TaxTMI Updates e-Newsletter
Sep 01,2021

Composite supply - Principal supply - Determination of tax on composite or mixed supply - Classification of services by SAC - Approbate and reprobate

Composite supply - Principal supply - Approbate and reprobate - Whether the 'Other Charges' form part of a composite supply with construction services (SAC 9954) or are independent supplies - HELD THAT: - The Authority examined the sale agreement and found that the consideration for the construction of the flat and the amounts labelled as 'Other Charges' are stated separately in the agreement and that the agreement reserves to the developer rights over common areas and amenities until transfer to an organization or apex body. The applicant paid stamp duty only on the basic flat consideration and not on the Other Charges, which indicates the applicant treated those amounts separately for stamp purposes; the Authority applied the principle that a party cannot approbate and reprobate and observed this inconsistent treatment undermines the claim that Other Charges form part of the principal construction supply. The agreement clauses (including reservation of rights, absence of creation of perpetual rights in favour of purchasers, and separate charging of amounts) demonstrate that the Other Charges relate to supplies distinct from the construction service, and therefore are not "naturally bundled and supplied in conjunction with" the main construction service in the ordinary course of business. The Authority rejected the applicant's contention that the construction service is the predominant element making the Other Charges ancillary, and held that the multiple supplies are independent and taxable separately. [Paras 5]

The Other Charges do not form part of a composite supply with construction services and are not classifiable under SAC 9954 along with the main residential construction service.

Classification of services by SAC - Determination of tax on composite or mixed supply - The applicable GST classification and rate on the services underlying the Other Charges and whether abatement (1/3rd land value deduction) applies to those charges - HELD THAT: - Having held that the Other Charges constitute independent supplies, the Authority mapped the different Other Charges to their appropriate SAC groups and concluded they fall under services other than construction. Because they are separate supplies, the 1/3rd deduction (deemed land value abatement) available under Entry No.2 of Notification No.11/2017-CT(R) for construction services cannot be applied to the Other Charges. Consequently, the Other Charges are taxable under their respective SAC entries in Notification No.11/2017-CT(R) and, as mapped by the Authority, attract GST at 18%. The Authority also noted that some potential contentions (e.g., reimbursement for electrical/water deposits) were not specifically advanced by the applicant and therefore were not examined. [Paras 5]

The Other Charges are taxable as independent services under their respective SAC entries and are liable to GST at 18%; no 1/3rd abatement under Notification No.11/2017-CT(R) is allowable on these charges.

Final Conclusion: The Authority answered that the amounts collected as 'Other Charges' are not part of the construction service (SAC 9954) but are consideration for independent services classified under their respective SACs, and such Other Charges are taxable at 18% under Notification No.11/2017-CT(R); the applicant cannot claim the 1/3rd deduction on those Other Charges.

Services by way of renting of residential dwelling for use as residence - Services by a hotel, inn, guest house, club or campsite for residential or lodging purposes - Interpretation of the phrase 'residential dwelling' - CBIC Circular No. 32/06/2018-GST - treatment of hostel accommodation

Services by way of renting of residential dwelling for use as residence - Interpretation of the phrase 'residential dwelling' - Whether the applicant's hostel accommodation qualifies as 'renting of residential dwelling for use as residence' and is therefore exempt under Serial Number 12 of Notification No. 12/2017-C.T.(Rate). - HELD THAT: - The Authority analysed the factual features of the hostel - rooms allotted on a sharing basis to students, absence of individual kitchen facilities in allotted rooms, food provided through a mess, restrictions on family/guest stay, and tenure tied to the period of training - and contrasted these with commonly understood attributes of a residential dwelling (freedom to have family/guests, self-contained kitchen and amenities, tenant-like rights). On this basis the Authority found that the common parlance test for 'residential dwelling' is not satisfied by the hostel accommodation in the present facts. Reliance on cases and dictionary meanings was considered but the Authority emphasised the factual distinctions which lead to the conclusion that the service does not fall within the scope of Serial Number 12. [Paras 5]

The applicant's hostel accommodation does not qualify as 'renting of residential dwelling for use as residence' and Serial Number 12 of Notification No.12/2017-C.T.(Rate) is not applicable.

Services by a hotel, inn, guest house, club or campsite for residential or lodging purposes - CBIC Circular No. 32/06/2018-GST - treatment of hostel accommodation - Whether the applicant's hostel accommodation is exempt under Serial Number 14 of Notification No.12/2017-C.T.(Rate) (i.e., services by hotels/inns/guest houses/etc. for residential or lodging purposes where declared tariff/value per unit of accommodation is below Rs.1000 per day). - HELD THAT: - The Authority observed that Entry No. 14 is user based and covers services by establishments 'by whatever name called' for residential or lodging purposes if the declared tariff or value of a unit of accommodation is below the prescribed threshold. The term 'hostel' being omitted specifically does not preclude coverage because 'by whatever name called' captures such arrangements. The applicant charged a nominal lump sum which, when reckoned per student per day, is below the threshold of Rs.1000; the Authority further placed weight on the CBIC clarification (Circular No.32/06/2018-GST) which expressly treats hostel accommodation (where the declared tariff per unit is below the threshold) as falling under the Entry No.14 exemption. Having considered the factual material and the circular, the Authority held that the applicant's hostel service satisfies the conditions of Entry No.14 and is therefore exempt. [Paras 5]

The applicant's hostel accommodation is exempt under Serial Number 14 of Notification No.12/2017-C.T.(Rate) as the per unit/day value is below the specified threshold.

Final Conclusion: The Authority answered the reference in the affirmative: the hostel services provided by the applicant are exempt from GST, and the exemption is to be claimed under Serial Number 14 of Notification No.12/2017-C.T.(Rate).

Allowance of depreciation in computing income of a charitable trust under section 11(1)(a) - depreciation as a legitimate deduction on general commercial principles - non-exclusivity of section 32 for claiming depreciation - double benefit objection to depreciation where capital expenditure was applied under section 11 - entitlement to carry forward unabsorbed depreciation - prospective operation of amendment to section 11(6)

Allowance of depreciation in computing income of a charitable trust under section 11(1)(a) - depreciation as a legitimate deduction on general commercial principles - Normal depreciation is allowable in computing the income of a charitable trust while applying section 11(1)(a). - HELD THAT: - The Court followed the decision of the Hon'ble Supreme Court in CIT v. Rajasthan and Gujarati Charitable Foundation Poona, which held that normal depreciation may be treated as a legitimate deduction in computing the real income of a charitable assessee either on general commercial principles or under section 11(1)(a). The reasoning in those authorities establishes that income of a trust derived from assets must be computed on normal commercial lines and depreciation ought to be allowed notwithstanding that the capital expenditure was earlier treated as application of income. [Paras 4, 5]

Depreciation is allowable while computing income under section 11(1)(a) and the substantial question is answered in favour of the assessee.

Non-exclusivity of section 32 for claiming depreciation - depreciation as a legitimate deduction on general commercial principles - Depreciation is not confined to deduction under section 32 and may be allowed to a charitable trust even where section 32 relates to business or profession. - HELD THAT: - Relying on the Supreme Court's exposition of earlier High Court decisions, the Court accepted that section 32 is not the sole source for granting depreciation. Where income is computed under section 11, the absence of business profits regime does not preclude allowing normal depreciation when computing income of the trust from its assets; the computation follows commercial accounting principles rather than being restricted to the machinery of chapter on profits and gains of business. [Paras 4, 5]

The Tribunal's view that depreciation deduction falls only under the head 'profits and gains of business and profession' and is therefore unavailable to a charitable trust is rejected.

Double benefit objection to depreciation where capital expenditure was applied under section 11 - The contention that allowing depreciation results in a prohibited double benefit where capital expenditure was earlier treated as application of income is untenable. - HELD THAT: - The Court adopted the Supreme Court's reasoning rejecting the revenue's double benefit argument: treating capital expenditure as application of income in the year of acquisition does not preclude computing income from the assets in subsequent years after providing for depreciation. Prior allowance as application does not amount to a 100% write-off preventing depreciation in later years. [Paras 4, 5]

The double benefit objection does not bar allowance of depreciation to the charitable trust.

Entitlement to carry forward unabsorbed depreciation - Where depreciation is allowed to the assessee, the assessee is entitled to carry forward depreciation. - HELD THAT: - Following the Supreme Court's pronouncement that once depreciation is allowed it may be carried forward, the Court confirmed that the right to carry forward unabsorbed depreciation accrues to the assessee in such circumstances and the departmental pleas to the contrary are foreclosed. [Paras 4, 5]

Assessee is entitled to carry forward depreciation allowed while computing income under section 11.

Prospective operation of amendment to section 11(6) - Legislative amendment to section 11(6) effected by Finance Act No.2/2014 is prospective and does not affect the assessee's entitlement for earlier years. - HELD THAT: - The Court noted the legislative amendment made effective from Assessment Year 2015-2016 and recorded the view, as taken by other High Courts and acknowledged by the Supreme Court, that the amendment operates prospectively. Therefore, it does not disturb the settled law permitting depreciation for earlier assessment years. [Paras 4, 5]

The amendment to section 11(6) is prospective and does not negate the entitlement to depreciation for the assessment year in issue.

Final Conclusion: Appeal allowed; the substantial questions of law are answered in favour of the assessee in accordance with the Supreme Court precedent, permitting allowance and carry forward of normal depreciation while computing income under section 11(1)(a), and the legislative amendment to section 11(6) is prospective.

Refund or adjustment of amounts paid under a void declaration - declaration deemed never to have been made - Income Declaration Scheme, 2016 - Direct Tax Vivad Se Vishwas Act, 2020 - non refund proviso to Section 191 of the IDS - Article 265 - tax leviable only by authority of law

Declaration deemed never to have been made - refund or adjustment of amounts paid under a void declaration - non refund proviso to Section 191 of the IDS - Article 265 - tax leviable only by authority of law - Whether respondent could refuse to give credit/adjustment for an amount paid under the Income Declaration Scheme, 2016 (IDS) when the declarant's IDS declaration is treated as deemed never to have been made, and rely on Section 191 to forfeit the amount instead of refunding or adjusting it under the DTVSV Act. - HELD THAT: - The Court held that Section 187(3) of the IDS renders a declaration void (deemed never to have been made) where the declarant fails to pay the amounts within the time specified, and consequently the Scheme contemplates that such a declaration is non est. Where the declaration is non est, the Scheme contains no provision authorising the Revenue to retain amounts paid under that void declaration. Reliance on the non refund language in Section 191 (and the explanatory circular) cannot be invoked to justify retention in circumstances where the declaration itself is void, because retention in such case would lack statutory authority and would be contrary to the principle in Article 265 that tax must be levied and collected by authority of law. The Court applied the principle in Hemlatha Gargya and subsequent High Court authorities which, while recognising that the time limits for compliance in voluntary disclosure schemes are mandatory, nevertheless required Revenue to refund or adjust deposits made purportedly under a scheme but not in terms of it. On these grounds the Court concluded that respondent was obliged to give credit for the amount actually paid under the IDS in computing the liability under the DTVSV Act and to rectify the certificate (Form No.3) accordingly. The Court directed respondent to issue a revised Form No.3 giving such credit within two weeks of service of an authenticated copy of the order, and permitted the petitioner to make any balance payment in accordance with the revised Form No.3 within two weeks of its issuance. [Paras 16, 17]

Respondent must rectify Form No.3 issued under the DTVSV Act to give credit for the amount paid under the IDS and issue a fresh Form No.3 within two weeks of service of an authenticated copy of the order; petitioner to pay the balance in accordance with the revised Form No.3 within two weeks of its issuance.

