TaxTMI Updates e-Newsletter
Aug 26,2021

Refund of unutilised input tax credit on zero-rated supplies - formula for refund under Rule 89 (turnover of zero-rated supplies x Net ITC / Adjusted Total Turnover) - net input tax credit - turnover of zero-rated supply - use of FOB (shipping bill) value if lower than invoice value - adjusted total turnover for relevant period - strict construction of exemption/refund provisions in favour of revenue

Net input tax credit - formula for refund under Rule 89 (turnover of zero-rated supplies x Net ITC / Adjusted Total Turnover) - Validity of the Net ITC figure adopted by the adjudicating authority for computing eligible refund. - HELD THAT: - The Commissioner (Appeals) recorded that neither party disputed the amount of input tax credit availed during the relevant period. The jurisdictional authority had verified the refund claim from RFD-01, Annexure-B, GSTR-3B and GSTR-1 and confirmed the Net ITC as declared. In view of the verification and absence of challenge to the quantum of ITC, the net input tax credit of Rs. 13,09,623/- was accepted and not interfered with while applying the Rule 89 formula to compute the maximum refundable amount. [Paras 12, 13]

Net ITC as determined by the adjudicating authority is upheld and accepted for computation of refund.

Turnover of zero-rated supply - use of FOB (shipping bill) value if lower than invoice value - refund of unutilised input tax credit on zero-rated supplies - Whether the turnover of zero-rated supplies for computation of refund should use the FOB (shipping bill) value when it is lower than the invoice value. - HELD THAT: - The Commissioner (Appeals) examined CBIC Circular Nos. 37/11/2018 and 125/44/2019 which advise that during processing of refund claims the value in the GST invoice and the corresponding shipping bill should be compared and the lower value sanctioned as refund. The officer relied on ICEGATE shipping bill details and CAG observations cautioning against sanctioning refund on invoice value when FOB is lower. Applying these clarifications and the principle of limiting concessionary benefits, the lower FOB (shipping bill) value was treated as the turnover of zero-rated supplies for calculating the refund under Rule 89. [Paras 11, 12, 13]

FOB (shipping bill) value, where lower than invoice value, is to be taken as turnover of zero-rated supplies for refund computation; the adjudicating authority's reliance on FOB value is upheld.

Adjusted total turnover for relevant period - turnover of zero-rated supply of services - Whether the appellant's proposed inclusion of turnover of zero-rated supply of services (as declared in invoices) for calculating the eligible refund is tenable. - HELD THAT: - The appellant contended for inclusion of zero-rated supply of services (amounts shown in invoice statements) in the turnover for refund calculation. The Commissioner (Appeals) noted that in refund claims arising from export of goods without payment of tax, shipping bill details must be checked and the FOB value taken; the jurisdictional officer's verification on record showed the total turnover of zero-rated goods as the FOB value and the adjusted total turnover as per GSTR-3B. Given the ICEGATE verification and circular guidance limiting the value to shipping bill/FOB where relevant, the appellant's contention to include the contested services turnover for enhancing refund was rejected. [Paras 9, 12, 13]

The appellant's claim to include the contested zero-rated services turnover for computing the refund is not accepted; the adjudicating authority's figures for turnover and adjusted turnover are sustained.

Final Conclusion: The appeal is dismissed. The Commissioner (Appeals) upholds the adjudicating authority's sanction of the refund after rejecting the claimed excess amount, confirming the Net ITC, the use of FOB (shipping bill) value as turnover of zero-rated goods where lower than invoice value, and the adjusted total turnover as adopted for the relevant period.

Supply - Import of services by a related person as deemed supply under Schedule I - Course or furtherance of business - Definition of "business" under Section 2(17) of the CGST Act - Liaison Office restrictions under FEMA/RBI - Registration under Section 24 of the CGST Act

Supply - Import of services by a related person as deemed supply under Schedule I - Course or furtherance of business - Definition of "business" under Section 2(17) of the CGST Act - Activities carried by the head office located outside India and rendered to the liaison office will amount to "supply" under Section 7 of the CGST Act where the liaison office is not engaged in business. - HELD THAT: - The Authority examined Section 7 (including sub paragraphs (b) and (c)) and Schedule I which treats import of services from a related person as supply only when the import is in the course or furtherance of business. The applicant's Head Office provides support services (HR, IT, administrative and project support) to the Liaison Office without charging consideration. The Liaison Office is established and governed by RBI/FEMA permissions which restrict it to liaison activities and prohibit commercial, trading or industrial activities; the permitted activities fall outside the definition of "business" in Section 2(17). As the services received are not in the course or furtherance of any business carried on by the Liaison Office, the deemed supply provision in Schedule I does not apply. For these reasons the Authority held that the services rendered by the Head Office to the Liaison Office do not constitute a "supply" under Section 7 of the CGST Act. [Paras 5]

Answered in the negative: the activities rendered by the Head Office to the Liaison Office do not amount to "supply" under Section 7 of the CGST Act.

Supply - Import of services by a related person as deemed supply under Schedule I - Course or furtherance of business - Whether the activities carried out by the Head Office and rendered to the Liaison Office would be liable to GST in the hands of the Liaison Office. - HELD THAT: - Because the Authority concluded that the services received from the Head Office do not constitute a "supply" under Section 7 (as they are not in the course or furtherance of business of the Liaison Office), there is no taxable event attracting GST. The Authority noted that if in future the Liaison Office undertakes any activity that does amount to a taxable supply, import of services from the Head Office may then become liable to GST; that contingency does not arise on the present facts. [Paras 5]

Answered in the negative: the activities rendered by the Head Office are not liable to GST in the hands of the Liaison Office on the facts before the Authority.

Registration under Section 24 of the CGST Act - Course or furtherance of business - Whether the Liaison Office is required to obtain registration in India under Section 24 of the CGST Act with respect to activities carried out by the Head Office and rendered to the Liaison Office. - HELD THAT: - Registration under Section 24 is triggered by specified categories of persons making taxable supplies or being liable to pay tax under reverse charge, inter state supplies, etc. Since the Authority has held that the services received from the Head Office do not amount to a taxable "supply" (they are not in the course or furtherance of business of the Liaison Office), none of the registration mandates under Section 24 are attracted on the facts presented. The Authority recorded that this conclusion is conditional on the Liaison Office continuing to operate strictly within the RBI/FEMA permitted non commercial activities. [Paras 5]

Answered in the negative: the Liaison Office is not required to obtain registration under Section 24 of the CGST Act in respect of the Head Office services on the facts before the Authority.

Final Conclusion: The Authority held that, on the facts and RBI/FEMA restrictions before it, services rendered by the foreign Head Office to the World Economic Forum Liaison Office in India are not "supply" under Section 7 of the CGST Act, are not liable to GST in the hands of the Liaison Office, and do not compel registration under Section 24 of the CGST Act; the conclusions are contingent on the Liaison Office remaining confined to the RBI permitted liaison activities.

Non-air conditioned contract carriage - rent-a-cab service - exemption under Notification No. 12/2017 - rental services of transport vehicles - contract carriage as defined in the Motor Vehicles Act, 1988 - input tax credit and its impact on rate

Non-air conditioned contract carriage - exemption under Notification No. 12/2017 - contract carriage as defined in the Motor Vehicles Act, 1988 - Whether the applicant's supply of non-AC buses for staff transport falls within the exemption in Serial No. 15, Heading 9964 of Notification No. 12/2017 and is therefore not taxable. - HELD THAT: - The Authority examined the service order and the contractual terms and applied the Motor Vehicles Act, 1988 definition of 'contract carriage'. The agreement showed that buses were supplied to RIPL on a monthly hire basis, operated strictly as per RIPL's instructions and paid for by RIPL; consideration was charged to RIPL and not to passengers. The Authority held that the activity thus amounted to hiring/renting of motor vehicles rather than transportation of passengers where the passenger is the service recipient. The exemption in Serial No. 15 of Notification No. 12/2017 applies to transport of passengers by non-air conditioned contract carriage (subject to exclusions), but the present supply is excluded because it is a hired/rented vehicle service and the recipient is the contracting company. Consequently Notification No. 12/2017 is not applicable to the subject supply. [Paras 5]

Notification No. 12/2017 does not apply; the service is not an exempt non-air conditioned contract carriage but is renting/hiring of motor vehicles.

Rent-a-cab service - rental services of transport vehicles - input tax credit and its impact on rate - Whether the impugned service qualifies as 'rent-a-cab' / rental service of transport vehicles and what tax rate applies. - HELD THAT: - The Authority analysed the commercial meaning of 'rent-a-cab' (including prior service-tax definitions) and found that renting of commercial vehicles for transportation of passengers, including buses, falls within 'rent-a-cab' or 'rental services of transport vehicles'. Given that the applicant supplies buses on hire to RIPL and the cost structure includes fuel and fixed hire, the supply falls within the scope of rental services of transport vehicles as covered by the relevant rate notification. Accordingly, the taxable character is rental/hire service. The applicable tax treatment is as provided in the rate notification for renting of motor vehicles: a concessional rate where input tax credit conditions are not availed, and a higher rate where input tax credit is availed. [Paras 5]

The service is a 'rent-a-cab' / rental service of transport vehicles and attracts tax under the rate notification - either the lower rate subject to the specified input tax credit restriction or the higher rate if input tax credit is availed.

Final Conclusion: The Authority ruled that the applicant's supply of non-AC buses on the contract is not covered by the exemption in Notification No. 12/2017 and is taxable as a rent-a-cab / rental service of transport vehicles; tax applies at the concessional rate when the specified input tax credit restriction is not availed, or at the higher rate where input tax credit is availed.

Pure agent under Rule 33 of CGST Act - reimbursement excluded from value of supply - intermediary / conduit payment - agent acting on behalf of recipient - consideration for supply

Pure agent under Rule 33 of CGST Act - reimbursement excluded from value of supply - intermediary / conduit payment - consideration for supply - Whether reimbursement by the industry partner to the applicant of the stipend paid to students attracts GST - HELD THAT: - The Authority found that the applicant is registered as a NEEM agent who, under contractual arrangements with industry partners, selects trainees, prepares attendance and stipend statements, collects stipend amounts from industry partners and disburses those amounts in full to trainees. The applicant receives a separate professional/administrative fee on which GST is discharged. The stipend is contractually payable by the industry partner to the trainees for services rendered by the trainees; the applicant merely collects and passes on the stipend without making deductions and therefore functions as an intermediary or conduit. Applying the concept of a pure agent under Rule 33 of CGST Act, the stipend payments are expenditures incurred on behalf of the industry partner and are separately indicated and reimbursed; the applicant neither holds title to nor uses the amounts for its own benefit. In these circumstances the amounts received and passed on as stipend do not qualify as consideration for any supply by the applicant and are excluded from the value of supply, and hence are not taxable in the hands of the applicant. The jurisdictional officer's observations agreeing with this characterisation were noted and accepted by the Authority. [Paras 5, 6]

The reimbursement by the industry partner to the applicant of the stipend paid to trainees does not attract GST.

Final Conclusion: The Authority rules that reimbursement of stipend routed through the applicant to trainees is not taxable in the hands of the applicant; the questions on reimbursement of insurance premium and uniform/safety shoes were withdrawn by the applicant and are not answered.

Taxability of reimbursement of stipend - pure agent under Rule 33 - reimbursement excluded from value of supply - intermediary / conduit payment - third party aggregator under the Apprentice Act

Taxability of reimbursement of stipend - intermediary / conduit payment - third party aggregator under the Apprentice Act - reimbursement excluded from value of supply - Reimbursement by the industry partner to the applicant of the stipend paid to trainees does not attract GST in the hands of the applicant. - HELD THAT: - The applicant is empanelled as a Third Party aggregator under the Apprentice Act and, under contracts with industry partners, prepares attendance records, processes and disburses stipends, procures uniforms and insurance and charges a separate professional service fee. The industry partners are contractually obliged to pay stipend to trainees; the applicant receives stipend amounts from the industry partners and pays them in full to the trainees without making any deduction. The applicant functions as a conduit/intermediary for the payment of stipend and has not treated the stipend receipts as consideration for its own service. Applying the principle of a pure agent and the exclusion of expenditures incurred as a pure agent from the value of supply, the Authority found that the stipend amounts received and passed on by the applicant are reimbursements and not taxable receipts in the hands of the applicant. The Authority accepted the jurisdictional officer's observation that the actual service of training is supplied by the industry partner and, therefore, the stipend routed through the applicant is not taxable in the applicant's hands. [Paras 5]

The reimbursement of stipend by the industry partner to the applicant does not attract GST in the hands of the applicant.

Final Conclusion: The Authority rules that reimbursement received by the applicant from industry partners of stipends paid to trainees is not taxable under the GST Acts. Questions on reimbursement of insurance premium and uniform/safety shoes were withdrawn by the applicant and are not decided.

Availability of statutory alternative remedy - Constitutional validity of statutory taxation provision (section 16(2)(c) and section 16(4) of the West Bengal GST Act, 2017) - Interim pre deposit relief pending appeal - Stay of coercive action pending filing of appeal

Availability of statutory alternative remedy - Writ petition challenging the adjudicating order dated 3 March 2021 is not maintainable insofar as it seeks to assail the adjudication order which is appealable under the statute. - HELD THAT: - The Court declined to entertain the challenge to the adjudicating authority's order dated 3 March 2021 because that order is an appealable order and a statutory appellate remedy is available. In view of the availability of the statutory alternative forum, the petition is not to be entertained on that ground; the petitioner is expected to pursue the remedy provided under the statute before the appellate forum.

The writ petition is not entertained to the extent it assails the appealable adjudication order; the petitioner must proceed to the statutory appellate forum.

