TaxTMI Updates e-Newsletter
Aug 22,2023

Power of search and seizure - seizure of goods, documents or things - interpretation of 'goods' and 'things' under Section 67 - goods liable for confiscation - evidentiary seizure (useful for or relevant to proceedings) - ejusdem generis reading of 'things' - return of seized items not relied upon in notice under Section 67(3) - provisional release of seized goods and six month notice rule - confiscation under Section 130

Interpretation of 'goods' and 'things' under Section 67 - goods liable for confiscation - ejusdem generis reading of 'things' - Scope of power under Section 67(2) to seize goods, documents or things and the meaning of 'goods' and 'things'. - HELD THAT: - Section 67(2) permits seizure only of (i) goods which the proper officer has reasons to believe are liable for confiscation, or (ii) documents, books or things which, in the officer's opinion, shall be useful for or relevant to any proceedings under the Act. The word 'goods' in Section 67 must be read with the qualifying condition of being liable for confiscation; mere movable assets found during search (e.g., furniture, appliances) cannot be seized absent reasons to believe they are subject matter of evasion. The term 'things' must be read ejusdem generis with 'documents' and 'books' and therefore denotes items that store information or records (for example, electronic devices, pen drives, mobiles) which are useful or relevant to proceedings under the Act. The legislative scheme (including provisions for provisional release, confiscation under Section 130, and return of documents not relied upon) and the remedial purpose of Section 67 support a contextual and purposive interpretation that limits seizure to material evidentiary to proceedings or goods suspected to be liable for confiscation. [Paras 18, 36, 38, 46, 47]

Section 67(2) does not vest an unfettered power to seize any movable asset; seizure is limited to goods believed to be liable for confiscation and to documents/books/things that are useful or relevant to proceedings, with 'things' to be read ejusdem generis with 'documents' and 'books'.

Interpretation of 'goods' and 'things' under Section 67 - goods liable for confiscation - Whether the silver bars seized are 'goods' or 'securities' and thus whether they could be seized under Section 67(2). - HELD THAT: - The definition of 'goods' in Section 2(52) excludes 'money' and 'securities'. The expression 'securities' (as per the Securities Contract (Regulation) Act) comprises marketable instruments (shares, bonds, government securities, units, etc.) and does not include bullion such as silver bars. Silver bars, being movable property not falling within the definition of 'securities', fall within the term 'goods'. However, inclusion within 'goods' does not by itself permit seizure under Section 67(2) unless the proper officer has reasons to believe those goods are liable for confiscation under the criteria in Section 130. [Paras 28, 29, 30, 33, 34]

Silver bars are 'goods' (not 'securities') under the Act; they can be seized under Section 67(2) only if the officer has reasons to believe they are liable for confiscation.

Power of search and seizure - evidentiary seizure (useful for or relevant to proceedings) - return of seized items not relied upon in notice under Section 67(3) - provisional release of seized goods and six month notice rule - Whether currency and the silver bars seized from the petitioner should be returned where they were not relied upon in the subsequent notice and no reasons showing confiscation were made out. - HELD THAT: - Cash is expressly excluded from the definition of 'goods' (it is 'money'); therefore cash cannot be seized as 'goods' unless it has specific evidentiary relevance as a 'thing' (e.g., a particular note correlative to modus operandi). The court found no material that the seized currency or silver bars could be traced in species to any transaction relevant to proceedings under the Act, and that the Revenue's asserted basis was merely that they were 'unaccounted wealth'. Section 67(3) requires that documents, books or things not relied upon for issue of a notice under the Act be returned within thirty days of the notice. Further, Section 67(7) mandates return of goods if no notice in respect thereof is given within six months (subject to extension). Because the notice dated 10.11.2020 (which includes a demand for April, 2019) did not rely on the seized items, the seized currency and silver bars fell to be released. The court emphasised that Section 67 is not a recovery provision and cannot be used to seize valuable assets merely as unaccounted wealth; seizure must be tied to evidentiary relevance or confiscation criteria. [Paras 31, 43, 56, 61, 62]

The seized currency and silver bars are to be released because they were not shown to be goods liable for confiscation nor were they relied upon in the subsequent notice; documents/books/things not relied upon must be returned under Section 67(3) and goods must be returned if no notice is issued within six months.

Final Conclusion: The petition is allowed: the respondents are directed to forthwith release the currency and other valuable assets seized on 28.01.2020, while preserving the Department's right to proceed in accordance with law; nothing in the order expresses any view on the petitioner's liability for tax, penalty or interest.

Bail under Section 439 of the Code of Criminal Procedure - illegal arrest - absence of notice for recovery of tax - penalty or tax not yet ascertained - compoundable offences - offences triable by Magistrate - balancing of public interest and liberty of the accused - relevant factors for grant of bail: nature of accusation, nature of evidence, severity of punishment, character and role of accused

Bail under Section 439 of the Code of Criminal Procedure - illegal arrest - absence of notice for recovery of tax - penalty or tax not yet ascertained - compoundable offences - offences triable by Magistrate - Grant of bail to the applicant in Case Crime No. 2415 of 2021 subject to conditions - HELD THAT: - The Court, after considering the material on record and submissions, recorded prima facie findings that the applicant was arrested without assignment of reasons or requisite satisfaction; no notice for recovery of GST has been issued against him; the penalty or tax has not yet been ascertained; the alleged offences attract punishment up to five years and are compoundable and triable by a Magistrate. Applying settled principles governing grant of bail - including the nature of accusation, the nature of evidence, severity of punishment, the character and role of the accused, and public interest - and having regard to precedents cited, the Court concluded that, without expressing any opinion on merits, the balance favours release on bail. The Court therefore directed release on furnishing a personal bond and two reliable sureties in like amount, subject to enumerated conditions restricting tampering with witnesses, ensuring attendance at critical stages of trial, undertaking against seeking adjournments when witnesses are present, and refraining from commission of further offences. Breach of conditions would warrant cancellation of bail and the trial court may treat deliberate absence as abuse of liberty.

Bail allowed and applicant directed to be released on furnishing bond and sureties subject to specified conditions; trial court to verify computerized copy of this order and to proceed independently on merits.

Final Conclusion: Bail application allowed: applicant released on furnishing personal bond and two sureties subject to conditions limiting interference with witnesses, mandatory attendance at specified stages, undertaking against adjournments, and prohibition on further criminality; observations confined to bail determination and without prejudice to trial court's independent adjudication on merits.

Classification of goods under the Harmonized System - General Rules for the Interpretation of the Harmonized System - application of Chapter and Section Notes in tariff classification - classification under Chapter 39 (Plastics and articles thereof) versus Chapter 62 (Articles of apparel and clothing accessories) - essential character/description of goods for tariff classification

Classification of goods under the Harmonized System - application of Chapter and Section Notes in tariff classification - classification under Chapter 39 (Plastics and articles thereof) versus Chapter 62 (Articles of apparel and clothing accessories) - essential character/description of goods for tariff classification - Classification of 'Foam cup pads' supplied as finished products for use in manufacture of brassieres among the HSN codes 39269079, 62129090 and 39262091. - HELD THAT: - The Authority applied the General Rules for interpretation of the Harmonized System and the Chapter/Section Notes. Polyurethane is a plastic within the meaning of Note 1 to Chapter 39 and the foam cup pads manufactured from polyurethane, glue and fabric are therefore articles of plastics or of materials of headings 3901 to 3914. Section XI (Chapter 62) does not cover articles of Chapter 39 by virtue of the Section Note excluding fabrics or textile materials impregnated, coated or covered with plastics; accordingly the product is not classifiable under Chapter 62 (HSN 62129090). The description for 39269079 (insulating liner of nylon etc.) does not fit because the product is not an insulating liner of nylon but a polyurethane foam article. Heading 3926 (Other articles of plastics) is therefore applicable; within that heading 39262091 expressly covers articles of apparel and clothing accessories of polyurethane foam. On the facts and character of the product as polyurethane foam pads used in brassieres, the product falls under 39262091. The Authority concluded that this classification attracts GST at the rate applicable to that heading. [Paras 14, 15, 16]

Foam cup pads made of polyurethane, glue and fabric are classifiable under HSN 39262091 and are liable to GST at the rate applicable to that heading.

Final Conclusion: Advance Ruling: Foam cup pads manufactured from polyurethane, glue and fabric and supplied for use in brassiere manufacture are classifiable under HSN 39262091 (not under 62129090 or 39269079) and attract GST at the rate applicable to that heading; ruling valid within the jurisdiction of the Authority for Advance Ruling Uttar Pradesh.

Value of taxable supply - transaction value - inclusion/exclusion of reimbursed expenditure from taxable value - pure agent - invoice and single supply

Value of taxable supply - invoice and single supply - inclusion/exclusion of reimbursed expenditure from taxable value - Whether where the applicant arranges and provides materials and procures installation and bills the customer (with supervision), the value of material and cost of execution must be included in the value of supply for GST. - HELD THAT: - The Authority examined the nature of the transaction and found that where the applicant itself provides the materials and undertakes the installation (even if supervision is separately described), the GST charged on cost of material and supervision is tenable and the entire work with materials must be treated as a single supply invoiced by the applicant. The Authority referred to the definition of 'supply' and the entries in Schedule II and observed that when materials are supplied and installation is performed by the applicant, those assets/works do not qualify for exclusion as mere reimbursements under the circumstances described. Consequently, GST is to be charged under a single invoice raised by the applicant covering materials and services together; the expenditure cannot be excluded from taxable value as mere reimbursement in such cases. The Authority also noted that a pending SLP on the pure agent question precludes a broader pronouncement on that doctrine, but on the facts where the applicant provides materials/works, the GST treatment described above is applicable. [Paras 17, 19, 20]

Value of materials and execution cost is included in the taxable value and GST is chargeable on the combined supply (single invoice) when the applicant provides materials and procures the installation.

Transaction value - pure agent - inclusion/exclusion of reimbursed expenditure from taxable value - Whether where the customer/recipient arranges and pays for materials and installation and the applicant only renders supervision and claims reimbursement, the value of material and execution cost will be included in the applicant's taxable value. - HELD THAT: - The Authority applied the transaction value concept and observed that where the recipient purchases the materials and arranges installation (and bears the obligation to pay), and the applicant's role is limited to supervision with only supervision charges as its consideration, the element of consideration for the applicant's supply is confined to the supervision fee. In such cases the value of supplies of materials and installation arranged and invoiced by the customers/contractors is not to be included in the applicant's taxable value; the applicant should raise invoice and charge GST only on supervision charges. To avoid double taxation, GST on materials-where the recipient/contractor issues the GST invoice-should not be charged again by the applicant. [Paras 17, 19, 20]

Value of material and execution cost is not included in the applicant's taxable value where materials and installation are arranged and invoiced by the recipient; the applicant is taxable only on supervision charges.

Final Conclusion: On the facts presented, when the applicant supplies materials and procures installation, GST is chargeable on the combined supply under a single invoice (materials and services); whereas when the recipient supplies materials and engages contractors and the applicant only provides supervision, the applicant must charge GST only on the supervision charges. The ruling is confined to the Authority's jurisdiction and is subject to pending higher court proceedings on the pure agent issue.

Economic offences and their seriousness in bail adjudication - offence under Section 132(1)(b)&(c) and 132(1)(i) of the CGST Act (fraudulent availing and passing of ineligible ITC) - control and management of a company despite non directorship / "sleeping director" arrangement - risk of tampering with evidence and influencing witnesses as factor against bail - independence of adjudication proceedings and criminal prosecution - parity in grant of bail and limits of court's power to extend orders of higher courts

Economic offences and their seriousness in bail adjudication - offence under Section 132(1)(b)&(c) and 132(1)(i) of the CGST Act (fraudulent availing and passing of ineligible ITC) - control and management of a company despite non directorship / "sleeping director" arrangement - risk of tampering with evidence and influencing witnesses as factor against bail - parity in grant of bail and limits of court's power to extend orders of higher courts - Bail application of the accused seeking release pending trial was rejected. - HELD THAT: - The Court applied the established principle that economic offences require careful appraisal of the seriousness of the charge and the severity of statutory punishment. The prosecution's case, as reflected in the investigation, attributes to the accused de facto control and management of M/s Sanraj Metals Pvt. Ltd. despite not being a formal director, including authorisation over banking matters, payment of salaries, contemporaneous chats demonstrating active management and directions to route funds to non existent suppliers, and records showing fraudulent availing and passing of ineligible ITC during the periods shown in the record. The magnitude and multi partner character of the alleged fraud, and the ongoing nature of the investigation, indicate a real prospect that the accused, if released, may tamper with evidence or influence witnesses. The Court also noted that parity with co accused who obtained bail could not be mechanically extended because the offences and the role of the applicant are distinct and because a trial court cannot equate its powers with those of the High Court. Balancing these considerations, the Court found the seriousness of the charge and the risk factors sufficient to refuse bail in the case.

