TaxTMI Updates e-Newsletter
Sep 06,2022

Detention and seizure for transporting goods without E-Way bill - release of goods on payment under Section 129(3)(a) of the CGST Act - determination of value for assessment at time of release - computation of demand as a percentage of tax payable - indemnity bond as security for recovery

Release of goods on payment under Section 129(3)(a) of the CGST Act - indemnity bond as security for recovery - Interim release of the detained goods subject to conditions - HELD THAT: - The Court, while keeping the matter for further consideration, directed the goods to be released immediately on compliance with two conditions: payment of half of the demand assessed by the adjudicating authority and execution of an indemnity bond as security for the remaining half. The order operates as an interim measure permitting release forthwith after satisfaction of both conditions, without adjudicating the underlying merits of the demand or valuation of the goods.

Goods to be released forthwith on payment of half the assessed amount and submission of an indemnity bond for the balance.

Detention and seizure for transporting goods without E-Way bill - determination of value for assessment at time of release - computation of demand as a percentage of tax payable - Validity of the assessment and computation of the demand was not finally adjudicated and was directed to be considered afresh - HELD THAT: - The Court noted the department's contention that goods were transported without an E Way bill and that the authorities computed a demand by applying a 200% figure to the tax payable. The petitioner challenged the authority's determination of valuation and contended that the invoice value ought to be presumed correct unless and until valuation is determined. The Court did not decide these contentions on merits; instead it directed the respondents to file a counter affidavit and the petitioner to file rejoinder, indicating that the questions relating to valuation, the correctness of the assessment methodology, and the computation of demand require further consideration by the adjudicating forum.

The questions as to valuation, the correctness of the 200% computation and the resultant demand are left open for determination after filing of pleadings and further consideration.

Final Conclusion: Interim relief granted: goods released on payment of half the assessed amount and furnishing an indemnity bond for the balance; substantive disputes regarding valuation, the authority to determine value at the time of release, and the method of computing the demand have not been finally decided and are directed to be considered after filing of counter and rejoinder affidavits.

Bill to-Ship to concept - triangular transaction - detention of goods - e-way bill compliance - rectifiable invoice discrepancies - role and powers of Roving Squad - jurisdiction of assessing officer - penalty under Section 129(1)(b) of the CGST Act - safeguarding revenue - security bond

Detention of goods - Bill to-Ship to concept - e-way bill compliance - rectifiable invoice discrepancies - role and powers of Roving Squad - Detention orders passed by the Roving Squad in respect of five vehicles were quashed. - HELD THAT: - The Court found that the consignments were part of a back-to-back EPC arrangement where goods were dispatched by the supplier with accompanying invoices and e-way bills, and that the only material discrepancy was the supplier's omission of the consignee's name (ITD Cementation India Limited) while correctly recording the place of delivery as the project site. The invoices raised by the petitioner on ITD Cementation India Limited were available on the GST portal and were produced before the authority. Given that the documentary records otherwise supported the movement and ultimate use of the goods at the project site, the discrepancy was held to be rectifiable and not indicative of tax evasion warranting detention. The Court emphasised that the Roving Squad is not the competent forum to decide classification/valuation or to effect final adjudication where invoices and e-way bills exist, and that the circular procedure requires transfer of records to the jurisdictional assessing officer or Review Cell. Applying these considerations, the Court quashed the detention orders but preserved the right of the assessing officer to examine the transactions on merits. [Paras 25, 26, 27, 32, 33]

Impugned detention orders quashed; vehicles released subject to directions and procedural safeguards.

Jurisdiction of assessing officer - triangular transaction - penalty under Section 129(1)(b) of the CGST Act - safeguarding revenue - security bond - Whether the triangular 'Bill to-Ship to' transaction and any consequent tax liability, valuation or penalty should be decided by the jurisdictional assessing officer. - HELD THAT: - The Court directed that all documents and records gathered by the Roving Squad be forwarded to the concerned jurisdictional assessing officer, who alone is to adjudicate on classification, valuation, completeness of the triangular transaction and any allegation of revenue loss or tax evasion. The petitioner was ordered to give explanations to the assessing officer and to execute a bond to safeguard revenue pending adjudication. The Court observed that where invoices and e-way bills exist and a bona fide discrepancy appears rectifiable, the assessing officer is the appropriate forum to determine whether a breach is minor or entails demand/penalty, and to apply the relevant provisions including any calculation methodology for penalty. [Paras 27, 32, 33]

Matter remitted to the jurisdictional assessing officer for decision on merits after opportunity to the petitioner; petitioner to execute a bond for safeguarding revenue.

Final Conclusion: The writ petitions are disposed of by quashing the detention orders; all records are to be forwarded to the jurisdictional assessing officer who shall decide the disputed questions concerning the triangular 'Bill to-Ship to' transactions, valuation and any penalty after giving the petitioner an opportunity to be heard, the petitioner meanwhile to execute a bond to safeguard revenue.

Cancellation of GST registration for continuous non-filing of returns - condonation of delay in filing revocation / appeal in view of COVID-19 - quashing of order of cancellation and revival of registration subject to safeguards - exclusion of pandemic period for computation of limitation - filing of belated returns with payment of tax, interest, fine and fee - restriction on utilization of Input Tax Credit pending departmental scrutiny - directions to modify GSTN portal to enable filing and payment

Cancellation of GST registration for continuous non-filing of returns - condonation of delay in filing revocation / appeal in view of COVID-19 - Validity of the order cancelling the petitioner's GST registration on account of continuous non-filing of returns and whether delay in seeking revocation / filing remedy can be excused in the circumstances - HELD THAT: - The petitioner, whose private accountant alone had access to the GST portal, did not file returns during the COVID-19 pandemic and only discovered the cancellation much later when the accountant accessed the GSTN. The Court treated the facts as comparable to earlier batch decisions of this Court where similar cancellations were quashed and delay was condoned in light of the pandemic and related administrative directions to exclude the pandemic period for limitation. Having regard to the petitioner's ill-health, closure of business during the pandemic, and the public interest in not permanently depriving erstwhile registrants of the GST fold, the Court held that the cancellation could not be allowed to operate without permitting revival subject to safeguards. The Court relied on the principle that mechanical exclusion from the GST regime in such circumstances would defeat the revenue's interest and the purpose of the GST scheme, and that adequate statutory safeguards exist to prevent misuse if registration is revived.

The order cancelling registration was quashed and the petitioner was permitted to seek revival notwithstanding the delay, having regard to the pandemic-related circumstances and the precedents of this Court.

Quashing of order of cancellation and revival of registration subject to safeguards - filing of belated returns with payment of tax, interest, fine and fee - restriction on utilization of Input Tax Credit pending departmental scrutiny - directions to modify GSTN portal to enable filing and payment - Relief to be granted upon quashing the cancellation and the conditions and safeguards to be imposed for revival of registration - HELD THAT: - Applying the safeguards articulated in the batch decision relied upon by the petitioner, the Court directed revival of registration subject to specified conditions. The petitioner must file the outstanding returns for the period prior to cancellation and pay the tax, interest, and applicable fines/fees within the stipulated period; such payments cannot be made or adjusted from any unutilized Input Tax Credit unless the credit is scrutinized and approved by a competent officer; any post-cancellation returns and tax liabilities must be discharged in cash; respondents may impose restrictions to prevent undue passing of Input Tax Credit or bill trading; on compliance the registration shall stand revived; and the respondents must take steps to instruct the GST Network to permit filing and payment within the stated timeframe. These conditions reflect the Court's view that revival is permissible provided adequate safeguards protect the revenue and prevent abuse.

Writ petition allowed and registration to be revived subject to filing of returns, payment of tax/interest/penalties, restrictions on ITC utilization pending scrutiny, and portal modifications as directed.

Final Conclusion: Writ petition allowed; the order cancelling the petitioner's GST registration is quashed and revival is permitted subject to the Court's protective conditions (filing of outstanding returns, payment of tax/interest/penalties, restrictions on utilization of Input Tax Credit pending scrutiny, and enabling steps on the GST portal).

Right to personal hearing - Principles of natural justice - Opportunity of personal hearing under Section 75(4) of the Central Goods and Services Tax Act, 2017 - Electronic service via GST portal and physical representation - Mode of communication under Section 169 of the Central Goods and Services Tax Act, 2017 - Remand for fresh consideration after hearing

Right to personal hearing - Principles of natural justice - Opportunity of personal hearing under Section 75(4) of the Central Goods and Services Tax Act, 2017 - Electronic service via GST portal and physical representation - Physical representation filed by the petitioner, received by the department on 10.01.2022, entitled the petitioner to a personal hearing and could not be ignored merely because it was not uploaded through the portal. - HELD THAT: - The Court found that the petitioner had sent a detailed representation dated 07.01.2022 which was received by the respondents on 10.01.2022 and that this fact was not disputed. While the department stressed that communications are effected through the portal and that personal hearing notices were posted electronically, the Court held that once the department had received the physical representation it ought to have been considered and the petitioner afforded an opportunity to be heard. The Court emphasised the applicability of the principle that an opportunity of personal hearing must be granted where an adverse decision is contemplated, and that denial of consideration of a received representation amounted to denial of the right of representation and principles of natural justice. The Court did not adjudicate the substantive merits of the show cause notices but confined itself to the procedural right to be heard. [Paras 5]

Petitioner is entitled to a personal hearing and the department must give opportunity to be heard and consider the documents submitted.

Remand for fresh consideration after hearing - Electronic service via GST portal and physical representation - Mode of communication under Section 169 of the Central Goods and Services Tax Act, 2017 - Proceedings on the show cause notices for the specified tax periods were directed to be reconsidered after affording personal hearing and receipt of any documents by the department. - HELD THAT: - The Court directed that the file, now with the second respondent, be processed by fixing a personal hearing date, receiving any documents produced by the petitioner, and then proceeding with the show cause notices (SCN Reference No.223011210520025 dated 30.11.2021 for July 2017 to March 2018 and SCN Reference No.223011210520145 dated 30.11.2021 for April 2018 to May 2018). The Court expressly declined to go into the merits of the departmental contentions and instead remanded the matter for fresh consideration limited to granting hearing, perusing the submitted documents and explanations, and thereafter completing the adjudicatory process. [Paras 6]

Department directed to fix personal hearing, consider submissions and documents, and proceed with the show cause notices within three months from receipt of the order.

Final Conclusion: Writ petitions disposed directing the department to afford the petitioner a personal hearing, consider the representation and documents received, and thereafter proceed with the show cause notices relating to July 2017 to March 2018 and April 2018 to May 2018; the process to be completed within three months. No order as to costs.

Transitional credit under TRAN-1 - rectification/revision of TRAN-1 filing - temporary reopening of portal for TRAN-1 and TRA-2 - extension of relief granted by higher court to similarly placed parties

Transitional credit under TRAN-1 - rectification/revision of TRAN-1 filing - extension of relief granted by higher court to similarly placed parties - consideration in accordance with law - Petitioner permitted to revise/correct/amend TRAN-1 details uploaded on the GST portal during the specified reopened period and respondent authorities directed to consider such revision in accordance with law. - HELD THAT: - The petitioner, a registered GST taxpayer, inadvertently uploaded incorrect TRAN-1 details and was unable to rectify the error before the portal was closed. The Court observed that the Hon'ble Apex Court in SLP No.32709-32710/2018 and connected matters directed GSTN to reopen a common portal for filing TRAN-1 and TRA-2 for a limited two month period. Counsel for respondents did not dispute that position of law. Applying the same principle of relief to the petitioner, the Court authorised revision/correction/amendment of TRAN-1 details between 01.09.2022 and 31.10.2022. The Court required the respondent authorities to consider any such revisions in accordance with law, thereby extending the benefit of the higher court's direction to a similarly placed party.

Petitioner permitted to revise TRAN-1 between 01.09.2022 and 31.10.2022; respondent authorities to consider the revisions in accordance with law.

Final Conclusion: Writ petition disposed of by permitting the petitioner to revise TRAN-1 details during the reopened portal period (01.09.2022 to 31.10.2022) and directing the authorities to consider the revisions in accordance with law, extending the benefit of the Apex Court's order to the petitioner.

Classification under HSN - Chapter 8436 (farm-type agricultural machinery) - Chapter 82 (hand tools) - Chapter 8437 (machines for cleaning, sorting or grading seed) - General Rules of Interpretation - Tariff item 84368090 - Rate of tax applicable under GST - Exclusion of farm-type machinery from 8437

Classification under HSN - Chapter 8436 (farm-type agricultural machinery) - Chapter 82 (hand tools) - Chapter 8437 (machines for cleaning, sorting or grading seed) - Tariff item 84368090 - Rate of tax applicable under GST - Whether the "Agricultural manually hand operated Seed dressing, Coating and Treating drum" is classifiable under Chapter Heading 8436 (tariff item 8436 80 90) and the consequent rate of GST. - HELD THAT: - The authority applied the Customs Tariff (HSN) rules and chapter notes. Chapter 82 covers hand tools with blades or working edges and thus does not extend to the appellants' drum which is not a hand tool as contemplated by Heading 8201. Chapter note to Chapter 82 also directs that appliances designed for fixing or of a size/weight requiring stands or base plates fall in Chapter 84. Heading 8437 covers machines for cleaning, sorting or grading seed but expressly excludes farm-type machinery. The explanatory notes to Heading 8436 include farm-type agricultural machinery and specifically refer to seed dusting machines consisting of hoppers feeding a revolving drum in which seeds are coated with powders. The appellant's manually operated seed dressing drum performs the same function of coating seeds and, despite hand operation, falls within the description of Heading 8436. Consequently, the Advance Ruling classifying the product under tariff item 8436 80 90 was correctly applied, and the applicable GST rate follows from that classification. [Paras 12, 13, 14]

The product is classifiable under Heading 8436, tariff item 8436 80 90, and the Advance Ruling upholding that classification and the consequent rate is affirmed.

Final Conclusion: The appeal is rejected; the Advance Ruling classifying the manually hand operated seed dressing, coating and treating drum under tariff item 8436 80 90 is upheld and the consequential GST position affirmed.

Principles of natural justice - rectification of advance ruling under Section 102 - remand for fresh adjudication - exemption under Notification No.12/2017 - Entry No.66 - exemption under Notification No.12/2017 - Entry No.3

Principles of natural justice - rectification of advance ruling under Section 102 - remand for fresh adjudication - Whether the Gujarat Authority for Advance Ruling (GAAR) failed to follow principles of natural justice by not considering the appellant's withdrawal application and rectification request, thereby requiring remand. - HELD THAT: - The Appellate Authority found that the appellant had submitted a withdrawal letter dated 25.08.2020 and an application for rectification dated 09.10.2020 within the six month period prescribed by Section 102, but the GAAR's order did not record any findings on the withdrawal request nor did it pass any order on the rectification application. The Authority relied on precedent establishing that where an adjudicatory body proceeds without giving an opportunity to be heard or without addressing a pending procedural application, principles of natural justice are not satisfied; in such circumstances remand for fresh adjudication is an appropriate remedy. Applying these principles to the facts before it, the Appellate Authority concluded that the GAAR had not followed the required procedure and that the matter ought to be reheard and decided afresh after affording the appellant an opportunity of hearing. [Paras 10, 11]

GAAR's order set aside in part and the matter remanded to GAAR for fresh decision after affording adequate opportunity of hearing and addressing the withdrawal and rectification applications.

Exemption under Notification No.12/2017 - Entry No.66 - exemption under Notification No.12/2017 - Entry No.3 - remand for fresh adjudication - Whether the alternative plea that the appellant's services are covered by Entry No.3 of Notification No.12/2017, which was raised for the first time before the Appellate Authority, requires consideration by the GAAR. - HELD THAT: - The Appellate Authority noted that the appellant advanced for the first time an alternative ground of exemption under Entry No.3 of Notification No.12/2017 before this appellate forum and that this ground had not been considered by the GAAR. Given the procedural infirmities identified and the decision to remit the matter for fresh adjudication, the Authority determined that all aspects, including any alternate pleas not earlier considered by GAAR, should be examined by GAAR in the remand proceedings so that the question of exemption under the relevant notification entries is decided after full opportunity to the parties. [Paras 10, 11]

The alternative plea under Entry No.3 is to be considered by GAAR on remand along with the other issues; the matter is remitted for fresh adjudication.