Final Conclusion: Writ petition allowed in part: respondent directed to give credit/adjustment for the amount paid under the Income Declaration Scheme, 2016 by rectifying Form No.3 under the DTVSV Act and to issue a fresh Form No.3 within two weeks; petitioner to pay any balance indicated in the revised Form No.3 within two weeks.

Full and true disclosure - maintainability of settlement application - compliance with the preconditions of Section 245C of the Income Tax Act - role and procedure of the Income Tax Settlement Commission under Chapter XIX-A - limited scope of judicial interference with Settlement Commission orders for procedural defect or lack of nexus

Full and true disclosure - maintainability of settlement application - compliance with the preconditions of Section 245C of the Income Tax Act - Whether the Settlement Commission rightly rejected the petitioners' applications as not maintainable for failure to make full and true disclosure as required by Section 245C - HELD THAT: - The Court examined the statement of facts filed by the applicants and the Settlement Commission's findings (extracted at paras.6.1-6.14 of the Commission's order) and noted the petitioners' admitted omission to declare income deposited in foreign bank accounts. The Commission recorded specific deficiencies: inability to furnish complete details of identified foreign accounts, unexplained credits and fixed deposits, incomplete statement of affairs, absence of corroborative evidence for claimed sources, and non-cooperation in producing consolidated records. The High Court held that Section 245C mandates a full and true disclosure of undisclosed income and the manner in which it was derived as a precondition to entertain a settlement application; where such disclosure is not made and material particulars are suppressed or not corroborated, the application is not maintainable. The Court accepted the Commission's factual conclusions that material information (including particulars of specified foreign accounts and sources of credits) was not disclosed, that enquiries required deeper investigation, and that settlement on an adhoc basis would not serve the statutory purpose. Reliance by petitioners on decisions permitting settlement or on interpretative propositions was held inapposite in view of the admitted non disclosure and the Commission's cogent findings. The Court therefore found no infirmity in the Commission's rejection of the applications for want of compliance with Section 245C and related procedural requirements. [Paras 41, 42, 43, 44, 45]

The Settlement Commission correctly rejected the settlement applications as not maintainable for failure to make full and true disclosure as required under Section 245C.

Final Conclusion: Writ petitions dismissed; the High Court found the Settlement Commission's conclusion that the petitioners did not comply with Section 245C (full and true disclosure and requisite corroboration) to be candid and convincing, and saw no reason to interfere with the Commission's rejection of the applications.

Allowability of interest as revenue expenditure under section 37 - penal nature of interest - capitalisation of cost as part of work-in-progress - treatment of interest payable to statutory authority for delayed payment - precedent and coordinate-bench/High Court guidance

Allowability of interest as revenue expenditure under section 37 - penal nature of interest - treatment of interest payable to statutory authority for delayed payment - precedent and coordinate-bench/High Court guidance - Interest paid to HUDA for delayed payment of External Development Charges (EDC) is revenue in nature and not penal, and is allowable as business expenditure. - HELD THAT: - The Tribunal examined whether interest charged by HUDA for delayed payment of EDC is a penal payment or an allowable business expense. Relying on earlier coordinate-bench decisions and the cited High Court authority, the Tribunal concluded that the interest arose under an agreement between the assessee and HUDA, did not fall within the mischief of a penal or illegal payment, and was not barred by the tests applied in the lower authority. The interest was held to pertain to the year in which it was paid and to be revenue in nature; the Tribunal therefore agreed with and followed the view of the CIT(A) and earlier precedents in deleting the addition made by the AO. [Paras 6]

Addition disallowing interest as penal was deleted and the interest was held to be an allowable revenue expenditure.

Capitalisation of cost as part of work-in-progress - treatment of interest payable to statutory authority for delayed payment - Interest on outstanding EDC does not form part of work-in-progress where the underlying project had been completed and realized earlier, and therefore is not to be capitalised. - HELD THAT: - The Tribunal considered the Revenue's contention that interest should be capitalised as part of work-in-progress of the housing project. On the facts, the interest related to amounts outstanding for services in respect of a project whose realization had already taken place in earlier years. Consequently, the interest did not form part of work-in-progress or cost of an asset; it was an expenditure on outstanding trade liability and thus revenue in nature and allowable in computing business income. The Tribunal upheld the CIT(A)'s conclusion on this point. [Paras 6]

Interest on EDC not included in work-in-progress and held to be revenue expenditure allowable in the year paid.

Final Conclusion: The appeal filed by the Revenue is dismissed; the order of the CIT(A) deleting the disallowance of interest paid to HUDA in assessment year 2014-15 is upheld.

Accommodation entries - rate of commission/commission as deemed income - evidentiary value of loose sheets - reliance on statement recorded under section 132(4) - intra-group transactions excluded for profit computation

Rate of commission/commission as deemed income - accommodation entries - evidentiary value of loose sheets - reliance on statement recorded under section 132(4) - intra-group transactions excluded for profit computation - Rate of commission on accommodation-entry transactions restricted to 0.50% for the year under consideration. - HELD THAT: - The only contested question was the percentage applied by the Assessing Officer as deemed commission on sale transactions alleged to be accommodation entries. The assessee admitted membership of the Tarun Goyal group. The Tribunal followed its earlier decision in ITA No. 6507/2015 & Ors. (Adonis Financial Services Pvt. Ltd. & Ors.), which, after considering (i) the limited evidentiary value of loose sheets and (ii) that a statement recorded under section 132(4) is evidence primarily in respect of the declarant, fixed a reasonable rate of commission at 0.50%. The Tribunal observed that loose sheets relied upon by Revenue lack independent evidentiary value as explained in the Supreme Court authorities cited in the earlier order and that the statement of the group kingpin cannot be mechanically applied to all entities. In the interest of settling the controversy and applying a uniform, reasonable measure, the Assessing Officer's rate was reduced to 0.50% of the transactions; further, intra group transactions are to be excluded while computing the profit element, and only transactions with outside parties are to be considered. [Paras 5, 6]

Appeal partly allowed by restricting the rate of commission to 0.50% and directing exclusion of intra group transactions for computation.

Final Conclusion: The Tribunal partly allowed the appeal for AY 2013-14 by reducing the deemed commission on accommodation entry transactions to 0.50% and directing that only transactions with outside parties be considered for computing profit.

Deduction under Section 36(1)(va) - Employee's contribution to provident fund and ESI - Credit to employee's account by due date - Non-applicability of Section 43B to employee's contribution - Retrospective legislative clarification via Budget 2021

Deduction under Section 36(1)(va) - Employee's contribution to provident fund and ESI - Credit to employee's account by due date - Non-applicability of Section 43B to employee's contribution - Deductibility of employees' contributions to PF and ESI under section 36(1)(va) where such contributions were deposited after the statutory due date. - HELD THAT: - The Tribunal held that section 36(1)(va) and section 43B operate in different fields: section 36(1)(va) governs deductions in respect of sums received from employees and permits deduction only if such sums are credited to the employees' account in the relevant fund on or before the due date as defined in the Explanation to section 36(1)(va). Section 43B(b) covers only the employer's contribution and does not extend to employees' contributions. The Supreme Court decision in CIT v. Alom Extrusions Ltd. concerned employer's contribution under section 43B(b) and is therefore not applicable to employees' contributions under section 36(1)(va). The Tribunal followed the view of the Jurisdictional High Court in CIT v. Bharat Hotels Ltd. and a coordinate Bench decision, holding that amounts constituting employees' contribution deposited beyond the statutory due date are not allowable as deduction under section 36(1)(va). The Tribunal noted that subsequent legislative amendments (Budget 2021) clarify retrospectively that section 43B does not apply to sums received from employees for the purposes of section 36(1)(va), reinforcing the distinction and the conclusion reached. [Paras 9, 11, 12, 16, 17]

The addition disallowing deduction of employees' contributions deposited after the due date under section 36(1)(va) is sustained; the CIT(A)'s order is affirmed and the assessee's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the assessee's appeal, affirming that employees' contributions to PF and ESI deposited after the statutory due date are not deductible under section 36(1)(va), and that section 43B does not apply to employees' contributions.

Registration under section 12A of the Income-tax Act - Genuineness of objects and activities - Activities includes proposed activities - CIT's duty to call for documents and be satisfied before refusing registration - Rejection of registration for lack of documentary evidence

Registration under section 12A of the Income-tax Act - Genuineness of objects and activities - Activities includes proposed activities - Whether the application for registration under section 12A could be refused on the sole ground that the assessee had not carried out any activity in pursuance of its objects. - HELD THAT: - The Tribunal examined the record and found that the Commissioner had no objection to the charitable nature of the assessee's objects. Relying on the principle that the term 'activities' in section 12AA/12A includes proposed activities, the Tribunal held that a newly formed entity need not have already undertaken completed activities to be registered. The purchase of land and corresponding entries in the balance sheet, ledger and bank statements were held to constitute activity in furtherance of the objects. Consequently, the CIT's conclusion that absence of actual, completed activities warranted rejection was factually incorrect and legally untenable in light of the settled position that proposed activities may satisfy the requirement for registration. [Paras 5]

The refusal to grant registration on the ground of absence of activity is set aside and the assessee's application must be allowed.

CIT's duty to call for documents and be satisfied before refusing registration - Rejection of registration for lack of documentary evidence - Whether substantial receipts and withdrawals reflected in the bank statement justified refusal of registration where the assessee had filed explanations and supporting documents. - HELD THAT: - The Tribunal noted that the assessee responded to the show cause notice and filed supporting documentation including bank statements, a lender's confirmation (loan), the balance sheet and purchase deed for land. The entries showing large receipts were shown to be explainable as an unsecured loan used for acquiring land in furtherance of objects. The CIT's observation that no accounts were filed was factually incorrect as the balance sheet and income & expenditure account for year ending 31/03/2020 were on record. Given that the CIT had the relevant documents and the transactions were explainable and linked to activities in furtherance of objects, the finding of unexplained withdrawals did not sustain refusal of registration. [Paras 5]

The rejection based on alleged unexplained receipts/withdrawals and non-filing of accounts is unsustainable; the documentation furnished sufficed to meet the CIT's requirement to be satisfied.

Final Conclusion: The Tribunal allowed the appeal, set aside the CIT (Exemptions)'s order rejecting registration under section 12A, and directed the CIT (Exemptions) to grant registration forthwith, holding that the assessee's objects were charitable, the transactions were explainable by documentary evidence and that proposed activity (including land acquisition) suffices for registration.

Carry forward of losses - treatment of return filed under section 153A as return required to be furnished under section 139 - abatement of assessment proceedings - scope of the phrase 'so far as may be' in section 153A(1)(a) - effect of late filing in response to notice under section 153A on entitlement to carry forward losses

Carry forward of losses - treatment of return filed under section 153A as return required to be furnished under section 139 - scope of the phrase 'so far as may be' in section 153A(1)(a) - effect of late filing in response to notice under section 153A on entitlement to carry forward losses - abatement of assessment proceedings - Whether denial of carry forward of losses on the ground that the return filed in response to notice under section 153A was not filed within the time specified in that notice is permissible where the assessment for the relevant year was completed before the search. - HELD THAT: - The Tribunal held that section 153A(1)(a) requires that the return furnished in response to a notice under section 153A shall, "so far as may be", be treated as if it were a return required to be furnished under section 139. That qualification - "so far as may be" - must be read with the factual situation: where assessment proceedings for a year are abated on account of search, the return filed under section 153A is to be treated as a return under section 139 and the provisions applicable to such returns will apply. However, where assessments for the year were already completed prior to the search (i.e., no abatement), the earlier return and its resulting determinations are not rendered non est by section 153A; in such cases alterations in the completed assessment can only be made to the extent of income revealed by incriminating material. Consequently, inability to file the return within the time specified in the section 153A notice does not, in a case of completed assessment, justify denying carry forward of losses which were validly determined in the original assessment under the regular provisions of the Act. Applying this reasoning to the facts, as the assessment for AY 2006-07 was not pending on the date of the search, the Assessing Officer was not entitled to refuse carry forward of the loss merely because the section 153A return was filed after the time specified in the notice; the action of the Assessing Officer in denying carry forward on that ground was thus held to be unjustified. [Paras 6]

The denial of carry forward of losses by the Assessing Officer on account of late filing of the return under section 153A was not justified where the assessment for the relevant year had been completed before the search; the Revenue's grounds are dismissed.

