TaxTMI Updates e-Newsletter
Sep 08,2023

Pre-arrest bail - anticipatory bail - appellate review of High Court order - dismissal of Special Leave Petition

Pre-arrest bail - appellate review of High Court order - Validity of the High Court's order rejecting pre-arrest bail and the maintainability of a Special Leave Petition challenging that rejection. - HELD THAT: - The Court heard learned counsel for the petitioner and examined the circumstances and allegations underlying the High Court's decision. On consideration, the Supreme Court found no error in the High Court's assessment and conclusion to refuse pre-arrest (anticipatory) bail to the petitioner. There is no substantive reasoning in the order beyond the Court's acceptance of the High Court's outcome; accordingly the Special Leave Petition does not merit interference and is dismissed.

Special Leave Petition dismissed; High Court order rejecting pre-arrest bail upheld.

Final Conclusion: The Supreme Court, after hearing counsel and considering the circumstances and allegations, found no error in the High Court's refusal of pre-arrest bail and dismissed the Special Leave Petition; pending applications are closed.

Custodial interrogation - cooperation with investigation - grant of bail - conditions of bail - surrender of passport - restriction on foreign travel

Custodial interrogation - cooperation with investigation - grant of bail - Whether custodial interrogation of the appellant was necessary and whether the impugned order should be set aside to grant bail in case of arrest. - HELD THAT: - The Court received assurance that the appellant has joined and is cooperating with the investigation. On that basis the Court concluded that custodial interrogation is not necessary. The impugned order was set aside and the Court directed that in the event of arrest in connection with the specified crime the appellant shall be released on bail. The terms of bail were left to the discretion of the Trial Court, which may frame conditions it considers fit and proper in the circumstances of the case.

Impugned order set aside; if arrested the appellant to be released on bail on such terms as the Trial Court may consider fit.

Conditions of bail - surrender of passport - restriction on foreign travel - What specific bail conditions should be imposed as a consequence of granting bail. - HELD THAT: - As part of the bail directions the Court required the appellant to surrender his passport, if any, to the Trial Court and imposed a condition that he shall not travel beyond the territory of India without the leave of the Trial Court during the pendency of the case. These conditions were imposed to ensure the appellant's presence during the proceedings and to give effect to the Court's decision to dispense with custodial interrogation.

Appellant must surrender his passport, if any, and shall not travel outside India without leave of the Trial Court while the case is pending.

Final Conclusion: The appeal is allowed: custodial interrogation is dispensed with given the appellant's cooperation; the impugned order is set aside and, if arrested, the appellant shall be released on bail on terms to be fixed by the Trial Court, subject to surrender of his passport and a prohibition on foreign travel without leave of the Trial Court.

Summary order. Delay condoned; appeal disposed as academic in view of subsequent appropriation of the refund by the Revenue and because the respondent's appeal is pending before the Customs, Excise and Service Tax Appellate Tribunal with requisite pre-deposit and the show cause notice dated 16-01-2018 is pending adjudication; all contentions kept open.

Detention and seizure under Section 129 of the GST Act - validity of e-way bill during transit - reclassification of goods and requirement of supporting expert/material evidence - admissibility of additional evidence by the State in appeal under Rule 112 of the GST Rules - distinction between penalty under Section 129(1)(a) and Section 129(1)(b) where owner comes forward

Detention and seizure under Section 129 of the GST Act - validity of e-way bill during transit - Detention and seizure of the goods were unjustified because the accompanying documents including the tax invoice, e-way bill and GR were valid on the date of interception and physical verification and no discrepancy in quantity or description was recorded at that time. - HELD THAT: - The record shows that on interception the documents (tax invoice, e-way bill and GR) were produced, verified and uploaded in Form GST MOV 01 and physical verification recorded in Form GST MOV 04 showed no discrepancy as to item, quantity or quality. A subsequent e-way bill generated during the validity of the first e-way bill did not warrant adverse inference; seizure/detention premised on later alleged discrepancies or later-recorded statements of the driver (not reflected in MOV 01) is not sustainable. In these circumstances the detention order and consequent demand are vitiated as there was no cogent material at the time of detention to justify seizure. [Paras 17, 18, 20, 21, 23]

Seizure/detention set aside as unjustified; impugned orders insofar as they sustain detention are not sustainable.

Reclassification of goods and requirement of supporting expert/material evidence - Reclassification of the goods from Arecanut/Betul Nut to Processed Betul Nut (to attract higher tax) was not supported by requisite material such as expert or laboratory report and therefore could not be accepted. - HELD THAT: - The authorities altered the description and valuation of the goods after physical verification without producing any expert opinion, laboratory test or other supporting material to justify reclassification. The physical verification form (MOV 04) contemporaneously recorded the goods as per the accompanying documents. In absence of cogent supporting material the subsequent treatment of the goods as different is legally unsustainable. [Paras 15, 22, 23]

Reclassification unsupported by evidence is rejected; action based on such reclassification is vitiated.

Admissibility of additional evidence by the State in appeal under Rule 112 of the GST Rules - Acceptance of additional evidence by the State-respondent before the first appellate authority under Rule 112 was improper and vitiates the impugned appellate order. - HELD THAT: - The appellate authority accepted and considered material brought by the respondents for the first time without giving notice to the petitioner or providing reasons, contrary to the position explained by this Court in Anandeshwar Traders. The principle that fresh reasons or evidence outside the record cannot be the basis of an adverse appellate finding (as affirmed by the Apex Court in Mohinder Singh Gill) was applied; accordingly the appellate order founded on such additional evidence cannot be sustained. [Paras 24, 25]

Impugned appellate order is vitiated to the extent it relies on additional evidence furnished by the State and is set aside.

Distinction between penalty under Section 129(1)(a) and Section 129(1)(b) where owner comes forward - Where the owner of the goods comes forward, penalty under Section 129(1)(a) (two hundred percent of tax payable) applies and imposition under Section 129(1)(b) (penal consequence treated differently) was not justified; the penalty levied (100% of value) is incorrect. - HELD THAT: - The petitioner was the registered owner at the time of transit and came forward; registration was cancelled only later. Division Bench precedents of this Court establish that when the owner comes forward Section 129(1)(a) prescribes the penalty measure; accordingly levying penalty at 100% of the value of goods (as under Section 129(1)(b) treatment) is inconsistent with that principle. The appellate order affirming such levy is therefore unsustainable. [Paras 26, 27, 28, 29, 30]

Penalty treatment under Section 129(1)(b) set aside; the matter requires compliance with the correct penal provision when owner comes forward.

Final Conclusion: Impugned appellate order dated 19.8.2021 and the underlying order dated 21.10.2020 are set aside. The writ petition is allowed; any amounts deposited to be returned in accordance with law and the matter listed for compliance.