Constitutional validity of statutory taxation provision (section 16(2)(c) and section 16(4) of the West Bengal GST Act, 2017) - The Court entertained the petitioner's challenge to the constitutional validity of section 16(2)(c) and section 16(4) of the West Bengal GST Act, 2017 and directed the respondents to file affidavits on that question. - HELD THAT: - Although the adjudication order itself is to be challenged before the statutory appellate forum, the Court retained jurisdiction to examine the distinct question of constitutional validity of the identified provisions of the State GST Act. The respondents were directed to file affidavits in opposition confined to the constitutional challenge within six weeks, and the petitioner permitted to file a reply affidavit within two weeks thereafter. The matter was listed for further hearing in November 2021 to decide the constitutional question.

Challenge to the constitutional validity of the specified provisions is entertained; respondents to file affidavit in opposition within six weeks and petitioner to reply within two weeks; matter listed for hearing.

Interim pre deposit relief pending appeal - Stay of coercive action pending filing of appeal - Petitioner was granted limited interim relief permitting withdrawal from his cash credit ledger for the purpose of pre deposit and protection from coercive action if the appeal is filed within the stipulated time. - HELD THAT: - In view of the petitioner's pleaded financial hardship arising from attachment of bank accounts, the Court allowed the petitioner to withdraw a specified sum from the cash credit ledger solely for making the pre deposit required for filing the appeal, noting that the petitioner had already paid the balance of the demand. The Court further directed that if the appeal is filed within seven days from the date of the order, no further coercive action shall be taken against the petitioner or until the appeal is filed, whichever is earlier. This constituted an interim, purposive relief limited to facilitating access to the appellate remedy and to temporarily restrain coercive measures conditioned on prompt filing of the appeal.

Petitioner permitted to withdraw the stated amount from the cash credit ledger for the pre deposit; if appeal is filed within seven days, no further coercive action shall be taken or until the appeal is filed, whichever is earlier.

Final Conclusion: The writ petition is declined insofar as it challenges the appealable adjudication order owing to availability of a statutory remedy; the Court, however, entertained the distinct challenge to the constitutional validity of section 16(2)(c) and section 16(4) of the West Bengal GST Act, 2017 and directed affidavits and further hearing, and granted limited interim relief to enable pre deposit and to restrain coercive action conditioned on prompt filing of the appeal.

Constitutional validity of subordinate legislation - ultra vires - value of supply in betting, gambling and horse racing - Rule 31A(3) of the CGST Rules, 2017 - interim stay - prima facie case for interim relief

Rule 31A(3) of the CGST Rules, 2017 - ultra vires - value of supply in betting, gambling and horse racing - Whether the operation of the Single Judge's order declaring Rule 31A(3) of the CGST Rules, 2017 ultra vires should be stayed pending hearing of the appeal. - HELD THAT: - The High Court, after hearing counsel, found that the appellants had made out a prima facie case warranting interim relief in respect of the challenge to Rule 31A(3) which prescribes the value of supply of actionable claim in betting, gambling or horse racing. The court noted earlier authority placed before it and, balancing the limited interim considerations, concluded that maintaining the status quo by staying the operation of the impugned Single Judge order was appropriate until the appeal is finally heard. The order grants only an interim stay and does not determine the substantive question of the constitutional validity of the Rule on merits.

Operation of the Single Judge's order declaring Rule 31A(3) ultra vires is stayed until the next date of hearing.

Admission for final hearing - procedural maintainability of appeal - Whether the writ appeal should be admitted for final hearing. - HELD THAT: - On consideration of the question of admission, the High Court admitted the appeal for final hearing. This is an interlocutory procedural determination permitting full adjudication of the substantive challenge to Rule 31A(3) at a subsequent hearing.

The appeal is admitted for final hearing.

Final Conclusion: The High Court admitted the writ appeal for final hearing and granted an interim stay on the operation of the Single Judge's order declaring Rule 31A(3) of the CGST Rules, 2017 ultra vires; the stay to continue until the next listed date.

Pre-arrest bail - Input Tax Credit - availability of Input Tax Credit as evidence of receipt of goods - prima facie satisfaction to believe offence made out - custodial interrogation not required where prosecution relies on documentary evidence

Pre-arrest bail - Input Tax Credit - availability of Input Tax Credit as evidence of receipt of goods - custodial interrogation not required where prosecution relies on documentary evidence - prima facie satisfaction to believe offence made out - Whether the applicant is entitled to pre-arrest bail in respect of the offences alleged under the Penal Code arising out of the sale and transfer of cloves - HELD THAT: - The Court considered the rival submissions that the applicant denied the transaction and maintained that no goods or invoices were received and that custodial interrogation was unnecessary because the prosecution relied on documentary material. The Investigating Officer placed on record the response from the Assistant Commissioner (Anti Evasion), CGST & C.Ex., which states that M/s. Bansal Traders had availed Input Tax Credit against the impugned invoices and enclosed the GSTR-2A and GSTR-1 material. The statements of the warehouse manager, the owner of the vehicles and the drivers prima facie indicate that 300 bags of cloves were transferred and delivered to the spice market godown at the instance of M/s. Bansal Traders. Applying these materials, the Court held that there exists a prima facie basis to believe that the goods were supplied by the complainant to the applicant and that the availability of ITC on the relevant invoices is a relevant contemporaneous record supporting receipt/transaction. In view of the cumulative documentary and testimonial material collected during investigation, the Court found the contention that custodial interrogation was unnecessary insufficient to displace the prima facie satisfaction formed by the investigating agency. Consequently, no case for grant of pre-arrest protection was made out. [Paras 5, 6]

Application for pre-arrest bail rejected.

Final Conclusion: The application for pre-arrest bail is refused as the court is prima facie satisfied, on the basis of the Assistant Commissioner's response regarding Input Tax Credit and the statements of warehouse and transport witnesses, that goods were supplied and the allegations warrant investigation; observations are confined to the bail rejection and will not influence the trial.

Interim stay - appealability of order - respect for coordinate bench interim order - stay pending determination of similar lis

Interim stay - respect for coordinate bench interim order - appealability of order - Grant of interim stay of the impugned order dated 24th March, 2021 passed by the Joint Commissioner, CGST, Bolpur. - HELD THAT: - The Court noted that a co-ordinate Bench had earlier passed an ex parte interim order on 27th November, 2019 in W.P. No.20484 of 2019 in favour of the same petitioner and that that interim order has been extended from time to time and remains in existence. The department's application to vacate that earlier interim order was pending and the respondent could not distinguish the present matter on facts or law. The Court also observed that the impugned order is an appealable order. In view of the existence of the interim order in the similar proceedings before a co-ordinate Bench and the pendency of the department's challenge to that order, the Court exercised its discretion to grant interim relief by staying the impugned demand order for short paid service tax, interest and penalty until 30th September, 2021. The Court directed the respondents to file affidavit in opposition by 20th August, 2021 and permitted the petitioner to file reply by 27th August, 2021, and listed the matter for final hearing along with specified connected writ petitions and applications on 3rd September, 2021.

Stay of the impugned order dated 24th March, 2021 is granted until 30th September, 2021; interlocutory directions for filings and listing for final hearing on 3rd September, 2021.

Final Conclusion: Interim relief granted: the demand order of 24th March, 2021 is stayed until 30th September, 2021; respondents to file affidavit by 20th August, 2021, petitioner to file reply by 27th August, 2021; matter listed for final hearing with connected matters on 3rd September, 2021.

Writ of Mandamus - Revocation of GST registration - Consideration of revocation application under Sec. 30 - Reliance on Apex Court decision in Misc. Application No.665/2021 arising out of SMW(C) No.3/2020 disposed off on 24.07.2021 - Delay in adjudicatory action - compensation for delay - Contempt risk for non-compliance

Writ of Mandamus - Revocation of GST registration - Consideration of revocation application under Sec. 30 - Reliance on Apex Court decision in Misc. Application No.665/2021 arising out of SMW(C) No.3/2020 disposed off on 24.07.2021 - Petition allowed directing respondents to consider the petitioner's revocation applications and decide them in terms of Section 30 and the cited Apex Court decision within six weeks. - HELD THAT: - The Court noted that the petitioner, a registered supplier, had filed revocation applications seeking rescission of the cancellation order and that those applications remained unconsidered. On the Court's request, counsel for respondents conceded that the applications could be considered if the petitioner cooperated by furnishing necessary information. In view of that concession and the petitioner's entitlement to adjudication, the Court issued a writ of mandamus directing the jurisdictional respondents to consider and decide the subject revocation applications in terms of Section 30 of the Act and while keeping in view the Apex Court decision referred to in Misc. Application No.665/2021 arising out of SMW(C) No.3/2020 disposed of on 24.07.2021. The Court kept all substantive contentions open for decision by the respondents on consideration of the applications.

Respondents directed to consider and decide the revocation applications within six weeks, in terms of Section 30 and the cited Apex Court decision; substantive contentions left open.

Delay in adjudicatory action - compensation for delay - Contempt risk for non-compliance - Respondents held liable to pay compensation for the delay in deciding the revocation applications and warned about contempt for non-compliance. - HELD THAT: - Having found unreasonable delay in taking a decision on the petitioner's applications, the Court directed the jurisdictional respondents to pay the petitioner a sum of Rs. 1,000/- per day for the delay suffered in adjudication. The Court additionally warned that failure to comply with the direction would expose the respondents to proceedings for contempt, thereby emphasising the compulsion for prompt compliance.

Respondents ordered to pay Rs. 1,000/- per day for the delay and warned of contempt proceedings for non-compliance.

Final Conclusion: Writ petition allowed; respondents directed to consider the petitioner's revocation applications under Section 30 and in light of the cited Apex Court decision within six weeks, respondents ordered to pay Rs. 1,000/- per day for the delay and warned of contempt for non-compliance; all substantive contentions preserved.

Treatment of unexplained credits as unexplained investment under the doctrine of unexplained cash credits - recognition of cheque discounting as taxable business income - principle of consistency in assessment years (precedent effect of earlier assessment findings) - computation of disallowance by applying a notional commission rate on turnover

Recognition of cheque discounting as taxable business income - principle of consistency in assessment years (precedent effect of earlier assessment findings) - Assessee is engaged in cheque discounting business and the AO's addition treating the entire bank credits as unexplained investment was not sustainable. - HELD THAT: - The Tribunal accepted the Investigation Wing's finding and earlier assessment treatment in AY 2009-10 that the assessee carried on cheque discounting, noting that the assessee's use of multiple bank accounts and prior acceptance of commission income on comparable turnover supported this conclusion. Relying on the principle that a factual position permeating several assessment years, once accepted in an earlier year, cannot be reversed by Revenue in a later year without material change of facts, the Tribunal held that the Assessing Officer erred in treating the entire bank credits as unexplained investment under the unexplained cash credits doctrine. Consequently, the addition of the entire turnover as unexplained investment was deleted and replaced by a business-related approach to computation of taxable income. [Paras 8]

AO's addition of Rs. 98,22,26,712 as unexplained investment deleted on finding that assessee carried on cheque discounting business.

Computation of disallowance by applying a notional commission rate on turnover - treatment of unexplained credits as unexplained investment under the doctrine of unexplained cash credits - Disallowance/adjustment to be computed by applying a notional commission rate of Rs. 75 per lakh on the turnover instead of the AO's treatment of the entire amount as unexplained investment. - HELD THAT: - While upholding that the assessee carried on cheque discounting, the Tribunal considered the notional commission approach adopted earlier and by the CIT(A). Observing that the previously applied rate of Rs. 50 per lakh was on the lower side given the time value of money, the Tribunal directed the Assessing Officer to compute the disallowance at Rs. 75 per lakh on the total turnover of Rs. 98,22,26,712, thereby substituting the AO's wholesale addition with a proportionate notional commission method for taxation of the cheque discounting activity. [Paras 8, 9]

Assessing Officer to compute disallowance at Rs. 75 per lakh on the total turnover instead of treating the whole credits as unexplained investment.

Procedural dismissal of cross-objections as not pressed - Cross objections filed by the assessee were dismissed as not pressed. - HELD THAT: - Although the cross objections supported the CIT(A)'s order, the assessee's counsel informed the Bench during hearing that the cross objections would not be pressed. The Tribunal therefore recorded that the cross objections were not pressed and dismissed them accordingly. [Paras 11, 12]

Cross objections dismissed as not pressed.

Final Conclusion: Revenue's appeal partly allowed: the AO's addition treating the entire bank credits as unexplained investment is set aside; the assessee is held to be engaged in cheque discounting and the Assessing Officer is directed to compute the adjustment by applying a notional commission of Rs. 75 per lakh on the turnover. Cross objections by the assessee dismissed as not pressed.

Unexplained investment in property - search and seizure and proceedings under section 153C - relevance and document-wise correlation of seized papers with the assessment year - onus and evidentiary burden for attribution of 'on-money' payments - precedent on quashing notice where loose papers lack nexus with assessment year

Unexplained investment in property - onus and evidentiary burden for attribution of 'on-money' payments - Deletion of addition of the alleged on-money as unexplained investment in the hands of the assessee for A.Y. 2006-07 - HELD THAT: - The Tribunal upheld the finding of the CIT(A) that the cash receipts of Rs. 11,05,51,000/- related to the Tapovan land were received by Rohit P. Modi from Saumya Construction Pvt. Ltd., and not by the assessee (Sandesh Ltd.). The CIT(A)'s conclusion rested on seized documents, conveyance deed entries, the sequence of memoranda and surrender of development rights to Saumya Construction, statements/affidavit of Rohit Modi and the absence of contemporaneous evidence linking Sandesh Ltd. to the cash payments. On a considered reading of the seized material and appellate material in Rohit Modi's case, the Tribunal found that Revenue failed to produce relevant material to controvert the CIT(A)'s conclusion. Consequently the addition made by the AO on protective basis as unexplained investment in the assessee's hands was not sustained and was deleted. [Paras 6, 7]

Addition held not justified and deleted; appeal dismissed on this ground.