Final Conclusion: The appeal filed by the Revenue is dismissed: where an assessment for the relevant year was completed prior to the search, the return filed under section 153A cannot displace the earlier determination except insofar as incriminating material justifies additions, and late filing in response to the section 153A notice does not preclude the assessee from carrying forward losses determined in the original assessment.

Disallowance under section 14A - Rule 8D - requirement of AO's satisfaction before invocation - Proportionate credit of TDS under Rule 37BA(3)(ii) - Tax treatment of licence fee paid to Department of Telecommunication - revenue v. capital - Finance lease - ownership and depreciation to lessor

Disallowance under section 14A - Rule 8D - requirement of AO's satisfaction before invocation - Validity of disallowance under section 14A read with Rule 8D in AY 2013-14 where assessee made suo motu disallowance and AO applied Rule 8D without recording reasonsed satisfaction. - HELD THAT: - The Tribunal held that the Assessing Officer was required to record a valid satisfaction after examining the assessee's accounts before invoking the formula under Rule 8D. Mere generic dissatisfaction recorded by the AO was insufficient. The Tribunal relied on the principles in Maxopp Investments Ltd. and HT Media Ltd. (as applied by the coordinate Bench in the assessee's earlier year) that a reasoned satisfaction is a mandatory pre requisite to apply Rule 8D and override a suo motu apportionment made by the assessee. In the present case the assessee had furnished audited accounts and a specific working for suo motu disallowance; the AO mechanically applied Rule 8D without calling for or discrediting that working, and therefore the additional disallowance was not sustainable. [Paras 16, 17, 18]

Disallowance under section 14A/Rule 8D deleted; Grounds No.1, 1.1 & 1.2 of ITA No.135/DEL/2018 for AY 2013-14 allowed in favour of the assessee.

Proportionate credit of TDS under Rule 37BA(3)(ii) - Whether credit for TDS deducted on amounts relating to deferred revenue (AMCs) must be allowed proportionately in years in which corresponding revenue is offered to tax. - HELD THAT: - The Tribunal applied Rule 37BA(3)(ii) which provides for allowing TDS credit across the years in the same proportion in which income is assessable where income is spread over a number of years. Relying on a coordinate Bench decision in the assessee's own case, the Tribunal held that where customers deducted tax on the entire AMC amount in the first year but the assessee offered income over subsequent years under percentage completion, the Assessing Officer must allow proportionate TDS credit in the years in which the income is brought to tax. The AO/CIT(A)'s denial of full credit in the year of deduction was therefore incorrect. [Paras 19, 22, 23]

Assessee entitled to proportionate credit of TDS as per Rule 37BA(3)(ii); Grounds No.2 & 2.1 of ITA No.135/DEL/2018 and Grounds No.1 & 1.1 of ITA Nos.136/DEL/2018 & 137/DEL/2018 determined in favour of the assessee.

Tax treatment of licence fee paid to Department of Telecommunication - revenue v. capital - Whether licence fee paid to DOT should be capitalized and amortized or treated as revenue expenditure for AYs 2013-14 and 2014-15. - HELD THAT: - The Tribunal upheld the view taken by the CIT(A), following consistent decisions of a coordinate Bench in the assessee's own earlier years and the Delhi High Court authority in the assessee's case, that licence fees payable under NTP 1999 policy were to be treated as revenue expenditure. On that precedent and the consistent line of decisions in the assessee's own cases, the Tribunal found no infirmity in the deletion of the AO's disallowance which had capitalised/amortised the licence fee under section 35ABB. [Paras 24, 26, 27, 28]

Deletion of addition relating to licence fee to DOT upheld; Revenue appeals in ITA Nos.385/DEL/2018 and 100/DEL/2018 (AYs 2013-14 & 2014-15) dismissed.

Finance lease - ownership and depreciation to lessor - Whether principal portion of lease rentals for vehicles could be disallowed on the basis that the assessee was owner and claim depreciation, or whether the lessor is the owner entitled to depreciation. - HELD THAT: - The Tribunal noted the registration certificate and the lease agreement which identified the assessee as lessee and the finance company as lessor and expressly provided that ownership would not transfer to the lessee during the lease term. Citing the settled principle that under finance lease the lessor remains the owner and depreciation is allowable to the lessor, including reference to the Supreme Court authority relied upon, the Tribunal found the AO's conclusion of ownership by the assessee to be factually incorrect and unsustainable. [Paras 29, 31, 32, 33]

CIT(A)'s deletion of the AO's disallowance relating to principal portion of lease obligation upheld; Ground No.2 of ITA No.100/DEL/2018 for AY 2014-15 determined against the Revenue.

Final Conclusion: All appeals filed by the assessees (ITA Nos.135/DEL/2018, 136/DEL/2018 & 137/DEL/2018) are allowed (deletion of section 14A disallowance and direction to allow proportionate TDS credit); Revenue appeals (ITA Nos.385/DEL/2018 & 100/DEL/2018) are dismissed (licence fee disallowance deleted and lease principal disallowance not sustained).

Unexplained credits under section 68 - evidentiary value of loose sheets / impounded documents - presumption under section 292C - double addition / merger of disallowances - addition based on proportional allocation / formula

Double addition / merger of disallowances - disallowance of project expenditure - Whether the cash expenditure of Rs. 15.82 crores claimed for Dummugudem Project could be treated as a separate unexplained income addition, or had to be merged with the separate disallowance already made in respect of Dummugudem Project - HELD THAT: - The Tribunal examined the Assessing Officer's disallowance of the entire project expenditure and the First Appellate Authority's treatment which merged the specific cash withdrawal addition of Rs. 15.82 crores with the larger disallowance of project expenses. The record showed that the Assessing Officer had already disallowed a substantial sum for the Dummugudem Project under a separate head. In view of that prior disallowance, treating the Rs. 15.82 crores as a separate addition would amount to double taxation of the same expenditure. The Tribunal found the CIT(A)'s reasoning to be clinching and concluded there was no merit in the Revenue's challenge to the merger/delete approach. The Revenue's identical substantive ground in all six appeals was therefore rejected. [Paras 2]

Former substantive ground declined; the cash withdrawal addition of Rs. 15.82 crores is not maintainable as a separate addition and stands merged with the prior disallowance relating to the Dummugudem Project.

Unexplained credits under section 68 - evidentiary value of loose sheets / impounded documents - presumption under section 292C - addition based on proportional allocation / formula - Whether additions of Rs. 20.50 crores (on aggregated basis from impounded loose sheets) as unexplained credits could be sustained or were to be deleted where the material relied upon comprised impounded investment statement/loose sheets - HELD THAT: - The Tribunal considered the material found during the survey, described in the record as an "INVESTMENT STATEMENT FROM 10-09-2007 TO 10-08-2012", and the Managing Director's survey statement acknowledging the entries as representing investments/loans/receipts over the stated period. The Assessing Officer had selectively picked certain entries from the impounded sheets and applied a proportionate formula (derived from turnover ratios) to arrive at additions. While the CIT(A) had disbelieved the loose sheets as "dumb" documents and deleted the additions for lack of corroboration and year-wise allocation, the Tribunal found that the impounded document was in the assessee's possession, was an investment statement covering the period in question, and was supported by the assessee's admissions in the survey statement. Applying the statutory presumption under section 292C to the material found at the assessee's premises (as amended), and having regard to the totality of entries and the absence of any satisfactory explanation or retraction from the assessee before authorities, the Tribunal held that the Assessing Officer was justified in treating the amounts as unexplained credits under the scheme of section 68. The Tribunal therefore reversed the CIT(A)'s deletion and restored the addition in respect of the year under reference. [Paras 3]

Latter substantive ground allowed for the Revenue; the additions based on the impounded investment statement/loose sheets are restored as unexplained credits for the year under reference (AY.2010-11).

Final Conclusion: The appeals are partly allowed: the Tribunal upheld the CIT(A)'s deletion/merger of the Rs. 15.82 crores cash withdrawal addition (no separate addition to stand), but restored the Assessing Officer's additions based on the impounded investment statement/loose sheets as unexplained credits for the year under reference, reversing the CIT(A)'s deletion.

Revision u/s. 263: erroneous and prejudicial to the revenue - Allowability of prior-year provision voluntarily disallowed u/s. 40(a) when tax is subsequently deducted - Interaction between transfer pricing adjustment and disallowance under section 40(a) - Arm's length price determination for intra-group support services and treatment of reimbursed foreign employees' salaries - Assessing Officer's plausible view as a bar to revision under section 263

Allowability of prior-year provision voluntarily disallowed u/s. 40(a) when tax is subsequently deducted - Interaction between transfer pricing adjustment and disallowance under section 40(a) - Revision u/s. 263: erroneous and prejudicial to the revenue - Whether the revision under section 263 sustaining that a prior-year provision disallowed u/s. 40(a) in AY 2009-10 should be treated as a transfer-pricing adjustment and thereby disallow the assessee's claim in AY 2010-11 was justified. - HELD THAT: - The Tribunal held that the assessee had voluntarily disallowed the year end provision in AY 2009-10 under section 40(a) because TDS had not been deducted at that time, and the Assessing Officer accepted that disallowance in computing total income. When actual payments were made in the year relevant to AY 2010-11 and TDS was deducted, the claim in AY 2010-11 fell squarely within the statutory scheme of section 40(a). The CIT's view - that because the TPO had determined ALP at NIL for management services the disallowance in AY 2009-10 should be construed as a transfer pricing (section 92CA) adjustment and therefore the amount could not be claimed in AY 2010-11 - effectively amounted to re opening and finding fault with the assessment for AY 2009-10. The proper approach is that, if the TPO erred by reducing TP adjustment by the amount voluntarily disallowed under section 40(a), the error lies in AY 2009-10; that does not convert a valid section 40(a) claim in the subsequent year into an impermissible claim. The Tribunal further noted that a year end provision is reversed on payment in accordance with accounting principles and is allowable when actual payment is made and TDS complied with. Applying these conclusions, the Tribunal found that the CIT had not pointed out any error in the AO's assessment for AY 2010-11 and therefore the revision under section 263 was unwarranted. [Paras 10, 12, 13, 14]

The revision by the CIT under section 263 in respect of the Rs. 2.80 crores provision was not sustainable; the claim in AY 2010-11 was allowable and the CIT's revision order on this ground was set aside.

Arm's length price determination for intra-group support services and treatment of reimbursed foreign employees' salaries - Assessing Officer's plausible view as a bar to revision under section 263 - Revision u/s. 263: erroneous and prejudicial to the revenue - Whether the CIT was justified in invoking section 263 to treat 'Foreign Service Employees expenses' included in employees' cost as part of support services/management fees and to direct addition on TP (ALP NIL) grounds. - HELD THAT: - The Tribunal found that the TPO had specifically enquired during transfer pricing proceedings whether reimbursements were routed through the profit and loss account and the assessee had replied that they were. The TPO examined the matter, applied the tested TNM benchmarking method to the international transactions and took a view accepting the transactions as at arm's length. Given that the TPO and AO had addressed the issue and adopted a plausible view, the CIT's attempt to disturb that conclusion through section 263 revision was impermissible. The Tribunal relied on the principle that an assessment cannot be held prejudicial to the revenue where the AO has taken a plausible view, and accordingly quashed the revision directed on this ground. [Paras 15, 16, 17, 18]

The revision under section 263 in respect of foreign service employees' expenses was unjustified and was set aside.