Final Conclusion: The Advance Ruling is set aside to the extent indicated and the matter is remanded to the Gujarat Authority for Advance Ruling for fresh decision after affording the appellant adequate opportunity of hearing and for GAAR to consider the withdrawal, rectification application and the alternate exemption plea afresh.

Composite supply - value of supply comprising cash and non-cash consideration - valuation of non-cash consideration by agreed notional consideration - exemption under entry no. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - advance ruling under section 97

Composite supply - value of supply comprising cash and non-cash consideration - valuation of non-cash consideration by agreed notional consideration - exemption under entry no. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - Whether the supply of fortified wholemeal flour by the miller to the Food & Supplies Department qualifies for exemption under entry no. 3A of Notification No. 12/2017-Central Tax (Rate) on the basis that the value of goods in the composite supply does not exceed 25% of the total value, when the total value includes notional non-cash consideration fixed by the Food & Supplies Department. - HELD THAT: - The Appellate Authority accepted that the transaction is a composite supply and that the total value of the composite supply comprises both cash and non-cash consideration. The WBAAR had declined to accept the notional valuation of non-cash consideration (gunny bags, bran and refractor) on the ground that the appellant did not produce documentary evidence of actual sale proceeds in the market. The Appellate Authority held that such an approach was erroneous. Valuation of the composite supply in the present case is the price agreed between the flour miller and the Food & Supplies Department and includes the notional values fixed by the Department (as reflected in its memos and the invoices raised by the miller). The value of goods in the composite supply (cost of fortification elements and packing materials) is Rs.60 per 100 kg, which is less than 25% of the agreed total supply value of Rs.260.48 per 100 kg. Therefore the composite supply satisfies all three criteria identified by the WBAAR for exemption under entry no. 3A: (i) supply to a Government entity; (ii) activity in relation to functions entrusted to local authorities; and (iii) value of goods in the composite supply not exceeding 25% of the total value. The advance ruling is accordingly modified to treat the supply as exempt under entry no. 3A.

The supply of fortified wholemeal flour to the Food & Supplies Department is a composite supply whose total value includes the notional non-cash consideration fixed by the Department; the value of goods is less than 25% of the total value and the supply is exempt under entry no. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

Final Conclusion: The Advance Ruling No. 16/WBAAR/2021-22 dated 31.12.2021 is modified: the supply of fortified wholemeal flour by M/s Shiv Flour Mill to the Food & Supplies Department is held to be exempt under entry no. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, the agreed notional non-cash consideration being included in the value of the composite supply.

Composite supply - Valuation of composite supply - Non-cash consideration as part of taxable value - Valuation based on agreed consideration including specified non-cash components - Exemption under entry no. 3A of Notification No. 12/2017-Central Tax (Rate) - Threshold: value of goods not exceeding 25% of composite supply - Supply to Government / public distribution under PDS

Composite supply - Exemption under entry no. 3A of Notification No. 12/2017-Central Tax (Rate) - Threshold: value of goods not exceeding 25% of composite supply - Supply to Government / public distribution under PDS - Whether the supply of fortified wholemeal flour by the miller to the Food & Supplies Department qualifies for exemption under entry no. 3A of Notification No. 12/2017-Central Tax (Rate). - HELD THAT: - The Appellate Authority accepted the WBAAR's classification of the transaction as a composite supply and its findings that the supply is to a Government entity and relates to distribution under the Public Distribution Scheme. The determinative question was whether the value of goods in the composite supply exceeds 25% of the total supply value. The Authority held that the value of goods (micronutrients and packing materials) in the composite supply is Rs.60 per 100 kg wheat and that the agreed total consideration for the composite supply is Rs.260.48 per 100 kg wheat as fixed by the Food & Supplies Department. Applying these figures, the value of goods is less than 25% of the composite supply value. Since all three criteria for entry no. 3A are satisfied, the supply falls within the exemption notification and is not taxable. [Paras 12]

Supply of fortified wholemeal flour to the Food & Supplies Department qualifies for exemption under entry no. 3A of Notification No. 12/2017-Central Tax (Rate).

Valuation of composite supply - Non-cash consideration as part of taxable value - Valuation based on agreed consideration including specified non-cash components - Whether valuation of the composite supply must depend on actual proceeds from subsequent sale of retained items (gunny bags, bran, refractor) or on the notional/agreed consideration fixed between the parties and the Food & Supplies Department. - HELD THAT: - The Authority overruled the WBAAR's approach that non-cash consideration should be valued by reference to actual future receipts from disposal in the open market. It held that the value of the composite supply is the price agreed between the miller and the Food & Supplies Department, which expressly includes notional values for retained gunny bags and by-products. The agreed notional non-cash consideration (Rs.124 per 100 kg wheat) forms part of the composite supply value irrespective of the miller's subsequent realisation on resale. Therefore the composite supply value is Rs.260.48 per 100 kg wheat as mutually fixed, and the non-cash components must be taken at the agreed notional amounts for valuation purposes. [Paras 12]

Valuation of the composite supply shall include the notional/non-cash consideration as fixed between the parties and the Food & Supplies Department, and need not be tied to actual future sale proceeds.

Final Conclusion: The Advance Ruling No. 18/WBAAR/2021-22 dated 31.12.2021 is modified: the composite supply of fortified wholemeal flour to the Food & Supplies Department is valued at the agreed consideration including specified non-cash components and, since the value of goods is under 25% of the composite value, the supply is exempt under entry no. 3A of Notification No. 12/2017-Central Tax (Rate).

Manufacturing services on physical inputs (goods) owned by others - Job work - Composite supply - Principal supply - Supply of service under paragraph 3 of Schedule II - Classification under SAC 998882 (Other transport equipment manufacturing services) - GST rate 18% under Notification No. 11/2017 (Sr. No. 26(ic) and 26(iv))

Supply of service under paragraph 3 of Schedule II - Job work - Composite supply - Principal supply - Fabrication and mounting of tanker/tipper bodies on chassis supplied by the owner is a supply of service. - HELD THAT: - The applicant receives chassis owned by the principal and undertakes cutting, bending, welding, fabrication and mounting, charging lump sum fabrication charges (including consumed inputs). Paragraph 3 of Schedule II and Section 2(68) treat treatment or processing of goods belonging to another as supply of service. The activity is naturally a service and, where bundled with supplied inputs, the composite supply analysis is governed by the principal supply doctrine; here the fabrication/mounting is the principal supply. The Board's Circular No. 52/26/2018-GST (para 12.2(b)) and sectoral FAQ Q27 support that building body on a chassis belonging to another is a service. The Authority therefore finds the activity to be a supply of service. [Paras 13, 14, 15]

The activity of fabricating and mounting tanker/tipper bodies on chassis supplied by the owner is a supply of service.

Manufacturing services on physical inputs (goods) owned by others - Classification under SAC 998882 (Other transport equipment manufacturing services) - GST rate 18% under Notification No. 11/2017 (Sr. No. 26(ic) and 26(iv)) - The correct SAC classification and applicable GST rate for the service. - HELD THAT: - Having held the activity to be a service, the Authority examined the Annexure to Notification No. 11/2017 and finds the service aligns with Heading 9988 (Manufacturing services on physical inputs owned by others), subgroup 99888 (Transport equipment manufacturing service) and Service Code 998882 (Other transport equipment manufacturing services). Circular No. 126/45/2019-GST clarifies the demarcation between job-work entries and other manufacturing services under heading 9988: where chassis are supplied by a registered person the activity falls within job-work description; where supplied by an unregistered person it falls within the residual manufacturing-on-others entry. In both situations the relevant entries (Sr. No. 26(ic) for job-work in relation to bus body building and Sr. No. 26(iv) for manufacturing services on physical inputs owned by others) mandate GST at 18%. The Authority also relied on earlier advance rulings as persuasive for identical factual scenarios but notes that advance rulings are binding only on the applicant and the jurisdictional officers. [Paras 16, 17, 18, 20]

The service is classifiable under SAC 998882 and taxable at 18% whether the chassis is supplied by a GST-registered principal (Sr. No. 26(ic)) or by an unregistered principal (Sr. No. 26(iv)).

Final Conclusion: The Authority rules that fabrication and mounting of tanker/tipper/bus bodies on chassis supplied by the owner is a supply of service classified under SAC 998882 (Other transport equipment manufacturing services) and is taxable at 18% whether the chassis is supplied by a GST-registered person (job-work entry) or an unregistered person (manufacturing-on-others entry).

Supply (as constituting taxable event) - In the course or furtherance of business - Consideration and contractual reciprocity / direct nexus - Outward supply - Input tax credit eligibility - Obligation under the Factories Act as determinant for ITC - Distinction between employees and contractual workers for Schedule III

Supply (as constituting taxable event) - In the course or furtherance of business - Distinction between employees and contractual workers for Schedule III - GST liability on the amount recovered by the company from its employees towards subsidised canteen charges - HELD THAT: - The Authority examined whether collections from employees for canteen meals amount to a supply by the applicant. Having regard to the CBIC clarification that perquisites provided by an employer to its employees in terms of the contractual agreement are in lieu of employee services and are not subject to GST when provided under the contract, and on the finding that the employees are on the applicant's payroll and the canteen is provided pursuant to the contractual terms of employment and the obligation under the Factories Act, the Authority held that the provision does not constitute an activity in the course or furtherance of business amounting to taxable supply by the applicant. Consequently, the amount collected from employees in terms of the contractual agreement, received as employees' share and paid to the canteen service provider, is not leviable to GST in the hands of the applicant. [Paras 20]

GST is not leviable on the employees' portion of canteen charges collected by the applicant.

Outward supply - Consideration and contractual reciprocity / direct nexus - Supply (as constituting taxable event) - GST liability on the amount recovered by the company from contractual workers (supplied by contractors) towards subsidised canteen charges - HELD THAT: - The Authority analysed whether amounts recovered from contractual workers constitute an outward supply by the applicant. It found that contractual workers are not on the applicant's payroll and are supplied through contractors; they do not satisfy the employer-employee relationship for Schedule III exclusion. The recovery from contractual workers is a deferred payment for the food supplied and falls within the definition of 'consideration' and 'outward supply'. Even in absence of any profit margin, the transaction is a supply of service (composite supply of food) under Schedule II and Section 7 read with Section 2(83). Therefore the recoveries from contractual workers are taxable in the hands of the applicant. [Paras 21, 25, 27, 28]

GST is leviable on the contractual workers' portion of canteen charges collected by the applicant.

Input tax credit eligibility - Obligation under the Factories Act as determinant for ITC - Provisionally available ITC where supply is obligatory under law - Admissibility of input tax credit (ITC) on GST paid for canteen supplies provided to the applicant's employees - HELD THAT: - The Authority referred to the proviso to Section 17(5)(b) and the CBIC circular clarifying that the proviso applies to the entire clause (b): ITC is available where the inward supply is obligatory for an employer to provide under any law. Since the applicant is mandated by Section 46 of the Factories Act to provide a canteen for its workers who are on its payroll, the GST paid on the canteen service procured by the applicant for its employees is eligible for ITC, subject to the condition that the burden of GST has not been passed on to the employees. [Paras 30]

ITC on GST paid for canteen supplies to employees is admissible to the applicant, provided the GST burden has not been passed on to employees.

Input tax credit eligibility - Obligation under the Factories Act as determinant for ITC - Distinction between employees and contractual workers for Schedule III - Admissibility of input tax credit (ITC) on GST paid for canteen supplies provided to contractual workers - HELD THAT: - The Authority considered whether ITC is available for food supplied to contractual workers. Chapter V of the CLRA places the obligation to provide canteens for contract labour on the contractor, not the principal employer. The contractual workers do not form part of the applicant's employer-employee relationship for this purpose and the applicant is not statutorily obliged to provide canteens to them. The proviso to Section 17(5)(b) permits ITC only where the inward supply is obligatory under law on the employer. As the applicant has no such obligation towards contractual workers, ITC on GST paid for food supplied to contractual workers is not admissible and remains blocked under Section 17(5)(b). [Paras 31]

ITC on GST paid for canteen supplies to contractual workers is not admissible to the applicant.

Final Conclusion: The Authority ruled that (i) collections from payroll employees towards canteen charges are not taxable in the hands of the applicant; (ii) collections from contractual workers are taxable as outward supply by the applicant; (iii) ITC on GST paid for food supplied to employees is admissible where the canteen is obligatory under law and the GST burden is not passed to employees; and (iv) ITC for food supplied to contractual workers is not admissible because the applicant is not legally obliged to provide such canteens to contract labour.

Exemption under Notification No.12/2017 entry 3 for services in relation to functions entrusted to a Municipality under Article 243W (Twelfth Schedule) - pure services (excluding works contract or composite supplies involving supply of goods) - local authority as service recipient - interpretation of functions listed in the Twelfth Schedule (public health, sanitation, conservancy and solid waste management) - availability of input tax credit under Section 17(5) CGST Act and its exclusions - condition in Notification No.11/2017 regarding ITC for rental services of transport vehicles and input services in the same line of business - jurisdictional scope of Authority for Advance Ruling under Section 95 (questions on which AAR may pronounce ruling)

Exemption under Notification No.12/2017 entry 3 for services in relation to functions entrusted to a Municipality under Article 243W (Twelfth Schedule) - interpretation of functions listed in the Twelfth Schedule (public health) - pure services - Whether the renting of motor vehicles supplied to Ahmedabad Municipal Corporation under work order No.445/1 dated 01-11-21 falls within Sr. No. 6 (Public Health) of the Twelfth Schedule and thereby qualifies for exemption under entry No. 3 of Notification No.12/2017. - HELD THAT: - The Authority examined the nature of the contract, the tender and work order which expressly provide for hiring of various vehicles on an emergency/Corona-period basis. It construed the entry in Notification No.12/2017 to require (a) a pure service, (b) supply to a governmental/local authority, and (c) that the supply be in relation to a function entrusted to a Municipality under Article 243W (Twelfth Schedule). While the supply was held to be a pure service and AMC was held to be a local authority, the Authority found on the record that the vehicles were not shown to be used exclusively for public health functions; the work order and tender contemplated administrative and other uses during emergencies and AMC did not furnish the clarifications sought. Further, GST TDS deducted by AMC treating the supply as taxable corroborated that the supply was not being operated as an exempt public-health activity. On these bases the Authority concluded that the hiring does not fall within Sr. No. 6 of the Twelfth Schedule and therefore does not qualify for exemption under entry No. 3 of Notification No.12/2017. [Paras 15, 17]

Renting of motor vehicles to AMC under the stated work order does not fall under Sr. No. 6 (Public Health) of the Twelfth Schedule and therefore does not qualify for exemption under entry No. 3 of Notification No.12/2017.

Jurisdictional scope of Authority for Advance Ruling under Section 95 - Whether the question seeking what documentary evidence or declarations the service provider should collect (question No.3) is maintainable before the Authority for Advance Ruling. - HELD THAT: - The Authority observed that question No.3 does not fall within clauses (a) to (g) of Section 97(2) of the CGST Act which define the matters on which the AAR may pronounce a ruling. As the question pertains to procedural/documentary practices rather than a question on classification, applicability of tax, determination of liability, or similar matters covered by Section 97(2), the Authority held it to be beyond its jurisdiction and therefore not maintainable. [Paras 18]

Question No.3 is not maintainable before this Authority.