Search and seizure and proceedings under section 153C - relevance and document-wise correlation of seized papers with the assessment year - precedent on quashing notice where loose papers lack nexus with assessment year - Validity of initiating proceedings under section 153C based on documents said to be seized from Saumya Construction and their relevance to the assessment year - HELD THAT: - The Tribunal examined the reasons recorded for initiation under section 153C and the documents said to be seized from Saumya Construction. It noted the assessee's contention (by way of Rule 27 submission) that the document relied upon was not an incriminating paper linked to the assessment year. The Tribunal considered the Supreme Court authority relied upon by the assessee that where loose papers do not establish a document-wise correlation with the assessment year, notices under section 153C can be quashed. Finding that Revenue did not point to contrary material to establish necessary correlation, the Tribunal accepted the CIT(A)'s treatment and dismissed the Revenue's appeal. [Paras 6]

Proceedings under section 153C, insofar as relied upon to sustain the addition, did not survive; appeal dismissed.

Final Conclusion: The ITAT dismissed the Revenue's appeal for A.Y. 2006-07, upholding the CIT(A)'s deletion of the addition of alleged on-money in the hands of the assessee and finding that the material did not establish that the cash payment was made by the assessee nor that the seized papers were so correlated with the assessment year as to sustain the addition.

Reimbursement of expenses not taxable in the hands of the payee - liability to deduct tax at source under section 195 - representative assessee under section 163 - simultaneous proceedings under sections 195/201 and 163 - effect of amendment to section 195 - remand for fresh adjudication on agency status

Reimbursement of expenses not taxable in the hands of the payee - liability to deduct tax at source under section 195 - Characterisation of remittances by the assessee to Braitrim U.K. as reimbursements and the consequent obligation to deduct tax at source under section 195 - HELD THAT: - The Tribunal recorded that, on facts and by concurrent findings in the appeal of Braitrim U.K., the amounts remitted by the Indian subsidiary were reimbursements of administration charges/discounts paid by Braitrim U.K. on behalf of the Indian group (without any mark up), supported by the Cost Reimbursement Agreement and accepted in transfer pricing/DRP/Tribunal proceedings for the relevant years. Payments which are pure reimbursements of expenses incurred on behalf of the payer and not carrying any profit element cannot be treated as income of the payee. Since no income element was held to exist in the remittances, no primary tax liability arose in the hands of the foreign payee and consequently no obligation was cast upon the Indian payer to deduct tax at source under section 195. The Tribunal therefore directed that no part of such reimbursements be treated as taxable income of the payee and recorded that the withholding tax demand under section 201 read with section 195 could not be sustained. [Paras 7]

Remittances were held to be reimbursements (without mark up) and not income; no obligation to deduct tax under section 195, and demands under section 201 read with section 195 were quashed.

Simultaneous proceedings under sections 195/201 and 163 - effect of amendment to section 195 - representative assessee under section 163 - Whether an assessee can be proceeded against under section 201/195 and also be assessed as representative assessee under section 163 for the same payments - HELD THAT: - The Tribunal examined prior High Court decisions which had held the two groups of provisions to be mutually exclusive under the pre 1987 wording of section 195. It noted that the proviso and the phrase creating the pre amendment exception were omitted by the Finance Act, 1987 w.e.f. 1.6.1987. In light of that amendment, the Tribunal accepted the reasoning in the Special Bench and subsequent decisions that liability to deduct tax under section 195 is distinct from liability to be assessed as a representative assessee under section 163, and that both proceedings can validly be initiated - the TDS, if deducted, being available as credit against any assessment on representative capacity. Accordingly, the CIT(A)'s conclusion that upholding a section 201 order precludes any assessment under section 163 was set aside. [Paras 8]

CIT(A)'s view that an order under section 201 precludes a subsequent or concurrent assessment under section 163 is incorrect in view of the amendment to section 195; simultaneous proceedings are permissible.

Representative assessee under section 163 - remand for fresh adjudication on agency status - Whether the assessee (BIPL) is an agent of Braitrim U.K. within the meaning of section 163 - remand for fresh adjudication - HELD THAT: - The Tribunal found that the CIT(A) had confined his decision to the question of dual proceedings and had not adjudicated the merits of the claim that BIPL was not an agent of Braitrim U.K. The assessing officer had treated BIPL as an agent based on business connection, control and receipt of income through BIPL, but the CIT(A) did not consider those merits. The parties did not press detailed merit based submissions before the Tribunal. In the interests of justice and fairness, the Tribunal set aside the aspect of the order relating to agency determination and restored the matter to the file of the CIT(A) with directions to decide, by a speaking order and after affording opportunity to the assessee, whether BIPL is an agent under section 163 on the merits; the same course was ordered for the other assessment years. [Paras 9, 10]

Issue of whether BIPL is an agent of Braitrim U.K. under section 163 is remanded to the CIT(A) for fresh, speaking adjudication after affording the assessee an opportunity to be heard.

Final Conclusion: The Tribunal held that the remittances from BIPL to Braitrim U.K. were reimbursements (without mark up) and not taxable income, thereby negating any obligation to deduct tax under section 195 and justifying quashing of demands under section 201 read with section 195 for the listed assessment years. It also ruled that, following the amendment to section 195, proceedings under sections 201/195 and section 163 are not mutually exclusive and may co exist; however, the factual determination whether BIPL is an agent of Braitrim U.K. under section 163 was not decided on merits and is remanded to the CIT(A) for a fresh speaking decision for the stated assessment years.

Revisionary jurisdiction under section 263 of the Income-tax Act - Error apparent and prejudicial to the interest of revenue - Carry forward of long-term capital loss - Assessment under section 143(3) of the Income-tax Act - Rectification under section 154 of the Income-tax Act - Appeal before the Commissioner (Appeals)

Revisionary jurisdiction under section 263 of the Income-tax Act - Error apparent and prejudicial to the interest of revenue - Carry forward of long-term capital loss - Rectification under section 154 of the Income-tax Act - Validity of the Principal Commissioner's exercise of revisionary powers under section 263 in setting aside the assessment order on the ground that the Assessing Officer had erroneously allowed carry forward of the entire long-term capital loss claimed by the assessee. - HELD THAT: - The Tribunal examined the assessment order dated 28.12.2018 together with the computation sheet annexed thereto and the documentary evidence placed on record by the assessee, including the application filed under section 154 seeking rectification and the appeal filed before the CIT(A). The material established that although the assessee claimed long-term capital loss of a specified amount and the AO disallowed a portion of that claim in assessment, the computation sheet did not record any carry forward of the claimed long-term capital loss to subsequent years. Further, the assessee had filed a rectification application under section 154 pointing out the omission and had challenged the disallowance before the CIT(A). The Principal CIT's order under section 263 proceeded on the premise that the ITBA CFL schedule incorrectly allowed the entire loss to be carried forward, but no verification was made of the assessment record or the computation sheet which demonstrated that no such carry forward had been granted by the AO. On the record before it, the Tribunal found that the precondition for valid exercise of section 263-existence of an assessment order which is erroneous and prejudicial to the revenue-was not satisfied because there was no error in the AO's order in the manner alleged by the Principal CIT. Consequently, the revisionary order was unjustified and liable to be set aside. [Paras 9, 10]

The order passed by the Principal Commissioner under section 263 was set aside and the assessee's appeal was allowed.

Final Conclusion: The Tribunal held that the Principal Commissioner erred in invoking section 263 without verifying the assessment record; as no error prejudicial to revenue was established, the revisionary order was set aside and the assessee's appeal allowed.

Validity of reopening - sufficiency of reasons to believe - Live link / nexus between material and belief that income has escaped assessment - Collateral challenge to jurisdictional validity of assessment in revisionary proceedings - Revisionary jurisdiction under Section 263 where reassessment is non est - Obligation to examine seized material before concluding reassessment

Validity of reopening - sufficiency of reasons to believe - Live link / nexus between material and belief that income has escaped assessment - Reopening of assessment under section 147/148 was invalid because the reasons recorded were vague, lacked particulars and did not prima facie disclose a live nexus between the material and existence of income escaping assessment. - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer which relied upon information/appraisal received from the Investigation Wing. The reasons merely recited the modus operandi of entry operators without specifying the parties, dates, mode or nature of transactions, or the quantum of entries attributable to the assessee in a manner that would permit a reasonable person to form a belief that income had escaped assessment. As held, only the reasons recorded are to be looked at for validating reopening; no addition or substitution from the assessment order is permissible. Where reasons are vague, scanty or ambiguous and do not disclose the AO's mind or a prima facie live-link nexus with escaping income, jurisdiction to reopen is not established. On those grounds the Tribunal found non-application of mind and held the reopening to be bad in law for each of the AYs considered. [Paras 23, 24, 52]

Reopening under section 147/148 quashed as invalid for lack of adequate reasons and absence of live nexus with escaping income.

Collateral challenge to jurisdictional validity of assessment in revisionary proceedings - Revisionary jurisdiction under Section 263 where reassessment is non est - An assessee may challenge the jurisdictional validity of an assessment/reassessment order in collateral revisionary proceedings under section 263; if the primary assessment is invalid or non est, the revisional jurisdiction cannot be validly exercised to cure that invalidity. - HELD THAT: - The Tribunal followed settled principles that an order passed without jurisdiction is a nullity and may be challenged whenever it is sought to be enforced or relied upon, including in collateral proceedings. It accepted that while many erroneous or irregular orders are not nullities, where the primary assessment is inherently invalid on jurisdictional grounds (for example, for lack of reasons to reopen), the consequent revision under section 263 cannot stand because collateral proceedings derive their legal platform from the primary order. Accordingly, the Tribunal held that validity of the assessment may be examined in proceedings under section 263 for the limited purpose of testing the jurisdictional basis for the revisional action. [Paras 17, 18, 22]

Validity of assessment can be challenged in section 263 proceedings; section 263 cannot be used to validate an inherently invalid reassessment.

Obligation to examine seized material before concluding reassessment - Revisionary jurisdiction under Section 263 where reassessment is non est - Principal Commissioner's order under section 263 setting aside the reassessment was not sustainable because the reassessment itself was held to be non est; accordingly the PCIT's order was set aside and quashed. - HELD THAT: - While the PCIT criticized the AO for not examining voluminous seized material and directed fresh consideration, the Tribunal's primary finding was that the AO's reopening lacked adequate reasons and was therefore invalid. Since section 263 is collateral and can be exercised only in relation to a valid primary order, the Tribunal concluded that there was no legal basis for the PCIT to revise the non est reassessment. Applying this reasoning uniformly to the appeals for AYs 2007-08, 2008-09 and 2009-10, the Tribunal set aside and quashed the PCIT orders and allowed the appeals. [Paras 24, 33, 34, 53]

Order of the Principal Commissioner under section 263 set aside and quashed; appeals allowed.

Final Conclusion: For Assessment Years 2007-08, 2008-09 and 2009-10 the Tribunal held that the reasons recorded for reopening were vague and devoid of the requisite live nexus with escaping income, rendering the reopening invalid; an assessee may challenge such jurisdictional invalidity in collateral revisionary proceedings under section 263, and because the reassessments were non est the PCIT's revisionary orders under section 263 were set aside and quashed, and the appeals were allowed.

Jurisdiction under Section 153C read with Section 153A - validity of satisfaction note for transfer of seized documents - requirement of incriminating material pertaining to relevant assessment year(s) - presumption under Section 132(4A) and rebuttal by AO of searched person - assessment under Section 153A of the total income - deletability of additions where seized material is non-incriminating

Jurisdiction under Section 153C read with Section 153A - validity of satisfaction note for transfer of seized documents - presumption under Section 132(4A) and rebuttal by AO of searched person - requirement of incriminating material pertaining to relevant assessment year(s) - Whether the Assessing Officer had jurisdiction to proceed under Section 153C/153A in respect of the completed assessment years in the absence of a satisfaction note disclosing reasons and of seized documents that are incriminating and pertinent to the assessment years in question. - HELD THAT: - The Tribunal examined the satisfaction notes and the seized material and applied settled legal tests: (a) the AO of the searched person must record a satisfaction, supported by reasons, that seized documents belong to a person other than the searched person (the presumption under Section 132(4A) must be rebutted by objective material); (b) the documents handed over must have a bearing on determination of the other person's total income; and (c) incriminating material must, in relation to the years sought to be reopened, pertain to those relevant assessment years. On the facts, although many of the seized documents could be said to belong to the assessee, the satisfaction note did not explain how the statutory presumption was rebutted nor did the seized material disclose any undisclosed income or have requisite nexus with the impugned assessment years. Several of the documents were statutory or publicly available records or related to other years and the AO did not link the seized material to the additions. Applying authorities (including the principle in Singhad Technical Education Society and decisions of the jurisdictional High Court such as Kabul Chawla and related precedents), the Tribunal held that the jurisdictional preconditions under Section 153C were not satisfied and therefore the AO lacked jurisdiction to make reassessments for the completed years on that basis.

Proceedings under Section 153C/153A were invalid for the impugned completed assessment years because the satisfaction note did not disclose reasons rebutting the presumption and the seized documents were not incriminating or not pertinent to the years; jurisdiction to reassess was not established.

Deletability of additions where seized material is non-incriminating - assessment under Section 153A of the total income - Whether the additions made under Section 68 (unexplained cash credits/share capital) and Section 69C (unexplained expenditure on brokerage) could be sustained where the reassessment under Section 153C/153A was founded on seized material that was non-incriminating and unrelated to the assessment years. - HELD THAT: - Because the Tribunal concluded that the jurisdictional preconditions for initiation of proceedings under Section 153C were not met (the satisfaction note lacked reasons and the seized documents did not disclose undisclosed income nor relate to the assessment years), the material basis for the additions under Sections 68 and 69C was absent. The Tribunal accepted the CIT(A)'s findings that the seized documents were statutory/public records or related to other years and that the AO failed to demonstrate nexus between the seized material and the additions. In that factual and legal matrix, the additions could not be sustained and deletion by the CIT(A) was affirmed.