Final Conclusion: The impugned revision order dated 19.1.2017 passed by the CIT(LTU) for assessment year 2010-11 is quashed and the appeal of the assessee is allowed.

Return on Value Added Cost (ROVAC) - Transaction Net Margin Method (TNMM) - Profit Level Indicator (PLI) - Comparability and selection of comparables in transfer pricing - Characterisation of transactions - business support services versus trading - Remand to Transfer Pricing Officer for factual verification - Set-off of brought forward MAT credit - Premature challenge to penalty proceedings

Return on Value Added Cost (ROVAC) - Transaction Net Margin Method (TNMM) - Comparability and selection of comparables in transfer pricing - Characterisation of transactions - business support services versus trading - Remand to Transfer Pricing Officer for factual verification - Whether the assessee's international transactions should be benchmarked using ROVAC and whether the assessee is to be treated as a business support service provider, a trader, or a mix of both. - HELD THAT: - The Tribunal examined the transfer pricing documentation, invoices and accounts and noted the assessee's principal activity in turnkey paint shop projects while also engaging in sales transactions pursuant to arrangements with its associated enterprise. The TPO had applied operating profit to total cost as the PLI and rejected the assessee's claim to use ROVAC on the basis that the international transaction compared was sales to the AE. The assessee produced alternative submissions asserting its role as a business support service provider and alternatively as trading activity, supported by invoices and contract expense details. Given the factual overlap and the materiality of contract/trading transactions reflected in the accounts, the Tribunal found the question of characterization and the appropriate PLI could not be finally resolved on the record before it. The Tribunal therefore considered it proper to remit the matter to the TPO for fresh verification of the nature of activities (business support services, trading, or both) and to permit the assessee to file supporting evidence, so that the correct base and PLI under TNMM can be determined by the TPO. [Paras 8]

Matter remanded to the Transfer Pricing Officer for fresh verification and determination whether the assessee's activities are business support services, trading, or a mix, and for appropriate application of the PLI/ROVAC accordingly.

Procedural dismissal for non-prosecution - Disposal of grounds which the assessee chose not to prosecute. - HELD THAT: - The assessee informed the Tribunal that it had no intention to prosecute certain grounds of appeal. The Tribunal recorded the concession and dismissed those grounds as not pressed. [Paras 9]

Ground Nos. 6 and 11 dismissed as not pressed.

Academic grounds - Treatment of remaining grounds rendered academic by the remand on core transfer pricing issues. - HELD THAT: - Having remanded the central question of characterization and benchmarking to the TPO, the Tribunal held that several other grounds depended on the outcome of that remand and therefore no adjudication on them was necessary at this stage. [Paras 10]

Ground Nos. 7, 8, 9, 10, 12, 13, 14, 15 and 16 are academic and require no adjudication.

Set-off of brought forward MAT credit - Direction regarding examination of set-off of brought forward MAT credit. - HELD THAT: - The assessee sought directions for examination of the entitlement to set off brought forward Minimum Alternate Tax (MAT) credit. The Tribunal directed that this matter may be examined in the proceedings. [Paras 11]

Request to examine set-off of brought forward MAT credit directed to be examined.

Premature challenge to penalty proceedings - Maintainability of challenge to initiation of penalty proceedings at the appellate stage. - HELD THAT: - The Tribunal observed that challenge to initiation of penalty proceedings under the relevant provision is premature at the appellate stage of assessment. Accordingly, it declined to adjudicate the penalty challenge in the appeal. [Paras 12]

Ground No. 20 dismissed as premature.

Final Conclusion: The Tribunal remanded the core transfer pricing issue to the Transfer Pricing Officer for fresh factual verification on whether the assessee's transactions are business support services, trading, or a mix and for determination of the appropriate PLI; certain grounds were dismissed as not pressed or held academic; entitlement to set off brought forward MAT credit was directed to be examined; challenge to initiation of penalty proceedings was dismissed as premature. The appeal is allowed for statistical purpose.

Condonation of delay in filing appeal - disallowance under section 40(a)(ia) for non-deduction of tax at source - first proviso to section 201(1) - certificate of accountant and not being an assessee in default - inclusion of receipt in recipient's return and payment of tax by recipient - remand for fresh consideration to the Assessing Officer

Condonation of delay in filing appeal - Delay in filing the appeal was condoned. - HELD THAT: - The Tribunal considered the assessee's explanation that the authorised representative did not attend the appellate hearing before the CIT(A), resulting in an ex parte order, and that the assessee was informed of the outcome only after adjustments to refunds revealed the order. The assessee filed an affidavit and explained further delay caused by the Covid lockdown. The Tribunal applied the principle that, in tax proceedings, delay should be condoned unless there is wanton negligence by the assessee, found the reasons acceptable and exercised its discretion to condone the delay. [Paras 7, 8, 9]

Delay of 188 days in filing the appeal was condoned.

Disallowance under section 40(a)(ia) for non-deduction of tax at source - first proviso to section 201(1) - certificate of accountant and not being an assessee in default - inclusion of receipt in recipient's return and payment of tax by recipient - remand for fresh consideration to the Assessing Officer - The addition/disallowance made under section 40(a)(ia) was not finally adjudicated and was remanded to the Assessing Officer for fresh consideration in light of the certificate produced under the first proviso to section 201(1). - HELD THAT: - The Tribunal noted that the assessee had paid interest without deducting tax at source and AO disallowed the expenditure under section 40(a)(ia). The assessee relied on the proviso introduced by Finance Act, 2012, and on the position that if the payee has included the amount in his return and paid tax thereon (with a certificate by an accountant) the disallowance may not apply. Although the CIT(A) had refused relief for lack of the requisite certificate on record, the assessee filed before the Tribunal a certificate of a Chartered Accountant certifying that the payee had filed return for AY 2014-15 and included the amount. As the matter involved verification of those facts and the applicability of the proviso, the Tribunal refrained from deciding the disallowance on merits and directed the AO to consider the certificate and decide whether disallowance under section 40(a)(ia) is attracted after giving the assessee an opportunity of being heard. [Paras 3, 4, 5, 6, 10]

Issue remanded to the Assessing Officer to examine the certificate and decide afresh whether disallowance under section 40(a)(ia) is warranted, after affording the assessee an opportunity of hearing.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and remitted the question of disallowance under section 40(a)(ia) to the Assessing Officer for fresh consideration in the light of the Chartered Accountant's certificate regarding the recipient's return and tax payment; the appeal is treated as allowed for statistical purposes.

Corporate guarantee as international transaction - Arm's Length Price adjustment - Explanation to Section 92B (retrospective effect) - Guarantee commission / benchmarking - Section 92CA(2) transfer pricing adjustment - Section 14A read with Rule 8D - Satisfaction under Section 14A(ii) - Non utilisation of interest bearing funds

Corporate guarantee as international transaction - Arm's Length Price adjustment - Explanation to Section 92B (retrospective effect) - Guarantee commission / benchmarking - Section 92CA(2) transfer pricing adjustment - Validity and quantification of transfer pricing adjustment on corporate guarantees - HELD THAT: - The Tribunal held that corporate guarantees fall within the definition of international transaction by virtue of the Explanation to Section 92B inserted by the Finance Act, 2012 with retrospective effect from 01-04-2002; therefore earlier tribunal decisions to the contrary were set aside. The Tribunal directs judicial consistency in quantification by adopting the commission rate of 0.53% as applied in the assessee's earlier coordinated proceedings. Further, relying on precedents holding that guarantee fee/adjustment is chargeable only on the amount actually utilized during the year (and not on the full contingent limit of the guarantee), the Tribunal ordered recomputation of the transfer pricing adjustment after considering only the actually utilised amount of the guarantees in the respective assessment years. [Paras 3, 4]

Corporate guarantee TP adjustments sustained as international transactions; quantification directed at 0.53% commission and recomputed only on the actually utilised amount of the guarantees.

Section 14A read with Rule 8D - exempt income - Applicability of Section 14A/Rule 8D where no exempt income is earned - HELD THAT: - The Tribunal applied binding precedents that Section 14A read with Rule 8D operates only in relation to exempt income. In the appeal of M/s. Rain Cements Ltd. (ITA No.2020/Hyd/2017), since the assessee had not derived any exempt income in the relevant year, the impugned disallowance under Section 14A/Rule 8D was held unsustainable and directed to be deleted. [Paras 5]

Disallowance under Section 14A/Rule 8D deleted as the assessee had not earned exempt income in the relevant year.

Section 14A read with Rule 8D - Satisfaction under Section 14A(ii) - Non utilisation of interest bearing funds - Validity of Section 14A/Rule 8D disallowance where Assessing Officer has not recorded statutory satisfaction - HELD THAT: - It was not disputed that investments were in group concerns yielding exempt income, but the Assessing Officer had not recorded the mandatory satisfaction contemplated by Section 14A(ii) in the assessee's books before computing disallowance under Rule 8D. In these circumstances the Tribunal found it appropriate to remit the matter to the Assessing Officer for fresh adjudication, directing him to examine and record satisfaction regarding the assessee's fund position, including whether interest bearing funds were utilised, and to recompute disallowance accordingly. [Paras 7]

Matter remitted to Assessing Officer for fresh adjudication and recomputation after recording required satisfaction and examining fund position.

Section 14A read with Rule 8D - exempt income - Sustainability of Section 14A/Rule 8D disallowance where exempt income exists but no proof of non interest funds was provided - HELD THAT: - In respect of the appeal where the assessee claimed availability of non interest bearing funds but failed to place supporting details on record and where the computed disallowance was less than the exempt income, the Tribunal found no merit in the assessee's challenge and affirmed the disallowance in the facts and circumstances of that case. [Paras 8]

Impugned Section 14A/Rule 8D disallowance affirmed on the available record.

Final Conclusion: The appeals are partly allowed: (i) transfer pricing adjustments on corporate guarantees are held to be international transactions (Explanation to Section 92B applies retrospectively); quantification directed at 0.53% commission and to be computed only on amounts actually utilised; (ii) Section 14A/Rule 8D disallowance deleted where no exempt income was earned; (iii) one matter remitted to the Assessing Officer for fresh adjudication after recording satisfaction and examining fund utilisation; and (iv) in one appeal the Section 14A disallowance is affirmed.

Revisional jurisdiction under Section 263 - twin conditions for exercise of revisional jurisdiction (erroneous and prejudicial to the revenue) - erroneous and prejudicial to the interest of the revenue - verification of source of share capital / source of source - inquiry under Section 142(1) and inquiry under Section 133(6) - computation of fair market value under Rule 11UA(2)(c) read with Section 56(2)(viib)

Revisional jurisdiction under Section 263 - twin conditions for exercise of revisional jurisdiction (erroneous and prejudicial to the revenue) - verification of source of share capital / source of source - inquiry under Section 142(1) and inquiry under Section 133(6) - Whether the Principal Commissioner of Income Tax rightly invoked revisional jurisdiction under Section 263 by holding the assessing officer's order to be erroneous and prejudicial for failing to enquire into the source of share capital. - HELD THAT: - The Tribunal applied the settled twin-condition test for exercise of revisional jurisdiction and examined whether the AO's order was erroneous and prejudicial to revenue. The AO had issued notices under Section 142(1) and specifically sought details of changes in shares and share premium; the assessee furnished board resolution, computation of fair market value, PANs, income-tax return acknowledgments, bank statements, contract notes evidencing sale of quoted shares and receipts, and other documents demonstrating identity, creditworthiness and genuineness of the subscribers and that subscriptions were routed through banking channels. The Principal CIT's basis for interference was a finding that the AO failed to conduct enquiries under Section 133(6) regarding sources of investment. The Tribunal held that the AO had in fact called for and received particulars of source and source-of-source and that no adverse inference was drawn by the AO; on these facts the Principal CIT's conclusion that the AO failed to enquire was a misdirection. Applying the Malabar Industries test, where the AO had adopted a permissible view based on the material on record, the order could not be characterized as erroneous and prejudicial such as to warrant exercise of revisional jurisdiction. Consequently the prerequisite for s.263 was not satisfied and the Principal CIT lacked jurisdiction to set aside the assessment for fresh inquiry on the same issue. [Paras 5, 10, 11]

The Principal CIT's exercise of revisional jurisdiction under Section 263 was quashed and the assessee's appeal was allowed.