IGST on ocean freight under reverse charge - composite supply doctrine - reverse charge mechanism - validity of delegated legislation in notifications - double taxation through delegated legislation - jurisdictional competence of show cause notice

IGST on ocean freight under reverse charge - composite supply doctrine - reverse charge mechanism - validity of delegated legislation in notifications - Whether the show cause notice seeking IGST on ocean freight, based on Notifications No. 8/2017 and 10/2017, was valid in law or without jurisdiction in view of the judicial conclusions on levy and composite supply. - HELD THAT: - The court examined the show cause notice which proceeded on the basis that the importer (or person filing the import manifest) was liable to pay IGST on ocean freight by virtue of the impugned notifications. The court relied on the reasoning and conclusions recorded by the Apex Court in Mohit Minerals Pvt. Ltd., which upheld that when a CIF contract results in a composite supply comprising goods and the related services (transportation, insurance, etc.), the levy of IGST on the composite supply to the importer precludes a separate levy on the same service component. The Apex Court also treated the specification in the notification as clarificatory of the recipient under the reverse charge provisions and held that delegated legislation cannot be used to impose double taxation by levying tax again on a service element already subsumed in the composite supply. One ground of invalidity identified was that the impugned notifications, to the extent they attempted to impose a separate tax on ocean freight already included in the value on which customs or IGST on import is chargeable, resulted in impermissible double taxation through delegated legislation. Applying those conclusions, the court found that the show cause notice was anchored solely on those notifications and the levy sought thereby conflicted with the principle of composite supply and the legal conclusions in the Apex Court's decision.

Show cause notice dated 16.02.2023, insofar as it seeks IGST on ocean freight pursuant to the impugned notifications, is without jurisdiction and is quashed.

Final Conclusion: The petition is allowed; the show cause notice dated 16.02.2023 is quashed as being without jurisdiction in light of the legal conclusions regarding IGST on ocean freight and composite supply, and the rule is made absolute.

Deprivation of statutory remedy due to non-constitution of Appellate Tribunal - Stay of recovery under Section 112(9) of the B.G.S.T. Act on deposit - Filing of appeal after constitution of Tribunal - Limited duration of court-ordered stay - Release of bank attachment upon compliance

Deprivation of statutory remedy due to non-constitution of Appellate Tribunal - Petitioner was deprived of the statutory remedy of appeal because the Appellate Tribunal under the B.G.S.T. Act had not been constituted. - HELD THAT: - The Court accepted that the Tribunal required by the B.G.S.T. Act had not been constituted, which prevented the petitioner from availing the appellate remedy under Section 112 and the concomitant procedural protections in Sub Sections (8) and (9). The respondents themselves have acknowledged the non constitution and issued a difficulty removal notification postponing the limitation period until the President/State President of the Tribunal enters office. The Court treated the non constitution as a factual basis for granting relief to avoid penalising the petitioner for a defect attributable to the authorities.

Finding that the petitioner was deprived of the statutory appellate remedy due to non constitution of the Tribunal.

Stay of recovery under Section 112(9) of the B.G.S.T. Act on deposit - Limited duration of court-ordered stay - Whether the petitioner should be granted the statutory stay of recovery on deposit despite the Tribunal being unconstituted, and on what terms. - HELD THAT: - Balancing equities, the Court directed that the petitioner be extended the statutory benefit of stay under Sub Section (9) of Section 112 of the B.G.S.T. Act subject to deposit of an amount equal to 20% of the remaining tax in dispute (in addition to any earlier deposit under Section 107(6)). The Court emphasised that this relief is granted because the Tribunal was not constituted by the authorities themselves and that the stay cannot be open ended; it is conditional upon the petitioner filing the appeal once the Tribunal is constituted and functional. The Court relied on parity with relief previously granted in a similar matter to justify the order.

Directed grant of stay of recovery upon deposit of 20% of remaining disputed tax, with the stay being time limited and conditional.

Filing of appeal after constitution of Tribunal - Obligation of the petitioner to file the statutory appeal once the Tribunal is constituted and the consequences of non filing. - HELD THAT: - The Court required that when the Tribunal is constituted and the President or State President enters office, the petitioner must present/file the appeal under Section 112 of the B.G.S.T. Act observing statutory requirements so that the appeal may be considered. The Court made clear that if the petitioner chooses not to file the appeal within the period which may be specified upon constitution of the Tribunal, the respondent authorities would be at liberty to proceed further in accordance with law. Thus the stay is conditional on pursuing the statutory remedy when available.

Directed petitioner to file the appeal after constitution of the Tribunal; failure to do so permits authorities to proceed.

Release of bank attachment upon compliance - Whether attachments of the petitioner's bank account should be released upon compliance with the deposit direction. - HELD THAT: - The Court ordered that if the petitioner complies by depositing an amount equivalent to 20% of the remaining disputed tax, any attachment of the petitioner's bank account pursuant to the demand shall be released. This relief is expressly tied to the petitioner making the deposit directed by the Court and is part of the operative relief granted to mitigate the consequences of the Tribunal's non constitution.

Ordered release of bank account attachments upon deposit of the directed sum.

Final Conclusion: Writ petition disposed by directing conditional stay of recovery under Section 112(9) of the B.G.S.T. Act upon deposit of 20% of the remaining disputed tax (in addition to earlier deposits), with the petitioner required to file the appeal when the Tribunal is constituted; attachments to be released on compliance, and authorities permitted to proceed if the petitioner does not file the appeal within the period to be specified.

Detention and penalty under Section 68(1) read with Section 129(1) of the Bihar Goods and Services Tax Act, 2017 - e-way bill - intra-state movement - inter-state movement - applicability of departmental Notification exempting intra-state consignments below specified value from e-way bill requirement - presumption of evasion and onus of proof - conditional release of vehicle

E-way bill - intra-state movement - inter-state movement - applicability of departmental Notification exempting intra-state consignments below specified value from e-way bill requirement - Whether the departmental Notification exempting intra-state consignments below the specified value from e-way bill requirement applied to the goods detained and whether non-generation of e-way bill justified the demand. - HELD THAT: - The court examined the invoices and the e-way bill produced. Although the Notification exempts intra-state movements where consignment value does not exceed the prescribed threshold, the material showed that three invoices were consigned together in one vehicle and the consolidated e-way bill (Annexure-1) covered goods of total value substantially above the threshold. One invoice related to supply to Tirupur, Tamil Nadu, and therefore constituted an inter-state movement to which the intra-state exemption could not apply. The invoices for the other consignments were dated before the e-way bill was generated and related to the same vehicle; there was no satisfactory explanation why those invoices were not included in the e-way bill at the time of generation. In these circumstances the Notification did not excuse the non-generation of an appropriate e-way bill and the departmental action for deficiency in e-way documentation could not be disallowed. [Paras 2, 3, 6, 8]

The Notification did not render the demand unsustainable; the presence of an inter-state consignment and the exclusion of earlier-dated invoices from the e-way bill justified departmental action.

Presumption of evasion and onus of proof - Whether the petitioner's reputation absolved it from liability or precluded a finding of possible evasion for failure to generate proper e-way documentation. - HELD THAT: - The court rejected the contention that the petitioner's reputation alone should lead the Court or the tax department to assume absence of evasion. The possibility of evasion when e-way bills were not generated was real, including the risk of multiple transports on the same invoice. Reputation does not displace the need for compliant documentation or preclude departmental scrutiny where discrepancies in e-way documentation and consignments are found. [Paras 4, 5]

Reputation of the petitioner did not absolve it from liability or preclude departmental action; the petitioner's plea on that ground was rejected.