Availability of input tax credit under Section 17(5) CGST Act and its exclusions - condition in Notification No.11/2017 regarding ITC for rental services of transport vehicles - Whether the service provider Varun Travels is entitled to claim input tax credit on input services received from persons in the same line of business for rendering the car hire services to AMC. - HELD THAT: - The Authority referred to Section 17(5) which restricts ITC in respect of certain supplies including leasing, renting or hiring of motor vehicles but permits ITC where the inward supply is used for making an outward taxable supply of the same category. It also examined the conditional provisions in Notification No.11/2017 (and its amendments) applicable to Heading 9966 which allow credit subject to the condition that credit of input tax on goods and services used in supplying the service has not been taken excepting input service in the same line of business. Applying these provisions, the Authority held that the applicant is eligible to avail ITC on receipt of direct services from the same line of business, subject to the statutory conditions and reversal/limitations prescribed in the notification and Section 17(5). [Paras 18]

The applicant is eligible to claim input tax credit on direct input services received from the same line of business subject to the conditions specified in Section 17(5) and Notification No.11/2017 (as amended).

Jurisdictional scope of Authority for Advance Ruling under Section 95 - Whether the question asking if direct input services supplied by a third party to the applicant are themselves exempt (question No.5) is maintainable before the Authority. - HELD THAT: - The Authority noted that question No.5 seeks a ruling on the tax treatment of supplies made by a third party to the applicant. Under Section 95 the AAR may pronounce on supplies being undertaken or proposed to be undertaken by the applicant who seeks the ruling. A question primarily about the status of a third party's supply does not fall within the AAR's jurisdiction to bind the third party or to pronounce on a supply not made by the applicant. Consequently the question was held not maintainable. [Paras 19]

Question No.5 is not maintainable before this Authority.

Final Conclusion: The Authority ruled that the car-hiring services supplied to Ahmedabad Municipal Corporation under the cited work order are not covered by Sr. No. 6 (Public Health) of the Twelfth Schedule and thus not exempt under entry No. 3 of Notification No.12/2017; the Authority cannot rule on the documentary-evidence issue (question No.3) or on the tax status of third party supplies (question No.5) as those are not maintainable before it; and the applicant may claim input tax credit on direct input services from the same line of business subject to the conditions in Section 17(5) CGST and Notification No.11/2017 (as amended).

Summary order. Authority refrained from answering the applicant's question on admissibility of input tax credit as the matter is sub-judice.

Opportunity of being heard under Section 148A(b) - time period for response between seven and thirty days - decision under Section 148A(d) whether to issue notice under Section 148 - requirement of a reasoned order on consideration of assessee's reply - interim non-operation of notice pending fresh decision under Section 148A(d)

Opportunity of being heard under Section 148A(b) - time period for response between seven and thirty days - Assessing authority's failure to grant adequate time under Section 148A(b) and validity of the order passed under Section 148A(d). - HELD THAT: - The Court held that Section 148A(b) prescribes that the assessee must be given a show-cause period not less than seven days and not exceeding thirty days, and that the Assessing Officer may further extend such period on an application. The assessing authority in the present case did not consider the petitioner's request for a longer period within the statutory band and passed the order under Section 148A(d) without assigning reasons for confining the time to the minimum permitted. Relying on the legislative scheme and the decision of the High Court of Delhi in Ester Industries Ltd. (as placed before the Court), the impugned order under Section 148A(d) was set aside because the mandate of Section 148A(b) to afford adequate opportunity within the 7-30 day period was violated. [Paras 6]

Impugned order dated 30.03.2022 under Section 148A(d) set aside for failure to grant adequate opportunity within the statutory 7-30 day period and for not recording reasons.

Decision under Section 148A(d) whether to issue notice under Section 148 - requirement of a reasoned order on consideration of assessee's reply - interim non-operation of notice pending fresh decision under Section 148A(d) - Directions for fresh consideration: filing of clarification, e portal access, time for reconsideration, and interim non-operation of earlier notice. - HELD THAT: - Having set aside the order under Section 148A(d), the Court directed that the petitioner be permitted to submit clarification within 15 days and ordered the respondents to open the e-portal to enable upload of the reply. The Assessing Officer may, if required, issue a supplementary notice seeking specific clarification. The Assessing Officer is directed to pass a reasoned order on whether to issue a notice under Section 148 within eight weeks after duly considering the petitioner's reply. Until such fresh order is passed, the earlier notice dated 17.03.2022 issued under Section 148A(a) shall not be given effect. The Court clarified that it did not express any view on the merits and left rights and contentions open for decision by the assessing authority in accordance with law. [Paras 6, 7]

Petitioner given 15 days to file clarification; respondents to enable e-portal; Assessing Officer to decide afresh by a reasoned order within eight weeks; earlier notice dated 17.03.2022 to remain not given effect until such decision.

Final Conclusion: The petition is disposed of by setting aside the order under Section 148A(d) for denial of adequate opportunity under Section 148A(b); the petitioner is permitted to file clarification within 15 days, the revenue to provide e-portal access and may seek supplementary clarification, and the Assessing Officer is directed to pass a reasoned fresh order within eight weeks, with the earlier notice held inoperative until that decision; no comment was made on the merits.

Bright Line Test - no statutory mandate - Arm's Length Principle - determination of cost as a preliminary step in ALP computation - binding precedent in absence of stay - stare decisis

Bright Line Test - no statutory mandate - Arm's Length Principle - determination of cost as a preliminary step in ALP computation - Permissibility and statutory status of the Bright Line Test for attribution of AMP/brand-building expenditure and the correctness of ITAT's reliance on precedents declining its mandatory application. - HELD THAT: - The Court affirmed that the Bright Line Test has no statutory mandate and a broad-brush segregation of 'routine' and 'non-routine' AMP expenditure by applying such a test is not prescribed. The High Court relied upon its earlier decision in Sony Ericsson (reproduced in the order) which held that applying the Bright Line Test to treat segregated transactional value as nil would be incorrect unless facts specifically warrant zero attribution; the decision in Bausch & Lomb Eyecare (India) Ltd. followed Sony Ericsson in holding that the question of applying the Bright Line Test to determine the existence of an international transaction involving AMP expenditure does not arise. The appellant's contention that the Transfer Pricing Officer's mandate to 'determine' cost as a primary step in ALP determination permits use of the Bright Line Test was not accepted, in view of the foregoing precedents which constrain treating the Bright Line Test as a mandated methodology for attribution. [Paras 4, 5]

ITAT did not err in relying on the High Court precedents; the Bright Line Test is not mandated by law for attribution of AMP expenditure.

Binding precedent in absence of stay - stare decisis - Whether the High Court's precedents remain binding on the Tribunal and this appeal despite being challenged before the Supreme Court. - HELD THAT: - Although the decisions in Sony Ericsson and Bausch & Lomb are under challenge before the Supreme Court, there is no stay on those judgments. Applying the principles in Kunhayammed and Shree Chamundi Mopeds, the Court held that earlier Division Bench decisions of this Court operate as binding precedent in the absence of a stay, and consequently the appeal is covered by those decisions and dismissed. The Court, however, clarified that its order shall abide by the final decision of the Supreme Court in the pending special leave petition. [Paras 6]

The appeal is dismissed as covered by the High Court's precedents which remain binding in the absence of a stay; the dismissal is subject to the eventual outcome of the pending Supreme Court proceedings.

Final Conclusion: Appeal dismissed being covered by this Court's decisions in Sony Ericsson and Bausch & Lomb which hold that the Bright Line Test is not statutorily mandated; the dismissal stands while remaining subject to the final decision of the Supreme Court in the pending SLP.

Wilful failure to furnish return - Mens rea - Quashing of prosecution as abuse of process - Effect of payment of tax and interest on criminal liability - Protective assessment and non-existence of protective penalty - Section 276CC of the Income Tax Act, 1961

Wilful failure to furnish return - Mens rea - Effect of payment of tax and interest on criminal liability - Quashing of prosecution as abuse of process - Continued criminal prosecution under Section 276CC where return was filed belatedly but tax and interest were paid and the first appellate authority set aside the further assessment. - HELD THAT: - The High Court examined whether prosecution for wilful failure to furnish return could be sustained where the assessee filed the return after notice under Section 153A, paid the tax and interest, and the first appellate authority subsequently set aside the further assessment. The Court observed that mens rea is an essential ingredient for criminal liability under provisions like Section 276CC and that charging of interest by the Income-tax Officer on acceptance of a belated return gives rise to a presumption of extension of time and negates wilful default. The Court relied on principles in the precedents referred to in the judgment to hold that the Department should not initiate criminal prosecution as a matter of course where the determination of liability-on which prosecution is founded-has not been finally made by the Income-tax authorities and where interest has been charged and accepted. The Court further noted that no penalty proceedings under the statute had been initiated by the Department in this case. In addition, the first appellate authority had exonerated the further assessment, and on the combined effect of payment of tax with interest and the appellate order setting aside the assessment, continuation of the criminal proceedings would amount to an abuse of the process of court. Applying these principles, the Court concluded that criminal prosecution could not be permitted to continue in the peculiar facts of this case. [Paras 22, 23, 24, 27, 29]

The criminal proceedings including the order taking cognizance dated 18.03.2016 under Section 276CC were quashed as an abuse of process in view of payment of tax and interest, absence of penalty proceedings and setting aside of the further assessment by the first appellate authority.

Final Conclusion: The petition was allowed and the entire criminal proceedings (C.O. Case No.01 of 2016) including the order taking cognizance dated 18.03.2016 were quashed; the interim order dated 05.12.2016 was vacated.

Re-opening of assessment under Section 148A(d) of the Income Tax Act, 1961 - limitation for issuance of notice for reopening - jurisdictional vires of reopening order

Re-opening of assessment under Section 148A(d) of the Income Tax Act, 1961 - limitation for issuance of notice for reopening - jurisdictional vires of reopening order - Validity of the impugned order dated 29th July, 2022 under Section 148A(d) insofar as it seeks reopening of assessment for Assessment Year 2014-2015. - HELD THAT: - The petitioner challenged the impugned order dated 29th July, 2022 on the ground that initiation of the reopening was made after six years from the end of the relevant assessment year and therefore the order was without jurisdiction and barred by limitation. The respondent was unable to contradict the factual and legal position asserted by the petitioner. Having regard to the admitted delay beyond the prescribed period and the consequent want of jurisdiction, the Court concluded that the impugned reopening order could not be sustained and must be quashed.

Impugned order dated 29th July, 2022 under Section 148A(d) quashed as being time-barred and without jurisdiction in respect of Assessment Year 2014-2015.

Final Conclusion: Writ petition disposed of by quashing the order dated 29th July, 2022 reopening the assessment for AY 2014-2015 on the ground of limitation and lack of jurisdiction.

Reassessment under Section 147/148 of the Income Tax Act, 1961 - notice under Section 148A(d) of the Income Tax Act, 1961 - sanction under Section 151 of the Income Tax Act, 1961 - prima facie material to assume jurisdiction for reopening - creditworthiness of lender as ground for reopening

Notice under Section 148A(d) of the Income Tax Act, 1961 - reassessment under Section 147/148 of the Income Tax Act, 1961 - prima facie material to assume jurisdiction for reopening - creditworthiness of lender as ground for reopening - Validity of the notice under Section 148A(d) and consequent reopening proceedings under Section 147/148 for A.Y. 2018-19 - HELD THAT: - The Assessing Officer relied on two stated grounds for reopening: specified cash deposits in two bank accounts and an unsecured loan credited to the assessee. The petitioner produced bank certificates which, on a prima facie view, explained the cash deposits as student fee collections made through pre-printed pay-in slips. However, the petitioner failed to produce credible evidence in the reply to establish the creditworthiness of the lender in respect of the unsecured loan from M/s Arrow Netmart Pvt. Ltd. In those circumstances the Assessing Authority possessed some relevant material to form a belief prima facie that income chargeable to tax had escaped assessment, thereby providing jurisdictional foundation for issuing the notice under Section 148/148A(d). The impugned order under Section 148A(d) cannot be characterized as without jurisdiction or illegal on the basis of the material then available to the Assessing Officer.

The petition challenging the notice under Section 148A(d) / reopening under Section 147/148 for A.Y. 2018-19 is dismissed; the petitioner is permitted to participate in the reassessment proceedings.

Final Conclusion: Writ petition dismissed insofar as challenge to the reopening notice for A.Y. 2018-19; petitioner may fully participate in reassessment proceedings and the court's observations shall not be treated as adverse by the Assessing Authority.

Due application of mind by the Assessing Officer - revisionary jurisdiction under section 263 of the Income tax Act - valuation of capital asset as on the valuation date (deemed cost) - reference to Valuation Officer under section 55A - reopening of assessment under section 147

Due application of mind by the Assessing Officer - valuation of capital asset as on the valuation date (deemed cost) - revisionary jurisdiction under section 263 of the Income tax Act - reference to Valuation Officer under section 55A - Whether the Principal Commissioner was justified in exercising revisionary jurisdiction under section 263 to set aside the assessment on the ground that the AO failed to apply his mind to the valuation (deemed cost) of the land and should have referred the matter to the Valuation Officer. - HELD THAT: - The Tribunal examined whether the AO had made the requisite enquiry into the basis of the valuation adopted as the deemed cost (value as on 01/04/1981) before accepting the returned capital gain. The reassessment was prompted by the absence of any stated basis for the value in the registered valuer's report and the non reference to the Valuation Officer. The AO's notices and the assessee's replies were considered; however, neither the assessment order nor the material on record recorded any independent basis for the valuation or any contemporaneous factual data (for example, specific sale instances) relied upon by the valuer. The registered valuer's report contained generalized statements and no verifiable data, and even the section labelled "SALES" recorded sale instances as "Not Available." The Bench found the valuer's report to be mechanistic and lacking an objective basis; further, the AO did not state reasons in his order demonstrating application of mind in evaluating the report or employing alternative valuation methods (such as enlarging the geographic/time horizon to locate sale instances, income capitalisation, or discounted later values). Given these facts, the revisionary authority was entitled to conclude that there was a lack of application of mind by the AO and that the assessment was erroneous and prejudicial to the Revenue, thereby justifying interference under section 263 and setting aside the assessment for fresh adjudication. The factual nature of valuation distinguishes prior decisions where an AO had taken a plausible view; on the instant record there was no such plausible, reasoned view by the AO. [Paras 5, 6, 7]

The Tribunal upheld the Pr. CIT's order under section 263, concluding that the AO had not applied his mind to the valuation issue and that the matter required fresh adjudication; the assessee's appeal was dismissed.

Final Conclusion: The Tribunal dismissed the assessee's appeal and upheld the revisionary order setting aside the assessment under section 263 for de novo consideration, on the ground that the AO failed to apply his mind to the valuation of the land (deemed cost) and the valuer's report lacked an objective basis.

Assessment under section 153C vs 153A - validity of search and warrant of authorization - approval under section 153D - natural justice - access to seized material - disallowance of unregistered dealer purchases under section 40A(3) - explanation to section 37(1) - illegal mining - remand to Assessing Officer for verification - addition on unexplained cash deposits/peak credit

Assessment under section 153C vs 153A - validity of search and warrant of authorization - approval under section 153D - natural justice - access to seized material - Validity of framing assessment under section 153C instead of section 153A and related procedural complaints - HELD THAT: - The Tribunal upheld the assessment under section 153C. The warrant of authorization (Form No.45) produced on record was in the name of Shri B. Nagendra and not in the name of the assessee; the reference in the panchnama to the assessee was an oversight. The Assessing Officer had obtained the requisite approval under section 153D and served notices; the assessee participated in proceedings and no prejudice was shown to have been caused by framing assessment under section 153C. The contention that seized materials were not provided was not supported by evidence before the Tribunal. In these circumstances the Tribunal found no illegality in invoking section 153C and rejected the contention that assessment should have been under section 153A.

Contentions attacking framing of assessment under section 153C were rejected and the assessment under section 153C was held valid.