Final Conclusion: The Tribunal held that the AO had made requisite inquiries under Section 142(1) and had material on record demonstrating identity, creditworthiness and genuineness of the share subscriptions; the Principal CIT erred in finding lack of enquiry under Section 133(6) and therefore lacked jurisdiction under Section 263 to set aside the assessment for AY 2016-17. The assessee's appeal was allowed.

Delay in revocation proceedings and compliance with Regulation 20 of CBLR - directory not mandatory but requiring recorded reasons for delay - Requirement of proximate link between acts of a director/'G' card holder and the licensed customs broker before visiting misconduct upon the broker - Remand for fresh adjudication where appellate fact finding is unsustainable for want of consideration of material evidence

Delay in revocation proceedings and compliance with Regulation 20 of CBLR - directory not mandatory but requiring recorded reasons for delay - Whether the delay in commencement and completion of inquiry under Regulation 20 vitiates the revocation order. - HELD THAT: - The Court held that Regulation 20 of the Customs Brokers Licensing Regulations cannot be construed as mandatory; the timelines prescribed are directory. However, where the prescribed time limit is exceeded, the officer conducting the inquiry must record cogent reasons and causes for the delay so that the deviation may be tested for reasonableness. The Tribunal erred in its interpretation of this Court's precedent by treating the timelines as mandatorily fatal and, further, failed to deal with the detailed explanations and submissions furnished by the Revenue regarding reasons for delay. For these reasons the Tribunal's conclusion on delay was based on an incomplete appreciation of the law and facts and is unsustainable. [Paras 33, 34, 35]

Tribunal's finding treating the time limits as fatal was unsustainable; the matter requires reconsideration by the Appellate Authority after properly dealing with the explanations for delay and the requirements of Regulation 20.

Requirement of proximate link between acts of a director/'G' card holder and the licensed customs broker before visiting misconduct upon the broker - Whether there was a sufficient link between the smuggling activities of Shri Vijay Poojary and the activities for which the Respondent was licensed to justify revocation of the broker licence. - HELD THAT: - The Court observed that the Tribunal recorded a conclusion of absence of any link without discussing or examining material factual material relied upon by the Revenue - including the show cause notice, statements recorded under Section 108 of the Customs Act, alleged modus operandi, prior detention under COFEPOSA, and admissions, as well as the shareholding information showing overwhelming control by Shri Vijay Poojary. The Tribunal's terse conclusion that no link existed and that such absence explained delay was reached without consideration of these materials. In that factual setting the appellate finding is a non application of mind and cannot stand; the factual questions require fresh consideration in light of the record. [Paras 36, 37, 38, 40, 41]

Tribunal's factual finding of absence of link is unsustainable; the matter must be reconsidered by the Appellate Authority after full examination of the material evidence and the shareholding/control aspects.

Final Conclusion: The order of the CESTAT dated 21.11.2019 is set aside and the matter is remanded to the CESTAT for fresh adjudication on the issues of (i) the explanation and recorded reasons for delay under Regulation 20 and (ii) the existence of a proximate link between Shri Vijay Poojary's alleged smuggling activities and the Respondent's licence; appeal disposed of with no order as to costs.

Classification of imported printed thermal paper rolls under CTH 4911 9990 - finality and departmental acceptance of earlier adjudication estopping reassessment for subsequent imports - invalidity of Show Cause Notice issued by Directorate of Revenue Intelligence as not being the proper officer - entitlement to exemption under the Indo Sri Lanka Free Trade Agreement as claimed under Notification No. 26/2000 Cus.

Classification of imported printed thermal paper rolls under CTH 4911 9990 - finality and departmental acceptance of earlier adjudication estopping reassessment for subsequent imports - Correct classification of the impugned goods is under CTH 4911 9990 and the Department cannot reopen classification for subsequent imports after accepting an earlier adjudication in the appellant's favour. - HELD THAT: - The Tribunal found that an earlier Order in Original (No.11678/2015 16 dated 31.03.2016) by the Commissioner of Customs, Nhava Sheva had held the same goods to be classifiable under CTH 4911 9990 and that the Department did not appeal that order but accepted it (reply to RTI dated 31.05.2021). Having accepted that earlier adjudication, the Department is precluded from taking a contrary view for imports of the same goods in later periods. The Tribunal applied the settled principle that a decision which has attained finality and is accepted by the Department cannot be re litigated for subsequent imports and relied on precedents in which the same principle was followed, holding the merits in favour of the appellant and affirming classification under CTH 4911 9990. [Paras 5, 6]

Classification of the impugned goods is under CTH 4911 9990 and the issue on merits is decided in favour of the appellant.

Invalidity of Show Cause Notice issued by Directorate of Revenue Intelligence as not being the proper officer - Proceedings initiated by the Show Cause Notice issued by the ADG, DRI are invalid for want of jurisdiction and the impugned order cannot be sustained on that basis. - HELD THAT: - The Tribunal noted the Supreme Court's decision in M/s. Canon India Pvt. Ltd. holding that the DRI is not the proper officer to issue a Show Cause Notice under the relevant provision of the Customs Act, and observed subsequent High Court and Tribunal decisions following the same view. Applying that legal principle, the Tribunal held that the Show Cause Notice issued by the ADG, DRI in respect of the imports falling in the stated period was without jurisdiction, vitiating the impugned proceedings. Consequently the impugned order was set aside on this ground as well. [Paras 7]

The impugned order is vitiated because the Show Cause Notice issued by the ADG, DRI was without jurisdiction and is therefore set aside.

Final Conclusion: The appeal is allowed: the impugned order is set aside, the goods are held classifiable under CTH 4911 9990 (entitling the appellant to the claimed exemption as per the accepted earlier adjudication), and the proceedings are also vitiated by the issuance of the Show Cause Notice by the ADG, DRI; consequential reliefs, if any, follow as per law.

Restoration of company name in the Register of Companies - power of Tribunal under Section 252 of the Companies Act, 2013 - consequential administrative actions on restoration (activation of DIN, change of status, intimation to bankers) - statutory compliance as condition for restoration (filing of pending returns and documents with fees/fine) - publication of restoration order in Official Gazette - costs and directions incidental to restoration - preservation of Registrar's power to take other actions for separate violations

Restoration of company name in the Register of Companies - power of Tribunal under Section 252 of the Companies Act, 2013 - Restoration of the struck-off company's name in the Register of Companies and exercise of Tribunal's powers under Section 252 of the Act. - HELD THAT: - The Tribunal, after considering the application, material on record and the RoC's report, exercised its statutory power under Section 252 of the Companies Act, 2013 and Rule 87-A of the NCLT (Amendment) Rules, 2017 to restore the company's name in the Register of Companies. The Tribunal found special circumstances and larger public interest sufficient to warrant restoration to enable continuation of pending proceedings before the Adjudicating Authority under the IBC and to regularise the company's status. The order directs the RoC to treat the company as if its name had not been struck off and to take consequential steps to reflect active status for e-filing and banking purposes.

The company's name is restored in the Register of Companies and the RoC is directed to effect consequential administrative actions to reinstate the company as active.

Statutory compliance as condition for restoration (filing of pending returns and documents with fees/fine) - costs and directions incidental to restoration - Conditions and consequential directions imposed on restoration including filing of pending Income tax returns, filing of statutory documents with prescribed fees/additional fee/fine, and payment of costs. - HELD THAT: - The Tribunal conditioned restoration on the company completing specified statutory compliances. The company was directed to file all pending Income tax returns forthwith and to file all outstanding statutory documents with the Registrar within thirty days of restoration along with prescribed fees/additional fee/fine as determined by the RoC. The Tribunal also imposed a cost payable online as an incidental direction tied to revival. These conditions form part of the restorative order and are intended to regularise compliance status before or immediately after restoration.

Restoration is subject to the company's immediate compliance with pending Income tax filings and filing of statutory documents with fees/fine within 30 days, and payment of the directed cost.

Publication of restoration order in Official Gazette - consequential administrative actions on restoration (intimation to bankers) - Obligation on the RoC to publish the Tribunal's restoration order in the Official Gazette and to inform bankers to defreeze accounts after compliance. - HELD THAT: - The Tribunal directed that upon delivery of a certified copy of the order and after the company complies with the directions, the RoC shall publish the order in the Official Gazette under its office name and seal. The RoC was also directed to take consequential actions such as changing the company's status from 'Strike off' to 'Active (for e filing)' and intimating bankers about restoration to enable defreezing of accounts, thereby restoring practical corporate functionality.

RoC to publish the order in the Official Gazette and take consequential steps including status change and intimation to bankers after compliance.

Preservation of Registrar's power to take other actions for separate violations - Restoration order does not preclude the RoC from initiating or continuing appropriate action for other violations or offences by the company. - HELD THAT: - The Tribunal expressly confined its order to the violations that led to striking off and clarified that restoration will not operate as a bar to the RoC taking any other lawful action for prior or contemporaneous violations or offences by the company. This preserves the Registrar's statutory powers to enforce compliance or pursue enquiries unrelated to the strike off ground addressed by the restoration.

The order is confined to strike off related violations and does not prevent the RoC from taking other lawful actions for additional violations/offences.

Final Conclusion: The Tribunal allowed the Company Application and directed restoration of the company's name in the Register of Companies, subject to specified compliance conditions (filing of pending Income tax returns and statutory documents with fees/fine, payment of costs), directed consequential administrative actions by the RoC including Gazette publication and bank intimation, and clarified that the restoration does not preclude the RoC from taking other lawful actions for separate violations.

Scheme of Amalgamation - sanction under Sections 230-232 of the Companies Act, 2013 - Appointed Date - transfer of assets and liabilities - continuation of pending proceedings - protection of employees' service conditions - share exchange ratio - compliance with Regional Director's observations - change of company name

Scheme of Amalgamation - sanction under Sections 230-232 of the Companies Act, 2013 - Approval and sanction of the presented Scheme of Amalgamation between the seven petitioner companies. - HELD THAT: - The Tribunal, having considered the petition, statutory compliance affidavits, statutory auditor certificates, audited and provisional financials, reports of the Official Liquidator, Regional Director, Registrar of Companies and Income Tax Department, and having found no objection from stakeholders or statutory authorities (subject to observations addressed elsewhere), held that there was no impediment to sanctioning the Scheme. The order expressly approves the Scheme and clarifies that the sanction does not exempt payment of any stamp duty, taxes or other charges and compliance with any other statutory permission or requirement remains incumbent on the parties. [Paras 25]

The Scheme is approved and sanctioned.

Appointed Date - compliance with Regional Director's observations - Approval of the common Appointed Date of 30.09.2019 for the Scheme. - HELD THAT: - The Regional Director had noted multiple appointed dates and sought modification; the petitioners responded that a common appointed date of 30.09.2019 had been adopted and that adoption would not affect implementation sequence or the share exchange ratio as valuation relied on financials up to 31.12.2019. On this basis the Tribunal accepted the common Appointed Date and directed that the Appointed Date of 30.09.2019 stands approved. [Paras 11, 16, 25]

The Appointed Date of 30.09.2019 is approved.