Detention and penalty under Section 68(1) read with Section 129(1) of the Bihar Goods and Services Tax Act, 2017 - conditional release of vehicle - Whether the order of detention, demand and conditional release of the vehicle should be interfered with by the Court. - HELD THAT: - On the material before it, including the timing of invoices, the contents of the e-way bill, and the discovery of consignments not accounted for in the e-way bill (including an inter-state consignment), the court found no reason to interfere with the order passed by the tax authority. The vehicle had been ordered released conditionally and any recovery arising from the demand was directed to be effected from the petitioner. Given the factual findings, the writ petition was dismissed and the departmental order left undisturbed. [Paras 6, 8, 9, 10]

Writ petition dismissed; the order of detention/demand is upheld and the vehicle's conditional release stands with recovery, if any, to be effected from the petitioner.

Final Conclusion: The High Court dismissed the writ petition, holding that the intra-state exemption did not apply to the mixed consignment (which included an inter-state supply), that the petitioner's reputation did not absolve it from scrutiny for failure to generate proper e-way documentation, and that there was no ground to interfere with the detention/demand; the vehicle was released conditionally and any recovery to be made from the petitioner.

Natural justice - initiation of recovery proceedings - proviso to Section 78-expediency in the interest of revenue subject to reasons recorded and specification of a shorter period - stay of recovery on payment under Section 112(8) - requirement of prior notice or intimation before coercive bank recovery - quasi-judicial duty of tax authorities to balance revenue interest and hardship to assessee - refund and interest for wrongful recovery - relief pending constitution of Appellate Tribunal

Proviso to Section 78-expediency in the interest of revenue subject to reasons recorded and specification of a shorter period - requirement of prior notice or intimation before coercive bank recovery - natural justice - Validity of coercive recovery effected from the assessee's bank accounts on the day following dismissal of the first appeal under the proviso to Section 78 where the Appellate Tribunal was not constituted. - HELD THAT: - The proviso to Section 78 permits the proper officer, for reasons recorded in writing, to require payment within a period shorter than three months if expedient in the interest of revenue. The Court held that such reasons must be meaningful and that the officer must specify the shorter period and communicate/intimate the reasons and time to the assessee. Recording reasons in the file alone, without intimation to the assessee and without specifying the period, does not satisfy the statutory scheme and the requirements of natural justice. Short-term administrative conveniences such as imminent bank holidays or the close of the financial year do not, without more, justify surreptitious forfeiture of a running business's bank balances. Consequently, the recovery effected immediately after the appellate rejection, by issuing notices to banks and without prior notice to the assessee, was arbitrary, not sustainable and in derogation of the rule of law and quasi-judicial duty of tax authorities. [Paras 12, 13, 14, 15, 17]

The coercive recovery effected without notice and without specification of a shorter period under the proviso to Section 78 is invalid; reasons recorded only in the file are insufficient and the assessee was entitled to prior intimation and opportunity.

Stay of recovery on payment under Section 112(8) - initiation of recovery proceedings - refund and interest for wrongful recovery - quasi-judicial duty of tax authorities - Extent of recovery permissible when the Appellate Tribunal is not constituted and relief and consequences flowing from wrongful full recovery. - HELD THAT: - Section 112(8) contemplates that on instituting an appeal before the Appellate Tribunal the appellant must satisfy admitted amounts and pay twenty per cent of the tax in dispute (in addition to amounts earlier paid) to obtain a deemed stay of recovery. Where the Tribunal is not constituted, the legislative scheme and the government notifications extending limitation in view of non-constitution indicate that coercive action could not permissibly result in forfeiture of the entire assessed demand. The assessing officer, even if exercising the proviso to Section 78, could at most have recovered admitted amounts and an amount equivalent to the twenty per cent required for instituting the second appeal (along with amounts already paid under first appeal); recovery of the entire tax, interest and penalty was excessive and contrary to the statutory mandate. The Court directed return of the excess recovered and provided consequences for non-compliance and for future interest claims. [Paras 8, 15, 19, 20, 21]

Only amounts corresponding to admitted dues and the twenty per cent of tax required under Section 112(8) (plus amounts already paid at the first appellate stage) could have been legitimately sought; the balance amounts recovered were to be refunded to the assessee within two weeks with prescribed consequences for delay and entitlement to interest if liability is later set aside; the officer responsible was directed to pay costs.

Final Conclusion: Writ petition allowed: the Court set aside the surreptitious full recovery from the assessee's bank accounts, held the recovery without prior intimation and without specification of the shorter period under the proviso to Section 78 to be invalid, directed refund of amounts in excess of what could legitimately have been recovered (leaving admitted sums and the twenty per cent required for instituting the second appeal), provided for interest and consequences for non-compliance, and awarded costs against the officer; guidelines for future recoveries were enunciated.

Electronic Credit Ledger adjustment for pre-deposit - pre-deposit under Section 107(6) of the Tamil Nadu Goods and Services Tax Act, 2017 - numbering of appeal - disposal on merits

Numbering of appeal - Electronic Credit Ledger adjustment for pre-deposit - Petitioner's appeal to be numbered and petitioner permitted to debit unutilised amounts in its Electronic Credit Ledger towards the statutory pre-deposit. - HELD THAT: - The High Court directed the first respondent to number the appeal filed by the petitioner against the order impugned before the first respondent. Concurrently, the court permitted the petitioner to debit the amounts lying unutilised in its Electronic Credit Ledger for the purpose of making the pre-deposit required under Section 107(6) of the Tamil Nadu Goods and Services Tax Act, 2017, thereby enabling the appeal to be processed administratively for admission and further adjudication. [Paras 2, 3]

The first respondent shall number the appeal and permit the petitioner to debit its Electronic Credit Ledger towards the pre-deposit.

Disposal on merits - The appeal, once numbered and the pre-deposit provisionally regularised by adjustment from the Electronic Credit Ledger, is to be disposed of on merits and in accordance with law. - HELD THAT: - The court required the first respondent to proceed to adjudicate the appeal on its merits after numbering it and allowing the pre-deposit by adjustment. No further directions were given as to the merits; the duty imposed is to decide the appeal in its turn in accordance with law. [Paras 3]

The appeal shall be disposed of on merits and in accordance with law.

Final Conclusion: Writ petitions disposed by directing the appellate authority to number the appeal, permit adjustment of unutilised Electronic Credit Ledger balances for the statutory pre-deposit, and thereafter decide the appeal on merits; no costs.