Disallowance of unregistered dealer purchases under section 40A(3) - explanation to section 37(1) - illegal mining - remand to Assessing Officer for verification - Treatment of large unregistered-dealer purchases debited in books as unexplained and disallowable - HELD THAT: - The Assessing Officer had disallowed substantial URD purchases on the basis that (i) ledger entries and seized vouchers indicated self-made bills and lack of TIN/PAN/addresses, (ii) payments were structured below Rs.20,000 to evade section 40A(3), and (iii) the purchases related to allegedly illegally extracted iron ore invoking the explanation to section 37(1). The Tribunal noted the AO's findings and that the assessee had not produced the URD persons or documentary proof before the AO or the Tribunal. Rather than deciding the merits, the Tribunal considered it appropriate to remit the issue to the Assessing Officer to verify the list of URD vendors allegedly provided to the AO, to give the assessee a reasonable opportunity of hearing and to decide the question in accordance with law.

The issue of disallowance of URD purchases is remitted to the Assessing Officer for verification and fresh decision after affording the assessee opportunity to be heard.

Addition on unexplained cash deposits/peak credit - remand to Assessing Officer for verification - Addition of cash deposits of Rs.22.00 lakhs and appellant's alternative contention of peak credit - HELD THAT: - The Tribunal noted the Assessing Officer made an addition of cash deposits on account of unexplained credits and that the assessee could not satisfactorily explain the source. Given the Tribunal's decision to remit related issues for A.Y.2008-09 and A.Y.2009-10, the Tribunal also remitted the question of the Rs.22 lakhs cash deposit for fresh examination by the Assessing Officer so that the source may be examined and decided in accordance with law, after giving the assessee a reasonable opportunity to be heard.

The issue concerning the cash deposit is remitted to the Assessing Officer for fresh examination and adjudication.

Final Conclusion: The Tribunal rejected the challenge to framing assessment under section 153C, remitted the disputed disallowance of unregistered-dealer purchases for verification by the Assessing Officer (with opportunity to the assessee), and also remitted the issue of unexplained cash deposits for fresh examination; appeals are allowed for statistical purposes accordingly.

Revisionary jurisdiction under Section 263 of the Income-tax Act - unexplained cash credit under Section 68 of the Income-tax Act - adequacy of assessment enquiries - plausible view of the assessing officer - Explanation 2 to Section 263 regarding applicability in revision

Revisionary jurisdiction under Section 263 of the Income-tax Act - unexplained cash credit under Section 68 of the Income-tax Act - adequacy of assessment enquiries - plausible view of the assessing officer - Explanation 2 to Section 263 regarding applicability in revision - Whether the Principal Commissioner of Income Tax was justified in invoking revisionary jurisdiction to treat gain on sale of shares as unexplained cash credit. - HELD THAT: - The Tribunal found on the record that the Assessing Officer had made full and complete enquiries regarding the sale of shares of Vishwajyoti Finance Ltd and that the assessee had furnished computations and responses during assessment proceedings. The PCIT's revision order did not identify any specific error in the AO's reasoning or state why the purchase cost would not be allowable while computing gain; instead it relied on the AO's treatment in a different assessment year. The PCIT also did not invoke Explanation 2 to Section 263. In these circumstances the Tribunal held that the PCIT had not shown that the AO's order was erroneous or prejudicial to revenue such as to justify exercise of revisionary jurisdiction. The AO had taken a plausible view on the issue and mere reliance on an assessment order of another year, without pointing out a substantive error or inadequacy of inquiries, is not a proper basis for revision under Section 263.

Revision order passed by the PCIT under Section 263 quashed; appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal, quashed the revision order of the PCIT for A.Y.2015-16, and held that the AO had conducted adequate enquiries and taken a plausible view; the PCIT had not demonstrated any specific error warranting revision under Section 263.

Revisionary jurisdiction under section 263 of the Income-tax Act - scope of reassessment under section 147 of the Income-tax Act - Explanation to section 147 - subsequent discovery of escaped income during reassessment - assessing officer confined to issues for which reassessment was reopened - erroneous and prejudicial to the revenue

Scope of reassessment under section 147 of the Income-tax Act - Explanation to section 147 - subsequent discovery of escaped income during reassessment - revisionary jurisdiction under section 263 of the Income-tax Act - Whether the Principal Commissioner of Income Tax could exercise revisionary powers under section 263 by holding the reassessment order under section 147 erroneous for failure to examine capital gain on sale of land when reassessment had been reopened only for alleged accommodation entries relating to sale of shares. - HELD THAT: - The Tribunal found on the facts that reassessment proceedings were initiated under section 147 to examine alleged accommodation entries and exempt long term capital gain on sale of shares (as evidenced in the assessment order passed under section 147). The Principal CIT held the section 147 assessment erroneous on the ground that the Assessing Officer had not verified capital gain on sale of land with reference to section 50C. The Tribunal accepted the legal position that the Assessing Officer's jurisdiction under section 147 is confined to income in respect of which he has reason to believe escaped assessment and to other escaped income that subsequently comes to his notice in the course of those proceedings (as clarified by the Explanation to section 147). Since the issue of capital gain on sale of land neither formed part of the reasons recorded for reopening nor was shown to have come to the AO's notice in the reassessment proceedings, the AO could not be faulted for not examining that issue in the section 147 proceedings. Consequently the order under section 263, which set aside the reassessment on that ground, was held unsustainable. [Paras 5, 6, 7, 8]

Order under section 263 setting aside the reassessment under section 147 for not examining capital gain on sale of land is not sustainable and is set aside.

Final Conclusion: The revisionary order passed by the Pr. CIT under section 263 was quashed; the appeal of the assessee is allowed and the section 147 assessment is restored since the omitted issue was beyond the scope of the reassessment initiated.

Real income principle - taxability of income where tax is deducted at source but payee has not received the income - accrual-based taxation versus receipt-based taxation - charging income on deemed accrual due to deduction of tax at source

Taxability of income where tax is deducted at source but payee has not received the income - real income principle - accrual-based taxation versus receipt-based taxation - Addition of interest income of Rs.92,28,545/- made by the Assessing Officer on the basis of TDS deposited by the borrower was not sustainable and only the actual amount received as TDS could be treated as income. - HELD THAT: - The Tribunal found that there was no material to show that any interest or principal had been received by the assessee from M/s. Anjani Technoplast Ltd. during the year; only an amount of Rs.9,22,855/- stood deposited as TDS by the borrower and even that amount was not traceable in the assessee's return filed earlier. Given that recovery of principal and interest was the subject of pending litigation and there was no realistic prospect of receipt of the alleged interest, it would be inequitable to tax the assessee on a hypothetical or deemed accrual of interest merely because the payer deposited TDS. Applying the principle that only real income should be taxed and not hypothetical income, the Tribunal held that the addition of Rs.92,28,545/- could not be sustained. The Tribunal directed that only the actual amount received by way of TDS be treated as income for taxation, the AO to deduct admissible tax on that sum and refund any balance to the assessee as per the Act. [Paras 8, 9, 10]

Addition of Rs.92,28,545/- deleted; only the actual TDS amount of Rs.9,22,855/- to be treated as income, tax to be deducted thereon and balance refunded.

Final Conclusion: The appeal is partly allowed: the addition of interest income of Rs.92,28,545/- is deleted and only the actual TDS amount is to be taxed, with the Assessing Officer directed to deduct tax on that amount and refund the balance to the assessee.

Deductibility under section 37(1) of the Income tax Act - business expenditure incurred wholly and exclusively for business - Capitalization of borrowing costs and treatment of pre commissioning interest - Expenditure on community relations/puja contributions as business expense

Deductibility under section 37(1) of the Income tax Act - business expenditure incurred wholly and exclusively for business - Expenditure on community relations/puja contributions as business expense - Assessee's discretion to incur business expenditure - Whether donations/subscriptions paid to local puja pandals and community organisations are allowable as business expenditure. - HELD THAT: - The Tribunal found as an undisputed fact that the payments were made to local puja pandals, sports associations and other neighbourhood organisations and were incurred to maintain cordial relations in the vicinity of the assessee's hotels so as to ensure smooth conduct of business. Reliance was placed on precedent recognizing that an assessee may incur expenditure to promote and protect its business and that the fact that others also benefit does not preclude deduction if the expenditure satisfies the statutory tests. The Tribunal held that it is for the assessee to decide on such expenditure for commercial reasons and that the revenue had not shown that the payments were not incurred wholly and exclusively for business. Accordingly the addition was deleted. [Paras 5]

Addition of Rs. 42,085 made by disallowing subscriptions/donations deleted; ground allowed.

Capitalization of borrowing costs and treatment of pre commissioning interest - Apportionment of interest between pre commissioning and post commissioning periods - Whether the interest and bank charges disallowed as relating to the pre commissioning period of the Durgapur hotel were correctly added back to income. - HELD THAT: - The Tribunal examined the record and noted that the Durgapur project was completed and commissioned on 16.05.2016 and that the assessee had apportioned interest and bank charges between the pre commissioning period (01.04.2016 to 16.05.2016) and the post commissioning period, with amounts pertaining to pre commissioning capitalized in the fixed assets as reflected in the annual accounts and the stated basis of capitalization. The Tribunal disagreed with the finding that the entire bank loan had been utilized only up to 31.12.2016 so as to require capitalization of the disputed interest, and on the basis of the documentary material in the record set aside the addition and directed deletion. [Paras 9]

Addition of Rs. 11,89,217 relating to interest and bank charges deleted; ground allowed.

Final Conclusion: The appeal was allowed in respect of both challenged additions (donations/subscriptions and interest/bank charges) and the additions deleted; the assessee's appeal succeeds.

Assessment under section 263 - lack of independent and adequate enquiry renders assessment order erroneous and prejudicial to revenue - Duty of Assessing Officer to examine identity, creditworthiness and genuineness of shareholders and to trace money trail for share capital and premium - Remand for de novo assessment with opportunity to produce documents and evidence - Consequences of non-compliance and non-appearance by assessee in appellate proceedings

Assessment under section 263 - lack of independent and adequate enquiry renders assessment order erroneous and prejudicial to revenue - Duty of Assessing Officer to examine identity, creditworthiness and genuineness of shareholders and to trace money trail for share capital and premium - Whether the revisional order passed by the Pr. CIT under section 263 setting aside the assessment dated 17.10.2016 was justified on the ground of lack of adequate and independent enquiry by the Assessing Officer. - HELD THAT: - The Tribunal found that the record before it does not disclose particulars of the share application money, identity of share applicants, bank entries, or documentary verification showing the AO carried out the inquiries directed by the earlier revisionary order. The AO's findings in the assessment order of 17.10.2016 were summary in nature and did not set out detailed examination of the investors' creditworthiness, genuineness of transactions, rationale for large share premium or the money trail in bank accounts. In the absence of such material and in view of the Pr. CIT's specific concerns recorded in the show-cause and impugned revision order, the Tribunal agreed that the assessment order suffered from lack of adequate enquiry and was therefore erroneous so far as prejudicial to the interests of revenue. The Tribunal, after hearing the Revenue and noting the assessee's non-appearance and failure to furnish records or submissions, found no infirmity in the Pr. CIT's conclusion that further and effective inquiry was necessary before a final assessment could be rendered. [Paras 10, 11]

The revisional order of the Pr. CIT under section 263 confirming that the assessment dated 17.10.2016 was erroneous and prejudicial to the interests of revenue is upheld.

Remand for de novo assessment with opportunity to produce documents and evidence - Consequences of non-compliance and non-appearance by assessee in appellate proceedings - Whether the matter should be remanded to the Assessing Officer for de novo adjudication and the effect of the assessee's non-compliance and non-appearance before the Tribunal. - HELD THAT: - The Pr. CIT directed remand to the AO to carry out adequate and effective enquiries, including examination of books, bank accounts of the assessee and investors, and verification of source and genuineness of share capital and premium, with a direction to afford the assessee reasonable opportunity to produce supporting documents. The Tribunal noted the assessee's persistent non-appearance before the Pr. CIT and the Tribunal and absence of any submissions or papers which precluded examination of whether the AO complied with the Pr. CIT's directions. In these circumstances the Tribunal found it appropriate to confirm the set aside of the assessment order and to continue the remand for de novo assessment to the AO so that the required inquiries may be completed and a fresh assessment passed after affording opportunity to the assessee. [Paras 11]

The assessment is remitted to the file of the Assessing Officer for de novo adjudication in accordance with the directions recorded by the Pr. CIT, with liberty to the AO to afford the assessee reasonable opportunity to produce documents and evidence; the assessee's appeal is dismissed for want of merit and non-prosecution.

Final Conclusion: The Tribunal confirms the Pr. CIT's order under section 263 setting aside the assessment dated 17.10.2016 for lack of adequate and independent enquiry and remits the matter to the Assessing Officer for de novo assessment after conducting effective enquiries and affording the assessee an opportunity to produce evidence; the appeal of the assessee is dismissed.

Disallowance of purchases - reconciliation of purchase register with audited trading account - inclusion of carriage inward (transportation charges) in purchase cost - revisionary power under section 263 of the Income-tax Act - reassessment under section 147 following revision under section 263

Disallowance of purchases - reconciliation of purchase register with audited trading account - inclusion of carriage inward (transportation charges) in purchase cost - The disallowance of Rs. 9,06,200 made on the ground of alleged overstatement of purchases was unsustainable. - HELD THAT: - The Tribunal examined the books of account and the tax audit records placed before it and noted that the assessee's trading account consistently included transportation charges as part of the purchase cost. The apparent mismatch between the purchase register (Rs. 1,86,63,585) and the purchases shown in the audited trading account (Rs. 1,95,69,785) was reconciled by adding carriage inward (transportation charges of Rs. 9,12,800) and reducing an insurance item already included in purchase bills (Rs. 6,600). After these adjustments the totals matched. On this reconciliation, supported by audited schedules and the tax audit report, the Tribunal found no overstatement of purchases and concluded that the addition was not justified. [Paras 9, 10]

The addition of Rs. 9,06,200 was deleted and the appeal was allowed.

Final Conclusion: On verification of audited books, schedules and reconciliation including carriage inward adjustments, the Tribunal set aside the disallowance sustained by the lower authorities and allowed the assessee's appeal for AY 2013-14.

On-money - reliability of statements recorded under section 131(1A) - extrapolation of transaction rates - estimation of undisclosed income - application of estimated net profit rate to disclosed and undisclosed turnover - use of admissions before the Settlement Commission as a basis for assessment

On-money - reliability of statements recorded under section 131(1A) - extrapolation of transaction rates - use of admissions before the Settlement Commission as a basis for assessment - Whether the assessee received on-money on sale/allotment of properties in the impugned assessment years. - HELD THAT: - The Tribunal found that the primary basis for treating higher sale rates as the actual rates (and thereby computing on-money) was the statement of Mr. Devji Sorathia recorded during survey, but that the statement was unreliable. Mr. Sorathia admitted that his knowledge of the alleged higher rate was based on information from his son and not his own knowledge; the son, the actual allottee, swore by affidavit that no on-money was paid. The Revenue did not displace that affidavit or otherwise demonstrate parity between the assessee's facts and the group concerns' admissions before the Settlement Commission. The alternate methodology of treating the maximum rate charged in a year as the actual rate for all transactions was held to be speculative and unsupported by statistical or other substantive evidence. The Tribunal emphasised that assessment estimates must rest on a substantial basis and not on pure assumptions or guesswork; moreover, the Tribunal noted that even under the Revenue's alternate calculation, in most cases no additional amount would arise. Consequently, there was no adequate basis to hold that the assessee received on-money. [Paras 14, 15, 16, 17, 18]

Finding of on-money received by the assessee is rejected and deleted.