Bail application rejected.

Final Conclusion: On consideration of the gravity of the alleged economic offence involving fraudulent availing and passing of ineligible ITC, the accused's alleged operational control of the company despite not being a director, and the risk of tampering with evidence, the Court refused to release the accused on bail and dismissed the bail application.

Principle of mutuality - interest earned on the bank deposits made by the clubs - complete identity between contributors and participators - privity of mutuality - income from other sources - ratio decidendi and precedential value - per incuriam

Ratio decidendi and precedential value - per incuriam - Whether the brief order in Cawnpore Club [1998 (2) TMI 591 - SC ORDER] is a binding precedent which required consideration by a subsequent Coordinate Bench. - HELD THAT: - The Court held that the short order in Cawnpore Club did not contain reasoning or a discernible ratio decidendi on the larger question of taxability of interest on fixed deposits and therefore cannot be treated as law declared under Article 141. The order bound only the parties and could not be read as deciding the other questions not expressly addressed. A speaking judgment or reasoned decision is necessary for precedential value; an order disposing of appeals without considered reasoning cannot preclude later adjudication on the point. [Paras 11, 24, 26, 27, 43]

The Order in Cawnpore Club is not a binding precedent for the proposition that interest on fixed deposits of clubs is exempt by virtue of mutuality.

Principle of mutuality - complete identity between contributors and participators - privity of mutuality - income from other sources - Whether interest earned by clubs on fixed deposits with banks (member or non-member) is covered by the principle of mutuality or is taxable as income from other sources. - HELD THAT: - Applying the established threefold test for mutuality - identity of contributors and recipients, action in furtherance of the association's mandate, and absence of scope for contributors to profit qua contributors - the Court accepted the analysis in Bangalore Club [2013 (1) TMI 343 - SUPREME COURT]. While mutuality may apply up to generation of surplus, depositing surplus as fixed deposits exposes the funds to commercial banking operations (loans to third parties), rupturing the privity/identity of the mutual fund and permitting profiteering by third parties. Exposure of the funds to such third party commercial dealings means the first and third conditions of mutuality are not satisfied; the resultant interest therefore partakes the character of income from other sources and is taxable irrespective of ultimate utilisation by the club. [Paras 33, 34, 35, 38, 43]

Interest on fixed deposits made by clubs in banks is not covered by the principle of mutuality and is taxable as income from other sources.

Principle of mutuality - ratio decidendi and precedential value - Whether the Coordinate Bench decision in Bangalore Club calls for reconsideration by a larger Bench in light of Cawnpore Club and other authorities. - HELD THAT: - The Court examined whether Bangalore Club was vitiated by not noticing Cawnpore Club or by being contrary to other High Court decisions (e.g., Canara Bank [2008 (7) TMI 239 - KARNATAKA HIGH COURT]). It concluded that Cawnpore Club's brief order did not lay down a ratio applicable to the broader question and that the reasoning in Bangalore Club was detailed, justified and consistent with the three pronged test and foreign authorities. Canara Bank was confined to its facts. Having regard to Keshav Mills [1965 (2) TMI 8 - SUPREME COURT] and the requirement for a strong basis to revisit settled decisions, the Court found no call for referring Bangalore Club to a larger Bench. [Paras 28, 40, 41, 42, 43]

Bangalore Club does not require reconsideration and remains the governing precedent on the taxability of interest on clubs' fixed deposits.

Final Conclusion: The appeals are dismissed: the short Order in Cawnpore Club is not a binding precedent on the broader question; the principle of mutuality does not exempt interest earned by clubs on fixed deposits (whether with member banks or not), which must be treated as income from other sources; and the judgment in Bangalore Club stands and applies to these cases.

Allowability of ESOP expenses as business expenditure under Section 37(1) - ascertained business liability versus contingent liability in mercantile accounting for ESOPs - deductibility of CSR payments under Section 80G despite Explanation 2 to Section 37 - application of binding judicial precedents from coordinate benches and High Court reliance

Allowability of ESOP expenses as business expenditure under Section 37(1) - ascertained business liability versus contingent liability in mercantile accounting for ESOPs - application of High Court and Tribunal precedent on ESOP deduction - Deletion of disallowance of ESOP expenses claimed by the assessee was sustainable. - HELD THAT: - The Tribunal upheld the CIT(A)'s allowance of the ESOP-related deduction on the basis that the discount on issue of ESOPs (difference between market price and exercise price) constitutes expenditure laid out or expended for the purposes of business and may be allowable under Section 37(1). Relying on the decision of the Hon'ble Karnataka High Court in Biocon Ltd (which affirmed the Special Bench of the Tribunal), the Court accepted that an ESOP gives rise to an ascertained business liability as employees earn the right to shares over the vesting period and the quantification at exercise does not convert the liability into a contingent one. The Tribunal noted that Section 37(1) does not require cash payout and that the mercantile system of accounting permitting accrual of such liability supports allowability. The Assessing Officer's characterisation of the discount as increase in capital or as merely notional/contingent was rejected in view of the High Court and Tribunal precedents applied by the CIT(A). The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's grounds on this issue. [Paras 8]

Revenue's challenge to the CIT(A)'s deletion of the ESOP disallowance is dismissed.

Deductibility of CSR payments under Section 80G despite Explanation 2 to Section 37 - application of coordinate bench precedents on CSR and section 80G - Deletion of disallowance of the claim under Section 80G in respect of CSR expenses was sustainable. - HELD THAT: - The Tribunal affirmed the CIT(A)'s allowance of the assessee's claim under Section 80G for CSR-related payments, observing that coordinate benches have consistently held that amounts spent on eligible CSR activities (other than donations to specified funds like Swachh Bharat Kosh or Clean Ganga Fund) may qualify for deduction under Section 80G even though such expenditure is not allowable under Section 37 consequent to Explanation 2 inserted by the Finance Act, 2014. The CIT(A) followed those precedents (including recent Tribunal decisions) and the Tribunal found no infirmity in that approach. The Assessing Officer's view that CSR contributions are mandatory and therefore not voluntary donations for Section 80G purposes was not upheld in light of the cited coordinate bench authorities relied upon by the CIT(A). [Paras 13]

Revenue's ground challenging deletion of the Section 80G disallowance is dismissed.

Final Conclusion: Both Revenue appeals for A.Y. 2017-18 and A.Y. 2018-19 are dismissed; the CIT(A)'s deletion of disallowances relating to ESOP expenses and the claim under Section 80G (CSR expenses) is upheld in each case.

Penalty under section 271(1)(b) of the Income Tax Act - failure to comply with notices issued under section 142(1)/143(2) - single penalty for the first default - penalty is deterrent and not a source of revenue - best judgement assessment as alternate remedy under section 144 - reasonable cause for non-compliance

Penalty under section 271(1)(b) of the Income Tax Act - failure to comply with notices issued under section 142(1)/143(2) - single penalty for the first default - penalty is deterrent and not a source of revenue - reasonable cause for non-compliance - best judgement assessment as alternate remedy under section 144 - Whether the penalty confirmed by the authorities for multiple defaults in non-compliance with notices should be sustained or restricted to the first default - HELD THAT: - The Tribunal examined the facts that the assessee had not responded to multiple notices under section 142(1)/143(2) and that the AO imposed penalty under section 271(1)(b) for each default. Noting the principle that the provision is deterrent and not a means to multiply revenue, the Tribunal followed the decision in Smt. Rekha Rani Vs. DCIT which held that where the default is the same, a single penalty for the first default is appropriate and repeated penalties for the same default are not intended. The Tribunal observed that the Assessing Officer's alternative remedy in case of non-compliance is to proceed under section 144 for best judgement assessment and not to impose multiple penalties for identical defaults. Applying that reasoning to the present facts, the Tribunal set aside the confirmation of penalty to the extent of repeated impositions and restricted the penalty to the first default only. The Tribunal did not make a finding that reasonable cause existed for non-compliance; rather it limited the quantum of penalty on the legal principle stated. [Paras 8]

Penalty confirmed only to the extent of one first default (restricted to the first penalty); the remainder of the penalty for subsequent identical defaults deleted.

Final Conclusion: Appeal partly allowed; the penalty confirmed by the authorities is restricted to the penalty for the first default and the balance penalty is deleted.

Rectification under section 154 - mistake apparent from record versus debatable issue - levy of fee under section 234E for period prior to 1.6.2015 - section 200A as machinery provision - conflicting High Court decisions - opportunity of hearing / issuance of notices

Opportunity of hearing / issuance of notices - ld. CIT(A) had afforded sufficient opportunity to the assessee before deciding the appeal. - HELD THAT: - The Tribunal examined the record of hearings and notices issued electronically by the ld. CIT(A). Five notices with specified hearing dates were issued and the assessee did not respond to any. In these circumstances the Tribunal found that adequate opportunity had been provided and there was no lapse of natural justice warranting interference. [Paras 6]

Ground no. 1 dismissed; sufficient opportunity given by ld. CIT(A).

Rectification under section 154 - mistake apparent from record versus debatable issue - levy of fee under section 234E for period prior to 1.6.2015 - section 200A as machinery provision - conflicting High Court decisions - Rectification under section 154 cannot be resorted to for the disputed question whether fee under section 234E could be levied for periods prior to 1.6.2015; the matter is debatable. - HELD THAT: - The Tribunal agreed with the ITO that the assessee's challenge to the levy of fee under section 234E for periods prior to 1.6.2015 raises a debatable question. The Tribunal noted conflicting High Court views: Gujarat High Court upheld levy (treating section 234E as chargeable and section 200A as machinery to compute it) while Karnataka High Court had taken a contrary view. Where the question is debatable and not a clear mistake apparent on the record, section 154 is not available to correct the order under section 200A. The Tribunal followed the Supreme Court's approach that debatable questions cannot be rectified under section 154 and accordingly upheld the rejection of the section 154 application. [Paras 9, 10, 11, 12, 13]

Rectification application under section 154 rightly rejected; issue is debatable and not a mistake apparent from record.

Rectification under section 154 - Miscellaneous/general unamended grounds were dismissed for want of substance. - HELD THAT: - The assessee did not amend, modify or add any substantive grounds beyond those considered; therefore the general ground raised in the appeal did not warrant separate consideration. [Paras 14]

Ground no. 3 dismissed.

Final Conclusion: The Tribunal dismissed the appeal. The order rejecting the rectification application under section 154 was upheld: the challenge to levy of fee under section 234E for periods prior to 1.6.2015 is a debatable question and not a mistake apparent from record; ld. CIT(A) had afforded sufficient opportunity and the remaining general ground failed.

Disallowance under section 14A read with Rule 8D - Applicability of section 14A irrespective of dominant purpose of investment - Requirement of Assessing Officer's satisfaction under Godrej & Boyce for invoking Section 14A/Rule 8D - Computation under Rule 8D(2)(iii) - 0.5% of average value of investments yielding exempt income - Restoration to Assessing Officer for de novo adjudication of claimed long term capital loss - Restoration to Assessing Officer for de novo adjudication of sundry balances written off / bad debts under section 36(2)(i)

Disallowance under section 14A read with Rule 8D - Applicability of section 14A irrespective of dominant purpose of investment - Computation under Rule 8D(2)(iii) - 0.5% of average value of investments yielding exempt income - Requirement of Assessing Officer's satisfaction under Godrej & Boyce for invoking Section 14A/Rule 8D - Validity of disallowance under section 14A read with Rule 8D(2)(iii) in respect of dividend income and investment in Trimax IT Infrastructure and Services Limited - HELD THAT: - The Tribunal held that section 14A applies notwithstanding the assessee's assertion that the investment was held as a promoter and no expenditure was incurred specifically to earn dividend. Reliance was placed on the Supreme Court's decision that dominant purpose is immaterial for applicability of section 14A and on the requirement that the Assessing Officer must be satisfied, on the accounts, before invoking section 14A/Rule 8D as explained in Godrej & Boyce. The Assessing Officer, noting items in the assessee's accounts (including director remuneration debited to administrative expenses) was not satisfied with the assessee's claim of no expenditure relating to exempt income and therefore computed disallowance under Rule 8D(2)(iii). The Tribunal found the computation under Rule 8D(2)(iii) (0.5% of average value of investment yielding exempt income) to be in conformity with law and upheld the disallowance. The same reasoning was applied mutatis mutandis to A.Y. 2013-14 and to the identical portion of A.Y. 2014-15. [Paras 9, 10, 11, 14, 18]

Disallowance under section 14A read with Rule 8D(2)(iii) upheld for A.Y. 2012-13; same conclusion applied to A.Y. 2013-14 and to the corresponding issue in A.Y. 2014-15.