Quashing of Assessment Order - Prohibition on Increasing Demand beyond Proposed Demand under Section 75(7) CGST Act, 2017 - Notice by Proper Officer under Section 70 CGST Act, 2017 - Duplicate Proceedings/Double Jeopardy in Tax Proceedings - Appealability of Tax Orders - Doctrine of Availability of Alternative Remedy

Quashing of Assessment Order - Notice by Proper Officer under Section 70 CGST Act, 2017 - Appealability of Tax Orders - Doctrine of Availability of Alternative Remedy - Writ petition seeking quashing of order in Form DRC-07 dated 22.07.2019 disposed of as not maintainable in view of replies showing earlier notice by proper officer and availability of appeal. - HELD THAT: - The petition challenged the order in Form DRC-07 dated 22.07.2019. Respondent's reply recorded that a notice had already been issued by the proper officer under Section 70 of the CGST Act, 2017 and that the impugned order dated 22.07.2019 is appealable. In those circumstances the Court declined to exercise writ jurisdiction to quash the order at this stage, treating the grievance as not surviving in view of the factual and procedural position set out in the respondents' replies. The Court accordingly disposed of the petition while leaving open the statutory remedy of appeal.

Writ petition disposed; petitioner permitted to avail statutory remedy of appeal against the order dated 22.07.2019.

Final Conclusion: The writ petition for quashing the order in Form DRC-07 dated 22.07.2019 is disposed of on the basis that the respondents have shown prior notice by the proper officer and that the impugned order is appealable; the petitioner is left free to pursue the available legal remedy.

Mandamus for disposal of representations - time-bound administrative decision - reimbursement of GST by government departments - application and consideration of tax Notifications in fixation of GST liability

Mandamus for disposal of representations - application and consideration of tax Notifications in fixation of GST liability - Respondents to consider and dispose of the petitioners' representations dated 27.12.2022 taking into account the specified Notifications and any other applicable orders/circulars - HELD THAT: - The petitioners, successful bidders in government tenders, sought settlement of dues and claimed that they had remitted GST at 18% but were reimbursed only at 12%. They relied on certain Central Tax (Rate) Notifications which they submitted ought to be taken into account in fixing GST liability and consequent reimbursement. The respondents accepted receipt of the representations. The Court directed that the representations be heard and disposed of in accordance with law, expressly requiring the authorities to take into account Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017, Notification No. 20/2017 - Central Tax (Rate) dated 22.08.2017, Notification No. 03/2022 - C.T.(R) dated 13.07.2022, as well as any other applicable notifications, orders or circulars, and to do so within a prescribed time frame. [Paras 2, 3, 4, 5]

The respondents shall issue notice to the petitioners, hear them and dispose of the representations dated 27.12.2022 within six weeks from receipt of a copy of the order, while taking into account the specified Notifications and any other applicable orders/circulars.

Final Conclusion: Writ petitions disposed by directing the relevant government authorities to consider and finally dispose the representations dated 27.12.2022 within six weeks, with no order as to costs.

Deprivation of statutory remedy due to non-constitution of tribunal - stay of recovery on deposit under Section 112(9) of the B.G.S.T. Act - requirement to file appeal upon constitution of Tribunal - limitation period to commence after constitution and assumption of office by Tribunal President - temporary equitable limitation of statutory benefit until tribunal is functional

Deprivation of statutory remedy due to non-constitution of tribunal - stay of recovery on deposit under Section 112(9) of the B.G.S.T. Act - Whether the petitioner, being unable to prefer an appeal because the Appellate Tribunal under the B.G.S.T. Act was not constituted, is entitled to the statutory stay of recovery under Section 112(9) upon deposit of the prescribed amount. - HELD THAT: - The Court found that the petitioner has been denied the statutory remedy of appeal by reason of non-constitution of the Tribunal by the State authorities. In consequence, the Court held that the petitioner cannot be deprived of the benefit of stay under Sub-Section (9) of Section 112 of the B.G.S.T. Act for that reason. Subject to deposit of a sum equal to 20% of the remaining amount of tax in dispute, if not already deposited, in addition to amounts earlier deposited under Sub-Section (6) of Section 107, the petitioner is to be extended the statutory stay. The recovery of the balance amount and any steps taken in that regard are to be deemed stayed while the stay subsists. The Court relied on parity with relief previously granted by it in a similar matter.

Petitioner entitled to statutory stay under Section 112(9) on deposit of 20% of remaining tax (in addition to earlier deposit); recovery stayed.

Temporary equitable limitation of statutory benefit until tribunal is functional - requirement to file appeal upon constitution of Tribunal - Whether the stay granted should be open-ended, and what obligations on the petitioner follow once the Tribunal is constituted. - HELD THAT: - The Court rejected an open-ended stay. Balancing equities, it directed that the stay is provisional and conditioned on the petitioner filing the appeal under Section 112 of the B.G.S.T. Act after the Tribunal is constituted and the President or State President assumes office. The appeal must be presented observing statutory requirements once the Tribunal comes into existence so that the statutory appellate remedy can be considered on merits. The stay is thus linked to the future constitution and functioning of the Tribunal and the petitioner's obligation to invoke the statutory appeal remedy thereafter.

Stay is provisional; petitioner must file the statutory appeal before the Tribunal once it is constituted and functional.

Requirement to file appeal upon constitution of Tribunal - consequences of not availing appellate remedy after tribunal constitution - Consequences if the petitioner does not file an appeal within the period specified after the Tribunal is constituted. - HELD THAT: - The Court provided that if the petitioner elects not to avail the appellate remedy by filing an appeal under Section 112 within the period which may be specified upon constitution of the Tribunal, the respondent authorities are at liberty to proceed further in accordance with law. Thus the provisional stay will cease to protect the petitioner if the statutory appeal is not filed within the specified timeframe following constitution of the Tribunal.

If no appeal is filed within the period to be specified after constitution of the Tribunal, authorities may proceed in accordance with law.

Final Conclusion: Writ petition disposed by directing a provisional stay of recovery under Section 112(9) of the B.G.S.T. Act on specified deposit (20% of remaining disputed tax plus earlier deposit), with the stay to cease and normal legal consequences to follow if the petitioner fails to file the statutory appeal within the period to be specified after constitution and functioning of the Appellate Tribunal.

Onus of proof - re-use of e-way bill - presumption of transaction from e-way bill - seizure order - tax and penalty under Section 129(3) of the U.P. Goods and Services Tax Act, 2017 - requirement of positive evidence

Re-use of e-way bill - onus of proof - requirement of positive evidence - tax and penalty under Section 129(3) of the U.P. Goods and Services Tax Act, 2017 - Whether tax and penalty under Section 129(3) could be validly imposed when the seizing authority did not produce positive evidence of reuse of the e-way bill. - HELD THAT: - The Court applied the legal principle that where an assessee pleads that an e-way bill was not reused, the initial burden lies on the seizing authority to lead positive evidence establishing that the goods had been transported on an earlier occasion using the same e-way bill. Relying on the reasoning in M/s Anandeshwar Traders (paras. 10-11), the Court noted that existence of an e-way bill alone does not permit a presumption of an earlier transaction in the absence of corroborative inquiry or material (for example, enquiries from the purchaser or toll plazas) by the authority. In the present case the seizing authority produced no evidence to establish reuse; the conclusion of double-use recorded in the seizure order was a bare conclusion without supporting material. For these reasons the impugned orders imposing tax and penalty could not be sustained. [Paras 5, 6]

Impugned orders dated 31.10.2017 and 23.08.2019 setting out tax and penalty are set aside for failure of the seizing authority to prove reuse of the e-way bill; writ petition allowed.