Estimation of undisclosed income - application of estimated net profit rate to disclosed and undisclosed turnover - extrapolation of transaction rates - Whether addition by applying a 17.5% estimated net profit rate on total (book and alleged undisclosed) turnover was sustainable. - HELD THAT: - The net profit addition was founded on the existence of undisclosed receipts (on-money). Having held that there was no reliable basis to conclude that on-money had been received, the Tribunal found no justification for rejecting the assessee's books or for applying an estimated net profit rate to augmented turnover. The Tribunal further noted that the 17.5% rate was taken from disclosures made by other group entities before the Settlement Commission, but parity of facts was not demonstrated and such admissions could not be indiscriminately applied to the assessee. In the absence of any other material displacing the book results, the estimate of profits was unsustainable. [Paras 11, 19]

Addition computed by applying 17.5% net profit on alleged undisclosed turnover is deleted.

Final Conclusion: The Tribunal allowed the appeals in part: the findings of on-money and the consequent estimated net profit additions for A.Y. 2012-13, 2013-14 and 2014-15 were set aside and the additions deleted; all appeals are partly allowed.

Addition as unexplained cash under Section 69A - Reliance on loose or "dump" papers seized during search and their evidentiary value - Requirement of corroborative material before treating seized notings as income - Admissibility of undated and unsigned seized documents - First appellate procedure under Rule 46A - opportunity to Assessing Officer

Addition as unexplained cash under Section 69A - Requirement of corroborative material before treating seized notings as income - Deletion of addition of part of the cash found at search (acceptance that Rs.5,00,000 belonged to partnership) and upholding limited addition of Rs.2,60,087. - HELD THAT: - The Tribunal affirmed the CIT(A)'s acceptance of the assessee's statement recorded during search that Rs.5,00,000 belonged to M/s Shital Textile and held there was no contrary material to rebut that specific assertion. The remainder of the seized cash was not consistently explained by the assessee at the search and before the Assessing Officer; the CIT(A) treated the subsequent explanation as an afterthought and sustained an addition limited to the unexplained balance after accounting for the accepted cash book balance. The Tribunal found no reason to interfere with the CIT(A)'s appreciation of the search statement and factual findings and therefore dismissed the revenue's challenge to that part of the deletion. [Paras 14]

CIT(A)'s relief on Rs.5,00,000 upheld; addition sustained only to the extent of Rs.2,60,087 and rest deleted.

Reliance on loose or "dump" papers seized during search and their evidentiary value - Admissibility of undated and unsigned seized documents - Deletion of addition of Rs.4.488 crores which was made solely on the basis of figures on loose papers seized during search. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that mere numerical notings on loose, unsigned and undated papers do not, without corroborative material, establish that any transaction occurred or that the notings represent the assessee's undisclosed income. The Assessing Officer had neither conducted independent inquiries nor produced corroborative evidence connecting the seized notings to actual transactions of the assessee; reliance on Section 132(4A) presumptions or simple totalling of figures on dump papers was insufficient. The Tribunal agreed with the appellate authority and relevant precedents that entries on loose papers, absent corroboration, cannot sustain an addition. [Paras 15, 16, 17]

Addition of Rs.4.488 crores deleted; CIT(A)'s order affirmed.

First appellate procedure under Rule 46A - opportunity to Assessing Officer - Revenue's contention that the CIT(A) admitted the assessee's submissions without providing opportunity to the Assessing Officer under Rule 46A was rejected. - HELD THAT: - The Tribunal found that no new evidence was filed before the CIT(A) beyond the assessee's written submissions, the appeal records were forwarded to the Assessing Officer, and the Assessing Officer responded as directed. The CIT(A) also considered and rejected the assessee's inconsistent explanation where appropriate. On these facts, the alleged breach of Rule 46A lacked merit and did not vitiate the appellate decision. [Paras 18]

Ground alleging violation of Rule 46A dismissed; no procedural infirmity found.

Final Conclusion: The revenue's appeal is dismissed; the CIT(A)'s deletions of the additions based on acceptance of the cash explanation for Rs.5,00,000 (with a limited upheld addition) and deletion of the addition based on loose seized papers are affirmed, and the procedural objection under Rule 46A is rejected.

Deemed export duty drawback on customs duty component - All Industry Rates (AIR) of drawback - fixation of brand rate of drawback based on duty paid documents - Customs and Central Excise Duty Drawback Rules, 1995 apply mutatis mutandis to deemed exports - reading down of administrative circular inconsistent with FTP/HBP

Deemed export duty drawback on customs duty component - 8.5 of Foreign Trade Policy (FTP) - Condition No.6 of drawback notifications - entitlement to duty drawback on the basic customs duty component in deemed exports where suppliers have availed CENVAT credit - HELD THAT: - The Court held that paragraph 8.5 of the FTP contemplates that where CENVAT credit has been availed by the supplier, deemed export drawback will be confined to the customs duty paid on inputs/components. The notes to the customs drawback notifications (condition no.6) clarify that where the rate shown in Column A and Column B of the AIR schedule is the same, the rate pertains only to the customs component and is available irrespective of whether CENVAT has been availed. Pursuant to paragraph 8.3.6 of the HBP, the Customs/Central Excise Drawback Rules, 1995 and the notifications issued thereunder apply mutatis mutandis to deemed exports. Applying these provisions, the petitioner is entitled to duty drawback on the customs duty component for the goods in issue. [Paras 26, 28, 31]

The petitioner is entitled to deemed export duty drawback limited to the customs duty component where suppliers have availed CENVAT credit.

All Industry Rates (AIR) of drawback - fixation of brand rate of drawback based on duty paid documents - 8.3.3 of Handbook of Procedures (HBP) - 2013 Circular - obligation to seek fixation of brand rate (and produce duty paid documents) where AIR is available - HELD THAT: - Paragraph 8.3.3 of the HBP permits use of AIR where available and requires fixation of brand rate only where AIR is not available or is less than four fifths of duties actually paid. The notifications and their condition no.6 show that when AIR yields the same rate in Columns A and B the rate represents only the customs component and is available irrespective of CENVAT. The DGFT's 2013 Circular insofar as it imposed a requirement that drawback on customs duty for deemed exports be allowed only after fixation of brand rate based on production of actual duty paid documents is inconsistent with FTP/HBP and the relevant notifications in cases where AIR is applicable. The Court therefore read down that part of the 2013 Circular and held that fixation of brand rate and production of duty paid documents is not required where AIR is applicable and the columns indicate the customs component. [Paras 25, 27, 28, 31]

Where AIR is available (and indicates the customs component), the claimant is not obliged to seek fixation of brand rate or produce duty paid documents; the 2013 Circular is read down to that extent.

Treatment of unutilised inputs on conversion from DTA to EOU - Appendix 14 I O / paragraph 6.36.1 of HBP - entitlement to drawback in respect of unutilised inputs transferred from a DTA unit on its conversion into a 100% EOU - HELD THAT: - The Court accepted the petitioner's submission that paragraph 6.36.1 of the HBP and Appendix 14 I O allow carry forward and fulfilment of outstanding obligations under schemes such as Advance Authorization upon conversion. The restriction in HBP against claim of concessions was directed to plant and machinery already installed, not to unutilised inputs. Given that the petitioner carried forward the advance authorization and transferred the unutilised inputs to the converted EOU, the petitioner is entitled to duty drawback in respect of those unutilised goods transferred on conversion. [Paras 29]

Duty drawback is extendable to unutilised inputs that were transferred from the DTA unit to the converted 100% EOU in accordance with HBP provisions.

Final Conclusion: The Court read down the 2013 Circular to the extent it required fixation of brand rate based on duty paid documents where AIR applies; set aside the Deputy DC order dated 26.04.2016 and consequentially quashed the Deputy DGFT order dated 17.11.2016; directed that the petitioner is entitled to deemed export drawback limited to the customs duty component (and to drawback for unutilised inputs transferred on conversion) in accordance with FTP, HBP and the applicable drawback notifications.

Jurisdiction of CBI investigation - status as Collective Investment Scheme versus chit fund - provisional registration by SEBI not conclusive - compliance with Section 207 of the Cr.P.C. - maintainability of writ challenge after criminal remedies exhausted - investigation by national agency in multi state financial scam - scope of Subrata Chattoraj directions for investigation of similar companies

Maintainability of writ challenge after criminal remedies exhausted - forum shopping and concurrent criminal remedies - Whether the writ petition challenging the CBI investigation and framing of charges is maintainable when the petitioners have already unsuccessfully pursued remedies in the criminal courts and the trial is ongoing. - HELD THAT: - The Court held that the petitioners had challenged the framing of charges before competent criminal fora and their recall/revision applications were rejected; a Section 482 challenge remains pending but has not produced any order in their favour. Having failed before those criminal forums and with the trial proceeding, invoking writ jurisdiction at this stage amounted to impermissible forum shopping. A belated challenge to criminal proceedings, after unsuccessful attempts in the appropriate criminal courts and with trial underway, ought not to be entertained by the writ court. [Paras 11, 12, 13, 21, 23]

The writ challenge is not maintainable; the petition constitutes forum shopping and will not be entertained.

Status as Collective Investment Scheme versus chit fund - provisional registration by SEBI not conclusive - scope of Subrata Chattoraj directions for investigation of similar companies - investigation by national agency in multi state financial scam - Whether the petitioner company's provisional registration with SEBI exempted it from CBI investigation as a chit fund or otherwise precluded investigation. - HELD THAT: - The Court observed that the provisional registration granted by SEBI was conditional and fettered, expressly restricting the company from launching schemes or raising funds unless full registration was granted; such provisional registration is not conclusive of the company's legal status. The Supreme Court's observations in Subrata Chattoraj directing investigations into 'similar cases' and other companies entitled national investigators to probe entities potentially connected with the multi state chit fund scam. In view of the scale and multi state impact of the scam and the fact that charges had been framed and trial was underway, the CBI's prima facie perception and continuation of investigation were justified notwithstanding the SEBI provisional certificate. [Paras 15, 16, 17, 20, 22]

Provisional SEBI registration does not bar CBI investigation; the petitioners fall within the sweep of directions for investigation into the chit fund scam and investigation by the CBI is justified.

Compliance with Section 207 of the Cr.P.C. - framing of charges and legal sufficiency - Whether the order framing charges was vitiated for non compliance with the statutory duty to furnish papers under Section 207 Cr.P.C. - HELD THAT: - While the contention was raised that Section 207 materials had not been furnished at the time of framing of charges, the Court noted that the petitioners had avenues to challenge the framing (and had in fact done so unsuccessfully before criminal courts). Given the unsuccessful criminal remedies and the continuation of trial, the Court found no basis to hold the framing of charges so vitiated as to warrant quashing in writ jurisdiction at this stage. [Paras 7, 11, 21]

The framing of charges is not set aside on the ground of non compliance with Section 207; no relief is granted in writ jurisdiction.

Custody of documents and rights of defence - power of writ court to direct return of documents from committee custody - Whether the One Man Committee should be directed to return documents and assets in its custody to the petitioners to enable defence in the criminal trial. - HELD THAT: - The Court declined to direct the retrospective return of documents held by the One Man Committee, observing there was no basis for such a direction in writ jurisdiction, particularly when the petitioners' attempts to obtain documents had failed before competent forums. The fact that the petitioner director is in custody and lacks documents did not justify ordering the committee to hand over all materials to the petitioners while criminal proceedings continue. [Paras 8, 23]

No direction is issued for the One Man Committee to return documents; the prayer for return of documents is rejected.

Final Conclusion: WPA No.3832 with CAN 1 of 2021 is dismissed on contest; the Court finds no merit in quashing the CBI investigation or the framing of charges and refuses reliefs sought concerning return of documents.

Replacement of Resolution Professional by Committee of Creditors - Applicability of principles of natural justice to Section 27 replacement - Finality of Committee of Creditors' resolution with requisite voting majority - Limited role of Adjudicating Authority in approving CoC's nominee - No requirement for Committee of Creditors to record reasons for replacement - Interference by Adjudicating Authority only if CoC decision is perverse or without jurisdiction

Applicability of principles of natural justice to Section 27 replacement - Replacement of Resolution Professional by Committee of Creditors - Whether the Adjudicating Authority must afford the outgoing Resolution Professional an opportunity of hearing before approving the Committee of Creditors' resolution for replacement under Section 27. - HELD THAT: - The Tribunal interpreted the scheme of Section 27 and concluded that the provision does not contemplate issuance of notice to, or an opportunity of hearing for, the outgoing Resolution Professional by the Adjudicating Authority before approving the CoC's nomination. Section 27(2) envisages replacement by a CoC resolution with the requisite voting share and forwarding of the proposed name to the Adjudicating Authority and then to the Board for confirmation; the statutory scheme contains no provision for making the erstwhile Resolution Professional a party or for hearing him. Given the time-sensitive object of the Code and the collective commercial nature of the CoC decision, the court held that principles of natural justice are by implication excluded insofar as a separate hearing by the Adjudicating Authority on the CoC's decision is concerned. The Tribunal relied on earlier Appellate Tribunal decisions to support that the Adjudicating Authority need not conduct a hearing of the outgoing Resolution Professional prior to approving the CoC's choice.

No opportunity of hearing by the Adjudicating Authority to the outgoing Resolution Professional is required before approving the CoC's replacement under Section 27.

Finality of Committee of Creditors' resolution with requisite voting majority - Interference by Adjudicating Authority only if CoC decision is perverse or without jurisdiction - Whether replacement of the Resolution Professional is complete upon passage of the CoC resolution with the requisite majority and whether the Adjudicating Authority can interfere with such decision. - HELD THAT: - The Tribunal held that replacement is complete when the Committee of Creditors passes a resolution with the statutory majority (66% voting share) and forwards the proposed nominee; the Adjudicating Authority's function is ministerial in forwarding the name to the Board for confirmation. The decision of the CoC, being a collective commercial determination, is not easily assailable; interference by the Adjudicating Authority is justified only if the CoC's decision is shown to be perverse or beyond its jurisdiction. The Tribunal relied on its earlier precedents which recognised the finality of a CoC resolution and limited grounds for judicial interference.

Replacement is effected by the CoC resolution with requisite majority and the Adjudicating Authority should not ordinarily interfere except where the CoC's decision is perverse or without jurisdiction.

No requirement for Committee of Creditors to record reasons for replacement - Replacement of Resolution Professional by Committee of Creditors - Whether the Committee of Creditors is required to record reasons or grounds when resolving to replace the Resolution Professional under Section 27. - HELD THAT: - The Tribunal observed that neither Section 27 nor the statutory scheme mandates the CoC to record reasons for replacing the Resolution Professional. The relationship between the RP and the CoC is one of confidence, and the CoC's commercial wisdom in exercising its voting power need not be accompanied by stated reasons. The absence of a statutory requirement to record reasons means that non-recording does not vitiate the CoC resolution.

The CoC is not required to record reasons or grounds when passing a resolution to replace the Resolution Professional.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority did not err in approving the Committee of Creditors' resolution to replace the Resolution Professional under Section 27; the statutory scheme does not require a hearing for the outgoing Resolution Professional, the CoC need not record reasons, and interference is permissible only if the CoC's decision is perverse or beyond jurisdiction.