Restoration to Assessing Officer for de novo adjudication of claimed long term capital loss - Claim of long term capital loss on sale of investment in Prestige Multi Trade Pvt. Ltd. for A.Y. 2014-15 - whether disallowance should be sustained - HELD THAT: - The Tribunal observed that while the assessee claimed a long term capital loss and the AO disallowed it for lack of supporting details (such as particulars of purchaser), the investment had been shown in prior year financials and there was no material on record showing Revenue disputed existence of the investment. In the interest of justice the Tribunal granted the assessee one more opportunity and restored the issue to the file of the Assessing Officer for fresh adjudication, directing the assessee to furnish the documents required by the lower authorities and reminding the AO to afford reasonable opportunity of hearing. [Paras 19, 21]

Issue restored to Assessing Officer for de novo adjudication; ground allowed for statistical purposes.

Restoration to Assessing Officer for de novo adjudication of sundry balances written off / bad debts under section 36(2)(i) - Allowability of sundry balances written off (bad debts) claimed in A.Y. 2015-16 under section 36(2)(i) - HELD THAT: - The Tribunal noted that the assessee furnished, in the paper book, breakup of the sundry balances written off and ledger evidence (not earlier placed before the lower authorities) showing receipt/payment particulars for the major item. Given these materials were not earlier considered by the AO/CIT(A), the Tribunal restored the issue to the file of the Assessing Officer for de novo adjudication and directed the assessee to produce further details (including proof that amounts were offered as income in earlier years) so that the AO may examine the claim afresh. [Paras 25, 27, 28]

Issue restored to Assessing Officer for de novo adjudication; grounds allowed for statistical purposes.

Final Conclusion: The appeals for A.Y. 2012-13 and A.Y. 2013-14 are dismissed (disallowance under section 14A/Rule 8D(2)(iii) upheld). For A.Y. 2014-15 the Tribunal upheld the section 14A disallowance but restored the claim of long term capital loss to the Assessing Officer for de novo adjudication. For A.Y. 2015-16 the claim for sundry balances written off (bad debts) is restored to the Assessing Officer for de novo adjudication; that appeal is allowed for statistical purposes.

Unexplained cash credit under section 68 - unexplained investment under section 69 - identity, creditworthiness and genuineness of creditors - admission of additional evidence under Rule 46A - proof of source through bank transactions - requirement of enquiry with lenders before making additions

Admission of additional evidence under Rule 46A - requirement of enquiry with lenders before making additions - Ld. CIT(A) was not justified in dismissing assessee's application for admission of additional evidence. - HELD THAT: - The assessee filed an application under rule 46A seeking to admit bank statements, account confirmations, PAN and ITR copies to establish the source of amounts received. The CIT(A) evaluated the materials but rejected admission on the basis that the documents were available during assessment and that the assessee's AR had stated he had nothing further to submit. The Tribunal found this reasoning unsustainable: the assessee had explained the reason for delayed filing under rule 46A; the CIT(A) both evaluated and rejected the same evidence creating a self-contradictory approach; and, in any event, the AO should have made specific enquiries from the lenders or asked the AR to produce documents rather than dismiss the evidence at the threshold. Thus the CIT(A) erred in refusing admission and in discarding documentary evidence without proper verification or enquiry of the related parties. [Paras 7]

Prayer for admission of additional evidence was wrongly dismissed by the CIT(A).

Identity, creditworthiness and genuineness of creditors - proof of source through bank transactions - unexplained cash credit under section 68 - unexplained investment under section 69 - Addition under sections 68/69 in respect of amounts received from M/s Ganesh Rolling Mills is not sustainable and is to be deleted. - HELD THAT: - The assessee produced bank statements of the lender and borrower, account confirmation, PAN details and ITR evidencing that M/s Ganesh Rolling Mills (a proprietorship of the assessee's husband) had an opening credit balance brought forward and subsequently repaid amounts to the assessee by bank transfer. The AO dismissed these as requiring proof of prior-year loans but made no enquiry of the related entity or lender. The Tribunal accepted the documentary trail as demonstrating repayment of earlier loans and the creditworthiness of the lender, and held that no addition under sections 68/69 was warranted. [Paras 8]

Addition in respect of receipts from M/s Ganesh Rolling Mills deleted.

Identity, creditworthiness and genuineness of creditors - proof of source through bank transactions - unexplained investment under section 69 - Addition in respect of amounts received from Govindam Casting Pvt. Ltd. is not sustainable and is to be deleted. - HELD THAT: - Documentary evidence including bank statements of both parties, account confirmation and ITRs showed that Govindam Casting Pvt. Ltd. had a brought-forward credit balance and effected payments to the assessee through banking channels, leaving a net debit at the year-end. The AO and CIT(A) dismissed the evidence without making verification of the related entity. The Tribunal held that identity, creditworthiness and genuineness were satisfactorily established and that the receipts were not unexplained investments warranting addition under section 69. [Paras 9]

Addition in respect of receipts from Govindam Casting Pvt. Ltd. deleted.

Creditworthiness and genuineness of transaction - requirement of enquiry with lenders before making additions - Addition in respect of amounts received from M/s R.D. Traders is not sustainable and is to be deleted. - HELD THAT: - Although a part of the lender's bank-credit comprised cash deposits, the AO and CIT(A) accepted the lender's creditworthiness and genuineness of transaction at one stage yet made addition solely on the basis of cash deposits without making any enquiry or verification from the lender. Relying on precedent principles that where the creditor's genuineness and creditworthiness are established the source being cash deposit ought not to be visited upon the borrower without further inquiry, the Tribunal held the addition unsustainable. [Paras 10]

Addition in respect of receipts from M/s R.D. Traders deleted.

Identity, creditworthiness and genuineness of creditors - proof of source through bank transactions - Addition in respect of amount received from Shri Anand Garg (brother of assessee) is not sustainable and is to be deleted. - HELD THAT: - The assessee furnished the lender's bank statement, loan confirmation specifying relationship, PAN and ITR showing returned income for AY 2015-16 exceeding the loan amount. The AO and CIT(A) did not controvert these documents or question the lender specifically. Given that the lender's declared income exceeded the loan amount and the transaction was through banking channels with supporting confirmations, the Tribunal found no ground to doubt creditworthiness or genuineness and disallowed the addition. [Paras 11]

Addition in respect of receipt from Shri Anand Garg deleted.

Unexplained cash credit under section 68 - unexplained investment under section 69 - proof of source through bank transactions - AO's simultaneous invocation of sections 68 and 69 without specifying the nature of the addition was unsatisfactory and the additions cannot be sustained where identity, creditworthiness and genuineness are established. - HELD THAT: - The AO recorded additions referencing both unexplained cash credits and unexplained investments but did not specify which provision he relied upon. The Tribunal observed that, on the material before it, the assessee had established identity, creditworthiness and genuineness for all four lenders through bank transactions and confirmations; consequently, there was no basis to uphold additions under either section 68 or section 69. [Paras 12]

The additions made under sections 68/69 without proper specification or verification are deleted.

Final Conclusion: The Tribunal allowed the appeal for AY 2015-16, held that the CIT(A) erred in refusing admission of additional evidence, and deleted the additions made by the Assessing Officer under sections 68 and 69 in respect of the four lenders, directing deletion of the impugned additions.

Unexplained cash credits treated as income - genuineness of documentary evidence and fabrication of bills - burden of proof on the assessee to establish source of deposits - entitlement to cross-examination of adverse witnesses - prohibition on tenancy/letting under UP Zameendari Abolition Reforms Act and effect on claimed agricultural receipts

Unexplained cash credits treated as income - genuineness of documentary evidence and fabrication of bills - burden of proof on the assessee to establish source of deposits - Addition made in respect of bank cash deposits treated as unexplained money and included in income was sustained. - HELD THAT: - The assessee claimed that large cash deposits represented commission/ sale proceeds received for and on behalf of M/s Agra Aloo Trading Company and produced bills and confirmation letters to that effect. The Assessing Officer independently verified with the alleged payer who denied making such payments; subsequent inquiries established that the bills/confirmations were fabricated or obtained by misusing the firm's letterhead. The assessee was confronted and filed replacement letters which were again discredited by independent confirmation. In these circumstances the Tribunal accepted the conclusion of the AO and CIT(A) that the deposits remained unexplained and that the assessee failed to discharge the onus of proving the source of the deposits; accordingly the addition was rightly made and required no interference. [Paras 6]

Addition of bank deposits as unexplained income upheld; appeal on this ground dismissed.

Prohibition on tenancy/letting under UP Zameendari Abolition Reforms Act and effect on claimed agricultural receipts - Claim that Rs. 10,60,000 represented agricultural receipts was rejected and treated as unexplained. - HELD THAT: - The assessee asserted part of the deposits were receipts from agricultural activity. The Tribunal noted that, under the statutory bar in the UP Zameendari Abolition Reforms Act no Bhoomadar or Asami can let land, and therefore the claimed receipts could not arise from letting of land as alleged. Coupled with absence of evidence of carrying out agricultural activity or genuine transactions, the AO's treatment of the amount as a sham agricultural receipt and inclusion as unexplained income was confirmed. [Paras 6]

Agricultural receipt claim rejected; addition of Rs. 10,60,000 sustained.

Entitlement to cross-examination of adverse witnesses - Assessee's plea that cross-examination of the declarant (whose statements were relied upon) was not allowed was rejected. - HELD THAT: - The Tribunal observed that the assessee did not at any stage request the opportunity to cross-examine the persons whose statements or confirmations were relied upon by the AO; further, the AO had confronted the assessee with the adverse replies and the materials showed fabrication. In these circumstances there was no denial of opportunity warranting interference with the addition. [Paras 6]

Ground alleging denial of cross-examination rejected; no interference with the assessment on this basis.

Final Conclusion: The Tribunal dismissed the appeal, upholding the additions made by the Assessing Officer and confirmed by the CIT(A): cash deposits were correctly treated as unexplained income after finding the documentary claims fabricated and the asserted agricultural receipts unsupportable under the statutory bar.

Condonation of delay - sufficient cause - choice of counsel - restoration for adjudication on merits

Condonation of delay - sufficient cause - choice of counsel - Delay of 603 days in filing first appeal before the CIT(A) was condoned. - HELD THAT: - The Tribunal accepted the assessee's explanation that the delay was attributable to unavailability of its chosen senior counsel who had undergone bypass surgery and noted that the fact of illness was not disputed by the CIT(A). Relying on the principle in N. Balakrishnan v M Krishna Murthy and the decision of the Delhi High Court in H.L. Malhotra & Co. v DCIT, the Tribunal held that where sufficient cause is shown the delay must be condoned and that the revenue cannot dictate that the assessee should have engaged alternate counsel. Applying these principles, the Tribunal found sufficient cause for the delay and therefore condoned it.

Delay condoned and ground allowed.

Restoration for adjudication on merits - Appeals dismissed in limine for want of condonation were restored to the file of the CIT(A) for adjudication on merits. - HELD THAT: - Because the CIT(A) had dismissed the appeals in limine by denying condonation without adjudicating the merits, the Tribunal directed that both appeals be restored to the CIT(A) for fresh adjudication on merits uninfluenced by the earlier order. The restoration was ordered for consideration of the substantive grounds of appeal.

Appeals restored to the CIT(A) for adjudication on merits; allowed for statistical purposes.

Final Conclusion: The Tribunal condoned the delay in filing the first appeals (on the basis of undisputed illness of the chosen counsel) and restored both appeals to the CIT(A) for fresh adjudication on merits; the appeals are allowed for statistical purposes.