Additions under Sections 68 and 69C deleted; the CIT(A)'s deletion of the additions is affirmed because they were not supported by incriminating seized material bearing on the relevant years.

Final Conclusion: The Tribunal dismissed the Department's appeals for AYs 2009-10, 2010-11 and 2011-12, affirming the CIT(A)'s deletion of additions because the satisfaction and seized material did not satisfy the jurisdictional and substantive requirements of Sections 153C/153A (no reasoned satisfaction and no incriminating material pertaining to the relevant years), and therefore the reassessments and consequent additions could not be sustained.

Reopening of assessment - reason to believe - failure to disclose fully and truly all material facts - accommodation entries - tangible material from investigation - subjective satisfaction of Assessing Officer

Reopening of assessment - reason to believe - failure to disclose fully and truly all material facts - accommodation entries - tangible material from investigation - Validity of notice issued under section 148/147 to reopen assessment for A.Y. 2012-13 on the basis of material received from the Investigation Wing alleging accommodation entries and non-disclosure of income. - HELD THAT: - The Court examined whether the Assessing Officer had a reason to believe that income chargeable to tax had escaped assessment because of the failure to disclose fully and truly all material facts. The material placed before the Court included investigation reports and a recorded statement under section 131 in which the power of attorney holder admitted that sales/purchases were paper transactions without delivery and that the assessee did not carry on genuine business activity but furnished accommodation transaction bills. The investigation also demonstrated large inter-company dealings with the Anil group, unsecured loans and interlinked sundry creditors/debtors, and an estimated commission income calculable on market rates. The Court applied settled principles that at the stage of issuing a reopening notice the Assessing Officer's belief need only be supported by prima facie material and need not be conclusive; fresh, specific and reliable information that impeaches the genuineness of transactions can justify reopening. Considering the direct nexus between the investigatory material and the formation of belief, and that such material was not available to the Assessing Officer at the time of the original assessment, the Court found the formation of belief to be justified and not a mere change of opinion. Consequently the reopening notice was held valid. [Paras 6, 7]

Reopening of assessment for A.Y. 2012-13 was validly initiated on the basis of tangible material received from the Investigation Wing; petition is dismissed.

Final Conclusion: The petition under Articles 226/227 challenging the notice issued under section 148 for Assessment Year 2012-13 is dismissed; notice discharged and interim relief vacated.

Reopening of assessment under Section 147/148 - reason to believe - change of opinion - Explanation 1 to Section 147 - objective satisfaction in disposal of objections - scope of judicial review under Article 226

Reopening of assessment under Section 147/148 - reason to believe - change of opinion - Explanation 1 to Section 147 - Validity of the notice issued under Section 148 and consequent disposal of objections for reopening assessment for Assessment Year 2004-05 - HELD THAT: - The Court examined whether the reassessment proceedings initiated beyond four years but within six years constituted an impermissible change of opinion or were founded on a valid 'reason to believe'. The reasons furnished by the Assessing Officer identified that certain deductions and the characterisation of payments to non-residents (including reliance upon a West Asia Maritime line of reasoning) led to lesser TDS and that issues regarding applicability of lower withholding or higher rates had not been adjudicated in the original assessment. The Court held that material or information produced during the original assessment may, on further scrutiny, yield new information enabling the Assessing Officer to form a 'reason to believe', and that Explanation 1 to Section 147 permits reopening where material evidence could, with due diligence, be discovered from the accounts and evidences already produced. The Court distinguished the subjective satisfaction required for passing a final reassessment order from the lesser, objective satisfaction necessary when disposing of objections; disposal of objections need not replicate the final subjective adjudication. Having found that the Assessing Officer culled an omission (potential incorrect TDS treatment) from the materials on record and that the matter fell within the scope of clauses contemplated by Section 147, the Court concluded the reopening was not merely a change of opinion. The High Court declined to re-adjudicate merits of the tax characterisation in writ proceedings, observing that sufficiency of reasons and detailed adjudication must be conducted before the tax authority with opportunity to the assessee. [Paras 17, 18, 22, 23, 24]

The notice under Section 148 and the order disposing of objections were held valid; the writ petition is dismissed and reassessment proceedings are to be concluded by the revenue following statutory procedure.

Final Conclusion: Reopening of assessment for Assessment Year 2004-05 was upheld as founded on a 'reason to believe' (not merely change of opinion) arising from materials on record; the High Court limited its review to process and declined to decide merits, dismissing the writ and directing expeditious completion of reassessment proceedings.

Special audit under Section 142(2A) of the Income tax Act - reasonable opportunity of being heard / principles of natural justice in special audit directions - nature and complexity, volume, doubts about correctness, multiplicity of transactions or specialised business activity as grounds for special audit - Form No.6B and the Assessing Officer's power to require "such other particulars as the Assessing Officer may require" - limits of delegation - calling for auditor's opinion vis a vis adjudicatory functions of the Assessing Officer - exclusion of period of pendency for computation of time under Section 142(2C)

Special audit under Section 142(2A) of the Income tax Act - reasonable opportunity of being heard / principles of natural justice in special audit directions - Validity of the impugned directions dated 22.4.2021 directing special audit - HELD THAT: - The petitions challenged only the directions dated 22.4.2021; the orders dated 8.4.2021 rejecting objections to the proposed special audit were not pressed and remain unchallenged. Having regard to the unchallenged decision making process (including issuance of show cause notices, supply of satisfaction note and disposal of objections), the Assessing Officer had jurisdiction under Section 142(2A) to direct special audit and to specify the report and particulars to be furnished by the nominated accountant. The High Court will not, in exercise of Article 226, re decide disputed questions of fact arising from voluminous seized material; absence of challenge to the antecedent order means the petitioners did not impugn the AO's power to order special audit. While isolated queries might be objectionable, that does not render the entire direction a nullity where jurisdiction exists and most directions are within statutory scope. Accordingly, the petitions were dismissed on merits as devoid of substance. [Paras 8, 16, 22, 24]

The impugned directions dated 22.4.2021 are not vitiated and the petitions challenging those directions are dismissed.

Form No.6B and the Assessing Officer's power to require "such other particulars as the Assessing Officer may require" - Whether the Assessing Officer is confined to the Annexure to Form No.6B when framing terms of reference for the special auditor - HELD THAT: - Section 142(2A) requires the audit report to be in the prescribed form and to set forth "such particulars as may be prescribed" and "such other particulars as the Assessing Officer may require." Form No.6B and its Annexure prescribe certain particulars but the statute expressly permits the AO to require additional particulars tailored to the facts of the case. To restrict the AO to the Annexure alone would render the statutory phrase "such other particulars as the Assessing Officer may require" redundant. Therefore the AO may, consistent with Section 142(2A) and Rule 14A, frame terms of reference beyond the Annexure where necessary to enable the auditor to examine seized material and other relevant facets of the accounts. [Paras 17, 18]

The Assessing Officer is not limited to the Annexure to Form No.6B and may require such other particulars as he deems necessary under Section 142(2A).

Limits of delegation - calling for auditor's opinion vis a vis adjudicatory functions of the Assessing Officer - Whether the Assessing Officer impermissibly delegated adjudicatory or legal functions to the special auditor - HELD THAT: - The Court recognised that assessment proceedings are quasi judicial and the ultimate determination of legal questions is for the Assessing Officer. However, Section 142(2A) and Form No.6B permit the AO to seek the special auditor's examination and opinion on factual and even legally tinged particulars (for example, matters relating to cash credits, unexplained investments, TDS compliance, etc.) to enable the AO to understand complex or specialised accounts. Calling for the auditor's opinion does not amount to surrendering the AO's adjudicatory function; the final decision remains the AO's. That said, roving or fishing inquiries are impermissible, but whether a particular term of reference is such is a disputed question of fact not to be adjudicated exhaustively on writ. [Paras 20, 21]

The Assessing Officer may obtain the special auditor's opinion on relevant factual and legally connected particulars, but the auditor does not supplant the AO's adjudicatory function; impermissible roving enquiries are not sanctioned, though their existence is a fact question.

Exclusion of period of pendency for computation of time under Section 142(2C) - Whether the period during which the writ petitions remained pending should be excluded for computation of time under the proviso to Section 142(2C) - HELD THAT: - Relying on the ratio in VLS Finance Ltd. (as applied by the Court), the High Court held that once the AO had formed the opinion that special audit was necessary and the assessment process awaited the special audit report, the period during which the petitions remained pending after issuance of notice should be excluded for purposes of the proviso to Section 142(2C). The pendency of the writ does not defeat the statutory exclusion merely because the writ may ultimately be decided against the revenue. [Paras 25, 26]

The period from issuance of notice on 14.6.2021 until pronouncement of judgment is excluded for the purpose of computing time under the proviso to Section 142(2C).

Final Conclusion: The challenge to the directions dated 22.4.2021 is dismissed: the Assessing Officer had jurisdiction under Section 142(2A) to direct a special audit, to require prescribed and additional particulars in Form No.6B, and to seek the special auditor's opinion while retaining final adjudicatory authority; the petitions fail on merits. The period of pendency of the writs is excluded for computation under Section 142(2C); the interim protection previously granted was extended to permit further appellate remedy.

Reopening of assessment under Section 147/148 - Reason to believe - Change of opinion - Disposal of objections as a speaking order (GKN Driveshafts) - Objective satisfaction in disposal of objections - Scope of judicial review under Article 226

Reopening of assessment under Section 147/148 - Reason to believe - Change of opinion - Validity of initiation of reopening proceedings for AY 2010-2011 on the basis of reasons recorded by the Assessing Officer - HELD THAT: - The High Court examined whether the reopening was a mere change of opinion or founded on a 'reason to believe' that income chargeable to tax had escaped assessment. The Court accepted the respondents' case that from and out of materials (including accounting schedules, notes to accounts and audited particulars) the Assessing Officer identified aspects - notably stock compensation allocations across years, gains on forward contracts, treatment of software depreciation, and usage-based depreciation at the SEZ unit - which, in the officer's view, led to escapement of income. The Court reiterated that change of opinion is impermissible when an issue was adjudicated with a clear finding in the original assessment; however, where from the same materials a different dimension is discovered showing non-consideration or escapement, reopening is permissible. The Court held that tangible new inferences drawn from the materials can constitute a reason to believe and that the Assessing Officer need not have founded the reason only on materials that were never seen earlier; materials produced in original proceedings may, from and out of them, give rise to a reason to believe. Applying these principles to the reasons recorded, the Court concluded that the Assessing Officer had established a reason to believe and that the initiation of Section 147/148 proceedings was legally sustainable. [Paras 54, 55, 56, 57, 59]

The reopening proceedings for AY 2010-2011 were held validly initiated on the basis of reasons to believe; the writ challenging initiation is dismissed.

Disposal of objections as a speaking order (GKN Driveshafts) - Objective satisfaction in disposal of objections - Scope of judicial review under Article 226 - Whether the order disposing of the assessee's objections complied with the requirement of a speaking order and met the test of objective satisfaction - HELD THAT: - The Court construed the GKN Driveshafts directives in context: the Assessing Officer must furnish reasons, the assessee may file objections, and the authority must dispose of them by passing a speaking order addressing whether the objections disprove the reasons for reopening. The Court held that the 'speaking order' required at that stage need not be a full adjudication on merits equivalent to a reassessment; it must, however, objectively consider the objections and record acceptable reasons if the objections are rejected. The disposal must be meaningful, sensible and relatable to the reasons furnished, so as to demonstrate objective satisfaction of the authority competent. On the facts, the Court found that the authority reproduced the reasons, considered the assessee's objections (including cited authorities) and formed the view that the objections did not disprove the reasons to believe; further adjudication of disputed facts was reserved to the reassessment process. The Court emphasised that judicial review under Article 226 focuses on the legality and propriety of the process (including compliance with natural justice and adequacy of reasons), not on rehearing disputed factual matters which are to be considered in reassessment and appeals. [Paras 44, 45, 46, 57, 58]

The order disposing of objections satisfied the requirement of a speaking order in the contextual sense described by the Apex Court; the disposal was objectively adequate and not vulnerable to quashing in writ jurisdiction.

Final Conclusion: The High Court dismissed the writ petition, holding that the Assessing Officer had reason to believe warranting reopening of assessment for AY 2010-2011 and that the objections were disposed of with sufficient objective reasons; reassessment may proceed expeditiously and there shall be no order as to costs.

Interest as compensation - judgment debt - tax deducted at source - Section 194A of the Income Tax Act - deduction of tax at source on interest - Section 2(28A) of the Income Tax Act - definition of "interest" - strict construction of taxing statutes

Interest as compensation - judgment debt - Section 194A of the Income Tax Act - deduction of tax at source on interest - Section 2(28A) of the Income Tax Act - definition of "interest" - Whether tax was required to be deducted at source from the "interest" payable under the Recovery Warrant, the Consent Terms and this Court's Order. - HELD THAT: - The Court examined Chapter XVII-B of the Income Tax Act and the statutory definition of "interest" under Section 2(28A), which applies to payments relatable to money borrowed or debt incurred. Applying authorities dealing with payments by builders/state authorities to allottees, the Court held that payments characterized as compensatory damages or a refund with compensatory interest do not create a debtor-creditor relationship and thus do not attract the definition of "interest" for the purpose of Chapter XVII-B. The Court relied on precedents which treat such payments as compensation (not interest in the statutory sense) and on the principle that taxing statutes must be strictly construed in favour of the taxpayer. On these grounds the Court concluded that the sums payable pursuant to the Recovery Warrant, Consent Terms and the Court's Order are either judgment debts or akin to compensation and therefore are not liable to deduction of tax at source under Section 194A/Section 2(28A). [Paras 19, 21, 25, 26, 27]

The amounts payable under the Recovery Warrant, Consent Terms and the Order dated 4th March 2021 are not liable to TDS under the Income Tax Act; Respondent Nos. 4 to 7 were directed to refund the TDS of Rs. 5,05,989/- deducted from the July 2021 instalment within one week.