Final Conclusion: The High Court allowed the writ petition, quashed the seizure/penalty order and the appellate order for lack of positive evidence proving reuse of the e-way bill, and directed that the impugned orders stand set aside.

Contractual burden of indirect taxation - Adjustment of Schedule of Rates/SOR for GST - Direction to governmental authority to consider representations - Remand for fresh adjudication on merits - Setting aside order dismissed on technical delay - Requirement of reasoned speaking order - Interim protection from coercive action

Contractual burden of indirect taxation - Adjustment of Schedule of Rates/SOR for GST - Direction to governmental authority to consider representations - Requirement of reasoned speaking order - Interim protection from coercive action - Liberty granted to petitioner to seek administrative relief from the State for bearing additional GST burden on government contracts and to seek updating of the State Schedule of Rates (SOR) to incorporate applicable GST; procedural directions for decision by the Additional Chief Secretary, Finance Department. - HELD THAT: - The writ petition seeking directions that the respondents bear the additional tax liability on subsisting Government contracts and update the State SOR to incorporate applicable GST was disposed of by granting the petitioner liberty to file appropriate representations before the Additional Chief Secretary, Finance Department within four weeks. On receipt, the Additional Chief Secretary is directed to take a final decision within four months after consulting relevant departments. The authority must give the petitioner or its authorised representatives an opportunity of hearing and pass a reasoned and speaking order on the merits, considering the judgments relied upon by the petitioner. Pending that final decision, no coercive action shall be taken against the petitioner. The liberty to file representations and the timetable imposed constitute the remedy afforded by the Court rather than an adjudication on the substantive contractual question.

Petitioner permitted to file representations; Additional Chief Secretary to decide within four months after consultation and hearing; reasoned speaking order to be passed; no coercive action meanwhile.

Setting aside order dismissed on technical delay - Remand for fresh adjudication on merits - Requirement of reasoned speaking order - Impugned appellate order dated 1st September, 2022 dismissing the petitioner's appeal on the ground of a four day delay was set aside and the appeal remanded for adjudication on merits. - HELD THAT: - The Court found that the appellate authority had dismissed the petitioner's appeal purely on a technical ground of delay of four days without considering the merits. In view of the circumstances, the impugned order was set aside and the matter remanded to the appellate authority for fresh consideration on merits and in accordance with law. The appellate authority is directed to decide the appeal by passing a reasoned and speaking order after affording opportunity of hearing to the petitioner or its authorised representatives within twelve weeks from communication of this order.

Impugned appellate order set aside; appeal remanded to appellate authority to be heard and decided on merits by a reasoned order within twelve weeks.

Final Conclusion: Writ petition disposed by permitting the petitioner to file representations regarding GST burden and updating of SOR, directing the Additional Chief Secretary to decide within the prescribed timeframe with hearing and a reasoned order and granting interim protection; the appellate order dated 1st September, 2022 is set aside and the appeal remanded for fresh merits adjudication within twelve weeks.

Capital Asset - agricultural land - actual user / nature of user - measurement of distance from municipal limits - planning authority vs. municipality - notification specifying area within municipal limits - HC [2022 (8) TMI 249 - KARNATAKA HIGH COURT] decided issue in favour of assessee - HELD THAT:- We are informed that the present special leave petitions are against the same order relating to the different assessment years have been dismissed.

Recording the aforesaid, the special leave petitions are dismissed.

Exemption under Section 11 - investment/deposit falling within Section 13(1)(d) and contravention of Section 11(5) - deviation from objects disentitling trust/society to exemption - voluntary contributions and corpus versus statutory extraction - concurrent finding of facts

Exemption under Section 11 - investment/deposit falling within Section 13(1)(d) and contravention of Section 11(5) - deviation from objects disentitling trust/society to exemption - Whether the appellant-society was entitled to exemption under Section 11 in respect of the receipts for AY 2002-2003 having regard to its investment in M/s. HITEX and transfer of land to that company. - HELD THAT: - The Court affirmed the concurrent factual findings of the Assessing Officer, CIT(A) and the Tribunal that the appellant-society invested in a joint venture (HITEX) which carried on commercial activities and that the society had also transferred 100 acres of the land allotted to it for commercial exploitation. Such investment and transfer amounted to dealing with funds in a manner prohibited by the statutory scheme and demonstrated a deviation from the society's declared charitable objects. In these circumstances the society disentitled itself from claiming exemption under Section 11 since the receipts/arrangements fell within the mischief of Section 13(1)(d) read with the restrictions of Section 11(5). The Court found no reason to interfere with the concurrent findings of fact and applied the statutory principle that income of a charitable institution is not exempt where it is invested or applied in a manner contrary to the specified modes or the objects of the institution. [Paras 22, 28, 29, 33]

Exemption under Section 11 denied; the investment in HITEX and transfer of land amounted to contravention attracting Section 13(1)(d)/Section 11(5) and disentitled the appellant to exemption.

Voluntary contributions and corpus versus statutory extraction - concurrent finding of facts - Whether the sums channelled to HITEX constituted voluntary corpus (and therefore outside the prohibition) or were not voluntary so as to preserve the society's entitlement to exemption. - HELD THAT: - The Court rejected the appellant's contention that the amounts invested in HITEX were part of a voluntary corpus derived solely from members' contributions. The corpus in question included amounts mobilised pursuant to Government Orders which provided for mandatory deductions from contractors' bills; those Government Orders were held not to provide lawful voluntary contributions and, in any event, had been set aside by this Court. On this basis the claim that the investment came from a protected voluntary corpus was held unsustainable. The Court therefore concluded that the investment could not be treated as immune from the operation of Section 13(1)(d). The Court also noted that these factual conclusions were concurrently recorded below and did not warrant interference under Section 260-A. [Paras 21, 23, 25, 26, 27]

The contributions were not voluntary corpus exempting the society; the contention that the investment in HITEX was from a protected corpus was rejected.

Final Conclusion: The appeals are dismissed. The High Court confirmed the concurrent factual findings that the society's investment in and transfer of land to HITEX involved deviation from its charitable objects and fell within Section 13(1)(d)/violated Section 11(5), thereby disentitling the appellant from exemption under Section 11 for AY 2002-2003; no interference is warranted and no order as to costs.

