functions of Advisory Board and statutory timelines for reference and report - Delegation of executive power and competence of delegated officer

Power to make orders detaining certain persons under the PITNDPS Act - Authority of State officers specially empowered to pass preventive detention orders - Delegation of executive power and competence of delegated officer - Validity of the detention order dated 30.09.2020 passed by the Commissioner of Police under Section 3(1) of the PITNDPS Act - HELD THAT: - The Court held that Section 3(1) permits a State Government or any officer of the State Government not below the rank of Secretary, specially empowered by that Government, to make detention orders. The State Government had by notification empowered specified officers including the Commissioner of Police and the Commissioner of Police for Bengaluru city was shown to hold a rank and pay scale equivalent to Principal Secretary. On this basis the Court found that the Commissioner of Police was among the officers specially empowered to pass orders under Section 3(1), and that the impugned order was not an unlawful delegation or abdication of the State's power to detain. The contention that the order was passed by an unauthorised delegate was rejected. [Paras 9, 14, 15]

Detention order dated 30.09.2020 passed by the Commissioner of Police is valid and free from the objection of lack of power.

Concept of appropriate Government in confirmation of detention orders - Confirmation of detention by appropriate Government under Section 9(f) - Competence of Under Secretary under State Transaction of Business Rules - Validity of the confirmation order dated 22.12.2020 issued on behalf of the appropriate Government - HELD THAT: - The Court examined the definition of 'appropriate Government' and the procedure under Section 9(f) for confirmation of detention when the Advisory Board reports sufficient cause. It observed that the Karnataka Transaction of Business Rules, 1977 (Rule 19) authorise specified officers including an Under Secretary to authenticate orders in the name of the Governor. The impugned confirmation was issued by an Under Secretary authorised under Rule 19 and Section 11 read with Section 9(f) was thereby satisfied. Consequently, there was no infirmity in the confirmation on the ground that it was not issued by the appropriate Government or competent officer. [Paras 13, 16, 17]

Order of confirmation dated 22.12.2020 issued by the State (through the authorised Under Secretary) is valid.

Constitution and functions of Advisory Board and statutory timelines for reference and report - Compliance with timelines under Section 9(b) and Section 9(c) - Whether the reference to the Advisory Board and the Advisory Board's report complied with statutory time-limits under Section 9(b) and 9(c) - HELD THAT: - The Court construed clause (b) of Section 9 to require the appropriate Government to make reference to the Advisory Board within five weeks from the date of detention, and clause (c) to require the Advisory Board's report within eleven weeks. Applying the statutory computation from detention on 01.10.2020, the five-week reference period expired on 05.11.2020 and the eleven-week report period on 17.12.2020. The record showed the reference was received by the Advisory Board on 27.10.2020 and the Advisory Board's report was received by the State on 11.12.2020, both dates falling within the respective statutory periods. The petitioner's plea of delayed reference and report was therefore rejected. [Paras 11, 18]

Reference to the Advisory Board and receipt of its report were within the statutory time-limits; the challenge on this ground fails.

Final Conclusion: Writ petition dismissed; the detention order dated 30.09.2020 and the confirmation order dated 22.12.2020 are affirmed.

Interim compensation under Section 143(A) of the Negotiable Instruments Act - bar on recalling or varying Magistrate's order once passed under Section 362 Cr.P.C. - exercise of writ jurisdiction under Articles 226 and 227 of the Constitution and inherent power under Section 482 Cr.P.C. to decide interlocutory applications - deposit of interim compensation in Court to be kept in fixed deposit till disposal - quashing of subsequent inconsistent order and restoration of earlier interim order

Bar on recalling or varying Magistrate's order once passed under Section 362 Cr.P.C. - quashing of subsequent inconsistent order and restoration of earlier interim order - Validity of the trial Court's order dated 01.03.2021 rejecting the complainant's application under Section 143(A) of the N.I. Act, after an earlier order on 11.12.2019 had allowed interim compensation. - HELD THAT: - The High Court found that the trial Court had earlier passed an order on 11.12.2019 allowing the complainant's application under Section 143(A) and directing payment of interim compensation. Thereafter the respondent/accused filed an application seeking permission to deposit the interim amount in Court, but no order was passed on that application. The trial Court subsequently passed an order on 01.03.2021 rejecting the complainant's application. The Court held that once an order has been passed allowing or rejecting an application, the Magistrate does not have power to recall or vary that order in view of the bar under Section 362 Cr.P.C.; consequently the later order of 01.03.2021 was erroneous and liable to be quashed and the earlier order dated 11.12.2019 restored. [Paras 4, 8]

Order dated 01.03.2021 is quashed and the earlier order dated 11.12.2019 allowing interim compensation is restored.