Final Conclusion: The Court held that the payments under the Recovery Warrant and the Consent Terms are compensatory/judgment debt in character and not "interest" within the Income Tax Act; TDS was not payable and the sum deducted from the July 2021 instalment was ordered to be repaid to the petitioners.

Tax deduction at source under Section 194H - commission or brokerage - payment to person acting on behalf of another - element of agency - professional services exclusion

Tax deduction at source under Section 194H - commission or brokerage - payment to person acting on behalf of another - Expenditure incurred on doctors cannot be classified as commission for the purpose of Section 194H. - HELD THAT: - The Court examined the scope of Section 194H and its Explanation which makes 'commission or brokerage' include payments received or receivable by a person acting on behalf of another for services rendered (not being professional services) or for services in the course of buying or selling of goods. Payments for medical services are excluded by the definition of 'professional services'. The Court accepted the Tribunal's interpretation that to fall within the Explanation the payment must be to a person acting on behalf of the payer. Mere marketing-related expenditures such as taxi, air-fare, conference expenses claimed by the assessee do not automatically convert into 'commission' unless the recipient is acting on behalf of the payer in a manner that satisfies the Explanation. Applying this legal test to the material before the authorities, the Court found no basis to treat the payments to doctors as commission liable to TDS under Section 194H. [Paras 9, 10]

The Tribunal rightly held that the expenditures on doctors were not payments of commission within Section 194H and the provision did not apply.

Element of agency - commission or brokerage - payment to person acting on behalf of another - There was no element of agency between the assessee and the doctors making the doctors 'agents' whose payments would attract Section 194H. - HELD THAT: - The department relied on emails and statements seized during survey to contend that doctors acted as agents by prescribing the assessee's medicines. The Court agreed with the Tribunal's factual and legal conclusion that the doctors were not bound to prescribe the medicines as suggested by the assessee and there was no legal compulsion or contractual obligation establishing agency. Since agency was not established, the prerequisite that the payment be received by a person acting on behalf of another (as required by the Explanation to Section 194H) was absent. Consequently, the payments could not be treated as commission under the statutory provision. [Paras 10]

Findings of absence of agency were sustainable and therefore the implication of Section 194H could not be invoked.

Final Conclusion: The appeals are dismissed. The Tribunal correctly held that the payments to doctors did not constitute 'commission' attracting deduction under Section 194H, because the requisite element of agency was not established and medical services fall within the professional services exclusion; no substantial question of law arises.

Waiver of interest under Section 220(2A) - compensatory interest under Section 220(2) - genuine hardship - circumstances beyond the control of the assessee - co-operation in inquiry/assessment proceedings - discretionary satisfaction of the competent authority - doctrine of merger and revival of demand on finality

Waiver of interest under Section 220(2A) - genuine hardship - circumstances beyond the control of the assessee - co-operation in inquiry/assessment proceedings - Validity of the rejection of the petitioner's application for waiver of interest under Section 220(2A) of the Income Tax Act - HELD THAT: - The Court considered the statutory scheme: Section 220(2) imposes compensatory simple interest for delayed payment of tax; Section 220(2A) permits the competent authority to reduce or waive such interest if three cumulative conditions are satisfied - (i) payment would cause genuine hardship, (ii) default was due to circumstances beyond the assessee's control, and (iii) the assessee co-operated in relevant enquiries. The Court held that these conditions must be cumulatively established and that the authority's subjective satisfaction is central. On review of the impugned order, the competent authority had entertained the petition, examined case records and quantified unpaid demands; it recorded reasons for concluding that the assessee had not shown genuine hardship, had not demonstrated that default was beyond his control, and had not co-operated during proceedings (including delayed filing of returns called for after search and sporadic attendance of authorised representative). The Court accepted the authority's application of precedent regarding revival/merger of demands on finality of assessment and that interest is chargeable from the date of the original demand. Given these findings based on records, the Court found that the three cumulative conditions of Section 220(2A) were not established and that the rejection was candid and convincing. The Court rejected the petition, observing that the authority was entitled to exercise its discretion to deny waiver when the statutory conditions are unmet. [Paras 29, 30, 31, 32, 33]

The rejection of the application for waiver of interest under Section 220(2A) was validly made as the petitioner failed to satisfy the three cumulative conditions; writ petition dismissed.

Final Conclusion: The High Court dismissed the writ petition, holding that the competent authority lawfully exercised its discretion in rejecting the Section 220(2A) waiver application because the assessee did not establish genuine hardship, circumstances beyond his control, nor adequate co operation; no costs.

Addition under section 68 as unexplained cash credits - share capital arising from amalgamation under scheme sanctioned by High Court (Companies Act, s. 394) - unsecured loan credits arising on account of amalgamation and inter company transfers - prior approval under section 153D - requirement of application of mind by approving authority - vitiation of assessment where approval under section 153D is a mechanical/technical approval

Addition under section 68 as unexplained cash credits - share capital arising from amalgamation under scheme sanctioned by High Court (Companies Act, s. 394) - unsecured loan credits arising on account of amalgamation and inter company transfers - Whether additions made under section 68 in respect of share capital and unsecured loans are sustainable where the amounts represent accounting entries arising from a High Court sanctioned amalgamation and no fresh sums were received in the relevant year. - HELD THAT: - The assessee established that nine transferor companies were amalgamated with it pursuant to the High Court order under the Companies Act with appointed date 01.04.2013, and that shares were allotted to shareholders of the transferor companies in terms of the scheme. The assessee placed on record revised financial statements, share allotment/return (Form No.2), confirmations, audited accounts and income tax returns of the counterparties and showed that the impugned share capital and most unsecured loan credits were entries incorporated on account of amalgamation or pre existing inter company balances transferred by journal entries. The Tribunal noted specific instances where credits were not fresh receipts in the assessment year and observed cases where AO had ignored corresponding debit entries. Applying the onus under section 68, the Tribunal found that the assessee had discharged its evidentiary burden by producing documentary evidence of the amalgamation, accounting treatment and confirmations, and that the AO made additions without adequate verification of whether amounts were actually received in the year. Consequently the additions to income on account of share capital and unsecured loans were not sustainable.

Additions under section 68 in respect of the share capital and unsecured loans are deleted; the orders of the lower authorities on these additions are reversed.

Prior approval under section 153D - requirement of application of mind by approving authority - vitiation of assessment where approval under section 153D is a mechanical/technical approval - Validity of the JCIT's approval under section 153D where the approval letter recorded that the draft orders were received late and directed the AO to ensure incorporation of seized material and appraisal report - and whether such approval is merely technical or evidences application of mind. - HELD THAT: - The approval letter expressly recorded that draft assessment orders were received late and contained directions that the AO must ensure taking into account seized documents/appraisal report; the approving authority thereby indicated limited time for examination. The Tribunal relied on binding/co ordinate precedents holding that approval under section 153D must flow from an independent application of mind and must not be a mere mechanical or conditional/technical approval. Having considered the approving letter and the line of authorities, the Tribunal observed that the facts fall within the established principle that a perfunctory/technical approval given without examination of material is invalid. However, since the Tribunal has already decided the substantive additions in favour of the assessee on merits (deleting the additions under section 68), further adjudication on the consequences of the approval was rendered academic.

The approval under section 153D is viewed as covered in favour of the assessee on the authorities cited (being of the character of a technical/mechanical approval), but no separate remedy is required because the substantive additions have been deleted.

Final Conclusion: The appeal is allowed: additions made under section 68 in respect of share capital and unsecured loans are deleted and the orders of the authorities below are reversed; the approval under section 153D is found to be of the type held in authorities to be a technical/mechanical approval, but no separate relief is required as the substantive deletions dispose of the appeal.

Disallowance of business expenditure for lack of substantiation and failure to deduct tax at source - capitalization of interest attributable to capital advances and test whether borrowed funds were used - deduction of employees' provident fund contribution contingent on timely credit to the fund - precedential weight of coordinate-bench ITAT decisions

Disallowance of business expenditure for lack of substantiation and failure to deduct tax at source - Whether commission expenses claimed by the assessee were disallowable for want of documentary substantiation and non-deduction of tax at source. - HELD THAT: - The Assessing Officer disallowed export commission claimed by the assessee on the grounds that the assessee failed to prove identity of overseas agents and the services rendered, and that tax was not deducted at source. The CIT(A) examined documentary proof produced in part (invoices, Forms 15CA/15CB, certificates of no PE and evidence of payments in subsequent year) and restricted the disallowance to amounts for which no supporting documents or payments were produced despite opportunities. The Tribunal, noting a coordinate-bench decision in an earlier assessment year of the same assessee where similar failures to furnish documents led to confirmation of disallowance, applied that precedent to the present assessment year and upheld the partial disallowance for the commission sums for which the assessee did not furnish requisite documentary evidence or proof of payment.

Partial disallowance of commission expenses upheld to the extent that supporting documentary evidence and proof of payment were not produced; balance of the claim allowed.

Capitalization of interest attributable to capital advances and test whether borrowed funds were used - Whether proportionate interest on loans should be capitalized against capital advances where the assessee's own/interest free funds exceeded the advances. - HELD THAT: - The Assessing Officer capitalized proportionate interest on advances given for acquisition of technical know how on the view that borrowed funds were being used while the asset was not yet received. The CIT(A) confirmed the disallowance relying on prior findings. The Tribunal considered a coordinate bench ITAT decision on identical facts which examined audited financials and concluded that the assessee's own funds (together with interest free loans shown in the accounts) exceeded the amount of the advance; thus there was a presumption that borrowed funds were not used for the advance. Applying that reasoning, and following the coordinate bench decision, the Tribunal held that capitalization of interest did not arise and allowed the claim.

Disallowance by way of capitalization of proportionate interest set aside; claim allowed on finding that borrowed funds were not used for the advance.

Deduction of employees' provident fund contribution contingent on timely credit to the fund - Whether employees' provident fund contributions paid late by the employer are allowable deduction for the employer. - HELD THAT: - The Assessing Officer disallowed employees' contribution to provident fund on the ground that it was not credited to the relevant fund within the due date, thereby attracting disallowance under the statutory scheme. The CIT(A) confirmed the disallowance. The Tribunal applied the jurisdictional High Court authority which holds that deduction is available only if the amount is credited to the relevant fund before the statutory due date. On that basis the Tribunal found no infirmity in the CIT(A)'s order.

Disallowance of employees' provident fund contribution confirmed; appeal dismissed on this point.

Final Conclusion: The appeal for A.Y. 2015-16 is partly allowed: the partial disallowance of certain commission claims is sustained for lack of substantiation, the capitalization of proportionate interest on the capital advance is set aside following a coordinate bench decision, and the disallowance of late-paid employees' provident fund contribution is upheld.

Confiscation and auction during pendency of appeal - permission of appellate court before auction - restitution of value of auctioned goods - refund with interest - inherent powers under Rule 41 of CESTAT (Procedure) Rules, 1982

Confiscation and auction during pendency of appeal - permission of appellate court before auction - restitution of value of auctioned goods - refund with interest - inherent powers under Rule 41 of CESTAT (Procedure) Rules, 1982 - Validity of confiscation proceedings and consequent auction of seized goods during the pendency of appeal and entitlement to restitution of the value of the goods with interest. - HELD THAT: - The Tribunal found that the seized goods were auctioned while the appeal was pending before the appellate authority and that the department neither sought permission from the appellate court nor gave notice to the appellant prior to auction. In these circumstances the Tribunal held it unnecessary to go into the allegation of undervaluation because the goods were not available for assessment or home clearance. Applying the settled principle that the department cannot take advantage of disposing goods while proceedings are sub judice, and relying on precedents where auction without prior permission/notice required refund of the adjudicated value, the Tribunal exercised its appellate and inherent powers under Rule 41 of the CESTAT (Procedure) Rules, 1982 to secure justice. Consequently the impugned order upholding confiscation and appropriation of sale proceeds was set aside and the department was directed to refund the assessed value as determined by the authorities along with interest to be quantified within three months. [Paras 7]

Impugned order set aside; appeal allowed; department directed to refund the assessed value of the imported goods along with interest to be quantified within three months.

Final Conclusion: The Tribunal allowed the appeal, set aside the order upholding confiscation and appropriation of sale proceeds, and directed the department to refund the assessed value of the auctioned goods for 1993 with interest to be quantified within three months.

Conversion of shipping bills from drawback scheme to advance authorisation scheme - Amendment of documents under Section 149 - Discretionary power of the proper officer - CBEC circular prescribing time limit not overriding statutory discretion - Proof of export by ARE-1 and bank realisation certificate - Customs endorsement on shipping bills as evidentiary requirement - Exercise of discretion judicially and in aid of justice

Conversion of shipping bills from drawback scheme to advance authorisation scheme - Amendment of documents under Section 149 - Discretionary power of the proper officer - Proof of export by ARE-1 and bank realisation certificate - Customs endorsement on shipping bills as evidentiary requirement - Whether the refusal to permit conversion/amendment of the shipping bills was sustainable and whether the appellant was entitled to conversion upon proof of export and repayment of drawback. - HELD THAT: - The Tribunal held that Section 149 confers a discretionary power on the proper officer to amend shipping bills, but such discretion is to be exercised judiciously to do justice. The appellant had produced shipping bills endorsed by Customs, ARE-1 forms, invoices and bank realisation certificates evidencing export of the goods and demonstrated that the goods imported from SEZ were processed and exported without local clearance. The CBEC circular prescribing a three-month limitation for conversion does not oust the statutory discretion under Section 149 and is not binding where it is contrary to the statute; the Tribunal relied on precedents holding that the circular's time limit cannot override statutory provision. The Tribunal examined authorities distinguishing cases where fraud, manipulation or absence of endorsement existed and found those not applicable on the facts: here there was no allegation of fraud, endorsement on the shipping bills existed and independent documentary proof of export was produced. Given the appellant's long clean track record, the small amount of drawback claimed relative to the duty foregone, the undertaking to repay the drawback with interest, and the documentary evidence, the refusal was unsustainable. The Tribunal therefore set aside the impugned order and directed conversion subject to repayment of the drawback with interest to be quantified by the Departmental officer. [Paras 6, 7]

Impugned order refusing amendment/conversion set aside; Customs officer directed to allow amendment of shipping bills after appellant repays duty drawback with interest quantified by the Departmental officer.