Pronouncement of order in open court - bench member who heard the case must partake in pronouncement - audi alteram partem - Rule 150 of the NCLT Rules relating to writing, signing, dating and pronouncement of orders - communication of certified copy and its role in computing limitation - limitation under Section 61 of the Insolvency and Bankruptcy Code running from pronouncement - remand for fresh consideration of CIRP costs and professional fees

Pronouncement of order in open court - bench member who heard the case must partake in pronouncement - audi alteram partem - Rule 150 of the NCLT Rules relating to writing, signing, dating and pronouncement of orders - Validity of the admission order dated 10.01.2018 pronounced by a bench member who had not heard the matter at the time it was reserved - HELD THAT: - The Tribunal held that the law does not permit a case to be heard by one bench and the order to be pronounced by another member who had not heard the case. The principle that the decision-maker should have heard the lis is an aspect of natural justice (audi alteram partem) and pronouncement in open court is an essential judicial act. Rule 150(1)-(3) of the NCLT Rules requires that orders be made and pronounced by the Members who heard the matter and that certified copies be supplied; this procedural requirement underpins the legitimacy of the adjudicatory act. Reliance was placed on earlier decisions addressing the necessity of pronouncement and the impermissibility of a different forum or person deciding a matter which was heard by others [Gullapalli Nageswara Rao & Ors. Vs. Andhra Pradesh State Road Transport Corporation & Anr. ; Ergomax India Pvt. Ltd. Vs. The Registrar, NCLT ] to conclude that the admission order dated 10.01.2018 was patently illegal and void ab initio because it was pronounced by a bench composition different from the bench that heard and reserved the matter. [Paras 12, 15, 16]

Order dated 10.01.2018 is void ab initio and is set aside

Communication of certified copy and its role in computing limitation - limitation under Section 61 of the Insolvency and Bankruptcy Code running from pronouncement - obligation of a party to apply for certified copy upon pronouncement - Whether the appeal against the admission order dated 10.01.2018 is barred by limitation under Section 61 of the IBC - HELD THAT: - The Tribunal found that because the admission order of 10.01.2018 was not validly pronounced and was not made known to the parties in accordance with Rule 150 and the statutory scheme, limitation could not be said to have begun to run from that date in favour of the Respondent. The court noted the principle in V. Nagarajan that appeals under the IBC are to be prosecuted with due diligence and that limitation ordinarily runs from pronouncement; however, where there was no proper pronouncement and the order was void for having been pronounced by a bench not competent to do so, the appellant lacked knowledge of a valid order and was not obliged to seek certified copies. On the facts, the Tribunal held that the appeal filed after appointment of the IRP (25.02.2022) challenged both the admission and the subsequent appointment order and was filed within time once the valid pronouncement occurred. [Paras 17, 23, 24]

Appeal is within limitation; challenge to order dated 10.01.2018 is maintainable

Remand for fresh consideration of CIRP costs and professional fees - appointment of IRP and continuation of CIRP steps - Outcome as to further steps in CIRP, including professional fees, CIRP costs and related applications, following setting aside of the impugned orders - HELD THAT: - Having set aside the impugned admission and appointment orders, the Tribunal directed that the matter be placed before the Adjudicating Authority for fresh consideration. The Registrar was directed to refund the fixed deposit made to the Appellate Tribunal. The Insolvency Resolution Professional (RP/IRP) was given liberty to make appropriate applications before the Adjudicating Authority for determination of professional fees, CIRP costs and paper publication amounts; those matters were remitted for fresh adjudication in accordance with law. [Paras 26, 27]

Matter remitted to the Adjudicating Authority for fresh consideration of RP professional fee, CIRP costs and related claims; refund of deposited FDR to appellant directed

Final Conclusion: Appeal allowed; impugned orders dated 10.01.2018 and 25.02.2022 set aside as the admission order was void for being pronounced by a bench member who had not heard the matter and was not properly pronounced; matter remanded to the Adjudicating Authority to proceed afresh including adjudication of professional fees and CIRP costs; Registrar directed to refund the deposited fixed deposit with accrued interest to the appellant.

Existence of default - bona fide financial debt - summary jurisdiction under the Insolvency and Bankruptcy Code - use of forensic audit and income tax assessment as cogent material - sham or paper/company entry transactions - abuse of process - imposition of costs

Existence of default - bona fide financial debt - summary jurisdiction under the Insolvency and Bankruptcy Code - use of forensic audit and income tax assessment as cogent material - sham or paper/company entry transactions - Whether the petition under Section 7 of the Insolvency and Bankruptcy Code could be admitted on the material on record showing alleged inter corporate deposits and alleged default. - HELD THAT: - The Tribunal upheld the NCLT's conclusion that the adjudicating authority, exercising summary jurisdiction under the Code, was not satisfied that a bona fide financial debt and a corresponding default were established from the record. The NCLT had considered the loan agreements, contemporaneous conduct of the parties, MCA records, a forensic audit report and an Income Tax assessment order which described the lenders as shell/ paper entities and treated the transactions as non genuine. The agreements were almost identically worded, repayable only on demand with no fixed tenure, and bore indicia of paper transactions (common addresses, common directors, immediate payback entries and lack of normal creditor conduct). The Income Tax assessment (reproduced and relied upon by the NCLT as part of the material) recorded raids, seized material, non production of lenders and concluded the credits were arranged, non genuine and added back as income. Taken together with the forensic audit and the surrounding facts, the NCLT reasonably found that the documents and conduct cast serious doubt on the genuineness of any financial debt and therefore correctly declined to commence CIRP. The Tribunal found no illegality in treating the assessment and the forensic audit as cogent material in the overall appraisal under Section 7 and endorsed the NCLT's rejection of the petition. [Paras 11, 12, 13, 14, 15]

The NCLT's rejection of the Section 7 petition for want of established financial debt/default is affirmed.

Abuse of process - imposition of costs - Whether the appeal amounted to an abuse of process warranting imposition of costs and, if so, the quantum and direction for payment. - HELD THAT: - The Tribunal held that the appellants' invocation of the appellate forum was an abuse of process in view of the circumstances: long delay in asserting the claim, commencement of demand only after change of management and SARFAESI proceedings, indicia of paper/layered transactions and the absence of normal creditor behaviour. Having found the appeal vexatious and an abuse of the process of the Tribunal, it was considered a fit case for imposition of costs. The Tribunal accordingly imposed a cost and directed deposit into the Prime Minister's National Relief Fund within a specified time and filing of proof with the Registrar. [Paras 8, 16, 17]

Appeal dismissed as an abuse of process and costs of Rs.1 lakh ordered to be deposited in the Prime Minister's National Relief Fund within one month, with proof to be filed.

Final Conclusion: The appeal is dismissed; the tribunal affirms the NCLT's rejection of the Section 7 petition for failure to establish a bona fide financial debt/default and, finding the appeal an abuse of process, directs payment of costs of Rs.1 lakh to the Prime Minister's National Relief Fund with proof of deposit to be produced.

Operational Debt - Pre-existing dispute - Admissibility of unstamped or unregistered lease agreement under proviso to Section 35 of the Stamp Act - Condonation of delayed reply to demand notice - Determination of date of default - Proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016

Operational Debt - Proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Outstanding lease rentals for commercial use constitute an operational debt under the Code. - HELD THAT: - Relying on NCLAT decisions cited in the record, the Tribunal held that lease rentals arising from use and occupation of premises for commercial purposes fall within the definition of 'operational debt' under the Code. The Tribunal applied the precedents to the facts of the case and was satisfied that the nature of the dues claimed (rent, service and maintenance charges) squarely attract the definition of operational debt. [Paras 17, 18, 19]

Outstanding lease rentals for the commercial premises in question are operational debt.

Admissibility of unstamped or unregistered lease agreement under proviso to Section 35 of the Stamp Act - The lease agreement produced, being insufficiently stamped and unregistered, cannot be taken into account for determining the alleged debt. - HELD THAT: - The Tribunal referred to the Supreme Court authority reproduced in the record which explains that a document chargeable with stamp duty but not duly stamped can be admitted in evidence only upon compliance with the proviso to Section 35 of the Stamp Act (payment of duty and penalty). Applying that principle, the Tribunal found the lease deed as produced cannot be relied upon to determine the debt. [Paras 20, 21]

The lease agreement on record, being insufficiently stamped/unregistered, is not available for determining the alleged debt.

Pre-existing dispute - Proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Existence of a pre-existing dispute regarding maintenance and related claims bars admission of the Section 9 petition. - HELD THAT: - The Tribunal examined contemporaneous emails, letters and a legal notice sent by the Corporate Debtor before the demand notice and observed that these communications raised bona fide complaints about non-maintenance and defects, and specifically informed the Operational Creditor that maintenance charges would not be paid until defects were remedied. Applying Mobilox and subsequent Supreme Court/NCLAT guidance, the Tribunal held that a plausible, non-spurious dispute existing prior to receipt of the demand notice disentitles the Operational Creditor to relief under Section 9. On the totality of evidence the Tribunal concluded that such a pre-existing dispute existed and was asserted in the reply to the demand notice, warranting rejection of the petition. [Paras 25, 26, 31, 32, 33]

A bona fide pre-existing dispute exists and the Section 9 petition must be rejected.

Condonation of delayed reply to demand notice - Pre-existing dispute - The belated reply by the Corporate Debtor to the demand notice was condoned and treated as valid for raising the dispute. - HELD THAT: - Noting NCLAT authority in Subhash Chandra Goyal (as cited), the Tribunal observed that the 10-day period for reply is directory and a short delay in responding does not defeat a legitimately raised dispute. Given the substance of the reply and the evidence of pre-existing complaints, the Tribunal condoned the delayed reply and accepted it as meeting the requirements of Section 9 for raising a dispute. [Paras 28]

The late reply to the demand notice is condoned and is effective to raise the pre-existing dispute.

Determination of date of default - Operational Debt - A clear determination of the date of default was not possible from the documents on record. - HELD THAT: - The Tribunal noted inconsistent averments by the Operational Creditor regarding the date from which the debt fell due (1st August 2017 vs. 1st September 2017), admissions in correspondence that rents for June and July 2017 were deposited in September 2017, and bank entries showing deposits on 06.09.2017. On this evidence the Tribunal found that the precise date of default could not be ascertained from the material before it, which weighed against admitting the petition. [Paras 27]

The date of default cannot be clearly ascertained from the record.

Final Conclusion: The petition under Section 9 is rejected: although the dues constitute operational debt, the lease deed as produced cannot be relied on for proof and, on the contemporaneous record, a bona fide pre-existing dispute exists (the late reply to the demand notice having been condoned) and the date of default is indeterminate; the Operational Creditor remains free to pursue other remedies.

Condonation of delay under the Limitation Act - maintainability of an application under Section 9 of the Insolvency and Bankruptcy Code - minimum amount of default / pecuniary threshold for initiation under Part II of the IBC - retrospective application of notification increasing the threshold

Condonation of delay under the Limitation Act - Condonation of delay of 84 days in filing the Section 9 petition - HELD THAT: - The Tribunal considered the applicant's plea for exclusion of the period of delay relying on the Supreme Court's and NCLAT's decisions concerning limitation during the COVID period. Having heard counsel and perused the cited orders, the Adjudicating Authority found that it had jurisdiction to grant the relief and that the authorities relied upon supported exclusion for the specified period. Accordingly, the IA seeking condonation of delay was allowed and the delay of 84 days in filing the Section 9 petition was condoned. [Paras 5]

IA-1606/2022 allowed; delay of 84 days condoned.

Maintainability of an application under Section 9 of the Insolvency and Bankruptcy Code - minimum amount of default / pecuniary threshold for initiation under Part II of the IBC - retrospective application of notification increasing the threshold - Whether the Section 9 petition filed on 27.11.2021 is maintainable in view of the enhanced minimum amount of default fixed by the notification dated 24.03.2020 - HELD THAT: - The Tribunal examined Part II applicability post-notification of 24.03.2020 which fixed the minimum amount of default at Rs. 1 crore for initiation under Sections 7 and 9. Relying on decisions including the NCLAT view cited and the High Court of Kerala's analysis of the effect of the notification and the Supreme Court's approach to the test of default, the Tribunal held that the pecuniary threshold of Rs. 1 crore applies to applications filed on or after 24.03.2020 even if the debt accrued earlier. The petition before the Tribunal was filed on 27.11.2021 and the demand notice was dated 28.10.2021; therefore the enhanced threshold was applicable and the present Section 9 application, alleging a debt below the threshold, was not maintainable. [Paras 6, 7, 8]

The Section 9 application IB-819/(ND)/2021 is not maintainable and is dismissed.

Final Conclusion: The application for condonation of delay is allowed and the delay of 84 days is condoned; however, the Section 9 petition filed on 27.11.2021 is dismissed as not maintainable because the enhanced minimum amount of default of Rs. 1 crore (notification dated 24.03.2020) applies to applications filed on or after that date; dismissal is subject to no order as to costs.

Applicability of the Limitation Act (Article 137) to applications under Section 9 of the IBC - existence of a pre existing dispute as a bar to initiation of insolvency proceedings under Section 9 - service of statutory demand/demand notice under Section 8 of the Code - operational creditor standing to sue on invoices issued in its name - forum shopping and imposition of costs for filing vexatious or multiplicious proceedings

Applicability of the Limitation Act (Article 137) to applications under Section 9 of the IBC - Whether the petition under Section 9 was barred by limitation. - HELD THAT: - The Tribunal examined the limitation point first, noting the invoices dated September 2009 and that a statutory demand under the Companies Act was served on 05.03.2012 and a winding up petition was filed thereafter. Applying the principle in B.K. Educational Services that Article 137 of the Limitation Act governs Section 9 applications, the Tribunal held that the applicant had acted within limitation because the earlier demand and the transferred Company Petition (withdrawn with liberty to file afresh) preserved the right to file the present petition, which was instituted on 10.01.2019. On that basis the petition was not time barred. [Paras 6, 7, 8, 9]

The petition is within the law of limitation.

Service of statutory demand/demand notice under Section 8 of the Code - Whether the demand notice dated 15.10.2018 was duly served on the corporate debtor. - HELD THAT: - The Tribunal considered the corporate debtor's plea of non service and examined the track report placed on record. It found that the demand notice dated 15.10.2018 was delivered to the corporate debtor's registered office (as per MCA master data) on 20.10.2018 and, therefore, the contention of non service was rejected. [Paras 10]

The demand notice was duly served on the corporate debtor.

Operational creditor standing to sue on invoices issued in its name - Whether M/s. Wacker Chemie AG is the operational creditor entitled to file the Section 9 petition. - HELD THAT: - Although the distribution agreement bore another corporate name and earlier proceedings were instituted by related entities, the Tribunal observed that the invoices forming the basis of the claim were raised by M/s. Wacker Chemie AG. On that factual and documentary basis the Tribunal held that M/s. Wacker Chemie AG is the operational creditor vis a vis the corporate debtor for the invoices in question. [Paras 11]

M/s. Wacker Chemie AG is held to be the operational creditor for the present claim.

Existence of a pre existing dispute as a bar to initiation of insolvency proceedings under Section 9 - Whether a real pre existing dispute existed between the parties such as to require rejection of the Section 9 petition. - HELD THAT: - The Tribunal applied the settled test that a pre existing dispute must be real and demonstrable from the record and reply, not a feeble or spurious defence, and examined the correspondence and judicial orders placed on record. Certified orders of the Delhi High Court and other proceedings showed that the corporate debtor's defence had earlier been held to require adjudication and that disputes between the parties pre dated the demand. Reliance was placed on the principle in Mobilox Innovative that the adjudicating authority need only be satisfied that a plausible controversy requiring further investigation exists. On the material before it the Tribunal found that there was a real, pre existing dispute concerning the same cause of action and that the applicant had engaged in forum shopping by pursuing multiple proceedings. [Paras 12, 13, 14, 15, 16]

A pre existing dispute existed and therefore the Section 9 petition could not be admitted.

Forum shopping and imposition of costs for filing vexatious or multiplicious proceedings - Whether costs should be imposed for filing the petition despite dismissal on account of the pre existing dispute. - HELD THAT: - Observing that the applicant had pursued multiple fora and had willfully concealed the existence of prior disputes, thereby wasting the Tribunal's time, the Bench concluded that simple dismissal would not suffice to discourage such conduct. In order to preserve the sanctity of proceedings and deter forum shopping, the Tribunal held that costs should be imposed on the applicant and directed payment to a public fund with proof of compliance. [Paras 16, 17]

The petition is dismissed with costs; the applicant is directed to pay costs to the PM Relief Fund and file an affidavit of compliance.