Transfer of assets and liabilities - continuation of pending proceedings - Transfer and vesting of all properties, rights, liabilities and duties of the Transferor Companies in the Transferee Company and continuation of pending proceedings. - HELD THAT: - Pursuant to the sanctioned Scheme and Sections 230-232, the Tribunal ordered that all property, rights and powers of the Transferor Companies be transferred to and vested in the Transferee Company subject to existing charges, and that all liabilities and duties be transferred to and become the liabilities and duties of the Transferee Company. It further ordered that proceedings pending by or against the Transferor Companies shall be continued by or against the Transferee Company in the same manner. [Paras 25]

Assets, rights, liabilities and pending proceedings of the Transferor Companies stand transferred to and vested in the Transferee Company.

Protection of employees' service conditions - Treatment of employees of the Transferor Companies post-amalgamation. - HELD THAT: - The Scheme provides for transfer of employees and, on perusal of the relevant clauses, the Tribunal found no adverse impact on service conditions of the employees of the Transferor Companies. Consequently, employees are to be transferred to the Transferee Company in terms of the Scheme. [Paras 9, 25]

Employees of the Transferor Companies shall be transferred to the Transferee Company in terms of the Scheme.

Share exchange ratio - Approval of the share exchange ratio as determined by the registered valuer and incorporated in the Scheme. - HELD THAT: - The share exchange ratios were determined by a Registered Valuer and annexed to the petition. The Tribunal accepted the valuation process and, having found no material change resulting from adoption of the common Appointed Date, approved allotment of Transferee Company shares to shareholders of the Transferor Companies in accordance with the Scheme. [Paras 23, 25]

Share exchange ratio as set out in the Scheme is accepted and allotment to be effected accordingly.

Income Tax Department compliance - Resolution of Income Tax Department's observations and protection of revenue rights relating to certain assessment years of Transferor companies. - HELD THAT: - The Income Tax Department raised no objection to most companies but flagged outstanding dues for Transferor Company 3 and requested protection of revenue rights for Transferor Company 4. The petitioners produced evidence that Transferor Company 3 had paid the outstanding dues for AY 2008-09 under the Vivad se Vishwas Scheme. The Tribunal noted the ITD's reports and, having seen the petitioners' counter and supporting documents, proceeded to sanction the Scheme subject to the established position that revenue rights and dues are not prejudiced by the sanction and shall be dealt with in accordance with law. [Paras 19, 20, 21, 22, 25]

ITD's observations recorded; payment/settlement for Transferor Company 3 accepted and sanction granted subject to protection of revenue rights as applicable.

Change of company name - compliance with Regional Director's observations - Change of the Transferee Company's name and compliance requirements. - HELD THAT: - The Scheme proposed a change of the Transferee Company's name to 'Century Metal Recycling Limited'. The Tribunal sanctioned the name change but directed that the Transferee Company must comply with the relevant provisions of the Companies Act, 2013, rules and Ministry guidelines for procedural requirements connected with change of name. [Paras 12, 17, 25]

Transferee Company's name stands changed to 'Century Metal Recycling Limited' subject to statutory procedural compliance.

Compliance with procedural formalities - Post-sanction procedural directions including deposits and filing of certified copy and schedule of properties. - HELD THAT: - The Tribunal directed the Transferee Company to deposit specified amounts with the Pay & Accounts Office for the Regional Director and with the Company Law Bar Association, Chandigarh within four weeks of receipt of the certified copy of the Order. It also directed that petitioner companies must, within 30 days of receipt of the Order, deliver a certified copy to the Registrar of Companies for registration, upon which the Transferor Companies shall be dissolved and files consolidated. Further, formal orders under Form CAA-7 shall be issued on filing of the Schedule of Property (freehold and leasehold) by affidavit. [Paras 25, 26]

Post-sanction deposits, delivery of certified copy to ROC, consolidation of files, and filing of Schedule of Property in Form CAA-7 ordered.

Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013, approved the Appointed Date of 30.09.2019, directed transfer of assets, liabilities and employees to the Transferee Company, accepted the share exchange ratio, recorded resolution of Income Tax observations (subject to protection of revenue rights), approved the change of name to 'Century Metal Recycling Limited' subject to statutory compliance, and issued consequential procedural directions including deposits and filing of the Schedule of Property and certified copy with the Registrar of Companies.

Dispensation of meetings of shareholders and creditors under Sections 230-232 of the Companies Act, 2013 - Scheme of Arrangement - certification of shareholders and creditors by statutory auditors/chartered accountants - compliance with accounting treatment under Section 133 of the Companies Act, 2013 - publication of notice following dispensation of meetings - filing of Company Petition for sanction of scheme

Dispensation of meetings of shareholders and creditors under Sections 230-232 of the Companies Act, 2013 - certification of shareholders and creditors by statutory auditors/chartered accountants - compliance with accounting treatment under Section 133 of the Companies Act, 2013 - Dispensation of convening and holding meetings of Equity Shareholders, Secured Creditors and Unsecured Creditors of the Applicant Companies. - HELD THAT: - The Tribunal examined the Company Application, board approvals, affidavits of shareholders and creditors, and certificates issued by the statutory auditors/chartered accountants certifying the composition of shareholders and creditors and compliance of the accounting treatment. Having regard to the materials placed on record and compliance with applicable provisions, the Tribunal was satisfied that all material facts relating to the Scheme had been disclosed and that the statutory certifications supported dispensation of meetings. On that basis the Tribunal exercised its power under the Companies Act to dispense with convening meetings of Equity Shareholders, Secured Creditors and Unsecured Creditors. [Paras 5, 6]

Meetings of the Equity Shareholders, Secured Creditors and Unsecured Creditors of the Applicant Companies are dispensed with.

Publication of notice following dispensation of meetings - filing of Company Petition for sanction of scheme - Directions as to publication of the Tribunal's order and the subsequent filing of the Company Petition for sanction of the Scheme of Arrangement. - HELD THAT: - The Tribunal directed the Applicant Companies to publish a paper notification in one English and one vernacular newspaper informing stakeholders of the dispensation of meetings within ten days of receipt of the order. The Tribunal also permitted the Applicant Companies to proceed to file the requisite Company Petition for sanction of the Scheme after following extant provisions of law. The order preserved the right of any aggrieved party to seek relief by filing a miscellaneous application in the Company Application. [Paras 6]

Applicant Companies directed to publish notice in English and vernacular newspapers and are permitted to file the Company Petition for sanction of the Scheme; aggrieved parties may file miscellaneous applications.

Final Conclusion: The Tribunal, satisfied with the disclosures, board approvals and statutory certifications, dispensed with convening meetings of shareholders and creditors, directed publication of the dispensation order, and permitted the Applicant Companies to file the Company Petition for sanction of the Scheme of Arrangement.

Admission of claims of workmen in liquidation - duty of the liquidator to consider and admit claims - proof of claim to be made as on liquidation commencement date - proof of claim in prescribed manner under liquidation regulations - admission on the basis of books of account where claim not made - requirement of a speaking order on admission or rejection of claims

Admission of claims of workmen in liquidation - duty of the liquidator to consider and admit claims - proof of claim in prescribed manner under liquidation regulations - admission on the basis of books of account where claim not made - Order rejecting the workmen's claims by the Liquidator was set aside and the claims were directed to be reconsidered afresh in accordance with the Code and the Liquidation Process Regulations. - HELD THAT: - The Tribunal recognised the legislative intent to protect workmen and noted that claims made during CIRP would have been part of records available to the Liquidator. Regulation 16 requires proof of claims as on the liquidation commencement date and Regulation 19 prescribes the manner and forms for submission of workmen's claims, with Regulation 19(4) permitting admission on the basis of the corporate debtor's books where a claim has not been made. Although the Liquidator had taken steps to invite claims (including publication), the Tribunal observed that procedural steps cannot justify denial of legitimate and verifiable dues. The Liquidator had indicated willingness to consider claims if submitted in accordance with the Code and Regulations. In the interests of justice and equity, and without adjudicating disputes pending before other fora, the Tribunal directed that the Liquidator reconsider the workmen's claims afresh, give reasons in a speaking order, and decide within the time prescribed, while adherence to the prescribed forms, timelines and verification under the Regulations is required.

Order rejecting the claims is set aside; the Liquidator is directed to reconsider the workmen's claims afresh, following the Code and the IBBI (Liquidation Process) Regulations, and to pass a speaking order within 30 days of receipt of this order.

Final Conclusion: The application succeeds to the extent the Liquidator's rejection of the workmen's claims is set aside; the Liquidator must re-admit and determine the claims in accordance with the Insolvency and Bankruptcy Code, 2016 and the IBBI (Liquidation Process) Regulations, 2016, and record reasons in a speaking order within 30 days.

Corporate Insolvency Resolution Process - Filing for CIRP under Section 9 of the Insolvency and Bankruptcy Code - Operational Creditor's claim of debt and default - Appointment of Interim Resolution Professional - Moratorium - Prohibition on suits and enforcement actions during CIRP - Supply of essential goods during moratorium - Public announcement of CIRP

Operational Creditor's claim of debt and default - Filing for CIRP under Section 9 of the Insolvency and Bankruptcy Code - Admission of the Company Petition under Section 9 and initiation of CIRP against the Corporate Debtor - HELD THAT: - The Tribunal found that the Operational Creditor supplied goods to the Corporate Debtor, invoices were raised and received, and the Corporate Debtor failed to make the payments claimed. The Operational Creditor issued the statutory demand notice which was received by the Corporate Debtor. The Corporate Debtor did not file any reply and was proceeded with ex parte. On the basis of the documents and submissions placed by the Operational Creditor, the Tribunal was satisfied about existence of debt and default and that the claim lay within limitation. Consequently the petition fulfilled the requirements for admission under Section 9 and CIRP was ordered to be initiated. [Paras 6]

Company Petition under Section 9 admitted and CIRP ordered against the Corporate Debtor.

Appointment of Interim Resolution Professional - Corporate Insolvency Resolution Process - Appointment of an Interim Resolution Professional where none was nominated by the Operational Creditor - HELD THAT: - The Operational Creditor had not proposed a name for the IRP in the petition. The Tribunal therefore appointed an Insolvency Professional from the list furnished by the Insolvency and Bankruptcy Board of India to perform the duties of the IRP and carry out functions as prescribed under the Code.

Mr. Balaji Shrirang Sagar appointed as Interim Resolution Professional.

Corporate Insolvency Resolution Process - Initial CIRP cost - Direction for deposit towards initial CIRP cost - HELD THAT: - The Tribunal directed the Operational Creditor to deposit a specified amount towards the initial CIRP cost by way of a demand draft in favour of the appointed IRP immediately upon communication of the order, as part of the process to enable the IRP to commence functions.

Operational Creditor directed to deposit the initial CIRP cost immediately to the IRP.

Moratorium - Prohibition on suits and enforcement actions during CIRP - Supply of essential goods during moratorium - Public announcement of CIRP - Corporate management vests in IRP - Imposition of moratorium and ancillary directions on conduct during CIRP - HELD THAT: - The Tribunal imposed the statutory moratorium with effect from the date of pronouncement until completion of CIRP or approval of a resolution plan or liquidation. The moratorium prohibits institution or continuation of suits or proceedings, execution of decrees or enforcement actions, transfer or disposal of assets, and actions to enforce security interests, subject to statutory exceptions notified by the Central Government. The Tribunal also directed that supply of essential goods or services, if continuing, shall not be terminated during the moratorium, ordered immediate public announcement of the CIRP as specified under the Code, recorded that management of the corporate debtor vests in the IRP/RP during the CIRP, and directed cooperation by suspended directors and employees. Registry was directed to inform the Registrar of Companies to update the Master Data.

Moratorium imposed with specified prohibitions and directions for public announcement, continuance of essential supplies, vesting of management in the IRP, and ROC update.