Liability under section 68 to prove identity, genuineness and creditworthiness of investors - treatment of share capital, share premium and share application money as unexplained cash credit - proof of genuineness by contemporaneous documentary and circumstantial evidence - estimation of undisclosed profit on purchases from unregistered dealers by adding the difference over declared gross profit to avoid double addition

Liability under section 68 to prove identity, genuineness and creditworthiness of investors - treatment of share capital, share premium and share application money as unexplained cash credit - proof of genuineness by contemporaneous documentary and circumstantial evidence - Whether the addition under section 68 in respect of share capital and share premium could be sustained. - HELD THAT: - The Tribunal and the Commissioner (Appeals) found that the assessee discharged the onus cast by Section 68 by establishing the identity, genuineness and creditworthiness of the investors. The assessing officer's reliance on non-issuance of original share certificates and non-declaration of dividend did not suffice to overturn the material placed by the assessee. The High Court, noting these concurrent findings, held that Section 68 could not be invoked to treat the receipts as unexplained, particularly in respect of share premium and application money, since the investors' identity and the genuineness of transactions were proved before the authorities. In these circumstances the Court found no substantial question of law in respect of that addition. [Paras 3]

Addition under section 68 in respect of share capital and premium deleted; no interference with the concurrent factual findings that the assessee discharged the onus.

Estimation of undisclosed profit on purchases from unregistered dealers by adding the difference over declared gross profit to avoid double addition - treatment of gross profit already disclosed in books when estimating income from URD purchases - What rate of profit should be adopted for determining undisclosed income on purchases from unregistered dealers (URD) and whether the Assessing Officer's addition at 6% could be sustained in full. - HELD THAT: - The Tribunal accepted that some addition was justifiable because URD purchases were unsupported by proper vouchers and many transactions were structured to avoid statutory limits. However, the assessee had already disclosed gross profit for the year as a whole at 5.76%. The Tribunal agreed with the Commissioner (Appeals) that estimating undisclosed profit on URD purchases must take into account the gross profit already disclosed in the books to prevent double addition. Accordingly, only the difference between the AO's estimated rate (6%) and the declared gross profit (5.76%) was liable to be added, resulting in a restricted addition, which the High Court found to be based on concurrent factual conclusions and justified in law. [Paras 4, 5]

Addition on account of URD purchases sustained only to the extent of the difference between the AO's estimated rate and the already disclosed gross profit; the restricted addition affirmed.

Final Conclusion: The High Court dismissed the revenue's appeal; the Tribunal's deletions/ reductions (deletion of the Section 68 addition and restriction of the URD addition to the difference over declared gross profit) were upheld on concurrent findings, and no substantial question of law was found to require interference.

Validity of notice under Section 148 for reassessment - Reopening of assessment - Change of opinion - Borrowed satisfaction - Fresh material/evidence - Applicability of Section 50B to slump sale and valuation dispute - Requirement of application of mind before sanction under Section 151 - Principle in CIT v. Kelvinator of India Ltd. regarding change of opinion

Validity of notice under Section 148 for reassessment - Change of opinion - Fresh material/evidence - Borrowed satisfaction - Principle in CIT v. Kelvinator of India Ltd. regarding change of opinion - Impugned notice under Section 148 insofar as it proposes reopening assessment for assessment year 2012-13 is unsustainable as it is founded on mere change of opinion and borrowed satisfaction without fresh material. - HELD THAT: - The court examined the material on record and found that the assessee had fully and truly disclosed all relevant facts during the original assessment proceedings under Section 142(1) and the assessment order under Section 143(3). The computation filed with the return disclosed the sale consideration at the value relied upon by the Assessing Officer. The reasons recorded for reopening relied on information from the file of the CIT (Appeals) and asserted a valuation difference and applicability of Section 50B, but did not demonstrate fresh material not previously available to the Assessing Officer. On this basis the court held that the reopening was based on a mere change of opinion and constituted borrowed satisfaction without proper application of mind, contrary to the rule laid down in CIT v. Kelvinator of India Ltd., and therefore the notice under Section 148 cannot be sustained. [Paras 7, 8, 9]

Impugned notice dated 31.03.2019 under Section 148 and the order rejecting objections dated 07.12.2019 quashed and set aside.

Final Conclusion: The petition is allowed; the reassessment notice and the order rejecting objections are quashed for being founded on borrowed satisfaction and mere change of opinion, without fresh material or proper application of mind.

Penalty under section 271(1)(c) of the Income Tax Act - bona fide / inadvertent mistake - no penalty for inadvertent and silly mistake - reduction in capital loss cannot be considered for imposition of penalty - Explanation 4 to section 271(1)(c) - difference between assessed income and returned income

Penalty under section 271(1)(c) of the Income Tax Act - bona fide / inadvertent mistake - no penalty for inadvertent and silly mistake - Whether penalty under section 271(1)(c) was rightly levied where the incorrect particulars arose from an inadvertent / bona fide mistake - HELD THAT: - The Tribunal and CIT(A) concurrently found that the incorrect claim of a large capital loss arose from bona fide mistake due to lack of documentary records at the time of filing and incorrect computation (entire sale consideration taken instead of assessee's 5% share). The Court accepted these concurrent factual findings and the legal conclusion that the error was inadvertent. Reliance placed on precedents treating 'inadvertent and silly' mistakes as not attracting penalty was noted and accepted. In view of the factual finding of bona fide mistake and absence of deliberate intent to furnish inaccurate particulars, imposition of penalty under section 271(1)(c) was held not sustainable.

Penalty under section 271(1)(c) could not be sustained as the incorrect particulars resulted from a bona fide/inadvertent mistake; the concurrent orders of the CIT(A) and Tribunal were upheld.

Reduction in capital loss cannot be considered for imposition of penalty - Explanation 4 to section 271(1)(c) - difference between assessed income and returned income - Whether the reduction in claimed capital loss should be taken into account for computing the income in respect of which inaccurate particulars were furnished for imposition of penalty - HELD THAT: - The CIT(A) held that the difference relevant for penalty computation is assessed income vis a vis returned income under Explanation 4 to section 271(1)(c), and that reduction in capital loss (which was claimed but could not be carried forward owing to belated filing) should be ignored for imposing penalty. The High Court recorded and accepted this conclusion of the CIT(A) and Tribunal, noting there was no incentive to claim the capital loss and that the return actually filed showed modest taxable income. Accordingly, the reduction in capital loss did not operate as a basis for penalty.

Reduction in the claimed capital loss was to be ignored for the purpose of imposing penalty; the approach of the CIT(A) and Tribunal was affirmed.

Final Conclusion: Concurrent findings of the CIT(A) and Tribunal that the incorrect claim of capital loss arose from a bona fide/inadvertent mistake and that reduction in capital loss should be ignored for penalty computation were affirmed; no substantial question of law arises and the departmental appeal is dismissed.