Presumption under section 292C is discretionary and rebuttable - Unsigned draft documents found in possession of a third party cannot, without corroborative evidence, support additions under deeming provisions - Burden on the Revenue to prove receipt/payment to invoke sections 69/69A - Section 69/69A requires establishment of actual investment/ownership of money before deeming - Deeming provisions cannot be applied on suspicion or mere possession of documents; positive corroborative evidence is necessary

Presumption under section 292C is discretionary and rebuttable - Unsigned draft documents found in possession of a third party cannot, without corroborative evidence, support additions under deeming provisions - Burden on the Revenue to prove receipt/payment to invoke sections 69/69A - Whether the addition of Rs. 1.50 crore as unexplained money under section 69A could be sustained on the basis of an unsigned Agreement to Sell (ATS) found in soft copy from a third party deed-writer's computer - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the presumption under section 292C is not mandatory but discretionary and is rebuttable. The ATS in question existed only as an unsigned soft copy seized from a deed writer (a third party), was denied by both parties mentioned in it, and never culminated in a sale between those parties; the property was ultimately sold to a different purchaser and disclosed in a later assessment year. There was no evidence of actual cash receipt corresponding to the ATS: cheque details that were verifiable were accounted for and an alleged cash component was not corroborated by any independent material, statements of the buyer, valuation enquiries, or other positive evidence. Repeating settled principles, the Tribunal held that sections 69/69A can be invoked only after establishing that an assessee in fact received/owned the money or made the investment and that the Revenue bears the burden of proving such receipt; mere possession of an unsigned draft in a third party's records cannot, without corroboration, be the basis for deeming additions. Applying these principles to the facts, the Tribunal found no ambiguity or perversity in the CIT(A)'s deletion of the addition and dismissed the Revenue's grounds. [Paras 12, 13, 14, 15, 16]

Addition of Rs. 1.50 crore as unexplained money under section 69A deleted; revenue appeal dismissed on this point.

Final Conclusion: The Tribunal dismissed the revenue's appeal and upheld the CIT(A)'s deletion of the addition made under section 69A, holding that an unsigned ATS found in a third party's computer, without corroborative evidence of cash receipt, cannot sustain a deeming addition; the burden to prove actual receipt rested on the Revenue and was not discharged.

Penalty under section 271B - reasonable cause under section 273B - tax audit under section 44AB - remand for verification of auditor appointment - deduction under section 80P(2)(a)(i) for interest on deposits - deduction under section 80P(2)(a)(iii) for paddy procurement - deduction under section 80P(2)(c)(ii) for PDS surplus (net profit basis) - deduction under section 80P(2)(d) for dividend from co-operative bank - condonation of delay in filing appeals

Penalty under section 271B - reasonable cause under section 273B - tax audit under section 44AB - remand for verification of auditor appointment - Whether penalty under section 271B should be sustained where tax audit report was filed after the specified date owing to circumstances said to be beyond the assessee's control. - HELD THAT: - Tribunal found merit in the assessee's contention that the audit certificate was issued after the due date under section 44AB and that a decisive fact - whether the statutory/tax auditor was appointed by the Registrar of Co-operative Societies after the specified date - had not been verified. Following precedents recognising that delay attributable to auditors appointed by cooperative authorities may constitute reasonable cause, the Tribunal set aside the orders confirming penalty and remitted the matter to the Assessing Officer to verify the date and circumstances of appointment of the statutory/tax auditor. If appointment occurred after the specified date and the audit was completed within a reasonable time thereafter, the penalty cannot be sustained; otherwise the AO may proceed in accordance with law. The Tribunal applied this course to the lead appeal and directed the same treatment mutatis mutandis to the related appeals, granting the assessee an opportunity to produce documents before the AO. [Paras 14, 15, 17, 18, 19]

Set aside the penalty orders and remitted the issue to the Assessing Officer for verification of appointment/completion of statutory/tax audit; appeals partly allowed for statistical purposes.

Deduction under section 80P(2)(a)(i) for interest on deposits - deduction under section 80P(2)(d) for dividend from co-operative bank - Whether interest on bank deposits (surplus funds) and dividend from a co-operative bank are eligible for deduction under section 80P. - HELD THAT: - Relying on earlier divisional-bench reasoning and relevant High Court authority, the Tribunal held that interest earned on surplus funds parked as short-term deposits in a co-operative bank in the normal course of a co-operative society's banking/credit business is attributable to that business and eligible for deduction under section 80P(2)(a)(i). The Tribunal directed the AO to allow the assessee's claim for deduction of the interest income for the year in question. Similarly, following the Tribunal's prior view that a co-operative bank is a "co-operative society" for purposes of section 80P(2)(d), the Tribunal vacated the disallowance of dividend received from the Jila Sahakari Bank and allowed the claim under section 80P(2)(d). [Paras 31, 32, 43, 44]

Deduction under section 80P(2)(a)(i) for interest on deposits and deduction under section 80P(2)(d) for dividend from the co-operative bank were allowed; appeals partly allowed.

Deduction under section 80P(2)(a)(iii) for paddy procurement - Extent to which income from paddy procurement qualifies for deduction under section 80P(2)(a)(iii). - HELD THAT: - The Tribunal concurred that the assessee is principally entitled to deduction for income from paddy procurement under section 80P(2)(a)(iii) but observed that the entitlement must be restricted to the profit attributable to marketing of produce of the society's members. Noting that materials relevant to identifying member and non-member procurement were not before the lower authorities, the Tribunal remitted the matter to the AO for re-adjudication after verifying the additional documentary evidence and determining the profit relatable to members' produce. [Paras 35, 36]

Matter remitted to the Assessing Officer to quantify and restrict deduction to the profit relatable to marketing of members' agricultural produce; ground partly allowed for statistical purposes.

Deduction under section 80P(2)(c)(ii) for PDS surplus (net profit basis) - Whether surplus from Public Distribution System (PDS) activity qualifies for deduction under section 80P and on what basis. - HELD THAT: - Following the Tribunal's earlier directions in related matters, the Tribunal held that the assessee's claim for deduction in respect of profit from PDS must be restricted to net profit after considering proportionate expenses. As factual verification was required to determine the net surplus, the Tribunal restored the issue to the file of the AO with directions to restrict the deduction to the extent of net profit and to call for requisite documents. [Paras 39, 40]

Remitted to the Assessing Officer to restrict deduction for PDS profit to net profit after proportionate expenses; ground allowed for statistical purposes.

Final Conclusion: Appeals are partly allowed: penalty orders under section 271B set aside and remitted to the Assessing Officer for verification of appointment/completion of statutory/tax audit; claims under section 80P(2)(a)(i) (interest on deposits) and section 80P(2)(d) (dividend from co-operative bank) were allowed; claims under section 80P(2)(a)(iii) (paddy procurement) and section 80P(2)(c)(ii) (PDS surplus) were remitted to the Assessing Officer for limited factual verification and quantification. Delays in filing the appeals were condoned.

Penalty under section 271(1)(c) - Explanation-1 to Section 271(1)(c) - deemed concealment - condonation of delay in filing appeal - service of statutory orders via ITBA/e filing portal and designated e mail - effect of deletion of quantum addition on sustainment of penalty - applicability of first proviso to section 12A(2) / registration under section 12AA and exemption under section 11

Condonation of delay in filing appeal - service of statutory orders via ITBA/e filing portal and designated e mail - Whether the application for condonation of delay in filing the appeal against the penalty order ought to have been rejected on the ground of non compliance with electronic service - HELD THAT: - The Tribunal examined the material placed by the assessee including the affidavit of a trustee and screenshots of the assessee's registered inbox which showed receipt of the show cause notice but no e mail evidencing service of the final penalty order. The Ld. CIT(A) concluded that the penalty order had been issued and served through the ITBA/e filing portal and that it was the duty of the assessee to monitor the portal; however, the Ld. CIT(A) did not verify the factual assertions made by the assessee with the assessing officer or the e mail records of the department. In absence of contrary evidence of service of the penalty order, the Tribunal held that the Ld. CIT(A) erred in dismissing the condonation application and set aside that part of the order, accepting the assessee's explanation that the assessee became aware of the order only on 13.05.2021 and that the appeal was filed within limitation thereafter. [Paras 3, 7, 8, 9]

Application for condonation of delay was wrongly rejected; appeal admitted for adjudication.

Penalty under section 271(1)(c) - Explanation-1 to Section 271(1)(c) - deemed concealment - effect of deletion of quantum addition on sustainment of penalty - Whether the penalty levied under section 271(1)(c), invoking Explanation 1 as deemed concealment, survives after deletion of the underlying additions in the quantum assessment - HELD THAT: - The Tribunal noted that the Assessing Officer imposed penalty invoking Explanation 1 to section 271(1)(c) by treating disallowance of exemption under section 11 and certain expenses as concealment. However, on appeal in the quantum proceedings this Bench in ITA No.272/SRT/2018 deleted the said additions by holding that exemption under section 11 was available in view of registration under section 12AA (and application of the first proviso to section 12A(2)) and consequentially other grounds were allowed. Where the additions/ disallowances forming the basis of the penalty have been set aside on merits, the Tribunal held that the penalty based on those additions cannot survive. [Paras 5, 10, 11]

Penalty under section 271(1)(c) does not survive and is liable to be set aside consequent to deletion of the quantum additions.

Applicability of first proviso to section 12A(2) / registration under section 12AA and exemption under section 11 - Whether the assessee was entitled to exemption under section 11 by application of the first proviso to section 12A(2) consequent to registration under section 12AA - HELD THAT: - The Tribunal relied upon its earlier decision in ITA No.272/SRT/2018 wherein, after considering the chronology (application for registration during assessment proceedings and grant of registration shortly thereafter) and authoritative decisions, it held that the first proviso to section 12A(2) (as inserted by Finance Act, 2014) was a beneficial provision and applied to the assessee, entitling it to exemption under section 11. That view resulted in setting aside the assessing officer's denial of exemption and deletion of additions. [Paras 5, 10]

First proviso to section 12A(2) applied; exemption under section 11 allowed and quantum additions deleted.

Final Conclusion: The appeal is allowed: the Ld. CIT(A)'s rejection of the condonation application is set aside and, on merits, since the quantum additions giving rise to the penalty were deleted by this Tribunal, the penalty under section 271(1)(c) is vacated.

Exemption under sections 11 and 12 of the Income Tax Act - filing of audit report in Form No.10B as a procedural requirement - substantial compliance - rectification under section 154

Exemption under sections 11 and 12 of the Income Tax Act - filing of audit report in Form No.10B as a procedural requirement - substantial compliance - rectification under section 154 - Whether denial of exemption under sections 11 and 12 on the ground that Form No.10B was not filed along with the return, but was filed belatedly during assessment proceedings and on rectification, justified. - HELD THAT: - The Tribunal held that the requirement to furnish an audit report in Form No.10B is a substantive condition for claiming exemption under sections 11/12, but filing it along with the return is a procedural requirement. Where the assessee had a longstanding claim to exemption, and the defect of non-filing with the return was cured by e-filing Form No.10B during assessment proceedings and a rectification application under section 154, the authorities had the Form No.10B on record while deciding rectification and the appeal. Following the decisions of the jurisdictional High Court treating non-filing with the return as a curable, procedural lapse and recognizing the principle of substantial compliance, the Tribunal held that the Revenue could not reject the exemption merely on this technicality. The Tribunal therefore accepted the assessee's contention that submission of Form No.10B during assessment/appellate proceedings satisfied the statutory requirement and entitled the assessee to the exemption.

The order denying exemption was set aside and the assessee's claim under sections 11 and 12 was allowed, the rectification and appellate rejection being quashed to the extent they denied the exemption.

Final Conclusion: Appeal allowed: denial of exemption under sections 11/12 for Asst. Year 2017-18 on the ground of belated filing of Form No.10B was held to be a curable procedural lapse where the form was filed during assessment/rectification proceedings; the rejection was set aside and the exemption allowed.

Rectification of mistake apparent on record under Section 154 - allowability of sales promotion expenses - debatable issue requiring investigation and arguments - prospective operation of CBDT Circular No. 5 of 2012

Rectification of mistake apparent on record under Section 154 - debatable issue requiring investigation and arguments - Rectification order passed by the Assessing Officer under Section 154 read with Section 116 was without jurisdiction and liable to be quashed. - HELD THAT: - The power under Section 154 is confined to correcting a 'mistake apparent from the record'. A matter which is debatable or requires investigation and argument on facts or law does not qualify as a mistake apparent on the record. The claim for sales promotion expenses stood contested: CBDT Circular No.5 of 2012 disallowed expenses in violation of the Indian Medical Council Regulations, while earlier Tribunal orders in the assessee's own cases had allowed similar deductions. The Assessing Officer, when completing the assessment, had applied his mind and allowed the expenses; the subsequent attempt to treat that allowance as a mistake apparent was improper. Given the existence of conflicting authorities and factual aspects in the breakup of expenses that were not manifestly freebies, the rectification could not be sustained as a correction of an apparent mistake. The Tribunal therefore held the rectification order to be beyond the scope of Section 154 and quashed it. [Paras 12, 13, 14]

Rectification order dated 31/03/2021 is quashed as beyond jurisdiction under Section 154; grounds challenging jurisdiction are allowed or rendered infructuous accordingly.