Final Conclusion: The appeal is allowed: the order rejecting conversion of shipping bills is set aside and conversion is to be permitted upon repayment of the duty drawback with interest as quantified by the Departmental officer; otherwise the statutory discretionary power under Section 149 may be exercised in favour of the appellant given documentary proof of export and Customs endorsement.

Reduction of share capital under Section 66 of the Companies Act, 2013 - confirmation of special resolution - service of notice on creditors in Form No. RSC-3 - notice to Registrar of Companies and Regional Director in Form No. RSC-2 - publication of notice in Form No. RSC-4 - representations and objections by creditors and authorities - compliance report of dispatch and publication

Reduction of share capital under Section 66 of the Companies Act, 2013 - confirmation of special resolution - Admission of petition for confirmation of reduction of share capital and fixation of hearing date. - HELD THAT: - The Tribunal admitted the petition filed for confirmation of a special resolution proposing reduction of issued equity share capital from 10,000 to 4,000 by cancellation of specified shares and fixed the matter for hearing. The petition was admitted on the record and the hearing was scheduled as recorded by the Tribunal. [Paras 2, 3]

Petition admitted and hearing fixed for 01.12.2021.

Service of notice on creditors in Form No. RSC-3 - representations and objections by creditors and authorities - Mandated procedure for informing creditors and permitting representations or objections. - HELD THAT: - The Tribunal directed the petitioner to serve notice in Form No. RSC-3 upon the creditors within seven days, stating that creditors may submit representations or objections within three months from receipt; failure to do so would be deemed no objection. The petitioner was also directed to submit to the Tribunal, after expiry of that period, the representations or objections received together with the petitioner's responses. [Paras 7, 10]

Petitioner to serve Form No. RSC-3 on creditors within seven days and to file any received representations/objections with responses after the three-month period.

Notice to Registrar of Companies and Regional Director in Form No. RSC-2 - representations and objections by creditors and authorities - Requirement to notify statutory authorities and permit them to file representations within three months. - HELD THAT: - The Tribunal directed service of notices in Form No. RSC-2, with a copy of the petition, upon the concerned Registrar of Companies and the Central Government through the Regional Director within seven days. The authorities were afforded three months from receipt to submit representations to the Tribunal, failing which it would be presumed they had no objection. [Paras 8]

Petitioner to serve Form No. RSC-2 on ROC and Regional Director within seven days and to treat non-response after three months as no objection.

Publication of notice in Form No. RSC-4 - representations and objections by creditors and authorities - Requirement for public notice publication and timeline for objections arising from publication. - HELD THAT: - The Tribunal directed publication, within seven days, of notice in Form No. RSC-4 in specified newspapers having circulation in Maharashtra, stating the proposed reduction and that objections must be filed within three months from publication and a copy served on the petitioner. This ensures public notice and opportunity for objections arising from publication. [Paras 9]

Petitioner to publish Form No. RSC-4 in the specified newspapers within seven days and accept objections within three months of publication.

Compliance report of dispatch and publication - Obligation to file compliance report confirming dispatch and publication of notices. - HELD THAT: - The Tribunal required the petitioner to file, not later than seven days from issue of the notices, a compliance report confirming dispatch to creditors and authorities and publication in the newspapers, and to submit the representations/objections received after the relevant period along with responses. [Paras 10, 11]

Petitioner to file compliance report within seven days of issue of notices and to submit received representations/objections with responses thereafter.

Final Conclusion: The Tribunal admitted the petition for confirmation of reduction of share capital, fixed the hearing, and directed the petitioner to serve statutory notices on creditors and authorities, publish the prescribed notice, allow three months for representations/objections, file received representations with responses, and file a compliance report of dispatch and publication.

Dispensing of shareholders' meeting where unanimous consent is given by affidavit - no requirement for creditors' meetings where auditors certify NIL secured and unsecured creditors - service under Section 230(5) of the Companies Act, 2013 of scheme and accompanying documents - filing of affidavit proving service and compliance

Dispensing of shareholders' meeting where unanimous consent is given by affidavit - consent by affidavit - Meeting of equity shareholders of the Applicant companies dispensed with where all shareholders have given consent to the Scheme by way of affidavits. - HELD THAT: - The Tribunal examined the applicants' record that all equity shareholders of both Applicant No.1 and Applicant No.2 had executed affidavits consenting to the proposed Scheme of Amalgamation. In view of those affidavits, the Tribunal found that holding a shareholders' meeting for the purpose of considering the Scheme was unnecessary and dispensed with such meetings. The decision is recorded as an order dispensing the meetings of equity shareholders in the terms set out by the Tribunal. [Paras 7]

Meetings of equity shareholders dispensed with as all shareholders have given consent by affidavit.

No requirement for creditors' meetings where auditors certify NIL secured and unsecured creditors - auditor's certificate of NIL creditors - No meetings of secured creditors or unsecured creditors are required because auditors' certificates verify that there are NIL creditors for the Applicant companies. - HELD THAT: - The applicants produced auditors' certificates verifying that both secured and unsecured creditors are NIL as on the relevant verification date. The Tribunal accepted the auditors' verification and concluded that there was no necessity to convene meetings of secured or unsecured creditors for the purpose of approving the Scheme. Accordingly, the Tribunal recorded that no creditors' meetings are required. [Paras 5, 7]

No meetings of secured or unsecured creditors to be held as auditors certify NIL creditors.

Service under Section 230(5) of the Companies Act, 2013 - filing of affidavit proving service and compliance - Notice under Section 230(5) of the Companies Act, 2013 along with the Scheme and accompanying documents to be served on specified authorities, and applicants to file an affidavit proving service and compliance with directions. - HELD THAT: - Although meetings were dispensed with or found unnecessary, statutory notice requirements remain. The Tribunal directed that the notice in the prescribed form, together with the Scheme and statement, be served on the Regional Director (Eastern Region), the Registrar of Companies, the Official Liquidator at the High Court, the Income Tax Department having jurisdiction, and the Reserve Bank of India by hand, post or email within two weeks. The notice must specify the period for filing representations and be sent in accordance with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The applicants were ordered to file an affidavit proving service and compliance with these directions. [Paras 8, 9]

Directed service of notice and documents under Section 230(5) on specified authorities and directed applicants to file affidavit proving service and compliance.

Final Conclusion: The Tribunal allowed the application: shareholders' meetings were dispensed with on account of unanimous affidavits of consent; no meetings of secured or unsecured creditors were required as auditors certified NIL creditors; the Scheme and accompanying documents are to be served on specified statutory authorities under Section 230(5) and the applicants must file affidavits proving compliance. The Company Application (CAA) No. 90/KB/2021 is disposed of accordingly.

Sale of the corporate debtor as a going concern - closure of liquidation process where corporate debtor is sold as a going concern - consistency of regulations with the Insolvency and Bankruptcy Code - power of the Insolvency and Bankruptcy Board of India to frame regulations - liquidation as a last resort and maximisation of value of assets

Sale of the corporate debtor as a going concern - closure of liquidation process where corporate debtor is sold as a going concern - Liquidator is authorised to sell the corporate debtor or its business as a going concern under Regulation 32 (read with Regulations 32A and 45(3)) of the Liquidation Process Regulations, 2016. - HELD THAT: - The Tribunal held that Regulations 32(e) and 32(f) expressly provide for sale of the corporate debtor or its business as a going concern and that Regulations 32A and 45(3), inserted subsequently, define the process for such sale and for seeking closure of the liquidation process where the corporate debtor is sold as a going concern. The agenda, discussion paper and legislative history reproduced in the judgment explain that sale as a going concern in liquidation is intended to preserve employment, maximise value and prevent premature corporate death, and that the liquidator may, where he considers such sale will maximise value, endeavour to sell under clauses (e) or (f). The Tribunal concluded that the liquidator in the present case followed Regulation 32A and the closure route under Regulation 45(3)(a) was available and properly invoked. [Paras 16, 22, 25, 28]

The sale of the corporate debtor as a going concern carried out by the liquidator was authorised by the Regulations and validly undertaken.

Consistency of regulations with the Insolvency and Bankruptcy Code - power of the Insolvency and Bankruptcy Board of India to frame regulations - The Adjudicating Authority erred in concluding that Regulation 39C of the CIRP Regulations and Regulations 32A and 45(3) of the Liquidation Process Regulations are inconsistent with Section 54 of the Code. - HELD THAT: - The Tribunal observed that Section 240 empowers the Board to make regulations consistent with the Code to carry out its provisions, and that Regulations 39C, 32A and 45(3) were framed to further the objectives of the Code - maximisation of value, promotion of entrepreneurship and preservation of employment. The Tribunal accepted the IBBI's explanation and background material showing the need for a framework to assess and implement sale as a going concern and held that there is nothing in the Code which precludes closure of liquidation proceedings where the corporate debtor survives by being sold as a going concern; treating dissolution as the only consequence would undermine the Code's objectives. [Paras 9, 10, 25, 28]

Regulation 39C and Regulations 32A and 45(3) are consistent with the Code and not repugnant to Section 54.

Liquidation as a last resort and maximisation of value of assets - sale of the corporate debtor as a going concern - The Adjudicating Authority's interpretation of the Code and the Liquidation Process Regulations was contrary to the scope and spirit of the Code and amounted to exceeding its jurisdiction. - HELD THAT: - Relying on Supreme Court authorities and the Code's preamble, the Tribunal emphasised that liquidation is to be a last resort and that every plausible effort should be made to revive a corporate debtor as a going concern. The Adjudicating Authority's broad observations rejecting the regulatory framework and characterising the Regulations as an attempt to rewrite the Code were found to be misplaced; the Tribunal held that the Adjudicating Authority can examine compliance with the Code and Regulations but cannot invalidate regulations made under the delegated power. In the present case the Tribunal concluded that the Adjudicating Authority travelled beyond its remit and misapplied the law. [Paras 6, 8, 28, 29]

The Adjudicating Authority erred in its interpretation and exceeded its jurisdiction; its order dismissing the liquidator's application is set aside.

Final Conclusion: The appeal is allowed. The Tribunal held that the liquidator was authorised to sell the corporate debtor or its business as a going concern under Regulations 32, 32A and 45(3); those regulations are consistent with the Code and framed within IBBI's powers; and the Adjudicating Authority erred in dismissing the liquidator's application and in making observations beyond its jurisdiction. The impugned order is set aside.

Corporate Insolvency Resolution Process - Operational Creditor's claim and default - Service of demand notice under section 8 - Compliance with Section 9(3)(b) and 9(3)(c) - Admission of Section 9 application - Moratorium under Section 14 - Public announcement and claims submission under Section 15 - Appointment of Interim Resolution Professional

Admission of Section 9 application - Operational Creditor's claim and default - The application under Section 9 was admitted and CIRP initiated against the Corporate Debtor on the basis of an established operational debt and default. - HELD THAT: - The Tribunal found from the pleadings and annexures that an outstanding sum was due from the Corporate Debtor to the Operational Creditor and that the date of default was pleaded as 7th March, 2019. The Operational Creditor filed the demand notice, annexed invoices, ledger entries and bank statements, and the Corporate Debtor had not raised any pre-notice dispute; the Corporate Debtor's averments of cash crunch were treated as admissions of inability to pay rather than a bona fide dispute. On this material the Adjudicating Authority was satisfied that a case for initiation of the Corporate Insolvency Resolution Process had been made out and accordingly admitted the petition under Section 9. [Paras 18, 20]

Application under Section 9 admitted and CIRP initiated against the Corporate Debtor.

Service of demand notice under section 8 - The demand notice under Section 8 was validly sent and served and no reply was received within the stipulated period. - HELD THAT: - The Operational Creditor produced the demand notice dated 9th August, 2019 and speed post acknowledgements showing delivery on 14th August, 2019, together with an affidavit that no reply was received within the period required by the Code. The Tribunal relied on this material to conclude that the statutory precondition of service and non-response was satisfied. [Paras 4, 8, 18]

Demand notice was duly served and remained unanswered within the statutory period.

Compliance with Section 9(3)(b) and 9(3)(c) - The application complied with the requirements of Section 9(3)(b) and 9(3)(c) and was complete for admission. - HELD THAT: - The Tribunal observed that the Operational Creditor had filed the affidavit required by Section 9(3)(b) and had furnished the prescribed application fee and documentary material as mandated by Section 9(3)(c) and the Rules. On this basis the Adjudicating Authority held the petition to be complete and in conformity with the statutory requirements for filing under Section 9. [Paras 8, 19]

Application found to be in compliance with Sections 9(3)(b) and 9(3)(c) and complete for adjudication.

Moratorium under Section 14 - Public announcement and claims submission under Section 15 - A moratorium was declared and directions were given for public announcement and submission of claims in accordance with the Code. - HELD THAT: - Upon admission of the Section 9 petition the Tribunal declared the statutory moratorium and stated the prohibitions and effects contained in Section 14. The Interim Resolution Professional was directed to cause the public announcement and invite claims under Section 15, and the Tribunal elaborated the moratorium's temporal operation and exceptions consistent with the Code's provisions. [Paras 20]

Statutory moratorium declared; IRP directed to make public announcement and call for claims.