Reopening of assessment - notice under Section 148 of the Income Tax Act - reasons to believe - reassessment beyond four years - failure to disclose fully and truly - change of opinion - scrutiny assessment - reasons recorded - acceptance of explanation and revised return

Reopening of assessment - notice under Section 148 of the Income Tax Act - reasons to believe - reassessment beyond four years - failure to disclose fully and truly - reasons recorded - change of opinion - Validity of reopening the assessment by issuance of notice under Section 148 r/w. Section 147 for Assessment Year 2015-16. - HELD THAT: - The Court examined the reasons recorded for reopening and the material relied upon by the revenue. The reasons stated that on verification of records it was noted that the assessee sold 13 properties in F.Y. 2014-15 and had neither disclosed the sale nor shown profits. However, the same 13 properties had been the subject-matter of scrutiny proceedings under Section 142(1), to which the assessee filed detailed replies supported by development agreements and financial statements and subsequently offered the relevant income by revised computation and assessment under Section 143(3). The recorded reasons were based on the case records already available to the revenue and did not disclose any new tangible material or any allegation of failure on the part of the assessee to disclose fully and truly all material facts. In these circumstances, reopening beyond the four-year period amounted to a change of opinion, which is impermissible where no fresh material or omission is shown. The Court therefore found the reassessment notice to be unsustainable. [Paras 6]

Notice dated 22.03.2021 under Section 148 r/w. Section 147 was quashed and set aside as the reopening was based on materials already available and amounted to a change of opinion without any failure to disclose.

Acceptance of explanation and revised return - scrutiny assessment - reasons recorded - disposal of objections - Validity of the order disposing of objections dated 09.02.2022. - HELD THAT: - The Court considered that the objections to reopening were disposed of without there being any new tangible material to justify reassessment and that the very material accepted during the original scrutiny (including the assessee's replies, development agreements and the revised computation) was the basis for the reopening. Since the reopening itself was held to be vitiated by change of opinion and lack of fresh material, the order disposing of objections founded on the same flawed premise could not stand. Consequently, the disposal order also failed. [Paras 6, 7]

Order dated 09.02.2022 disposing of objections was quashed and set aside.

Final Conclusion: The writ petition is allowed; the reassessment notice dated 22.03.2021 under Section 148 r/w. Section 147 and the order disposing of objections dated 09.02.2022 are quashed and set aside on the ground that reopening beyond the four-year period was based on records already available and amounted to an impermissible change of opinion in absence of any failure to disclose fully and truly.

Genuineness, identity and creditworthiness of creditors - addition under Section 68 on account of alleged bogus unsecured loans - reliance on third party statements recorded during survey proceedings - evidentiary value of statements recorded under survey and requirement of corroboration - principle of natural justice - right to cross examination before using adverse third party statement

Genuineness, identity and creditworthiness of creditors - addition under Section 68 on account of alleged bogus unsecured loans - The identity, genuineness and creditworthiness of the creditor loan were satisfactorily established and the addition under Section 68 was not sustainable. - HELD THAT: - The Tribunal and the Commissioner (Appeals) found on the evidence produced that the loan transaction from Gujarat Computer and Software Limited was substantiated by confirmation signed by the creditor's director, bank statements of the creditor, the creditor's returns of income, PAN, address and the auditor's report. The Assessing Officer's adjustment on the basis that the loan was non genuine did not withstand scrutiny where documentary proof showed the correct loan amount and regular banking channels were used, interest was paid and TDS deposited. On this basis the appellate authorities concluded that the requirements for establishing identity, genuineness and creditworthiness under Section 68 were met and the addition could not be sustained. [Paras 5, 22, 24]

Addition under Section 68 deleted; documentary evidence proved identity, genuineness and creditworthiness.

Reliance on third party statements recorded during survey proceedings - evidentiary value of statements recorded under survey and requirement of corroboration - The Tribunal correctly held that the statement of the director recorded during survey, without corroborative evidence, could not be the sole basis for adverse findings against the assessee. - HELD THAT: - The Tribunal noted that the statement of the third party (director of the creditor) recorded during survey lacked corroboration from independent evidence connecting that statement to the assessee's transactions. Survey recorded statements, when uncorroborated, do not carry sufficient evidentiary weight to establish that transactions were accommodation entries. The appellate authorities therefore declined to base the addition solely on such third party statements in the absence of supporting material. [Paras 22, 23]

Third party statement recorded during survey, without corroboration, insufficient to sustain addition.

Principle of natural justice - right to cross examination before using adverse third party statement - reliance on third party statements recorded during survey proceedings - It was untenable to rely on the director's statement against the assessee where the assessee's request for cross examination was not afforded; reliance on such statement violated principles of natural justice. - HELD THAT: - The Tribunal observed that the assessee had specifically sought cross examination of the director whose statement was relied upon. Although summoned, the director chose to send a written reply instead of appearing for cross examination. Absent an opportunity for cross examination, using the third party statement against the assessee would contravene the principle of fair hearing. Consequently, the Tribunal upheld that the Assessing Officer's reliance on that statement, without providing the requested opportunity to test it, was improper. [Paras 23]

Reliance on the director's survey statement without allowing cross examination violated natural justice and could not justify the addition.

Final Conclusion: No substantial question of law arises; the High Court concurs with the findings of the Tribunal and CIT(A) that documentary evidence established the genuineness, identity and creditworthiness of the creditor and that uncorroborated third party survey statements (used without affording cross examination) could not sustain the addition under Section 68 - revenue's appeal dismissed.

Eligibility for deduction under Section 80JJAA of the Act - Meaning of the requirement that a new regular workman has "worked for 300 days" - Interpretation of the proviso to Section 80JJAA - Application of precedent in Texas Instruments India (P.) Ltd. to computation of the 300-day requirement

Eligibility for deduction under Section 80JJAA of the Act - Meaning of the requirement that a new regular workman has "worked for 300 days" - Application of precedent in Texas Instruments India (P.) Ltd. to computation of the 300-day requirement - Whether a new regular workman is required to have been employed for 300 days in the previous year relevant to the assessment year in order for the employer to claim deduction under Section 80JJAA. - HELD THAT: - The Court examined the proviso and relevant statutory scheme and applied its earlier reasoning in Texas Instruments India (P.) Ltd., concluding that a restrictive reading requiring the 300 days to be completed solely in the previous year relevant to the assessment year would defeat the object of the incentive. The Court observed that the statutory scheme contemplates the status of a "regular workman" and that the period of 300 days can be taken into account in the previous and succeeding years for the purpose of availing the deduction. The Court further noted subsequent legislative amendment reducing the required days for certain industries, including apparel, as reinforcing that the statutory test is not to be narrowly read to the first year of employment. On these grounds the view of the Assessing Officer and appellate authorities that denial was warranted because the employees had not worked 300 days in their first year was held unsustainable.

Answered in favour of the assessee: the 300-day requirement need not be confined to the previous year relevant to the assessment year; denial solely on ground that employees worked less than 300 days in their first year is unsustainable.

Interpretation of the proviso to Section 80JJAA - Eligibility for deduction under Section 80JJAA of the Act - Whether the Tribunal was correct in holding that the assessee was not entitled to the deduction under Section 80JJAA in respect of new regular employees employed on permanent basis solely because they worked for less than 300 days during the relevant previous year. - HELD THAT: - The Court reviewed the facts that the employees claimed as new regular workmen had worked more than 300 days from the second year of employment onwards, and that the Tribunal and lower authorities denied relief because the employees had not completed 300 days in the initial previous year. Relying on the Court's earlier decision in Texas Instruments and on the legislative history (including later amendment reducing required days for apparel industry), the Court concluded that the Tribunal's approach was erroneous. The Court held that denial of the incentive solely on the basis that in the first year the employee did not complete 300 days was not legally tenable where the statutory interpretation permits consideration of the requisite period across years as recognised by precedent.