Allowability of sales promotion expenses - prospective operation of CBDT Circular No. 5 of 2012 - debatable issue requiring investigation and arguments - The question of disallowing sales promotion expenses was a debatable question of law and fact and not a matter of mistake apparent on record. - HELD THAT: - The record showed a detailed breakup of sales promotion expenses including items (e.g., market research fees, printing, documentation) that were not manifestly freebies. There were conflicting legal positions: the CBDT circular sought to disallow expenses in violation of Medical Council Regulations, whereas Tribunal precedents in the assessee's own earlier years had upheld such deductions and another Tribunal view treated the circular as prospective. As the issue involved legal controversy and factual investigation as to which components constituted freebies, it could not be treated as an apparent mistake. The Tribunal noted that the Supreme Court decision relied upon by Revenue post-dated the rectification exercise and was therefore not available to the Assessing Officer at the relevant time. Consequently, the addition could not be upheld under the guise of rectification. [Paras 13, 14]

The disallowance of sales promotion expenses cannot be sustained as a rectification; the matter was debatable and required investigation, and is not a mistake apparent on the record.

Final Conclusion: The appeal is allowed: the Assessing Officer's rectification order under Section 154 (31/03/2021) quashing the prior allowance of sales promotion expenses is set aside as beyond the scope of rectification since the issue was debatable on law and facts and not a mistake apparent on the record.

Failure to comply with directions under section 144C(13) - Finality of DRP directions in assessment proceedings - Classification of receipts as Royalty versus Fees for Technical Services

Failure to comply with directions under section 144C(13) - Finality of DRP directions in assessment proceedings - Whether the Assessing Officer followed the directions of the Learned DRP under section 144C(5) and in terms of section 144C(13) while passing the final assessment order for AY 2018-19 - HELD THAT: - The Tribunal examined the DRP directions and the final assessment order and found that the DRP had analysed the receipts and given a clear conclusion that a portion of the receipts (support services) fell within Fees for Technical Services while addressing the assessee's objections. The Assessing Officer, however, passed the final assessment reproducing his draft analysis and completed assessment by taxing the receipts as royalty, without classifying the receipts in accordance with the DRP's finding and without following the directive structure mandated by section 144C(13). The Assessing Officer's attempt to treat his draft views as "without prejudice" and to read them alongside DRP's directions was held insufficient: the final order did not implement the DRP's directions and thereby violated the statutory requirement of applying DRP directions in the final assessment. Given the divergence between the AO's final order and the DRP's directions, and the failure to at least adopt the DRP classification (FTS for support services) even as part of the final order, the assessment was held to be invalid. [Paras 18, 19]

Assessment order for AY 2018-19 quashed as not in compliance with the directions of the DRP under section 144C(13); grounds raised by the assessee allowed.

Failure to comply with directions under section 144C(13) - Classification of receipts as Royalty versus Fees for Technical Services - Disposition of the appeal for AY 2019-20 in view of the decision on AY 2018-19 - HELD THAT: - The Tribunal noted that the facts for AY 2019-20 are mutatis mutandis to AY 2018-19. Having quashed the assessment for AY 2018-19 on the ground of non-compliance with DRP directions, the Tribunal applied the same reasoning to AY 2019-20 and allowed the appeal for that year as well without separate adjudication on the substantive classification of receipts. [Paras 20, 21]

Appeal for AY 2019-20 allowed on the same basis as AY 2018-19.

Final Conclusion: The Tribunal allowed the appeals: it quashed the final assessment order for AY 2018-19 for failure to implement the DRP's directions under section 144C(13) and, applying the same reasoning, allowed the appeal for AY 2019-20.

Estimation of net profit - rejection of books of account - treatment of advances/receipts from customers in turnover - best judgment assessment - violation of Rule 46A of the Income Tax Rules, 1962 - addition as unexplained cash credit - comparability and past results in profit estimation - co-terminus power of appellate authority

Treatment of advances/receipts from customers in turnover - double inclusion in turnover - Receipts from customers / booking advances should not be added again to turnover for the purpose of estimating net profit. - HELD THAT: - The Tribunal agreed with the assessee that the amount described as "receipt from customers/booking advance" represents adjustments of debtors/advances and not fresh turnover. Adding such receipts to the agreed sale consideration would amount to double counting of turnover. The bench relied on the assessee's submissions, bank statements and coordinate decisions which hold that advances adjusted against subsequent sales are not to be treated as unexplained receipts for addition. Accordingly the CIT(A)'s inclusion of such receipts in the turnover for computing estimated profit was held incorrect. [Paras 14]

Receipts from customers/booking advances shall not be treated as part of turnover for estimation of net profit.

Violation of Rule 46A of the Income Tax Rules, 1962 - co-terminus power of appellate authority - Rejecting the books and using figures available on record did not amount to a violation of Rule 46A by the CIT(A). - HELD THAT: - The Tribunal noted that the turnover figures and audit report relied upon by the CIT(A) were already available to the Assessing Officer during assessment. The CIT(A) did not admit or rely upon any fresh evidence that was not on record before the AO; he exercised his co-terminus power to reject the books and make an estimate. Therefore the allegation that Rule 46A was violated by admitting additional evidence at the appellate stage was unfounded. [Paras 15]

No violation of Rule 46A; the CIT(A)'s reliance on material already on record does not vitiate the appellate estimation.

Addition as unexplained cash credit - rejection of books of account - Once the books of account are rejected and estimation is adopted, the Assessing Officer should not make separate line by line additions such as treating certain deposits as unexplained cash credits for separate addition. - HELD THAT: - The Tribunal observed that when books are rejected and a global estimation of profit is made, separate detailed additions (for example, treating deposits as unexplained cash credit) are inappropriate; reliance was placed on jurisdictional precedent that disallows line by line additions from the same books post rejection. Consequently the Revenue's plea for a separate addition on account of the unexplained cash deposit was rejected. [Paras 16]

No separate addition is to be made for the unexplained cash deposit once books are rejected and profit is estimated.

Estimation of net profit - best judgment assessment - comparability and past results in profit estimation - The CIT(A)'s adoption of a 15% net profit rate was not supported by sound reasoning; the Tribunal substituted fairer percentages and directed re computation accordingly. - HELD THAT: - The Tribunal emphasised that estimation in a best judgment assessment must be founded on reasoned comparison with past results and comparable cases, and must not be arbitrary. The CIT(A) had not demonstrated adequate comparability or taken average past profits into account and had improperly included receipts from customers in turnover. Having reviewed prior returns, comparable decisions and the material on record, the Tribunal held the 15% rate unreasonable and directed the Assessing Officer to estimate net profit at 11% for AY 2013 14 and 14% for AY 2014 15 (both before partner remuneration and interest), for fresh computation. [Paras 17, 21]

CIT(A)'s estimate of 15% set aside; AO directed to estimate net profit at 11% for AY 2013 14 and 14% for AY 2014 15 (before remuneration and interest to partners).

Final Conclusion: Revenue appeals are dismissed; assessee appeals are partly allowed. The Assessing Officer is directed to recompute income for AY 2013 14 and AY 2014 15 by estimating net profit at 11% and 14% of turnover respectively (before remuneration and interest to partners), and to exclude receipts/booking advances from turnover; no remand for Rule 46A breach is required.

Condonation of delay - Sufficient cause - Statutory time-limits for filing appeals - Exclusion of Section 5 of the Limitation Act - Tribunal's power to condone delay circumscribed by statute

Condonation of delay - Sufficient cause - Statutory time-limits for filing appeals - Exclusion of Section 5 of the Limitation Act - Whether the delay of thirty-one days in filing the appeal before the Commissioner (Appeals) could be condoned. - HELD THAT: - The Tribunal applied settled precedent of the Hon'ble Supreme Court in Singh Enterprises holding that the proviso to the relevant statutory provision permits condonation of delay only up to thirty days beyond the primary limitation period and that Section 5 of the Limitation Act cannot be invoked to extend that period. The Tribunal therefore held that the Commissioner (Appeals) had no jurisdiction to condone any delay beyond the thirty-day extension prescribed by the statute. Reliance was also placed on subsequent decisions and benches which followed the same principle, and the contrary view that the Tribunal may condone delay beyond the prescribed extended period was rejected as inconsistent with Singh Enterprises. Applying this principle to the facts, the appeal filed after ninety-one days from communication could not be condoned as it exceeded the statutory maximum condonable period; consequently the Commissioner (Appeals) did not err in dismissing the appeal as time barred.

Delay beyond the statutory extended period could not be condoned; dismissal of the appeal as time barred is upheld.

Final Conclusion: The appeal is dismissed as the delay in filing before the Commissioner (Appeals) exceeded the thirty day condonable period beyond the statutory sixty days and Section 5 of the Limitation Act cannot be invoked to extend the time.

Penalty under Section 112(a) of the Customs Act, 1962 - penalty under Section 114AA of the Customs Act, 1962 - redemption of confiscated goods under Section 125 of the Customs Act, 1962 - re-exportation versus destruction of hazardous goods - liability of customs broker/authorised representative for removal without out of charge (Section 47 violation) - confiscation of goods under Section 111 of the Customs Act, 1962

Penalty under Section 112(a) of the Customs Act, 1962 - liability of customs broker/authorised representative for removal without out of charge (Section 47 violation) - Sustainability of penalty imposed on the customs broker (partner and H-card holder) under Section 112(a). - HELD THAT: - The Tribunal examined the adjudicating authority's findings that the CHA (partner and his H-card holder) had filed Bills of Entry, presented the consignments for examination, and advised the importer in writing not to move the goods without an out of charge certificate. The consignments were nevertheless removed by the importer at his own risk. The Tribunal accepted that the CHA had taken steps to prevent removal and had no evidence of active participation in the unauthorised removal. On these facts the Tribunal held that the CHA could not be made liable for the violations committed by the importer and that penalties under Section 112(a) were not sustainable against the CHA partner and his employee. [Paras 7]

Penalty imposed on the CHA partner and the H-card holder under Section 112(a) is set aside.

Penalty under Section 112(a) of the Customs Act, 1962 - liability of customs broker/authorised representative for removal without out of charge (Section 47 violation) - Sustainability of penalty imposed on the authorised representative (employee of the importer) under Section 112(a). - HELD THAT: - The Tribunal noted that the authorised representative performed clearance formalities, paid duty and prepared challans as directed by the importer, and there was no finding in the adjudication that he participated in removal of the goods without out of charge. The adjudicating authority did not produce evidence that the authorised representative knowingly abetted the unauthorised removal, and the importer had admitted taking the consignments out on his own risk. In these circumstances the Tribunal held that an employee/authorised representative cannot be held liable for the wanton act of the importer and the penalty under Section 112(a) was unsustainable. [Paras 8]

Penalty imposed on the authorised representative under Section 112(a) is set aside.

Re-exportation versus destruction of hazardous goods - redemption of confiscated goods under Section 125 of the Customs Act, 1962 - confiscation of goods under Section 111 of the Customs Act, 1962 - Validity of the Commissioner's order permitting re-export (with payment of fine) of goods detected with hazardous Azo dye instead of destruction. - HELD THAT: - The Tribunal recorded the Commissioner's finding that the consignments contained prohibited hazardous Azo dye above permissible limits and that such goods ordinarily require destruction. It examined the authority to offer redemption under Section 125 and noted relevant Board/DGFT guidance and environmental prohibition under the Environment (Protection) Act and Rules. The Tribunal found no violation in allowing re-export on payment of fine as an alternative to destruction and held that permitting re-export under Section 125 was permissible in the circumstances. [Paras 11]

Order permitting re-export of hazardous goods on payment of fine is upheld; departmental appeals challenging re-export are rejected.