Final Conclusion: The Section 9 petition by M/s. Wacker Chemie AG, though within limitation and notwithstanding valid service and the applicant's status as operational creditor, is dismissed because a real pre existing dispute between the parties existed prior to the demand; costs are imposed on the applicant to be paid to the PM Relief Fund within 14 days and compliance is to be filed by affidavit.

Look Out Circular (LOC) - judicial review of administrative action - exceptional clause in Office Memorandum permitting LOCs in non-cognizable matters - automatic deletion/continuance of LOCs and renewal procedure - res judicata by prior writ dismissal - territorial jurisdiction for writ petitions

Look Out Circular (LOC) - exceptional clause in Office Memorandum permitting LOCs in non-cognizable matters - judicial review of administrative action - Validity of the LOC issued on 10.02.2016 against the petitioner in light of OM dated 27.10.2010 and its 2017 amendment - HELD THAT: - The Court found that the Directorate of Enforcement had reasonable grounds to suspect the petitioner as being closely associated with the principal accused and that the petitioner had been non-cooperative in the investigation. The Office Memorandum dated 05.12.2017 amends the OM of 27.10.2010 to permit issuance of LOCs in exceptional cases even where the strict pre-condition of involvement in a cognizable offence is not met. The Court accepted the view of Coordinate Benches that the 2017 OM operates as an amendment to the 2010 OM and that the exception can be invoked only in exceptional circumstances when the originating authority forms a reasonable belief that departure would be detrimental to sovereignty, security, bilateral relations or economic/strategic interests or impede investigation. Applying these principles to the material on record, the Court held that sufficient grounds existed to form the belief that the petitioner's departure would be detrimental to the larger public interest and that issuance of the LOC was justified and open to limited judicial scrutiny but not vitiated on the facts presented. [Paras 11]

The LOC was validly issued and falls within the exceptional clause as per the amended OM; there is no basis to quash it on merits.

Automatic deletion/continuance of LOCs and renewal procedure - Look Out Circular (LOC) - Whether the LOC issued on 10.02.2016 had lapsed after one year or continued in force - HELD THAT: - The Court reviewed clause 8(i) of the OM dated 27.10.2010 which provided for automatic removal after one year unless renewed, and subsequent guidelines (including Clause 'J' of the 22.02.2021 guidelines) that reversed the automatic deletion principle so that a LOC remains in force until a deletion request is received. On the material, the respondents asserted that the LOC had been extended/maintained in accordance with amendments and later guidelines. The Court accepted that the law now permits continuance of a LOC until deletion is requested and found no force in the contention that the LOC had automatically expired after one year. [Paras 8, 11]

The contention that the LOC lapsed automatically after one year is repelled; the LOC lawfully continued in force in view of the subsequent amendments and guidelines.

Res judicata by prior writ dismissal - judicial review of administrative action - Whether the present petition is barred by res judicata in view of earlier dismissal by the Bombay High Court of Writ Petition No. 2332/2016 - HELD THAT: - The Court reviewed the prior order dated 21.12.2016 by the High Court of Bombay in which the earlier writ challenging the same LOC had been dismissed after perusal of a confidential report indicating that a FIR had been registered and that investigation by Enforcement Directorate was in progress. Relying on settled principles, the Court observed that a writ dismissed on merits by a court of competent jurisdiction ordinarily bars a subsequent writ on the same cause of action. The petitioner had not challenged the Bombay High Court order further and provided no explanation for not pursuing available remedies earlier. On these grounds the Court held that the present petition is barred by the principle of res judicata. [Paras 12]

The petition is barred by res judicata and is not maintainable in view of the earlier dismissal.

Territorial jurisdiction for writ petitions - jurisdiction - Whether the Delhi High Court has territorial jurisdiction to entertain the present petition - HELD THAT: - The Court examined the locus of the underlying investigations and proceedings: the ECIR and prosecution complaints were filed and the principal investigative and judicial activity were connected to Mumbai where searches, prosecutions and the Special Court (PMLA) proceedings were pending. Although the LOC had been requested/issued through authorities in Delhi, no cause of action had arisen in Delhi such as to vest territorial jurisdiction in the Delhi High Court. The petitioner had previously invoked the jurisdiction of courts in Mumbai and the Special Court in Mumbai remained seised of related criminal matters. The Court concluded that the present petition did not raise a cause of action in Delhi and that the Delhi High Court therefore lacked territorial jurisdiction to entertain it. [Paras 13]

This Court lacks territorial jurisdiction to adjudicate the petition; the petition is not maintainable in Delhi.

Final Conclusion: The writ petition is dismissed: the LOC was held to be justifiable under the amended OM in exceptional circumstances, the challenge is barred by res judicata, and the Delhi High Court lacks territorial jurisdiction to entertain the petition.

Charge of service tax on services received from outside India (national treatment and legal fiction of recipient as provider) - Application of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 - requirement of receipt in India for use in relation to business or commerce - Requirement of identification of the taxable service before invoking the special deeming fiction - Effect of amalgamation appointed date on taxability of pre-merger transactions - Treatment of separate permanent establishments under Section 66A(2) - independent status of overseas branch/head office for determination of import of services

Charge of service tax on services received from outside India (national treatment and legal fiction of recipient as provider) - Requirement of identification of the taxable service before invoking the special deeming fiction - Application of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 - requirement of receipt in India for use in relation to business or commerce - Whether the payments reflected in appellant's accounts for 2009-10 attracted service tax under the special charging fiction applicable to services received from outside India. - HELD THAT: - The Tribunal held that Section 66A is a limited, special provision creating a legal fiction to treat certain services provided from abroad as taxable by deeming the recipient to be the provider; its operation is subject to the framework and limitations in the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. The adjudicating authority failed to identify the specific taxable service actually procured from the overseas supplier and did not apply the threefold determination required under the Rules (services performed in India, services relating to immovable property in India, or services received by a recipient located in India for use in relation to business or commerce). The presence of entries in the post merger final accounts or the adoption of transactions pursuant to an approved scheme of amalgamation does not supplant the statutory requirement to show that the service was received in India for use in business or commerce or that the transaction falls within the categories specified in the Rules. Further, the deeming of amalgamation from the appointed date could not be mechanically applied to invoke Section 66A without examining whether the overseas entities continued to operate independently (and hence whether the payments were by distinct overseas establishments). In the absence of any determination of the nature of the services by the adjudicating authority and without satisfying the Rule based tests, Section 66A could not be invoked to fasten liability for the impugned payments for 2009-10. The impugned order therefore lacked the requisite application of the Rules and statutory scheme and was set aside. [Paras 6, 9, 10, 11]

Demand under the charging fiction for services received from outside India in respect of the payments for 2009-10 set aside for failure to identify the taxable service and to apply the Rules; the appeal allowed on this ground.

Effect of amalgamation appointed date on taxability of pre-merger transactions - Treatment of separate permanent establishments under Section 66A(2) - independent status of overseas branch/head office for determination of import of services - Whether the deeming consequences of the approved scheme of amalgamation (appointed date) rendered the pre effective date payments taxable in the hands of the appellant under Section 66A. - HELD THAT: - The Tribunal recorded that corporate restructuring or the court approved scheme of amalgamation cannot automatically broaden the scope of Finance Act, 1994; taxability under Section 66A depends on the statutory fiction and the Rules. Although an appointed date in an amalgamation scheme may deem certain acts to have been done on behalf of the transferee, Section 66A(2) and its Explanation treat permanent establishments in different countries as separate persons for the purpose of determining import of services. The adjudicating authority did not assess whether the overseas transferor companies ceased to operate or whether the payments were for services received in India by the transferee for use in business or commerce. Consequently, the appointed date could not be mechanically used to attribute overseas payments to the appellant so as to attract Section 66A without satisfying the statutory tests; the impugned order's reliance on the appointed date without the requisite statutory analysis was unsustainable. [Paras 9, 10, 11]

The attempt to fasten tax liability by reference to the appointed date of amalgamation was held to be insufficient in law; the impugned reliance on the amalgamation date for invoking Section 66A is set aside.

Consequences of invalid demand - charging of interest and penalties linked to the primary demand - Whether the charges of interest and penalties imposed along with the primary demand are sustainable. - HELD THAT: - The Tribunal concluded that because the primary charging provision (invocation of Section 66A for 2009-10) was not sustained - the adjudicating authority having failed to identify the taxable service and to apply the Rules - the consequential imposition of interest and penalties under the relevant provisions could not stand. The impugned order imposing interest and penalties was therefore not maintainable in the present factual and legal matrix. [Paras 1, 12]

Interest and penalties imposed along with the primary demand are set aside as consequential to the quashed demand.

Final Conclusion: The appeal is allowed: the adjudicating order charging service tax (for 2009-10) under the special deeming provisions for services received from outside India, and the consequential interest and penalties, are set aside because the adjudicating authority failed to identify the taxable service and to apply the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 and could not rely merely on accounting entries or the appointed date of amalgamation to fasten liability.

Exemption under Section 26 of the Special Economic Zones Act, 2005 - overriding effect of the SEZ Act over other laws - service tax exemption for services provided to a Unit or Developer in a SEZ - procedural non-compliance not defeating substantive entitlement to exemption - definition of export of services under the SEZ Act

Exemption under Section 26 of the Special Economic Zones Act, 2005 - overriding effect of the SEZ Act over other laws - service tax exemption for services provided to a Unit or Developer in a SEZ - Whether notifications issued under the Finance Act could override or invalidate the exemptions conferred by Section 26 of the SEZ Act in respect of services rendered to a SEZ unit. - HELD THAT: - The Tribunal accepted the principle that Section 26(1) of the SEZ Act confers specified exemptions on Developers and entrepreneurs and that the Central Government's power to prescribe terms and conditions for such exemptions flows from Section 26(2) and the SEZ Rules made thereunder. In consequence of Section 51 of the SEZ Act (providing that the Act shall have effect notwithstanding inconsistency with any other law), notifications under the Finance Act cannot be read so as to nullify or displace the exemptions granted under Section 26. The Tribunal relied on the reasoning in the cited High Court decision that Rule 22 of the SEZ Rules prescribes the terms and conditions for grant of exemptions under the SEZ Act and that additional terms imposed by notifications under Section 93 of the Finance Act cannot be allowed to curtail the statutory exemption under the SEZ Act. [Paras 6, 7]

Notifications under the Finance Act cannot invalidate or override the exemption conferred by Section 26 of the SEZ Act in respect of services to a SEZ unit; the exemption prevails.

Procedural non-compliance not defeating substantive entitlement to exemption - service tax exemption for services provided to a Unit or Developer in a SEZ - Whether procedural lapses or delayed compliance with the notification procedure disentitle the appellant to the SEZ exemption and sustain the demand for service tax. - HELD THAT: - The Tribunal found on the record that although documentary requirements were not available for the entire disputed period, eligibility to the exemption did exist at some point. The adjudicating authority did not conclude that the appellant lacked substantive entitlement absent the procedural infirmities; accordingly, the Tribunal held that procedural breaches do not supplant the statutory exemption under the SEZ Act. Applying the overriding provision of Section 51 and the SEZ Act's scheme, the Tribunal set aside the demand premised on failure to comply with notification procedures. [Paras 7]

Procedural non-compliance with notification formalities does not defeat the substantive exemption under the SEZ Act; the demand based on such breaches was set aside.

Definition of export of services under the SEZ Act - service tax exemption for services provided to a Unit or Developer in a SEZ - Whether the services rendered by the appellant were to be treated as rendered and consumed in India for service tax purposes, notwithstanding the SEZ scheme. - HELD THAT: - The Tribunal observed that the SEZ Act contains its own definition of 'export' of services which differs from the definitions used in the service tax law and must be read in the context of the exemptions under Section 26. Given Section 51's overriding effect, the SEZ Act's treatment governs and the adjudicator's perception based on service-tax-centric domestic supply/consumption concepts was inapplicable. Consequently, the finding that the services were rendered and consumed in India did not sustain. [Paras 8]

The services are to be considered under the SEZ Act's export framework; the finding of rendering and consumption in India does not sustain and the related demand fails.

Final Conclusion: The impugned order demanding service tax and penalty in respect of services provided to a SEZ unit is set aside; the appeal is allowed on the basis that the SEZ Act exemptions prevail and procedural lapses do not defeat substantive entitlement, and the services are to be viewed under the SEZ Act's export framework.

Levy of service tax on installation and commissioning of excisable goods where excise duty paid on full transaction value - Concept of manufacture vis-a -vis taxable service of installation and commissioning - Requirement of separate consideration for levy of service tax - Incidental services to manufacture not taxable as service

Levy of service tax on installation and commissioning of excisable goods where excise duty paid on full transaction value - Requirement of separate consideration for levy of service tax - Concept of manufacture vis-a -vis taxable service of installation and commissioning - Incidental services to manufacture not taxable as service - Whether installation and commissioning of weighing machines at customers' premises attracts service tax where no separate consideration was charged and Central Excise duty was paid on the total value of the goods. - HELD THAT: - The Tribunal found as an admitted fact that the appellant did not separately charge, bill or receive any amount for installation or commissioning services, and had discharged Central Excise duty on the entire transaction value without claiming any deduction or abatement for installation. In these circumstances there was no separate consideration for any service and therefore no basis to fasten service tax liability under the provision invoked. The Tribunal further applied the settled principle reflected in the cited decisions that erection/installation/commissioning, when integral or incidental to the manufacture and sale of excisable goods and accounted for in the transaction value on which excise duty is paid, cannot be treated as an independent taxable service. Relying on those authorities and the factual finding that no separate consideration existed, the Tribunal held the departmental demand unsustainable.

Demand of service tax and attendant penalties confirmed by the lower authority were set aside; appeals allowed in favour of the appellant.

Final Conclusion: The adjudged demands of service tax and penalties in respect of installation and commissioning of weighing machines were not maintainable because no separate consideration was charged and Central Excise duty had been paid on the total value; the impugned orders are therefore set aside and the appeals allowed.

Classification under heading 3302.10 vs heading 2108.10 - binding effect and finality of Tribunal decisions - obligation of subordinate revenue authorities to follow appellate orders - revenue neutrality as affecting adjudication of classification disputes

Binding effect and finality of Tribunal decisions - obligation of subordinate revenue authorities to follow appellate orders - Validity of the order dropping show-cause proceedings in view of the Tribunal's earlier decision and the Supreme Court disposal. - HELD THAT: - The Tribunal held that the three impugned show-cause notices were periodical continuations of the dispute already adjudicated in Britco Foods Company Ltd v. Commissioner of Central Excise, Pune and that the matter had been finally determined by the Tribunal. The Supreme Court's disposal of an earlier appeal on the ground of revenue neutrality did not negate the finality of the Tribunal's classification ruling. The Court emphasised the principle that subordinate revenue officers are bound to give effect to orders of higher appellate authorities and that errors of articulation in the original order do not furnish a ground for setting aside a decision which accords with the binding appellate precedent. Consequential harassment and disorder would result if the original authority were free to re-open matters already settled by the Tribunal unless and until a higher court reverses that decision. [Paras 4, 5]

The order dropping the proceedings was legally sustainable; Revenue's appeal against that dropping is dismissed.

Classification under heading 3302.10 vs heading 2108.10 - revenue neutrality as affecting adjudication of classification disputes - Whether the goods described as 'non-alcoholic beverage bases/concentrates' are classifiable under heading 3302.10 rather than heading 2108.10 and whether Revenue could re-open classification after Tribunal's determination. - HELD THAT: - The Tribunal's reasoning, as adopted by the court, found the products to be based on odoriferous substances and within the scope of heading 3302.10. The Explanatory Notes and prior tribunal practice support classification under 3302.10 for preparations of a kind used in the food or beverage industry, and heading 21.08 (2108) was held not to be the proper head. While the Supreme Court had observed that the classification dispute was academic on account of revenue neutrality in an earlier appeal, that observation did not nullify the Tribunal's classification ruling. Having regard to the Tribunal's settled classification and the binding effect of that decision, Revenue was not entitled to adopt an alternate approach and re-initiate demands for the specified periods. [Paras 6, 7, 11]

Classification as settled under heading 3302.10 stands and the demands founded on classification under 2108.10 are not sustainable.