Appointment of Interim Resolution Professional - An Interim Resolution Professional was appointed and procedural directions were issued including convening the Committee of Creditors and timelines for progress. - HELD THAT: - The Tribunal appointed the proposed Insolvency Resolution Professional as Interim Resolution Professional subject to written consent and directed him to ascertain creditors' particulars, convene the Committee of Creditors and pursue resolution steps within the statutory timeframes. The Operational Creditor was directed to deposit an initial amount for IRP's costs and the IRP was given 105 days from the insolvency commencement date to convene the CoC and identify prospective resolution applicants.

IRP appointed and directed to convene CoC and carry forward CIRP proceedings with specified timelines and interim financial directions.

Final Conclusion: The Tribunal admitted the Section 9 petition, initiated the Corporate Insolvency Resolution Process against the Corporate Debtor, declared the moratorium, directed public announcement and claims submission, appointed an Interim Resolution Professional with specified directions and timelines, and ordered procedural communications and a progress listing.

E-auction cancellation - Liquidator's discretion - Liquidation Process Regulations - schedule 1 of the Liquidation Process (auction procedure) - regulation 33(3) - collusion ground for withholding sale - contractual clause cannot override statutory code

E-auction cancellation - Liquidator's discretion - schedule 1 of the Liquidation Process (auction procedure) - regulation 33(3) - collusion ground for withholding sale - contractual clause cannot override statutory code - Whether the Liquidator was justified in cancelling the e-auction after the auction concluded and the highest bidder was identified. - HELD THAT: - The Adjudicating Authority held that the statutory auction procedure prescribed by schedule 1 of the Liquidation Process Regulations governs the conduct and conclusion of the e-auction. Sub para (12) of clause (1) of schedule 1 contemplates that on close of the auction the highest bidder shall be invited to provide the balance sale consideration within the prescribed period and does not confer on the Liquidator a roving discretion to cancel the auction once the highest bidder is identified. Regulation 33(3) of the Liquidation Regulations permits the Liquidator to withhold proceeding with a sale only if there is reason to believe in collusion between parties, in which case a report to the Adjudicating Authority is mandated. In the present matter there was no material of collusion or other statutory ground to justify cancellation. A contractual clause in the e auction process document purporting to give the Liquidator an absolute right to cancel (clause 3(k)) cannot be read to override the Code and the Regulations which constitute a complete statutory code; reliance on earlier Company Law practice under the Companies Act, 1956 was inapposite because that regime involved court vetting and confirmation which is absent under the Code. Having found no statutory basis or supporting material for the cancellation, the Authority directed that the successful bidder be invited to deposit the balance sale consideration within the time specified in the e auction notice and disposed of the application accordingly. [Paras 10, 11, 12, 13, 14]

The Liquidator's cancellation of the e auction was unjustified; the sale cancellation was set aside and the Liquidator was directed to require the successful bidder to deposit the balance sale consideration within the time specified in the e auction notice.

Final Conclusion: I.A. disposed of; directions issued to the Liquidator to communicate to the successful bidder to deposit the balance sale consideration within the time specified in the e auction notice and to proceed in accordance with the Liquidation Process Regulations.

Remittance to corporate debtor's account - operation of bank account subject to prior remittance - directions to bank for immediate compliance - interim restraint on utilisation pending adjudication of related applications - implementation of Supreme Court's liberty to seek NCLT directions

Remittance to corporate debtor's account - directions to bank for immediate compliance - ICICI Bank, Chandrashekharpur Branch, Bhubneswar to remit Rs. 32.50 lakhs into the Corporate Debtor's account immediately. - HELD THAT: - The Tribunal recorded the Supreme Court's directions which afforded the petitioner liberty to prefer an application before the NCLT and directed the NCLT to pass appropriate directions. Having heard the parties and noting that the Respondent represents inability to arrange funds directly because sums are held with the ICICI Bank, the Tribunal directed the ICICI Bank, Chandrashekharpur Branch, Bhubneswar to remit the specified amount to the Corporate Debtor's account immediately and to enable compliance with the Supreme Court's order. This direction was made taking into account the practical difficulty faced by the Respondent MSME in arranging the amount and the Supreme Court's modification permitting operation of the account subject to first remitting the amount into the Corporate Debtor's account. [Paras 6]

Bank directed to remit the amount to the Corporate Debtor's account immediately.

Operation of bank account subject to prior remittance - implementation of Supreme Court's liberty to seek NCLT directions - Respondent to be allowed to operate the account after the remittance is effected, consistent with the Supreme Court's order. - HELD THAT: - Relying on the Supreme Court's pronouncement that the Respondent may operate its account only after remitting the amount into the Corporate Debtor's account and that the order does not preclude the Respondent from pursuing its claims in other fora, the Tribunal provided that once the bank remits the amount the said account shall be made free for the Respondent to operate. The direction aligns the local compliance mechanism with the Supreme Court's conditional modification of the impugned order. [Paras 6]

Respondent permitted to operate the account after the remittance is made.

Interim restraint on utilisation pending adjudication of related applications - directions to bank for immediate compliance - The Resolution Professional / Corporate Debtor shall not utilise the remitted amount until further orders of this Bench while related IAs are pending; Respondent to file an affidavit of compliance by the specified date. - HELD THAT: - Although the Tribunal ordered immediate remittance and subsequent operation of the account by the Respondent, it concurrently directed that the petitioner (the Resolution Professional) shall not utilise the remitted funds until further instructions because interlocutory applications relating to the transaction (IA Nos. 34 of 2021 and 30 of 2021) remain pending before the Bench. To ensure and record compliance, the Respondent was directed to send a copy of the order to the ICICI Bank and to file an affidavit confirming remittance on or before the date fixed by the Tribunal. These measures balance enforcement of the Supreme Court's direction with preservation of the contested funds for adjudication of pending applications. [Paras 7]

Remitted funds to be preserved (not utilised) pending further orders; compliance affidavit to be filed by the Respondent by the stipulated date.

Directions to bank for immediate compliance - The matter listed for further consideration before the Tribunal on the specified date. - HELD THAT: - In view of the Supreme Court listing and to monitor compliance with its directions and the Tribunal's order, the Bench fixed the next listing date. This ensures supervision of compliance and any further adjudication of the pending interlocutory applications. [Paras 8]

Matter listed on the specified date for further consideration.

Final Conclusion: The Tribunal, acting pursuant to the Supreme Court's liberty to seek NCLT directions, directed the ICICI Bank to remit Rs. 32.50 lakhs immediately into the Corporate Debtor's account, allowed the Respondent to operate the account after such remittance, restrained utilisation of the remitted funds pending disposal of listed interlocutory applications, required a compliance affidavit by the Respondent, and listed the matter for further consideration.

Liberty to file application - non-compliance with earlier judicial directions - power of the NCLT to pass appropriate directions

Non-compliance with earlier judicial directions - liberty to file application - power of the NCLT to pass appropriate directions - Petitioner's remedy for alleged non-compliance with the Court's earlier directions was remitted to the NCLT, Gauhati, with liberty to file an application. - HELD THAT: - The Supreme Court noted the petitioner's grievance that directions contained in the earlier judgment dated 22.04.2021 had not been complied with and that a specified amount had not been made over. Rather than adjudicating the compliance itself, the Court granted the petitioner liberty to move the NCLT, Gauhati, for appropriate relief and directed the NCLT to consider and pass such directions as early as possible. The Court prescribed a seven-day period for filing the application before the NCLT.

Liberty granted to the petitioner to file an application within seven days before the NCLT, Gauhati, which is directed to pass appropriate directions as early as possible; matter listed on 20.08.2021.

Final Conclusion: The Supreme Court declined to decide compliance itself and remitted the grievance to the NCLT, Gauhati, granting the petitioner seven days' liberty to apply and directing the NCLT to pass appropriate directions at the earliest; the matter was listed for further consideration on 20.08.2021.

Payment under protest - characterisation as pre-deposit versus deposit - entitlement to interest for retention of amounts without authority of law - interest on delayed refund - finality of appellate tribunal's order

Payment under protest - characterisation as pre-deposit versus deposit - entitlement to interest for retention of amounts without authority of law - interest on delayed refund - Whether the appellant is entitled to interest on amounts paid under protest during investigation, and if so at what rate and for what period - HELD THAT: - The Tribunal found that the amounts were paid by the appellant as service tax under protest during the course of investigation and that this fact was not disputed. Having earlier held that the appellant was not liable to pay service tax and with that order attaining finality, the amounts retained by the Revenue were held to have been kept without authority of law. The Court reasoned that monies paid under protest in such circumstances do not remain as mere pre-deposit or admitted tax but constitute a deposit which, if retained without legal authority, gives rise to a claim for interest from the date of payment until actual realisation. Applying that principle, the Tribunal concluded that the impugned decision granting only a portion of the claimed interest (10%) was unsustainable and that the appellant was entitled to interest on the deposited amount from its payment until realization at the rate of 12% per annum.

Appellant entitled to interest on amount paid under protest from date of deposit till realization at 12% p.a.; impugned order granting 10% interest set aside and appeal allowed with consequential relief.

Final Conclusion: The appeal is allowed: amounts paid under protest during investigation, which were ultimately held not payable, attract interest from date of deposit until realization at 12% per annum; the order of the Commissioner (Appeals) granting only 10% interest is set aside and consequential relief follows.

Admissibility of CENVAT credit on input services - Place of removal for exports - Interpretation of "input service" and Ejusdem generis - Sales promotion including commission on export sales - Financial/banking services as input services - Courier services as input services - Aviation/travel services and temporal scope prior to amendment - Limitation, extended period and penalty

Place of removal for exports - Admissibility of CENVAT credit on input services - CENVAT credit is admissible for services received for export up to the point of removal (load port/depot) where sale/transfer to carrier takes place. - HELD THAT: - The Tribunal applied the Board Circular No. 999/6/2015-CX and the Larger Bench decision in Honest Biovet to hold that where, in export clearances, property passes to the buyer on handing over to the carrier or at the port/shipping point, the 'place of removal' extends up to the loading/port/depot. Services received and taxed for export up to that point, such as Custom House Agent (clearing) charges, Material Handling Charges and Terminal Handling Charges, qualify as 'input services' under Rule 2(1) of the CENVAT Credit Rules, 2004 and are therefore admissible as CENVAT credit. [Paras 4]

CENVAT credit allowed for Clearing Charges (CHA), Material Handling Charges and Terminal Handling Charges as input services up to the place of removal (load port/depot).

Sales promotion including commission on export sales - Admissibility of CENVAT credit on input services - Commission paid to foreign export agents for promoting exports constitutes 'sales promotion' and is an input service eligible for CENVAT credit. - HELD THAT: - Relying on High Court and Tribunal authorities and on the Explanation inserted in Rule 2(l) by Notification No.2/2016 CE(NT) (construed purposively and retrospectively where beneficial), the Tribunal found commission on export sales to fall within the ambit of 'sales promotion' in Rule 2(1) and therefore to be an input service. The Tribunal treated precedents and the Explanation as supporting retrospective application to benefit the assessee for the period in question. [Paras 4]

CENVAT credit allowed for Commission on Export Sales as input service (sales promotion).

Financial/banking services as input services - Admissibility of CENVAT credit on input services - Bank commission/financial charges are input services eligible for CENVAT credit. - HELD THAT: - Following Tribunal precedent (Sundaram Clayton) and on the basis that finance is a necessary input for manufacturing activity, the Tribunal held that banking/commission charges used in the course of business qualify as 'activities relating to business' and thus as input services under Rule 2(1). The Tribunal therefore allowed CENVAT credit on Service Tax paid on bank commission charges. [Paras 4]

CENVAT credit allowed for Bank Commission Charges.

Courier services as input services - Admissibility of CENVAT credit on input services - Courier services used for business activities are input services and eligible for CENVAT credit. - HELD THAT: - Relying on Tribunal precedent (Apar Industries) and subsequent High Court upholding, the Tribunal observed that courier services are used in relation to various business and manufacturing activities (orders, marketing, dispatch instructions, statutory filings etc.) and thus fall within the definition of 'input service' under Rule 2(1). [Paras 4]

CENVAT credit allowed for Courier Services.

Aviation/travel services and temporal scope prior to amendment - Admissibility of CENVAT credit on input services - Aviation/travel charges for travel of senior executives/employees do not qualify as input services for the pre 2011 definition and CENVAT credit is not admissible for the period under consideration. - HELD THAT: - The Tribunal examined the nature of claimed aviation/travel expenses and compared relevant authorities, noting that many supportive decisions relate to the post amendment widened definition (post 2011). For the period November 2005 to 2011 (pre amendment), the definition required use 'in or in relation to the manufacture of final products and clearance up to the place of removal', and the Tribunal found the claimed air travel expenses did not meet that test. Consequently, CENVAT credit for aviation/travel services claimed for that period was disallowed. [Paras 4]

CENVAT credit disallowed for Aviation Services (travel of executives) for the period in question.

Interpretation of "input service" and Ejusdem generis - The examples in the definition of 'activities relating to business' are to be read ejusdem generis; only services of the same genus as the listed examples qualify as input services beyond the core tests. - HELD THAT: - The Tribunal (following the Commissioner's reasoning recited in the record) accepted that the definition is inclusive but that the use of examples introduced a genus which must be respected. Applying ejusdem generis, services not akin to the examples (such as certain aviation services) are less likely to qualify unless they satisfy the overall conditions of being used by the manufacturer in or in relation to manufacture or clearance up to the place of removal. The Tribunal nonetheless allowed credit where services objectively met the place-of-removal/use tests (e.g., CHA, terminal handling, banking, courier, commission for sales promotion). [Paras 4, 16]

Ejusdem generis limits the category of "activities relating to business", but services meeting the combined statutory tests (use by manufacturer and relation to manufacture/clearance up to place of removal) were admitted as input services; others (notably aviation/travel here) were rejected for the period considered.