Penalty under Section 114AA of the Customs Act, 1962 - Whether penalty under Section 114AA should have been imposed on the importer and the CHA partner for use of false or incorrect material. - HELD THAT: - Section 114AA penalises knowingly or intentionally making, signing or using any declaration or document which is false or incorrect in a material particular. The adjudicating authority had specifically found that the importer and the CHA partner did not make, sign or use any declaration or document other than the import documents supplied by the exporter and that there was no evidence of prior or additional knowledge about the mis-declaration. The Tribunal agreed that the material on record did not establish the requisite mens rea or use of false documents and that the Department failed to bring evidence to substantiate imposition of penalty under Section 114AA. [Paras 14]

Non-imposition of penalty under Section 114AA on the importer and the CHA partner is upheld.

Final Conclusion: The Tribunal allowed the three appeals filed by the appellants and set aside the penalties imposed on the CHA partner, his H-card holder and the authorised representative under Section 112(a); it upheld the Commissioner's order permitting re-export of hazardous goods on payment of fine; and it rejected departmental appeals seeking imposition of penalties under Section 114AA, upholding the impugned order insofar as no penalty was imposed under that provision.

Approval of resolution plan - expeditious disposal - timelines under the Insolvency and Bankruptcy Code - duty of the adjudicating authority to pass final orders without undue delay

Approval of resolution plan - expeditious disposal - timelines under the Insolvency and Bankruptcy Code - Direction that the National Company Law Tribunal shall dispose of the application for approval of the resolution plan within two months and report compliance to the Supreme Court. - HELD THAT: - The Court noted that after its earlier judgment dated 13 September 2021 the NCLT conducted hearings on numerous days without rendering final orders. Having considered the delay in concluding the approval proceedings and the statutory timelines prescribed by the Insolvency and Bankruptcy Code, the Court concluded that the matter requires prompt final disposal. The Court observed the practical interruption caused by the transfer of a Bench member but emphasised that such administrative developments do not absolve the adjudicatory obligation to decide the application expeditiously. Exercising supervisory jurisdiction, the Court directed the NCLT to decide the application within a fixed period and to report compliance. [Paras 3]

The NCLT is directed to dispose of the application for approval of the resolution plan within two months from the date of the order and to report compliance to this Court.

Final Conclusion: The Miscellaneous Application is disposed of by directing the NCLT to conclude the approval proceedings for the resolution plan within two months and to report compliance to the Supreme Court.

Resolution Plan approval under Insolvency and Bankruptcy Code - overriding effect of the Insolvency and Bankruptcy Code over conflicting statutory or regulatory provisions - treatment of electricity dues as claims in CIRP and entitlement of the distribution licensee as an operational creditor - deemed termination of electricity supply and requirement to clear outstanding dues for new service connection

Resolution Plan approval under Insolvency and Bankruptcy Code - overriding effect of the Insolvency and Bankruptcy Code over conflicting statutory or regulatory provisions - Whether the Adjudicating Authority erred in approving the Resolution Plan by failing to give effect to Clause 8.4 of the GTCS and related electricity supply regulations which, it was contended, required recovery of past electricity dues and barred waiver of such dues. - HELD THAT: - The Tribunal held that the Resolution Plan approved by the Adjudicating Authority does not contravene the Code. Regulations under the Electricity Act or contractual provisions such as Clause 8.4 of the GTCS, which may contemplate continuing liabilities or bar new connections unless dues are cleared, cannot be pressed into service where the Code and a Resolution Plan operate. The Code is accorded overriding effect over inconsistent laws under the non obstante provision. To the extent any statutory or regulatory provision conflicts with the Code or the approved Resolution Plan, the provision is overridden and does not invalidate the Resolution Plan. The Tribunal found no merit in the challenge to the Plan on the ground of contravention of such electricity regulations and saw no basis to interfere with the Adjudicating Authority's approval.

The challenge to the Resolution Plan on the ground that Clause 8.4 of the GTCS and related electricity regulations require recovery or non-waiver of past dues is rejected; the approved Resolution Plan stands.

Treatment of electricity dues as claims in CIRP and entitlement of the distribution licensee as an operational creditor - deemed termination of electricity supply and requirement to clear outstanding dues for new service connection - Whether the decision of the Hon'ble Supreme Court in TSSPDCL v. Srigdhaa Beverages (relied upon by the Appellant) requires a different result in the present IBC proceedings. - HELD THAT: - The Tribunal observed that the Supreme Court decision was in the context of auction under the SARFAESI Act and did not consider IBC provisions. In CIRP under the Code the electricity supplier is an operational creditor whose claims are to be dealt with under the Code; therefore, regulatory provisions imposing post-sale liabilities on a purchaser would conflict with the Code and be overridden. The Tribunal concluded that the Supreme Court decision cited by the Appellant does not assist the challenge to the Resolution Plan in the IBC context.

The reliance on the Supreme Court judgment is rejected as inapplicable; the principle that electricity dues are to be claimed and adjudicated under the IBC framework applies.

Final Conclusion: The appeal is dismissed and the Adjudicating Authority's approval of the Resolution Plan is upheld; connected interlocutory applications are closed and the matter is disposed of without costs.

Grant of bail while in custody for predicate offence - continued detention in relation to maximum statutory sentence - flight risk and surrender of passport as condition for bail - interpretation of Section 45 of the Prevention of Money Laundering Act, 2002 - status quo order vacated

Grant of bail while in custody for predicate offence - continued detention in relation to maximum statutory sentence - flight risk and surrender of passport as condition for bail - Continued incarceration of the respondent pending trial was not necessary and he could be released on conditions by the Special Court. - HELD THAT: - The Court observed that the respondent had completed nearly half of the maximum sentence that could be imposed (maximum sentence being seven years) and, therefore, continued detention was not justified. Although the respondent remained in custody in connection with the predicate offence, that circumstance did not preclude independent consideration of the bail order impugned in the Special Leave Petition. The Court rejected the contention that the respondent was presently a flight risk, noting that custody for the predicate offence and surrender of the passport (which was stated to have been surrendered) addressed such apprehensions and that the Special Court could impose appropriate conditions, including surrender of passport if not already done. In consequence, the Court dismissed the Special Leave Petition and directed that the respondent may be released subject to such conditions as the Special Court may impose.

Special Leave Petition dismissed; respondent may be released by the Special Court subject to conditions (including surrender of passport) and the earlier status quo is vacated.

Interpretation of Section 45 of the Prevention of Money Laundering Act, 2002 - The interpretation of Section 45 of the PMLA given by the High Court in the impugned judgment was incorrect and shall not be treated as precedent. - HELD THAT: - While the Court found it unnecessary to uphold continued detention in the present facts, it expressly held that the High Court's interpretation of Section 45 of the Prevention of Money Laundering Act, 2002 is not in conformity with the law as laid down by this Court. The Court therefore clarified that the High Court's observations and interpretation on Section 45 are erroneous and must not be relied upon as precedent in other cases.

High Court's interpretation of Section 45 PMLA is disapproved and shall not operate as precedent.

Final Conclusion: The Special Leave Petition is dismissed; the status quo order dated 31.07.2020 is vacated; the respondent may be released by the Special Court subject to such conditions as it may impose (including surrender of passport), and the High Court's interpretation of Section 45 of the PMLA is held to be incorrect and not to be treated as precedent.

Manpower Recruitment and Supply Agency Service - cargo handling service - reimbursement of expenses versus taxable consideration - penalty exclusion by application of Section 80 for bona fide or debatable cases - incompatibility of simultaneous penalties under Sections 76 and 78

Manpower Recruitment and Supply Agency Service - cargo handling service - Validity of service tax demand on loading and unloading charges - HELD THAT: - The Tribunal examined the contract and work order and found that the appellant was contractually obliged to supply labour for shifting, loading and unloading of material. Irrespective of whether the service recipient's equipment was used or whether the labour actually performed only loading/unloading, the contractual obligation to supply manpower qualified the activity as Manpower Recruitment and Supply Agency Service. The appellant's contention that the activity should be taxed as cargo handling service or treated as an ancillary exempt activity was rejected because the contract described provision of manpower as the core service. [Paras 4]

Demand sustained as the activity qualified as Manpower Recruitment and Supply Agency Service

Reimbursement of expenses versus taxable consideration - Taxability of house rent charges claimed as reimbursement by the appellant - HELD THAT: - The Tribunal noted the contract terms whereby the appellant was to pay salary, food and accommodation to workers and recover service charges on a turnkey basis. The arrangement showed that the appellant incurred expenditure and incorporated those costs into its service consideration rather than acting as an agent incurring expenses on behalf of the service recipient. Consequently, the house rent amounts could not be treated as mere reimbursements outside the taxable service consideration. [Paras 4]

Demand sustained; house rent charges not a reimbursement exempt from service tax

Sustainability of service tax demand alleged to arise from incorrect calculation - HELD THAT: - The appellant relied on reconciliations and letters asserting computational errors. Both lower authorities and the Tribunal observed that no supporting documents were placed on record in appeal to substantiate the claimed miscalculation. In absence of documentary proof in the appeal, the assertion of incorrect computation could not be accepted. [Paras 4]

Demand sustained for the amount alleged to be due to incorrect working

Penalty exclusion by application of Section 80 for bona fide or debatable cases - incompatibility of simultaneous penalties under Sections 76 and 78 - Imposability of penalties under Sections 76, 77 and 78 and applicability of Section 80 relief - HELD THAT: - The Tribunal found that the appellant had recorded transactions in books, had paid the major portion of the demand with interest, and the remaining disputes related to debatable issues. In these circumstances malafide could not be attributed and relief under Section 80 was invoked to hold penalties under Sections 76, 77 and 78 not imposable. Separately, relying on the settled position cited from the Gujarat High Court, the Tribunal held that penalties under Sections 76 and 78 cannot be imposed simultaneously and accordingly held penalty under Section 78 not imposable. [Paras 4, 5]

Penalties under Sections 76, 77 and 78 waived by invoking Section 80; penalty under Section 78 also held not imposable as simultaneous with Section 76

Final Conclusion: The appeal is partly allowed: the service tax demands challenged for loading/unloading charges, house rent reimbursements and the alleged calculation error are sustained; penalties are not imposable by invoking Section 80 and the penalty under Section 78 is additionally held not imposable where imposed simultaneously with Section 76. The decision relates to the period April, 2006 to March, 2011.

Exemption under Notification No. 25/2012- ST - auxiliary educational services - outsourced educational activities remain educational in nature - appealability of decision under Section 85(1) of the Finance Act, 1994 - decision by subordinate adjudicating authority

Exemption under Notification No. 25/2012- ST - auxiliary educational services - outsourced educational activities remain educational in nature - Whether the services of arranging and conducting outstation camps, tracking camps, adventure camps, wildlife safaris, nature camps and related arrangements provided to school students are covered by the exemption under Notification No. 25/2012- ST as auxiliary educational services. - HELD THAT: - The Tribunal found that the activities in question were provided to school students as outdoor educational activities forming part of the educational curriculum and aimed at all round development. The fact that educational institutions outsource such activities to specialists does not alter their educational character. Consequently, the activities fall within the scope of services related to education and qualify for the exemption under Notification No. 25/2012 ST; the Commissioner (Appeals) correctly set aside the Additional Commissioner's contrary view. [Paras 4]

Activities undertaken by the respondent are educational in nature and are covered by the exemption Notification No. 25/2012 ST; the Commissioner (Appeals) order upholding the exemption is correct.

Appealability of decision under Section 85(1) of the Finance Act, 1994 - decision by subordinate adjudicating authority - decision versus administrative/communicative letter - Whether the Additional Commissioner's letter dated 01.05.2013 was an appealable decision under Section 85(1) of the Finance Act, 1994. - HELD THAT: - On plain reading, Section 85(1) permits appeal against any decision or order passed by an adjudicating authority subordinate to the Principal Commissioner/Commissioner. The Tribunal held that the Additional Commissioner's letter was a decision on taxability of the respondent's activities and thus fell within the term 'decision' in Section 85(1). The Revenue had not objected to maintainability before the Commissioner (Appeals). Therefore the appeal to the Commissioner (Appeals) was maintainable. [Paras 4]

The letter dated 01.05.2013 is an appealable decision under Section 85(1) and the appeal before the Commissioner (Appeals) was maintainable.

Final Conclusion: The Commissioner (Appeals) correctly held that the respondent's outsourced outdoor educational activities are exempt under Notification No. 25/2012 ST and that the Additional Commissioner's letter was an appealable decision; the Revenue's appeal is dismissed and the Commissioner (Appeals) order is upheld.