Final Conclusion: The Company Petition under Section 9 was allowed; CIRP was initiated against the Corporate Debtor, an IRP was appointed from the IBBI list, the Operational Creditor was directed to deposit the initial CIRP cost, a moratorium with attendant prohibitions and directions was imposed, public announcement was ordered and the Registrar of Companies was to be informed to update records.

Admission of petition under Section 9(5) of the Insolvency and Bankruptcy Code, 2016 - Existence of a pre existing dispute and its effect on maintainability of a Section 9 application - Operational debt and default within the meaning of Section 5(20) of the Code - Appointment of Interim Resolution Professional and suspension of Board of Directors' powers - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 and its consequences - Continuation of supply of essential goods or services during moratorium under Section 14(2) and 14(2A)

Existence of a pre existing dispute and its effect on maintainability of a Section 9 application - Demand notice and timing of raising of disputes - There was no dispute between the parties prior to the issuance of the Demand Notice such as would bar admission of the Section 9 application. - HELD THAT: - The Corporate Debtor pleaded disputes about quantity, quality, HSN/GST and raised debit notes, but furnished no contemporaneous documentary evidence showing a real dispute existing prior to the Demand Notice. The counter contained only bald allegations and the asserted debit notes were issued after the Operational Creditor's reminder; therefore those contentions were held to be afterthoughts. In consequence, the Tribunal concluded that the defences raised by the Corporate Debtor did not amount to a pre existing dispute under Section 9 and did not defeat maintainability of the application. [Paras 12, 13]

The plea of a pre existing dispute is rejected and does not bar admission of the Petition.

Operational debt and default within the meaning of Section 5(20) of the Code - Proof of operational debt for invoices raised and non payment - The Operational Creditor proved the existence of operational debt and default by the Corporate Debtor for the invoices spanning 2017-2018. - HELD THAT: - The invoices attached to the application related to supplies made during 2017-2018 and remained unpaid when the petition was filed. The Tribunal found that the supplies and failure to pay fall within the definition of "Operational Debt" and that the Operational Creditor had established non payment despite issuance of the demand notice and affidavit under Section 9(3)(b). On this basis the statutory test for admission under Section 9(5) was satisfied. [Paras 14, 15]

Operational debt and default established; petition to be admitted under Section 9(5).

Appointment of Interim Resolution Professional and suspension of Board of Directors' powers - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 and its consequences - Continuation of supply of essential goods or services during moratorium under Section 14(2) and 14(2A) - Upon admission, an Interim Resolution Professional was appointed, the Board's powers were suspended, and moratorium under Section 14 was applied with the statutory exceptions for essential supplies noted. - HELD THAT: - Having admitted the application, the Tribunal appointed the proposed IRP who filed the required written communication and directed him to take steps under the Code. The order suspended the powers of the Board of Directors as a consequence of initiation of CIRP. The Tribunal also declared the moratorium operative from the date of the order and reproduced the statutory prohibitions and the exceptions relating to essential supplies and transactions not covered by the moratorium under Section 14(2), 14(2A) and 14(3). [Paras 15, 16, 17, 18, 19]

IRP appointed; Board's powers suspended; moratorium under Section 14 declared with statutory exceptions.

Final Conclusion: The Tribunal admitted the Section 9 petition, appointed the Interim Resolution Professional to conduct the CIRP and directed enforcement of the moratorium in accordance with the Code; the Corporate Debtor's pleaded disputes were rejected as afterthoughts and the Operational Creditor's claim of operational debt and default was accepted.

Financial creditor - financial debt - financial contract - application under Section 7 of the I&B Code, 2016 - Rule 4 of the IBBI (Application to Adjudicating Authority) Rules, 2016 - Regulation 8 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - default - admission of insolvency application

Financial contract - Rule 4 of the IBBI (Application to Adjudicating Authority) Rules, 2016 - Regulation 8 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Whether the Section 7 application could be admitted in the absence of a financial contract evidencing the terms of the loan and the disbursement. - HELD THAT: - The Tribunal held that Rule 4 and Regulation 8 require a financial creditor to place on record the financial contract evidencing the terms of the financial debt, including amount disbursed, tenure, interest payable and repayment conditions. The petitioners did not produce any financial contract, agreement or promissory note; instead they relied on ledgers and bank statements. In the absence of a financial contract on record, the relationship necessary to qualify the applicants as financial creditors under the Code could not be established and the essential pre-condition for admission under Section 7 was missing. [Paras 8, 9]

The petition could not be admitted because no financial contract was placed on record.

Default - financial debt - admission of insolvency application - Whether default in repayment of the claimed financial debt was established so as to trigger initiation of the Corporate Insolvency Resolution Process. - HELD THAT: - The Tribunal found that determination of default depends on establishing the underlying financial contract which defines the debt and repayment obligations. Since no financial contract or promissory note was produced, the alleged default could not be determined from the material on record. Consequently, the asserted default remained unproved and could not form a basis for initiating insolvency proceedings. [Paras 9, 10]

Default was not established and the Section 7 petition was dismissed.

Final Conclusion: The Section 7 petition was dismissed without costs for failure to place on record a financial contract and for inability to prove default; no insolvency process was initiated.

Levy of service tax on indivisible composite works contracts - non-existence of levy of service tax under the Finance Act, 1994 - reliance on the ratio in CCE & Cus. v. Larsen & Toubro Ltd. - appropriation of part payment against assessed liability - interest for delayed payment and penalties for failure to file return and recovery

Levy of service tax on indivisible composite works contracts - reliance on the ratio in CCE & Cus. v. Larsen & Toubro Ltd. - Service tax demand on amounts recovered for composite contracts (supply of material alongwith services) during FY 2004-05 - HELD THAT: - The appellants provided contract services involving supply of materials together with services. The Tribunal found the question squarely covered by the decision of the Hon'ble Supreme Court in CCE & Cus. v. Larsen & Toubro Ltd., which held that the Finance Act, 1994 does not lay down a charge or machinery to levy and assess service tax on indivisible composite works contracts and therefore the levy is non-existent. Applying that ratio, the Tribunal concluded that the demand of service tax for the composite contracts in question could not be sustained. [Paras 4]

Appeal allowed: the service tax demand on the composite works contracts is unsustainable in view of Larsen & Toubro and is set aside.

Appropriation of part payment against assessed liability - interest for delayed payment and penalties for failure to file return and recovery - Validity of appropriation of amounts deposited and of interest and penalties imposed in consequence of the service tax demand - HELD THAT: - Because the primary demand for service tax on the composite contracts was held to be untenable, consequential actions premised on that demand were also addressed. The Tribunal, following the acceptance of the Larsen & Toubro ratio, allowed the appeal in favour of the appellant and accordingly rendered the demand (including appropriation, interest and penalties imposed insofar as they flowed from the demand) unsustainable. The Tribunal awarded consequential benefits to the appellant in accordance with law. [Paras 4]

Consequential measures-appropriation of deposits, interest and penalties imposed in relation to the set-aside demand-are set aside and the appellant entitled to consequential benefits.

Final Conclusion: The appeal is allowed: the service tax demand for FY 2004-05 on the composite works contracts is set aside and all consequential appropriation, interest and penalties founded on that demand are unsustainable; the appellant is entitled to consequential relief in accordance with law.

Refund of service tax - proof of payment through bank statements - verification of supporting documents - de novo adjudication - remand for fresh consideration - opportunity of hearing

Refund of service tax - proof of payment through bank statements - verification of supporting documents - remand for fresh consideration - Whether the rejection of the refund claim on the ground of non-production of bank statements and supporting documents could be sustained, and whether the matter should be remanded for verification and fresh adjudication. - HELD THAT: - The Tribunal found that the appellants had produced supporting material, including an SAP accounting abstract and, belatedly, a correlation of vendor payments with bank statements by letter dated 13.06.2017, which was acknowledged by the Department but was not considered by the Commissioner (Appeals) when passing the impugned order. Given that the Original Authority is better placed to verify and appreciate the bank statements and related documents, the Tribunal concluded that the verification had not been properly undertaken by the Commissioner (Appeals). The matter therefore required fresh consideration rather than summary rejection for non-production of documents. In consequence, the Tribunal set aside the impugned order and remanded the matter to the adjudicating authority for de novo adjudication, with directions to take into account all documents produced by the appellants, verify the payment evidence, and afford a reasonable opportunity of hearing. The Tribunal did not decide the substantive entitlement on the merits but directed the Original Authority to examine the documentary proof and decide afresh. [Paras 4, 5]

Impugned order set aside; matter remanded to the adjudicating authority for de novo adjudication with directions to verify the documents, consider the bank statements and other supporting material, and grant a reasonable opportunity of hearing to the appellants.

Final Conclusion: Appeal allowed by way of remand; the impugned order is set aside and the matter is remanded to the Original Adjudicating Authority for fresh adjudication after verification of all documents and grant of hearing.

Renting of immovable property service - support services of business - reverse charge mechanism - service tax on advertisement (sale of space or time) - requirement that adjudicating authority not go beyond show cause notice - failure to consider reply to show cause notice

Renting of immovable property service - Whether the appellant rendered 'renting of immovable property' service to film distributors - HELD THAT: - The Tribunal examined the agreements between exhibitor and distributors and followed earlier Division Bench decisions (Moti Talkies and subsequent authorities) which held that where the exhibitor obtains theatrical exhibition rights from the distributor and pays consideration to the distributor (no consideration flows from the distributor to the exhibitor), no service of 'renting of immovable property' is provided by the exhibitor to the distributor. The Principal Commissioner's finding that the appellant rendered 'renting of immovable property' service was held unsustainable on that legal and factual basis. [Paras 13, 14, 15, 16]

Finding of service tax liability under 'renting of immovable property' service cannot be sustained and is set aside.

Requirement that adjudicating authority not go beyond show cause notice - support services of business - Whether the adjudicating authority could confirm demands under a different category (e.g., 'support services of business') than that raised in the show cause notice - HELD THAT: - The Tribunal applied the settled principle that an adjudicating or appellate authority cannot decide matters beyond the grounds raised in the show cause notice. The show cause notice dated 21.04.2014 raised demands under 'renting of immovable property' but the impugned order confirmed certain demands under 'support services of business'. Reliance was placed on the Tribunal's decision in Delhi Duty Free Services (as discussed) to conclude that confirmation on a ground not raised in the show cause notice was impermissible. The appellant had also made written submissions on these heads which the Principal Commissioner failed to consider. [Paras 22, 23, 24, 25, 26]

Confirmation of demand under categories not raised in the show cause notice (notably the shift to 'support services of business') is unsustainable and set aside.

Failure to consider reply to show cause notice - Whether the Principal Commissioner considered the appellant's reply to the first show cause notice dated 21.04.2014 - HELD THAT: - The Tribunal noted documentary evidence that the appellant's reply and additional written submissions were filed and acknowledged (endorsement showing receipt on 21.10.2014 and additional submissions), but the impugned order records non-receipt/non-consideration. Because the Principal Commissioner failed to consider the filed reply, the part of the impugned order adjudicating the first show cause notice was vitiated. The Tribunal observed that remand was an option but, having heard the merits, proceeded to examine the contentions. [Paras 18, 19, 20]

Impugned order, insofar as it adjudicates the first show cause notice (21.04.2014), is vitiated for failure to consider the appellant's reply and is set aside on that ground.

Service tax on convenience charges, pouring fees, parking fees and service charges - Sustainability of service tax demand on amounts shown as convenience charges, pouring fees, parking fees and service charges - HELD THAT: - The show cause notice raised these demands under 'renting of immovable property' but the impugned order confirmed them under 'support services of business' and recorded that no submissions were made. The Tribunal found that the appellant had made detailed submissions on these heads in the reply and additional submissions, and that confirmation on a different ground without considering the submissions is impermissible. Accordingly, the confirmations on these heads were set aside. [Paras 21, 22, 24, 25, 26]

Service tax confirmed on these heads in the impugned order is set aside.