Interim compensation under Section 143(A) of the Negotiable Instruments Act - exercise of writ jurisdiction under Articles 226 and 227 of the Constitution and inherent power under Section 482 Cr.P.C. to decide interlocutory applications - deposit of interim compensation in Court to be kept in fixed deposit till disposal - Whether the respondent/accused's application for permission to deposit the interim compensation in Court should be considered and what direction should be given. - HELD THAT: - Though the trial Court had not adjudicated the respondent/accused's application to deposit the interim compensation in Court, the High Court, invoking its supervisory and writ jurisdiction under Articles 226 and 227 and inherent jurisdiction under Section 482 Cr.P.C., considered the application. Having regard to the respondent/accused's apprehension about the complainant's foreign citizenship and the age of the transaction, and in the exercise of those powers, the Court modified the restored order to require deposit of the interim compensation into Court. The deposit is to be placed in a Nationalised Bank as a Fixed Deposit initially for one year and renewable, to remain until disposal by the trial Court. [Paras 5, 6, 7, 8]

Application for deposit is disposed of by directing the respondent/accused to deposit 10% of the cheque amount in Court within six weeks; the amount shall be kept as a fixed deposit in a Nationalised Bank for one year, renewable until trial disposal.

Final Conclusion: The petition is allowed: the trial Court order dated 01.03.2021 is quashed, the earlier order dated 11.12.2019 allowing interim compensation is restored, subject to modification directing the respondent/accused to deposit 10% of the cheque amount in Court as a renewable fixed deposit within six weeks, to remain until disposal of the trial.

Cognizance under Section 138 of Negotiable Instruments Act - maintainability of complaint where cheque or bank account belongs to a third party - presumption arising from undisputed signature on cheque - power of magistrate to review its own order - scope and limits of revisional court remand - directions for expeditious trial of cases under Section 138

Maintainability of complaint where cheque or bank account belongs to a third party - presumption arising from undisputed signature on cheque - Whether, on the facts before the Court, proceedings under Section 138 N.I. Act could be maintained against the applicant although the cheque-book and bank account belonged to his father. - HELD THAT: - The Court found that the applicant never specifically disputed his signature on the cheque; when pressed, counsel conceded that no denial of signature had been taken before the trial Magistrate. The record showed that the cheque-book and bank account belonged to the applicant's father but the applicant had access to them and had produced a bank letter confirming the account-holder relationship. On the limited prima facie appraisal permissible in a Section 482 application, the High Court concluded that the applicant had, prima facie, issued the cheque in his own signature and attempted to defraud the complainant. The Court emphasised that the stage was not one for final adjudication of defence contentions or facts, which the accused could fully raise and prove at trial.

On the present record and at this stage the complaint under Section 138 is maintainable against the applicant; quashing of prosecution cannot be ordered.

Power of magistrate to review its own order - scope and limits of revisional court remand - Whether the Trial Magistrate could reevaluate or review its earlier order taking cognizance after the Revisional Court remanded the matter to consider the accused's documents. - HELD THAT: - The Court observed that the Trial Magistrate had earlier taken cognizance and that the Revisional Court's direction to reconsider issuance of summons after taking note of the accused's defence was incorrect in principle. Citing the established position that a Magistrate cannot review its own order of cognizance (as explained in Adalat Prasad and subsequent approval), the High Court held that the Trial Magistrate rightly refused to exercise a review jurisdiction in that manner. The Revisional Court's dismissal of the revision was accordingly correct. The Court also noted subsequent endorsement of the Adalat Prasad principle in the context of expeditious trial of Section 138 cases.

The Trial Magistrate did not err in declining to review its cognizance order; the Revisional Court's dismissal of the revision is sustained.

Directions for expeditious trial of cases under Section 138 - What remedial directions, if any, should be given in view of prolonged pendency of the Section 138 complaint. - HELD THAT: - The Court took note of the prolonged suspension of proceedings and the need for timely disposal of Section 138 complaints. Exercising its supervisory jurisdiction, the High Court directed that the Trial Court must decide the criminal complaint within six months from the date of the order. The Court also imposed costs on the applicant in view of the conduct and delay in the proceedings.

The application under Section 482 is dismissed; costs awarded to the respondent and the Trial Court directed to decide the complaint within six months.

Final Conclusion: The petition under Section 482 Cr.P.C. is dismissed. On the prima facie record the prosecution under Section 138 N.I. Act is maintainable against the applicant; the Trial Magistrate correctly declined to review its cognizance order and the Revisional Court's dismissal is sustained. The Trial Court is directed to conclude the complaint within six months; costs awarded to the respondent.