Service Tax liability on provisions for royalty and technical knowhow - Interest liability under Section 75 - Liability to pay interest arises by operation of law - Short payment of tax and attendant interest obligation

Service Tax liability on provisions for royalty and technical knowhow - Short payment of tax and attendant interest obligation - Interest liability under Section 75 - Liability to pay interest arises by operation of law - Whether interest charged on the belated payment of service tax in respect of provisions made towards royalty and technical knowhow is leviable. - HELD THAT: - The appellant did not dispute the taxability or the tax demanded and had paid part of the tax; only the charge of interest was contested. The Tribunal noted that where an assessee, without disputing taxability, short-pays the tax or pays it belatedly, the obligation to pay interest on the delayed amount follows under the statutory scheme. Interest under Section 75 is linked to the duty payable and accrues by operation of law; thus the Revenue is entitled to demand interest on belated payments. The Tribunal relied on the established principle that interest liability arises automatically (as applied in precedent) and observed that the limited scope of the appeal - confined to interest - did not absolve the appellant from the statutory interest consequence of delayed payment. Consequently, the plea for waiver of interest was rejected. [Paras 9, 10, 12]

The demand of interest on the belated payment of service tax is sustainable; the appellant's challenge to the interest is rejected and the appeal is dismissed.

Final Conclusion: Appeal dismissed; interest charged under Section 75 on the delayed/short payment of service tax in respect of provisions for royalty and technical knowhow is upheld.

Declared service under section 66E(e) - flow of consideration - leviability of service tax on liquidated damages - nexus between supply and consideration - contractual recovery of liquidated damages not constituting a service

Declared service under section 66E(e) - flow of consideration - contractual recovery of liquidated damages not constituting a service - Whether the amount deducted by the appellant as compensation for delayed supply of the WHR boiler is a declared service under section 66E(e) and therefore exigible to service tax. - HELD THAT: - The Tribunal applied the principle that a service under clause (e) of Section 66E is a contractual arrangement where one party, for consideration, agrees to refrain from an act, to tolerate an act or situation, or to do an act, and there must be a specific agreement and a flow of consideration for that obligation. The Division Bench decision in South Eastern Coal Fields was followed, which held that recovery of liquidated damages or penalties arising from breach of contract does not, by itself, amount to consideration for a declared service because such recoveries are penal safeguards to ensure performance and are not payments for an activity carried out as a service. The Board's Circular dated 28.02.2023 was also applied, which clarifies that taxability under Section 66E(e) requires an independent contractual arrangement expressly providing for the obligation and a necessary nexus between that supply (of toleration/forbearance or doing an act) and the consideration. In the present case the department did not show that the underlying agreement provided consideration for agreeing to refrain from an act, to tolerate an act or situation, or to do an act, nor that there was an independent contractual arrangement for such an obligation. Consequently the confirmed demand could not be sustained.

The demand confirmed by the Commissioner (Appeals) was set aside and the appeal was allowed.

Final Conclusion: The Tribunal allowed the appeal, setting aside the demand because the deduction recovered as compensation/liquidated damages did not satisfy the requirement of an agreement with a specific obligation and a flow of consideration necessary to attract tax as a declared service under clause (e) of Section 66E.

Classification of goods - marketability as an essential ingredient of excisability - burden of proof on the Department to establish that an article is "goods" known to the market - goods made in situ and captively consumed - remand for independent application of mind - exclusion of silver waste from Chapter 26 and classification under Chapter 71 - consequential failure of interest and penalties upon negation of duty demand

Classification of goods - marketability as an essential ingredient of excisability - burden of proof on the Department to establish that an article is "goods" known to the market - goods made in situ and captively consumed - The Tribunal's factual conclusion that the chemical preparations produced in situ by the assessee for processing cinematographic films are not marketable goods and therefore not exigible to excise duty was upheld. - HELD THAT: - The Tribunal recorded that the adjudicating authority had failed to apply its mind independently and had followed earlier observations which were not binding. The Tribunal found (on the material placed before it) that the assessee's chemical preparations were made in situ, captively consumed and not marketed; the Department produced no evidence to show that the appellant's preparations were marketable or marketed. The assessee produced an expert letter from M/s Kodak India Ltd. explaining that the marketed kit chemicals are concentrated and, after dilution, have very short shelf life and are not marketable; the Department did not test samples or otherwise rebut that evidence. The Tribunal relied on precedent holding that marketability is an essential ingredient of "goods" for excise; accordingly the burden to prove that the articles are goods known to the market rested on the Department, which the Tribunal found it had not discharged. The Supreme Court, upon review of the Tribunal's findings of fact and evidence (including the absence of contrary material), found no substantial question of law warranting interference. [Paras 3, 5, 6, 7]

Tribunal's finding that the chemical preparations are not marketable goods and hence not exigible to excise duty is upheld.

Exclusion of silver waste from Chapter 26 and classification under Chapter 71 - consequential failure of interest and penalties upon negation of duty demand - The demand of excise duty in respect of silver residue arising during film processing was held unsustainable because silver waste is excluded from Chapter 26 and is properly classifiable under Chapter 71 and, for the material period, was exempt from excise duty. - HELD THAT: - The Tribunal applied the Chapter Note to Chapter 26 to conclude that silver waste arising in processing of cinematographic films is excluded from Chapter 26 and falls under Chapter 71. It further noted that during the relevant period silver residue was exempt from excise duty. Since the substantive duty demands failed on this classification and exemption basis, the Tribunal also held that consequential demands for interest and penalties could not be sustained. The Supreme Court accepted these conclusions drawn by the Tribunal on the classification and exemption aspects. [Paras 6, 7]

Excise duty demand on silver residue does not sustain; consequential interest and penalties also fail.

Remand for independent application of mind - classification of goods - The appellant's contention that the matter should be remanded to the Tribunal for fresh consideration because of alleged confusion arising from prior High Court orders was rejected; no remand was directed by the Supreme Court. - HELD THAT: - The appellant argued that the Tribunal did not properly address classification because of confusion caused by earlier High Court orders; the Tribunal's order and the High Court's order were examined and the Tribunal had earlier directed the adjudicating authority to apply its mind independently. The Tribunal, having considered evidentiary material and found the Department's case wanting, gave a reasoned conclusion on marketability and classification. The Supreme Court found these factual findings and the Tribunal's application of mind sufficient and concluded there was no question of law warranting remand for re-examination. [Paras 1, 2, 3, 7]

No remand; appeal dismissed for lack of any substantial question of law arising from the Tribunal's findings.

Final Conclusion: The Supreme Court dismissed the appeal, upholding the Tribunal's factual findings that the chemical preparations made in situ and captively consumed by the assessee are not marketable goods exigible to excise duty, holding the silver residue to be excluded from Chapter 26 and not dutiable for the material period, with consequent failure of interest and penalty demands; no remand was ordered.

Interest on delayed refunds under Section 11BB - Refund claim under Section 11B - Applicability of compounded levy scheme / Section 3A to refund and interest - Doctrine that a statutory scheme must be followed and cannot be supplemented by tribunal - Computation of period for interest from date of receipt of refund application

Interest on delayed refunds under Section 11BB - Computation of period for interest from date of receipt of refund application - Interest on delayed refund is payable only in terms of Section 11BB and, where applicable, is to be computed from the date of receipt of the refund application (06.09.2010 in this case). - HELD THAT: - The Tribunal and the departmental orders treated the claim as a refund under Section 11B and the Assistant Commissioner sanctioned the refund under Section 11B. Section 11BB prescribes interest on delayed refunds and contains an Explanation deeming appellate or tribunal orders to be orders under sub-section (2) of Section 11B for the purposes of interest. The statutory scheme requires computation of interest from the date of receipt of the application under sub-section (1) of Section 11B. Consistent authorities and the Board circular indicate that the three-month period under Section 11BB runs from the date of receipt of the refund application and not from the date of appellate or tribunal decision where the refund claim was validly filed only after finalization. Applying these principles to the facts, the appropriate date for computing interest is 06.09.2010, the date when the appellant filed the refund application. [Paras 3]

Amount of interest, if any, is to be determined in terms of Section 11BB taking 06.09.2010 as the date of receipt of the refund application; appeal is partly allowed to that extent.

Applicability of compounded levy scheme / Section 3A to refund and interest - Refund claim under Section 11B - Doctrine that a statutory scheme must be followed and cannot be supplemented by tribunal - The present refund arose from re-determination of annual capacity (finalization) and is not a refund governed by the compounded-levy provisions of Section 3A(5); therefore the claim must be considered under the statutory refund machinery (Section 11B/11BB) and the tribunal cannot override express statutory provisions to prescribe interest or its rate. - HELD THAT: - Although earlier authorities have characterized the compounded levy scheme as a self-contained code, the Tribunal's reliance on those precedents to exclude Section 11B/11BB is inapposite on these facts because the refund here arose from reduction in final annual capacity determined on 31.12.2010 after remand/redetermination, and not from the specific mechanism under Section 3A(5) relating to adjustment on determination of actual production. The Supreme Court's pronouncements in Mafatlal and other authorities establish that refund claims must be dealt with under the statutory refund provisions; a tribunal or authority cannot prescribe a different mode or rate of interest contrary to the statute and governmental notifications. Hence the Commissioner (Appeal)'s conclusion based on the compounded-levy jurisprudence is not sustainable in the factual matrix of this case. [Paras 3]

Tribunal's characterization of compounded levy as excluding Section 11BB does not apply to this refund; the claim is to be governed by Section 11B/11BB and the appeal is allowed to the extent indicated.

Final Conclusion: The appeal is partly allowed: the refund stands sanctioned (as earlier ordered) and the entitlement to interest is to be determined and paid only in accordance with Section 11BB, computing the period from 06.09.2010; the Tribunal cannot substitute or prescribe a different mode or rate of interest contrary to the statutory scheme and governmental notifications.

Condonation of delay - limitation - power to condone delay vested in appellate authority - substantial justice over technicality - remand for decision on merits

Condonation of delay - limitation - power to condone delay vested in appellate authority - substantial justice over technicality - remand for decision on merits - Whether the Commissioner (Appeals) was justified in rejecting the appellant's appeal on the ground of limitation by refusing condonation of delay, and whether the matter should be remitted for decision on merits. - HELD THAT: - The Tribunal examined the Commissioner (Appeals)'s conclusion that the appellant's explanation for the 23-day delay was insufficient and that condonation under the proviso to Section 35 could not be granted. The Tribunal emphasised the statutory power of the appellate authority to condone delay and applied the established principle that causes of substantial justice should be preferred over rigid technicalities. Relying on precedents cited in the impugned order and other authorities stressing a liberal approach to condonation, the Tribunal found that denial of condonation resulted in denial of an opportunity to have the appeal heard on merits. The Tribunal concluded there was enough reason to justify condonation of the relatively short delay and observed that refusing condonation would inappropriately wither away the statutory right of appeal. Consequently, the Tribunal set aside the order rejecting the appeal for limitation and remitted the matter to the Commissioner (Appeals) to decide the appeal on merits within a specified time frame, after affording opportunity of hearing to the parties. [Paras 3, 4]

The Tribunal allowed the appeal, set aside the dismissal for limitation, and remanded the matter to the Commissioner (Appeals) for decision on merits within three months of receipt of the order.

Final Conclusion: Appeal allowed; the order of the Commissioner (Appeals) dismissing the appeal as time-barred is set aside and the matter is remitted to the Commissioner (Appeals) to decide the appeal on merits within three months.

Assessable value - Transaction value - Third-party inspection charges - Optional/additional testing at buyer's instance - Inclusion in assessable value under section 4 of the Central Excise Act, 1944

Assessable value - Third-party inspection charges - Optional/additional testing at buyer's instance - Transaction value - Third-party special inspection/testing charges, paid by the manufacturer and subsequently recovered from the customer at the customer's instance, are not includible in the assessable/transaction value of finished excisable goods. - HELD THAT: - The Tribunal found that the goods were fully manufactured and in marketable condition before the special third-party inspection requested by the customer. The manufacturer had no obligation to undertake such special testing; it merely facilitated the inspection as a convenience to the buyer, initially paying the third party and being reimbursed thereafter. The excise duty payable is on the transaction value fixed between the manufacturer and the customer; charges for optional additional testing carried out at the buyer's request and borne by the buyer do not form part of that transaction value. The Tribunal applied and followed a consistent line of precedent holding identical charges-third-party inspection/testing at the buyer's instance and reimbursed to the manufacturer-not includible in assessable value, and distinguished cases where additional mandatory or integral testing had been performed. On these facts and authorities, the demand to include such charges in assessable value was held unsustainable.