Lease rent income - renting of immovable property service - Validity of confirmation of service tax on amounts shown as 'lease rent income' - HELD THAT: - The Tribunal noted that the Principal Commissioner gave no specific reasoning for sustaining the demand under this head despite detailed submissions by the appellant and that the appellant had already deposited service tax on amounts received in lieu of space given to vendors under 'renting of immovable property' service. On these bases the confirmation was held to be unsustainable. [Paras 27, 28]

Demand confirmed under 'lease rent' is unsustainable and set aside.

Other income - renting of immovable property service - Whether service tax on amounts shown as 'other income' could be sustained - HELD THAT: - The impugned order recorded non-submission by the appellant on this issue for 2008-09 to 2012-13, but the Tribunal found that the appellant had in fact made detailed submissions and that similar demands for 2013-14 had been dropped by the Principal Commissioner. Given these facts and the failure to consider the submissions, confirmation could not be sustained. [Paras 29, 30]

Confirmation of demand on 'other income' is set aside.

VPF charges - Sustainability of service tax demand on VPF charges - HELD THAT: - The Tribunal accepted the appellant's submission that VPF amounts were subsidies paid by distributors towards digital projection equipment and that service tax on such amounts had been deposited. The impugned order nevertheless confirmed a demand on the premise tax had not been paid. Because tax had been deposited and this was acknowledged in the record, the confirmation could not stand. [Paras 31, 32]

Demand confirmed on VPF charges is unsustainable and set aside.

Service tax on advertisement (sale of space or time) - Validity of confirmation of service tax on 'advertisement income' - HELD THAT: - The Tribunal examined the period-wise position recorded in the impugned order and the appellant's submissions. It noted that service tax for periods up to 30.06.2012 had been paid and that the impugned order itself had dropped demands for periods when the activity was not taxable (post 01.07.2012 as per section 66D(g) as recorded). The Principal Commissioner had also recorded non-receipt of submissions which the appellant had in fact filed. On these grounds the confirmation was found erroneous. [Paras 33, 34, 35, 36]

Confirmation of service tax on advertisement income is erroneous and set aside.

Reverse charge mechanism - foreign exchange expenses - Sustainability of demand confirmed under reverse charge for foreign expenditure incurred - HELD THAT: - The impugned order recorded that no submissions were made by the appellant; however, the Tribunal found that detailed submissions had been filed (Ground G) and that the appellant had paid the service tax. The Principal Commissioner ignored both the submissions and the fact of payment, rendering the confirmation unsustainable. [Paras 37, 38, 39]

Confirmation of demand under reverse charge for foreign expenditure is unsustainable and set aside.

Final Conclusion: For the reasons stated, the Tribunal set aside the impugned adjudication (quashing the confirmed demands across the heads examined and in particular those grounded on 'renting of immovable property', the re-categorisation to 'support services', advertisement, reverse charge and the amounts where replies/submissions were not considered) and allowed the appeal.

Clandestine removal of goods - admission and corroboration - burden of proof - penalty and redemption fine

Clandestine removal of goods - admission and corroboration - burden of proof - penalty and redemption fine - Whether the demand of duty and imposition of penalty and redemption fine for clandestine manufacture and removal of cigarettes was justified on the materials available, including admissions and recovered stock. - HELD THAT: - The Tribunal accepted the Revenue's case that excess raw material (210 kg of cut tobacco and other inputs) and ongoing production of the specified brand at the manufacturer's premises, together with discovery of finished packets and unaccounted cash at the trader's premises, were not disputed by the appellants (para 7). The appellants made inculpatory statements during investigation and did not retract them; no documents were produced to show lawful purchase or possession of the excess material or licit provenance of the goods (para 8). The Tribunal applied the principle that admissions need not be further proved, citing the Apex Court (para 9), and held that where the appellants admitted the illicit procurement of excess stock and failed to produce exculpatory documents, the Revenue was not required to prove licit procurement (para 10). In view of the admitted facts, the presence of unexplained excess stock and recovered finished goods, and the un-retracted statements, the Tribunal found sufficient corroboration to sustain the demand of duty and the penalties/redemption fine. [Paras 7, 8, 10, 11]

The impugned order demanding duty and imposing penalty and redemption fine for clandestine manufacture and removal of cigarettes is upheld and the appeals are dismissed.

Final Conclusion: The Tribunal dismissed the appeals, holding that un-retracted admissions together with unexplained excess raw material and recovered finished goods furnished sufficient corroboration to sustain the demand of duty and the imposition of penalty and redemption fine.

Time barred refund claims under the statutory limitation for refund - effect of a High Court setting aside a tribunal order on consequent original and appellate orders - demand raised under Section 11A of the Central Excise Act

Effect of a High Court setting aside a tribunal order on consequent original and appellate orders - time barred refund claims under the statutory limitation for refund - demand raised under Section 11A of the Central Excise Act - Whether the impugned Order in Original and the Commissioner (Appeals) order confirming demand remained sustainable after the High Court set aside the CESTAT order. - HELD THAT: - The appeal was disposed of by reference to the order of the Hon'ble High Court of Karnataka dated 18.03.2020 which had set aside the CESTAT's earlier decision that had held the refund claims to be time barred. Because the High Court set aside the tribunal's order, the foundation on which the original adjudication and the subsequent appellate confirmation rested ceased to exist. The Tribunal therefore held that the Order in Original and the Commissioner (Appeals) order were not sustainable in law and, following the High Court's decision, the impugned order was set aside. The Tribunal granted consequential relief to the appellant in view of the High Court's ruling.

Impugned Order in Original and the Commissioner (Appeals) order set aside and the appellant's appeal allowed with consequential relief following the High Court's order.

Final Conclusion: The Tribunal set aside the impugned orders and allowed the appeal, holding that in view of the Hon'ble High Court of Karnataka's order setting aside the CESTAT decision, the original adjudication and the appellate confirmation were not sustainable in law; consequential relief granted to the appellant.

CENVAT credit on capital goods used in R&D located within registered factory premises - definition of "factory" under Section 2(e) of the Central Excise Act, 1944 - use requirement for capital goods under the Cenvat Credit Rules, 2004 - admissibility of CENVAT credit on input services used in premises forming part of the factory - onus of proof on the assessee under Rule 9(5) of the Cenvat Credit Rules, 2004 - application of limitation and extended period where department had prior knowledge of activities

CENVAT credit on capital goods used in R&D located within registered factory premises - definition of "factory" under Section 2(e) of the Central Excise Act, 1944 - use requirement for capital goods under the Cenvat Credit Rules, 2004 - CENVAT credit on capital goods installed in the R&D building situated within the registered premises is admissible. - HELD THAT: - The Tribunal found that the R&D building is located within the registered premises as per the approved ground plan and, applying the statutory definition of "factory" under Section 2(e), held that parts of premises within which manufacturing-related activities (including R&D, storage, administrative and development activities) are carried on form part of the factory. The Tribunal distinguished the Commissioner's approach which required the capital goods to be used "in or in relation to the manufacture of final products"; for capital goods the relevant requirement is their use in the factory of the manufacturer. Reliance was placed on precedents recognising capital goods installed in R&D buildings within factory premises as eligible for credit (including Maruti Suzuki and subsequent Tribunal decisions). Since the capital goods were within the registered premises and their initial admissibility was not disputed by Revenue, denial of credit on the ground that R&D was not manufacturing was unsustainable. [Paras 4]

Credit on capital goods installed in the R&D building situated within the registered factory premises is allowable; the denial on that ground is set aside.

Admissibility of CENVAT credit on input services used in premises forming part of the factory - application of definition of "input service" and nexus with factory use - CENVAT credit on input services used in the R&D building (part of the registered factory premises) could not be denied. - HELD THAT: - Having held that the R&D building forms part of the factory/registered premises, the Tribunal applied the principle that credit for inputs and input services used in the factory cannot be disallowed merely because the activities in that part do not produce a final marketable product. The Tribunal noted that the department had knowledge of the activities from contemporaneous correspondence and that the impugned order's denial of services-credit for alleged cessation of manufacturing was not tenable. Consequently, the demand premised on denial of input services credit was not sustained. [Paras 4]

CENVAT credit on input services used in the R&D building (within registered premises) is allowable; the denial is set aside.

Application of limitation and extended period where department had prior knowledge of activities - requirement of contemporaneous departmental awareness for invoking extended limitation - Extended period of limitation for demanding reversal of credit was not justified. - HELD THAT: - The Tribunal observed that the department had contemporaneous documents and correspondence reflecting knowledge of the R&D activities and installations (applications for installation certificates, factory manager's certificate, range superintendent's letter). In view of that prior knowledge and the documents on record relied upon by the Tribunal, there was no justification for invoking the extended period of limitation for the demands; accordingly the demands could not be sustained on that ground. [Paras 4]

The impugned demands are not sustainable on the basis of extended limitation; extended period invocation is unjustified.

Remand compliance - supply of verification report and opportunity to be heard - tribunal remand directions and scope of remand - The Commissioner failed to address the verification report called for by the Tribunal's remand and proceeded without dealing with the material the Tribunal directed to be supplied; the impugned order is therefore unsustainable. - HELD THAT: - The Tribunal's earlier remand required the verification report dated 13/14.01.2009 to be supplied to the assessee and a fresh speaking order to be passed after affording opportunity. The Commissioner's subsequent order was silent on that verification report and proceeded to rehear and expand the case beyond the limited scope of remand. The appellate Tribunal noted this procedural deficiency and the Commissioner's failure to comply with remand directions contributed to setting aside the impugned order. [Paras 2, 4]

Commissioner's order did not comply with remand directions regarding supply of the verification report and opportunity to be heard, and is therefore set aside.

Final Conclusion: The appeals are allowed. The impugned adjudication denying CENVAT credit on capital goods and input services installed and used in the R&D building (found to be within the registered factory premises) and the related demands and penalties are set aside; the Commissioner's order is unsustainable for having ignored remand directions and relevant contemporaneous material, and the extended period of limitation is not attracted.

Penalty under Rule 26 of the Central Excise Rules, 2002 - Liability limited to natural persons - Inapplicability of Rule 26 to artificial persons (partnership firms/companies) - Precedential value of Tribunal orders on interpretation of penal provisions

Penalty under Rule 26 of the Central Excise Rules, 2002 - Liability limited to natural persons - Inapplicability of Rule 26 to artificial persons (partnership firms) - Whether penalty under Rule 26 could be imposed on the appellants who are partnership firms. - HELD THAT: - The Court examined the text of Rule 26 which prescribes penalty for "Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation" and concluded that the penal provision is directed to natural persons. The Tribunal found that partnership firms are artificial persons and, therefore, not amenable to penalty under Rule 26. The Tribunal relied on its prior decisions, including Woodmen Industries and a co-ordinate Bench order dated 20.04.2018, which held that Rule 26 penalties attach to the natural person handling the goods and cannot be imposed on a firm. The Tribunal differentiated the authorities cited by Revenue on the ground that those decisions concerned different statutory provisions or issues (for example, Section 112(a) of the Customs Act, quantification of penalty, or Section 11AC of the Central Excise Act) and thus were not on point for the applicability of Rule 26 to partnership firms. Applying these precedents and the statutory language, the Tribunal held that invoking Rule 26 against the appellants (partnership firms) was incorrect. [Paras 6, 7]

Penalty under Rule 26 cannot be imposed on partnership firms; the impugned order upholding such penalty is set aside and the appeals are allowed to that extent.

Final Conclusion: The Tribunal allowed the appeals insofar as penalty under Rule 26 of the Central Excise Rules, 2002 was imposed on the appellants (partnership firms), holding that Rule 26 applies to natural persons and is not invocable against artificial persons such as partnership firms; the impugned order is set aside on that point.