Limitation, extended period and penalty - Extended period of limitation was not invokable and penalties equivalent to the confirmed demand could not be sustained. - HELD THAT: - The Tribunal found no suppression warranting extended limitation for most demands and observed that, since most demands were set aside on merits, the question of extended limitation became infructuous. As there was no case for invoking extended limitation, penalties imposed equal to the demand could not be upheld, and the Tribunal relied on Supreme Court authority to the effect that once extended period is not attracted, corresponding penalties are not sustainable. [Paras 4]

Extended limitation not attracted; penalties equivalent to demands set aside.

Final Conclusion: Appeals partly allowed: CENVAT credit allowed for Custom House Agent (clearing) charges, Material Handling Charges, Terminal Handling Charges, Commission on export sales, Bank Commission Charges and Courier Services; CENVAT credit disallowed for Aviation/travel services for the period November 2005 to 2011; all demands and penalties except the disallowed aviation service demand are set aside; penalties quashed.

Condonation of delay - limitation - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - amount in arrears - Section 35 of the Central Excise Act - limitation on condonation beyond 90 days - remand for adjudication on merits - lenient approach to limitation/diligence and sufficient cause

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - amount in arrears - condonation of delay - lenient approach to limitation/diligence and sufficient cause - Whether the time spent by the appellant in exploring and applying under the SVLDRS, notified during the limitation period, justified treating the subsequent appeal as filed within time. - HELD THAT: - The SVLDRS was notified on 01.09.2019, before the expiry of the 60-day period available to the appellant to file an appeal against the Order-in-Original of 31.7.2019; the Scheme expressly contemplates settlement of confirmed demands which are "amount in arrears" where no appeal had been filed. The tribunal noted that the appellant applied under the Scheme and pursued the remedy; departmental delay and rejection of the Scheme application occurred before the appellant filed the appeal. Reliance was placed on the principle that limitation should be viewed leniently and that satisfactory explanation and diligence, not mere lapse, govern condonation. Given these facts-notification of the Scheme within the limitation period, the appellant's prompt engagement with the Scheme, and the department's processing time-the tribunal held that the appellant had a sufficient and reasonable cause for not filing the appeal immediately and that technical invocation of limitation would be inequitable.

The appellant's conduct in pursuing the SVLDRS during the limitation period justified treating the appeal as having been filed within time and warrants adjudication on merits.

Section 35 of the Central Excise Act - limitation on condonation beyond 90 days - condonation of delay - remand for adjudication on merits - Whether the statutory limit on condonation under Section 35 precluded relief and whether the Commissioner (Appeals) erred in rejecting the appeal as time-barred. - HELD THAT: - The tribunal observed the statutory mandate that the Commissioner (Appeals) cannot condone delay beyond 30 days over and above the initial 60 days (i.e., beyond 90 days). Notwithstanding this statutory constraint, the tribunal found that the facts warranted hearing the appeal on merits: the Scheme's notification fell within the initial limitation window, the appellant had pursued the Scheme diligently, and the Department's processing delayed the appellant's resort to the ordinary appellate remedy. Balancing the statutory restriction against the equities of the case and established authorities favouring leniency where the appellant has been diligent, the tribunal concluded that the Commissioner (Appeals) should be directed to treat the appeal as timely and decide it on merits.

Although Section 35 limits the Commissioner (Appeals)'s power to condone delay beyond 90 days, the appeal is remanded and the Commissioner (Appeals) is directed to consider the appeal as within time and adjudicate it on merits.

Final Conclusion: The appeal is allowed by way of remand: the Tribunal treats the appellant's appeal as timely in view of the SVLDRS notification and the appellant's diligence, and directs the Commissioner (Appeals) to entertain and adjudicate the appeal on merits.

Application of the fourth proviso to Section 5(1) of the Orissa Sales Tax Act - sale of containers sold with goods but not charged separately - exemption of goods and consequent tax treatment of containers - rate of tax on containers sold with tax-exempt goods

Application of the fourth proviso to Section 5(1) of the Orissa Sales Tax Act - sale of containers sold with goods but not charged separately - Sale of tins (containers) used for packaging tax-exempt oil is exigible to sales tax under the fourth proviso to Section 5(1) of the OST Act when the container price is not separately charged. - HELD THAT: - The Court held that the fourth proviso to Section 5(1) of the OST Act governs the taxability of containers sold with goods when not separately charged. Where the commodity (oil) is itself exempt, the proviso requires that containers of taxable goods sold with such goods but not charged separately be subject to tax at the same rate as the goods contained therein. Applying that principle, the tins used for packaging exempt oil could not be treated as independently taxable at a positive rate because the underlying goods were exempt. The Assessing Officer's assumption that omission of a separate container price warranted presumption of taxable sale was rejected where no separate sale price appeared in invoices and the statutory proviso dictated the result. [Paras 10, 11]

The tins are not exigible to sales tax under the fourth proviso when sold with exempt oil and not charged separately; the proviso applies to the facts.

Exemption of goods and consequent tax treatment of containers - sale of containers sold with goods but not charged separately - Whether the fourth proviso to Section 5(1) applies to containers of exempt goods sold with those goods but not separately charged. - HELD THAT: - The Court answered this in the affirmative for the assessee. It found that earlier Supreme Court decisions relied upon by the Assessing Officer supported treating the container in accordance with the tax status of the goods contained. The Tribunal's contrary conclusion - that merging consideration does not make the container an integral part of the sale of oil - was rejected as a misapplication of the proviso. Because the oil was exempt, the proviso operated to make the container correspondingly exempt when its price was not separately shown. [Paras 11]

The fourth proviso to Section 5(1) applies to containers of exempt goods sold with those goods but not charged separately; applicability is in favour of the assessee.

Rate of tax on containers sold with tax-exempt goods - exemption of goods and consequent tax treatment of containers - Rate of tax applicable to the containers when sold with exempt oil and not charged separately. - HELD THAT: - Since the tins were sold with oil that was exempt from sales tax and the proviso prescribes that the container shall be subject to tax at the same rate as the goods contained therein, the appropriate rate for the container is the nil rate applicable to the exempt oil. The Court therefore held that no positive rate of tax could be levied on the tins in the circumstances of this case. [Paras 11]

Nil rate of tax applies to the tins sold with exempt oil when not separately charged.

Final Conclusion: The Tribunal's order is set aside; the fourth proviso to Section 5(1) of the OST Act applies so that tins sold with tax-exempt oil and not separately charged are exempt (nil rate), and the revision petition is allowed in favour of the assessee for the year 1993-94.

Input tax credit - raw material - input / consumable used in manufacturing - essentiality test for consumable ingredients as raw material - raw material versus fuel distinction - intermediate product absorption test (ash/ash-content forming part of clinker)

Raw material - input / consumable used in manufacturing - essentiality test for consumable ingredients as raw material - Whether coal used in the manufacture of cement qualifies as an input/raw material entitling the assessee to input tax credit under the OET Act for the years 1999-2000 and 2000-2001. - HELD THAT: - The Court applied the test articulated by the Supreme Court in Collector of Central Excise v. Ballarpur Industries Ltd. that ingredients which are burnt up or consumed may nonetheless qualify as raw material if they are indispensable to the process and without their presence the end-product could not be produced. The tribunal and lower authorities had treated coal as mere fuel, distinguishing coal from coal ash which enters the clinker and ultimately the cement. The High Court noted that in the manufacture of cement coal is used such that when burnt it produces ash which is absorbed into clinker - an intermediate product - and that clinker cannot be produced without coal and cement cannot be produced without clinker. Reliance was placed on this Court's precedents which recognise consumables and intermediates integrally connected to manufacture as inputs (see National Aluminum Company Limited v. Deputy Commissioner of Commercial Taxes; J.K. Cotton Spinning & Weaving Mills Co. Ltd; Reliance Industries Ltd.). Applying these principles, the Court concluded that coal, insofar as it is consumed in the manufacture and its ash forms part of clinker which is incorporated into cement, is an input/raw material within the meaning of Section 2(25) of the OET Act and therefore qualifies for input tax credit.

Coal used in the process of manufacture of cement is an input/raw material within the meaning of the OET Act and entitles the petitioner to input tax credit for the years in question.

Raw material versus fuel distinction - intermediate product absorption test (ash/ash-content forming part of clinker) - essentiality test for consumable ingredients as raw material - Whether the Tribunal erred in holding that coal could not be treated as a raw material vis-a -vis the finished product (cement) and whether that conclusion was contrary to the principle in Ballarpur Industries Ltd. - HELD THAT: - The Court examined the Tribunal's conclusion that coal is only a fuel and not a raw material, and held that such a conclusion ignored the essentiality test from Collector of Central Excise v. Ballarpur Industries Ltd.. The Tribunal's differentiation between coal and coal ash as distinct taxable commodities did not address that coal, though consumed, is indispensable to produce clinker - an intermediate which enters the composition of cement. The High Court observed that precedents, including this Court's decisions, treat consumables and intermediates integrally connected with manufacture as falling within the expression 'in the manufacture of goods'. On that basis the Tribunal's finding was held to be contrary to the legal principle in Ballarpur and was set aside.

The Tribunal's conclusion that coal could not be treated as a raw material vis-a -vis cement was erroneous and contrary to the principle in Ballarpur Industries Ltd., and is set aside.

Final Conclusion: The impugned orders of the Tribunal, the ACST and the STO are set aside; the petitions are allowed, and the petitioner is entitled to input tax credit on coal used in manufacture of cement for the tax periods 1999-2000 and 2000-2001.

Exhaustion of statutory appellate remedy - principles of natural justice - appellate authority as final fact-finding forum - judicial review under Article 226 - opportunity of hearing - condonation of delay - adjudication on evidence and original records

Exhaustion of statutory appellate remedy - judicial review under Article 226 - Permissibility of entertaining writ petition without first availing the statutory appellate remedy. - HELD THAT: - The High Court held that writ jurisdiction is not to be routinely exercised in lieu of the statutory appellate remedy. Absent an imminent threat or gross injustice, mere allegation of violation of the principles of natural justice does not justify bypassing the appellate forum. The Court emphasised that appellate authorities constituted under the statute are the appropriate and final fact-finding fora, and their findings based on original records are material for judicial review under Article 226. Consequently, the petitioner was directed to resort to the prescribed appellate remedy; entertaining the writ before exhausting that remedy was declined. [Paras 4, 7, 8, 9, 10]

Writ petition not entertained for adjudication of merits; petitioner must prefer statutory appeal.

Opportunity of hearing - adjudication on evidence and original records - Whether the petitioner was denied opportunity to put forth its case in the impugned assessment order. - HELD THAT: - The Court examined the impugned order and record and found that notice was issued, a written reply was filed, and a personal hearing was afforded; original invoices and returns were produced at the personal hearing. While the petitioner questioned the sufficiency of the opportunity, the High Court observed that the record did not show complete denial of hearing and that issues such as movement of goods and mode of payment require adjudication by the competent authority on original documents and evidence rather than by writ adjudication. [Paras 2, 3, 5, 6]

Opportunity was afforded; sufficiency of that opportunity and disputed factual issues are to be examined in appeal by the appellate authority.

Condonation of delay - appellate authority as final fact-finding forum - appellate adjudication on merits - Relief by way of directions and treatment of delay in filing the statutory appeal. - HELD THAT: - In view of declining to decide the merits on writ, the Court granted liberty to the petitioner to file the prescribed appeal within a limited period and directed the appellate authority to condone any delay occasioned by pendency of the writ and to dispose of the appeal on merits after affording opportunity to the petitioner, as expeditiously as possible. The direction preserves the petitioner's right to appellate adjudication and recognises the appellate forum's competence to examine original records and evidence. [Paras 11]

Petitioner permitted to file appeal within four weeks; appellate authority to condone delay if any and decide the appeal on merits expeditiously.

Final Conclusion: Writ petition dismissed without adjudication on merits for failure to exhaust the statutory appellate remedy; petitioner granted liberty to prefer the prescribed appeal within four weeks and the appellate authority directed to condone delay, if any, and decide the appeal on merits after affording opportunity.

Quashing of criminal proceedings under inherent powers of the High Court - summary consideration of delay and laches in seeking relief under Section 482 CrPC - exercise of Sections 200 and 202 CrPC in summoning accused in proceedings under Section 138 of the Negotiable Instruments Act - adjudication of delay in filing a complaint under Section 138 of the Negotiable Instruments Act to be considered at trial

Quashing of criminal proceedings under inherent powers of the High Court - summary consideration of delay and laches in seeking relief under Section 482 CrPC - adjudication of delay in filing a complaint under Section 138 of the Negotiable Instruments Act to be considered at trial - Application under Section 482 CrPC seeking quashing of the summoning order dated 18.12.2014 and the criminal proceedings under Section 138 NI Act was dismissed. - HELD THAT: - The High Court examined the applicant's plea for quashing the summoning order passed after the Magistrate's enquiry under Sections 200 and 202 CrPC. The court noted that the applicant had not shown proper explanation for the laches in filing the present petition and that summons had not earlier been challenged. It observed that the question of delay in lodging the complaint under Section 138 of the Negotiable Instruments Act is a matter which can be suitably considered by the trial court during the course of trial. In view of the unexplained delay in invoking the High Court's inherent jurisdiction and the availability of trial as the appropriate forum to examine the contention of limitation or delay, the impugned summoning order was held to be just, proper and legal and did not merit interference at that belated stage.

Petition under Section 482 CrPC dismissed; impugned summoning order upheld and delay/contention of limitation left open for trial court's adjudication.

Final Conclusion: The High Court declined to exercise inherent jurisdiction to quash the summoning order impugned, dismissing the belated Section 482 CrPC petition for lack of satisfactory explanation for delay and leaving the question of delay in filing the complaint under Section 138 NI Act to be considered by the trial court during trial.