Demand to include third-party inspection/testing charges in the assessable/transaction value is rejected and the impugned orders are set aside.

Final Conclusion: Appeals allowed; the orders demanding inclusion of third-party special inspection/testing charges in the assessable value are set aside.

Assessment of Countervailing Duty under Section 4A of the Central Excise Act, 1944 - Valuation-based CVD assessment under Section 4 of the Central Excise Act, 1944 - Invocation of extended limitation period for recovery-requirement of suppression or mis-declaration - Duty of Customs to reassess classification and appropriate statutory provision when tariff heading is declared - Liability to CVD where importer correctly declares tariff heading but officials assess under incorrect statutory provision

Assessment of Countervailing Duty under Section 4A of the Central Excise Act, 1944 - Valuation-based CVD assessment under Section 4 of the Central Excise Act, 1944 - Duty of Customs to reassess classification and appropriate statutory provision when tariff heading is declared - Batteries imported under CET 850710.00 are required to be assessed for CVD under Section 4A, and Customs officials who assess CVD under Section 4 do so despite the declared tariff heading. - HELD THAT: - On the material before the Tribunal, the parties and this Bench concur that the imported Lead Acid Electric Accumulators/batteries falling under CET 850710.00 are properly liable to assessment under Section 4A rather than under Section 4. The importer's Bills of Entry declared the tariff heading 850710.00 and there is no suggestion that the nomenclature or tariff heading was misdeclared. Once the tariff heading was declared and not disputed, the obligation lay on Customs to examine statutory provisions and assess CVD under the correct provision. The Bench accepts the view in the earlier decision relied upon by the Department that such batteries are to be classified under Section 4A, but records that this classification issue was not contested by the appellant in the present appeal and does not alter the limitation conclusion. [Paras 5]

Batteries are to be assessed under Section 4A; the declared tariff heading did not amount to mis-declaration.

Invocation of extended limitation period for recovery-requirement of suppression or mis-declaration - Liability to CVD where importer correctly declares tariff heading but officials assess under incorrect statutory provision - Extended period for recovery could not be invoked because the Department failed to prove suppression or mis-declaration by the appellant; demand confirmed beyond the normal period is barred by limitation. - HELD THAT: - The Tribunal examined whether the Department had established suppression or deliberate mis-declaration by the importer sufficient to justify invoking the extended limitation period. The Bills of Entry consistently declared the tariff heading and Customs officials assessed CVD under Section 4 at the time of import. There is no material to show that the importer hid facts or mis-described the goods to mislead authorities. In absence of suppression, the extended period is not attracted and the demand confirmed by the adjudicating authority must be set aside on limitation grounds. The Tribunal therefore does not remit the question to decide classification afresh but allows the appeal on the limitation point. [Paras 5, 6]

Impugned order confirming demand under extended period is set aside for want of proof of suppression; appeal allowed on limitation grounds.

Final Conclusion: The Tribunal accepted that the imported batteries are properly assessable under Section 4A but found no suppression by the appellant to justify invocation of the extended limitation period; accordingly the demand confirmed beyond the limitation period was set aside and the appeal was allowed with consequential relief.

Exemption under Notification No. 6/2006 CE (Serial No. 91) - eligibility under Project Import Notification No. 21/2002 Cus (Serial No. 400) subject to Condition No. 86 - supply against International Competitive Bidding as condition for excise exemption - requirement that goods be exempt from customs duty when imported into India - classification under Heading 98.01 of Customs Tariff vis a vis Central Excise Tariff

Exemption under Notification No. 6/2006 CE (Serial No. 91) - eligibility under Project Import Notification No. 21/2002 Cus (Serial No. 400) subject to Condition No. 86 - supply against International Competitive Bidding as condition for excise exemption - requirement that goods be exempt from customs duty when imported into India - Appellants entitled to exemption from Central Excise duty under Notification No. 6/2006 CE (Serial No. 91) for goods supplied to specified Mega Power Projects against International Competitive Bidding, provided the goods are exempt from customs duty when imported as per Notification No. 21/2002 Cus (Serial No. 400) and Condition No. 86 is satisfied. - HELD THAT: - The Tribunal examined the statutory scheme under Notification No. 6/2006 CE, Serial No. 91, which grants 'nil' excise rate for all goods supplied against International Competitive Bidding subject to Condition No. 19 (i.e., that the goods are exempt from customs duty when imported). Notification No. 21/2002 Cus (Serial No. 400) provides customs exemption for goods required for setting up Mega Power Projects subject to Condition No. 86, and certificates from the Ministry of Power in the record satisfy Condition No. 86. The facts that the goods were supplied to certified Mega Power Projects and cleared against International Competitive Bidding were not in dispute. Since the customs exemption condition would have been satisfied had the goods been imported (and the relevant certification exists), the appellants satisfy the conditional requirement in the excise notification and are thus legally entitled to excise exemption. The Tribunal relied on precedents where similar factual matrices led to allowance of the excise exemption when project import conditions were met. [Paras 7, 12, 13, 16]

Exemption under Notification No. 6/2006 CE (Serial No. 91) is admissible to the appellants for the periods in question.

Classification under Heading 98.01 of Customs Tariff vis a vis Central Excise Tariff - requirement that goods be exempt from customs duty when imported into India - Denial of excise exemption on the ground that Heading 98.01 exists only in the Customs Tariff and not in the Central Excise Tariff is not a sustainable basis to refuse benefit under Notification No. 6/2006 CE. - HELD THAT: - The Tribunal noted that Heading 98.01 is a Customs Tariff construct (project imports) and there is no corresponding heading in the Central Excise Tariff; therefore, the absence of an identical tariff heading in Central Excise cannot defeat the conditional test in the excise notification. The determinative inquiry is whether the goods, if imported, would be exempt under the customs notification and whether the supplies were made against International Competitive Bidding to certified Mega Power Projects. The Learned Commissioner erred in applying a narrow classification approach and in requiring an excise heading identical to Customs Heading 98.01; such a demand is legally unsustainable where Condition No. 86 of Notification No. 21/2002 Cus is fulfilled. The Tribunal thus rejected the classification based denial and set aside the adjudicating order on that ground. [Paras 14, 15]

Denial of exemption based on non availability of Heading 98.01 in Central Excise Tariff is unsustainable; exemption cannot be refused on that ground.

Final Conclusion: The adjudicating authority's demand, interest and penalty confirmed in the impugned order are set aside; the appellants are held entitled to exemption under Notification No. 6/2006 CE for the specified periods and the appeal is allowed.

Definition of "goods" excluding electricity - escaped assessment under assessment of escaped turnover - best judgment assessment under Section 25(1) of the KVAT Act - requirement of reasonable opportunity before making assessment - distinction between filing incorrect return and suppression of taxable turnover - treatment of knocked down consignments and part invoices for determining sale

Definition of "goods" excluding electricity - escaped assessment under assessment of escaped turnover - best judgment assessment under Section 25(1) of the KVAT Act - requirement of reasonable opportunity before making assessment - distinction between filing incorrect return and suppression of taxable turnover - Whether a best judgment assessment under Section 25(1) could be sustained where the dealer filed nil returns by not declaring turnover from electrical energy which is excluded from the definition of "goods" and is included in the 1st Schedule as exempted - HELD THAT: - The Court examined the statutory definition of "goods" under Section 2(xx) of the KVAT Act which expressly excludes electricity, and the scope of Section 25(1) (assessment of escaped turnover). Even if electrical energy appears in the 1st Schedule as exempt, its inclusion does not create escaped assessment because no tax is payable on such exempted item. The ingredients of Section 25(1) - namely that turnover has escaped assessment, has been underassessed, or assessed at a lower rate - are absent where the turnover relates only to an exempt item and no tax is chargeable. The Court therefore treated the matter at best as filing an incorrect return rather than suppression of taxable turnover and noted the mandatory requirement of giving a reasonable opportunity before completing a best judgment assessment. In those circumstances an assessment by best judgment was unsustainable. [Paras 10, 11]

Assessment under Section 25(1) could not be sustained as there was no escaped assessment on account of electrical energy; the proceedings amounted at most to an incorrect return and the essential ingredients of Section 25(1) were not satisfied.

Treatment of knocked down consignments and part invoices for determining sale - distinction between filing incorrect return and suppression of taxable turnover - Whether the consignments and part invoices amounted to import and sale of three windmills within the State or to delivery of one windmill in knocked down condition assembled and in use at the site - HELD THAT: - The Court considered the documentary material produced by the petitioner, including KSEB certification and invoices, and the factual finding that the windmill arrived in a knocked down condition in three separate vehicles pursuant to the same bill/invoice. The KSEB's confirmation that one windmill remains functional and is supplying electrical energy supported the petitioner's case. On these facts the assumption that three separate windmills were brought in and sold was found to be incorrect. Consequently the premise for assessing tax on sale of three windmills did not stand. [Paras 9, 12]

The materials establish that one windmill was brought into the State in parts and assembled on site; the assessment premised on sale of three windmills is unsustainable.

Final Conclusion: Exts. P19, P20 and P26 set aside; writ petition allowed as the best-judgment assessment under Section 25(1) was unsustainable given that electricity is excluded from "goods" and the material showed one windmill in knocked down condition rather than sale of three windmills.

Qualified exemption under Section 8(1)(d) and 8(1)(e) - larger public interest test - non-obstante clause and limited exceptions to disclosure under Section 8(1) - third party information and confidentiality requirement under Section 11 - public activity / information relating to grant of statutory benefits - opportunity to third party on appeal under Section 19(4) - balance between right to information and protection of third party interests

Public activity / information relating to grant of statutory benefits - qualified exemption under Section 8(1)(d) and 8(1)(e) - larger public interest test - Directions of the First and Second Appellate Authorities to furnish documents relating to eligibility status and exemptions granted under the Industrial Policy of 1997 and Central Excise notifications (Clauses 1(a)-1(x), except Clause 1(g)) were valid. - HELD THAT: - The Court applied the principle that Section 8(1) contains specified exceptions to disclosure and that Clauses (d) and (e) are qualified exemptions subject to the larger public interest test. The information sought in Clauses 1(a)-1(x), save Clause 1(g), concerned public actions and the grant of statutory exemption/benefits and therefore did not fall within the protected categories warranting non-disclosure. Having regard to the nature of the information as relating to public activity and statutory orders, the appellate authorities were correct in directing disclosure subject to payment of prescribed fees. [Paras 5, 8, 9]

Order directing disclosure of information in Clauses 1(a)-1(x) except Clause 1(g) is upheld.

Third party information and confidentiality requirement under Section 11 - qualified exemption under Section 8(1)(d) - Information sought in Clause 1(g) (list of manufacturers/suppliers of equipments/machineries) does not attract protection under Section 11 where no confidentiality was claimed when the information was supplied. - HELD THAT: - Section 11 protects information supplied by a third party which has been treated as confidential by that party. The petitioners did not plead or establish that confidentiality was claimed at the time of furnishing the list of manufacturers/suppliers. In absence of any claim of confidentiality, the Court found that Clause 1(g) did not fall within the ambit of third party protected information and therefore was not exempt under Section 11 or by virtue of Section 8(1)(d)/(e). [Paras 10]

Clause 1(g) is not protected as third party confidential information in the absence of a confidentiality claim.

Opportunity to third party on appeal under Section 19(4) - third party information and confidentiality requirement under Section 11 - Submission that Section 19(4) required a reasonable opportunity to the petitioners as third party in the appellate proceedings was rejected as misconceived where no confidentiality claim under Section 11 was made. - HELD THAT: - Section 19(4) contemplates giving notice to a third party where the information relates to them and confidentiality is claimed. Because the petitioners did not assert that the information was confidential under Section 11, the contention that they were entitled to a separate opportunity under Section 19(4) did not arise. The Court therefore held the argument to be without merit. [Paras 11]

The contention based on Section 19(4) is misconceived and is rejected.

Final Conclusion: Writ petition dismissed. The orders of the First and Second Appellate Authorities directing disclosure of the requested information (Clauses 1(a)-1(x) except Clause 1(g)) are upheld; the petitioners' contentions on third party confidentiality and procedural entitlement under Section 19(4) are rejected.