Final Conclusion: Appeal dismissed. The Tribunal's prior determination that the impugned preparations are classifiable under heading 3302.10 is binding on subordinate authorities and bars reopening of demands for the specified periods absent reversal by a higher court; the orders dropping the show cause proceedings are upheld.

Restriction on transfer of property arising from tax recovery measures - protection of revenue by communicating lien to public registries - quashing of administrative communication - bank's duty to safeguard public funds when disbursing loans - precautionary administrative action pending disposal of tax liability appeal - encumbrance certificate as evidence of recorded restriction

Restriction on transfer of property arising from tax recovery measures - protection of revenue by communicating lien to public registries - bank's duty to safeguard public funds when disbursing loans - quashing of administrative communication - encumbrance certificate as evidence of recorded restriction - Whether the impugned communication by the tax authority placing a restriction/lien which resulted in the Bank withholding disbursement of the sanctioned loan could be quashed. - HELD THAT: - The Court recorded that adjudication by the tax authority had confirmed a tax liability (with penalty) against the petitioner's father and an appeal against that order was pending. In those circumstances the tax authority, in the interest of revenue, sent a representation to the Sub Registrar recording a restriction so that a charge, lien or other alienation would be noted against the property. That representation is recorded and reflected in the encumbrance certificate. The Bank, having to protect public funds and having received information of the restriction, lawfully withheld disbursement and indicated that alternate unencumbered security could be considered. Given the confirmed liability, the risk that the Department would be left without a source of recovery, and the presence of the restriction in public records, the Court found no reason to quash the communication and recognised the Bank's precautionary stance.

The Writ Petition praying for quashing of the communication was dismissed and the impugned holding of the loan was upheld; the petition is disposed of with no order as to costs.

Final Conclusion: The High Court declined to quash the tax authority's communication placing a restriction reflected in the encumbrance certificate and upheld the Bank's decision to withhold disbursement of the loan in the interest of revenue and protection of public funds; the petition is disposed of with no costs.

Priority of secured creditors - registration of security interest with Central Registry (CERSAI) - prospective operation of Chapter IV-A of the SARFAESI Act - statutory first charge of the State - non-obstante clause and its limited operation - section 26D and section 26E of the SARFAESI Act - section 31B of the RDDB Act - effect of prior attachment and proclamation under the MLR Code - auction purchaser on 'as is where is' basis and liability for encumbrances/constructive notice

Priority of secured creditors - section 26E of the SARFAESI Act - registration of security interest with Central Registry (CERSAI) - Whether a secured creditor, on enforcement of security interest, has priority over government dues and state departmental claims - HELD THAT: - The Court held that Chapter IV A of the SARFAESI Act (sections 26B-26E) was enacted to make CERSAI registration central to the benefits accorded to secured creditors: section 26D disables enforcement under Chapter III unless the security interest is registered, and section 26E accords 'priority' in payment to secured creditors after registration. The legislative scheme thus rewards diligent registration and gives registered secured creditors precedence over other debts including revenues, taxes, cesses and rates, subject to the Insolvency and Bankruptcy Code. The Court rejected the contention that the word 'priority' is inferior to 'first charge' and held that, where applicable, section 26E overrides competing State statutory charges. The Court emphasised the purposive context of the amendments and their aim to protect secured creditors who comply with the registration requirement. (Key reasoning at paras. 73-79, 82-90, 92.) [Paras 82, 85, 88, 89, 92]

A secured creditor whose security interest is registered with the Central Registry (CERSAI) is entitled to priority in payment over other debts and government dues in terms of section 26E of the SARFAESI Act, subject to the IBC.

Prospective operation of Chapter IV-A of the SARFAESI Act - registration of security interest with Central Registry (CERSAI) - Whether the priorities and disabling/enabling provisions of Chapter IV A (including sections 26D and 26E) operate retrospectively or prospectively - HELD THAT: - The Court examined the legislative history, the Statement of Objects and Reasons, and the notification dates. Chapter IV A and its regulatory framework impose mandatory duties (registration) and change substantive rights (denial of enforcement absent registration and priority upon registration). Such remedial/substantive changes were held to be prospective. The notification timetable (Chapter IV A enforced from 24 January 2020) confirms this; applying the provision retrospectively would undermine completed enforcement actions and create legal chaos. Therefore section 26E and related provisions operate prospectively from their date of enforcement. (Key reasoning at paras. 95-102.) [Paras 96, 99, 100, 101, 102]

The provisions of Chapter IV A, including sections 26D and 26E, operate prospectively from the date they were brought into force (24 January 2020) and are not to be given retrospective effect.

Section 31B of the RDDB Act - non-obstante clause and its limited operation - Whether section 31B of the RDDB Act can be invoked to overcome the disability imposed by section 26D of the SARFAESI Act or to claim priority where the CERSAI registration is absent - HELD THAT: - The Court accepted that section 31B begins with a non obstante clause but read it in context: section 31B is embedded in the RDDB Act scheme and grants priority in circumstances where secured creditors obtain a determination from the DRT and recover through the RDDB procedure. The non obstante clause in section 31B cannot be used to circumvent the mandatory registration requirement in section 26D of the SARFAESI Act or to validate enforcement under Chapter III absent registration. Allowing a creditor to evade section 26D by invoking section 31B would frustrate the purpose of Chapter IV A and permit circumvention of the statutory registration mandate. Consequently, section 31B is not a general free standing remedy to be used whenever a secured creditor chooses the SARFAESI route without registration. (Key reasoning at paras. 103-123.) [Paras 112, 114, 116, 118, 120]

Section 31B cannot be pressed into service to overcome the disability created by section 26D; the benefit of section 31B operates in the RDDB/DRT context and does not entitle an unregistered secured creditor to claim priority under the SARFAESI Act.

Effect of prior attachment and proclamation under the MLR Code - statutory first charge of the State - Whether a State department's prior attachment and proclamation under the MLR Code precludes application of sections 26E/31B - HELD THAT: - The Court held that a valid pre existing exercise by State authorities-where the property was attached in accordance with the MLR Code and MRLR Rules and a proclamation was duly made-can preserve the State's enforcement rights so as to defeat subsequent claims of priority by secured creditors under central provisions. Thus, where attachment and proclamation occurred in law prior to the operative date of the central prioritising provision, the State may insist on payment first. Conversely, where no lawful attachment and proclamation preceded the central priority (or where the State failed to register an attachment under Chapter IV A), the registered secured creditor's priority will prevail. The Court emphasised the practical importance of attachment + proclamation being made public to affect transferees. (Key reasoning at paras. 136-154.) [Paras 137, 139, 143, 152, 154]

A State department's lawful attachment followed by proclamation under the MLR Code prior to the central priority taking effect will preserve the department's enforcement rights; otherwise the registered secured creditor's priority under section 26E (or a DRT determination under section 31B) will prevail.

Auction purchaser on 'as is where is' basis and liability for encumbrances/constructive notice - Security Interest (Enforcement) Rules, 2002 - duties of authorised officer - Whether an auction purchaser who buys on 'as is where is, whatever there is' basis is liable to pay departmental dues/encumbrances to obtain clear title - HELD THAT: - The Court analysed rules 8 and 9 of the 2002 Rules and prior authorities. The authorised officer must disclose encumbrances known to the secured creditor and give purchasers opportunity to deposit sums to discharge such encumbrances; the purchaser may be required to deposit money to discharge encumbrances. Where sale is on 'as is where is' basis, the purchaser takes the property with its liabilities and cannot later claim only the rights. Liability to pay departmental dues will attach where the purchaser had actual or constructive notice of the encumbrance; a purchaser may overcome the liability only by disproving constructive notice. The Court noted that with the CERSAI regime, availability of registered attachments/encumbrances improves purchasers' ability to discover charges. (Key reasoning at paras. 156-161.) [Paras 157, 158, 159, 160, 161]

An auction purchaser on an 'as is where is' basis is ordinarily liable for encumbrances known to the secured creditor or which the purchaser had constructive notice of; the authorised officer must disclose known encumbrances and provide for deposit to discharge them.

Final Conclusion: The Court held that (i) Chapter IV A of the SARFAESI Act conditions the priority accorded to secured creditors on registration of the security interest with the Central Registry (CERSAI); registered secured creditors have priority in payment over government dues (subject to IBC); (ii) Chapter IV A operates prospectively from the date it was brought into force (24 January 2020); (iii) section 31B of the RDDB Act confers priority in the DRT/ RDDB context but cannot be used to circumvent the CERSAI registration requirement under section 26D; (iv) lawful attachments and proclamations made by State authorities under the MLR Code prior to the operative date preserve State priority; and (v) auction purchasers buying on 'as is where is' basis take the property subject to known or constructively-noticed encumbrances and must deposit sums to discharge them unless they can disprove notice. Several individual writ petitions were disposed in accordance with these principles; a few matters were directed to be re listed for factual determination where registration dates, attachment/proclamation compliance or allegations of fraud required further adjudication.

Assessment based on departmental web report - principles of natural justice - show cause notice with particulars - Commissioner's circular as guideline for procedure - remand for fresh consideration after providing particulars and personal hearing

Assessment based on departmental web report - principles of natural justice - show cause notice with particulars - Validity of the assessment/revision order dated 27.05.2022 which was founded on the Department's web report without furnishing particulars or conducting the requisite inquiry and hearing. - HELD THAT: - The Court found that the impugned order was premised on a mismatch allegedly revealed by Annexure-II (sellers' entries) on the Department's website but did not furnish particulars of the alleged discrepancies nor conduct the enquiry contemplated by the departmental guidelines and principles of natural justice. The Commissioner's Circular dated 24.02.2021 prescribes that show cause notices in mismatch cases must contain details and afford opportunity for objections and personal hearing, and the assessing authority should, where appropriate, summon other dealers for cross-examination or proceed only if the dealer is nonexistent. In the present case the petitioner received a show cause notice and, owing to ill-health, did not immediately reply; the assessing authority nevertheless passed the order without giving the particulars or affording the hearing and without following the procedure set out in the Circular. For these reasons the assessment made on the basis of the web report without giving particulars or following the stated procedure was held to be invalid and liable to be set aside. [Paras 6, 7, 8, 12, 13]

Impugned order of 27.05.2022 set aside for failure to furnish particulars and to follow the procedural safeguards and principles of natural justice; fresh consideration required.

Commissioner's circular as guideline for procedure - remand for fresh consideration after providing particulars and personal hearing - Relief and directions on the mode of fresh consideration of the alleged mismatch and timeframe for completion of the process. - HELD THAT: - The Court directed that the respondent shall supply the mismatch particulars to the petitioner so that the petitioner may file his reply and be afforded a personal hearing. Thereafter the assessing authority may pass an assessment order in accordance with law and by following the procedures and safeguards set out in the Commissioner's Circular dated 24.02.2021. The Court specified that the entire process, from furnishing particulars to passing the assessment order, shall be completed within two months from receipt of a copy of the order. The directions do not adjudicate the correctness of the alleged suppression on merits but require procedural compliance before any fresh assessment is made. [Paras 8, 13, 14]

Respondent directed to furnish particulars, afford personal hearing and proceed in accordance with the Commissioner's Circular; entire process to be completed within two months.

Final Conclusion: Writ petition allowed; impugned assessment order set aside and remanded for fresh consideration after furnishing mismatch particulars and affording personal hearing in accordance with the Commissioner's Circular, to be completed within two months; no costs.

Best judgment assessment - estimation of escaped turnover - use of check-post extracts as corroborative evidence - estimation based on electricity consumption - right to cross-examination in tax assessment proceedings - extended limitation in cases of suppression

Best judgment assessment - estimation of escaped turnover - use of check-post extracts as corroborative evidence - extended limitation in cases of suppression - Validity of the best judgment assessment founded on check-post extracts and other corroborative material in determining escaped turnover. - HELD THAT: - The Court held that the assessing authority's best judgment assessment, grounded on cross-verification from check-post extracts together with bank information and purchasing-dealer data, was supported by adequate material. The Division Bench reasoning, adopted by the Court, indicates that where the assessing authority "took every possible means to prove the nature of transactions" and there is corroboration between different sources, such estimation is justifiable. Further, in cases of suppression of turnover, the extended limitation applies and the authorities may rely on such corroborative material to quantify escaped turnover. The assessee's general denials and unsupported claim of destroyed records were insufficient to displace the estimation or to show absence of corroboration. [Paras 7]

The best judgment assessment based on check-post extracts and other corroborative evidence was upheld and the estimation of escaped turnover sustained.

Estimation based on electricity consumption - estimation of escaped turnover - Permissibility of using electricity consumption as a basis for estimating turnover. - HELD THAT: - The Court reiterated the principle that estimation of turnover from electricity consumption is a permissible method but only when there is a direct nexus between consumption and turnover and no other evidence is available. The Division Bench observed that electricity-consumption-based estimation is only one of the permissible modes and cannot be relied upon in the absence of material establishing the nexus. In the present matter, the Court found that this mode was not the sole basis and, where used, must be supported by corroborative material-failure to show such nexus would render that mode unsustainable. [Paras 7]

Estimation by reference to electricity consumption is permissible in principle but requires a demonstrable direct nexus; it cannot be the sole basis without supporting material.

Right to cross-examination in tax assessment proceedings - Whether the assessee was entitled to cross-examine witnesses relied upon by the assessing authority. - HELD THAT: - The Court accepted the Division Bench's view that cross-examination is not an absolute right in such proceedings and will not be afforded where the material placed does not warrant it or where no substantial case is made out to justify cross-examination to elicit material required for consideration. The reasoning emphasises that mere assertion by the assessee that documents or transactions are false, without particulars or supporting material, does not entitle the assessee to cross-examination of witnesses relied upon by the assessment authority. [Paras 7]

Denial of an opportunity for cross-examination in the circumstances was not improper; no interference was warranted.

Final Conclusion: The Tax Revision is dismissed as the present case is squarely covered by the Division Bench decision in T.R.C. Nos.264 of 2003 and 23 of 2004; the best judgment assessment and attendant procedures were held to be legally sustainable and the revision is dismissed without costs.

Condonation of delay - Statutory right to appeal - Reconsideration on merits by appellate authority - Natural justice - opportunity to be heard - Reopening of assessment on change of opinion

Condonation of delay - Statutory right to appeal - Reconsideration on merits by appellate authority - Natural justice - opportunity to be heard - Whether delay in filing statutory appeals against the assessment/reassessment orders should be condoned and whether the appellate authority must consider the appeals on merits after affording opportunity to the petitioner. - HELD THAT: - The Court observed that the assessments for the tax years in question had been reopened, credits and refunds revisited and that the issues arising from assessments for 2008-2009, 2009-2010 and 2013-2014 are common and were pending. The Court noted that authorities ought to have afforded adequate opportunities to the petitioner before revisiting the refund positions and emphasised that a statutory appeal is a vested procedural right which cannot be denied; there is also a statutory provision for condonation of delay. In exercise of its supervisory jurisdiction the Court condoned the delay and directed that the appellate authority (first respondent) shall consider the petitioner's appeal on merits. The petitioner was directed to file the appeal within three weeks from receipt of the order, and the appellate authority was directed to consider and dispose of the appeal within two months from submission of the delay condonation application and appeal, subject to the appellate authority's usual terms and conditions. The Court thus required compliance with principles of natural justice and mandated adjudication on merits rather than refusing the remedy solely on account of delay.

Delay condoned; petitioner directed to file appeal within three weeks and the appellate authority directed to consider and dispose the appeal on merits within two months after submission.

Final Conclusion: Writ petitions disposed by condoning the delay and directing the appellate authority to consider and dispose the statutory appeals on merits after due opportunity; no order as to costs.