Tribunal's holding set aside; Tribunal was incorrect to deny deduction solely because employees worked less than 300 days in their first year.

Final Conclusion: Appeals allowed; orders of the ITAT for the assessment years 2013-14, 2014-15, 2015-16 and 2016-17 are set aside and questions of law answered in favour of the assessee and against the Revenue.

Characterisation of interconnectivity / bandwidth charges as "royalty" - "use of" or "right to use" intellectual property - impact of Explanation 5 and Explanation 6 to the domestic definition of "royalty" - applicability and primacy of the India-Singapore DTAA over domestic tax provisions - taxation as business profits and absence of permanent establishment - reopening of assessment under section 148 of the Income-tax Act

Characterisation of interconnectivity / bandwidth charges as "royalty" - "use of" or "right to use" intellectual property - impact of Explanation 5 and Explanation 6 to the domestic definition of "royalty" - Payments received by the non-resident assessee towards interconnectivity utility charges (IUC) do not constitute "royalty" for the purposes of taxation in India under the India-Singapore DTAA or, on the facts, under section 9(1)(vi) read with Explanations 2, 5 and 6. - HELD THAT: - The Tribunal examined the scope of the word "process" and the surrounding expressions in Explanation 2 to section 9(1)(vi), applying principles of noscitur a sociis and ejusdem generis, and concluded that 'process' in that context denotes an item of intellectual property. The court noted that Explanation 5 and 6 (widening the domestic definition to include transmission and non-secret processes) expand the domestic tax definition but do not alter the narrower definition of 'royalty' in the India-Singapore DTAA. On the facts, there was no transfer of exclusive intellectual property rights, no possession or control of equipment by the Indian payers, and the processes used were not secret. Relying on consistent authorities and the reasoning of the Karnataka High Court in Vodafone Idea Ltd., the Tribunal held that mere provision of bandwidth/connectivity and use of an operator's network does not amount to the grantee's 'use' or 'right to use' of intellectual property or equipment in the sense required for royalty; the service-dominant character of the transaction precludes classification as royalty. [Paras 9]

IUC receipts are not taxable as "royalty" under Article 12 of the India-Singapore DTAA and do not fall within the domestic royalty definition as applied for taxability in India on the facts of these years.

Applicability and primacy of the India-Singapore DTAA over domestic tax provisions - impact of Explanation 5 and Explanation 6 to the domestic definition of "royalty" - The India-Singapore DTAA governs the characterization of the receipts and, where the DTAA definition is narrower and more beneficial to the taxpayer, it prevails over the expanded domestic definition introduced by Explanations 5 and 6. - HELD THAT: - Following the reasoning in Engineering Analysis Centre of Excellence and the Karnataka High Court's decision in Vodafone Idea Ltd., the Tribunal held that an assessee is entitled to claim benefits under the DTAA and that the retrospective domestic clarificatory explanations which expand the scope of 'royalty' cannot be applied so as to override DTAA protections to the detriment of the taxpayer. The Tribunal accepted that Explanation 5 and 6 broaden the domestic concept of 'process' and remove requirements such as secrecy or control in the domestic statute, but these statutory changes do not amend or supplant the DTAA's narrower test for 'royalty'. Consequently, the expanded domestic language cannot be used to bring into tax receipts that the DTAA does not characterise as royalty. [Paras 9]

DTAA protections between India and Singapore apply and prevail over the broadened domestic explanations for the assessment years in question; the domestic Explanations do not operate to convert the receipts into royalty for those years.

Taxation as business profits and absence of permanent establishment - characterisation of interconnectivity / bandwidth charges as "royalty" - The payments received by the non-resident assessee constitute business profits of the non-resident and are not taxable in India because the non-resident did not have a permanent establishment in India. - HELD THAT: - On the material facts - equipment and submarine cables situated overseas, services rendered by non-resident telecom operators outside India, and absence of any presence or PE in India - the Tribunal (following Vodafone Idea Ltd. and relevant authorities) held that the receipts are business profits taxable in the country of residence and not taxable in India. The Tribunal recorded that the revenue had not established that the non-resident service providers had a taxable presence or permanent establishment in India; accordingly India lacks jurisdiction to tax such extraterritorial business profits. [Paras 9]

The IUC receipts are to be treated as business profits of the non-resident assessee and are not taxable in India in the absence of a permanent establishment.

Final Conclusion: For the assessment years 2009-10, 2010-11 and 2011-12 the Tribunal allowed the merits grounds pressed by the assessee: interconnectivity / bandwidth charges received by the non-resident telecom operator are not taxable as "royalty" in India under the India-Singapore DTAA or on the facts as royalty under domestic law, DTAA provisions prevail where more beneficial, and the receipts represent business profits not taxable in India in the absence of a permanent establishment; the appeals are accordingly partly allowed.

Charitable purpose - relief of the poor - advancement of any other object of general public utility - proviso to section 2(15) - microfinance - dominant purpose test - exemption under section 11 - incidental business - section 11(4A)

Relief of the poor - advancement of any other object of general public utility - proviso to section 2(15) - microfinance - exemption under section 11 - dominant purpose test - Characterisation of the assessee's microfinance and allied activities as charitable (relief of the poor) or as advancement of general public utility so as to attract the proviso to section 2(15) and denial of exemption under section 11. - HELD THAT: - The Tribunal analysed the nature, objects and operations of the trust, the constituency of beneficiaries (rural poor, SHG members), the manner of lending (loans without collateral, use of animators, training, insurance and other welfare expenditure), and the financing structure (borrowings from banks partly funding advances to SHGs). It distinguished commercial micro lending carried out at exorbitant rates or targeted to affluent groups from lending aimed at socio economic upliftment of weaker sections where marginal interest is charged to cover administrative cost and defaults. Applying the dominant purpose test and relevant precedents, the Tribunal found that (i) the trust's primary objects emphasise poverty alleviation through micro credit and related welfare activities; (ii) the higher interest charged was not shown to be exorbitant or diverted for private gain but went to meet genuine administrative and financing costs; and (iii) the activities (animator remuneration, training, insurance, santhwana, scholarships, etc.) demonstrate a sustained charitable program directed at the weaker sections. On that basis the Tribunal concluded that the activities fall within "relief of the poor" and are not caught by the proviso to section 2(15), and therefore the denial of exemption under section 11 was not justified. [Paras 24, 33, 34, 38, 39]

Microfinance and allied activities of the trust are charitable as "relief of the poor" and the proviso to section 2(15) does not apply; exemption under section 11 is allowable for A.Y. 2017-18.

Incidental business - section 11(4A) - dominant purpose test - exemption under section 11 - Whether the microfinance business is a "business incidental to attainment of objectives" under section 11(4A) so as to deny exemption. - HELD THAT: - The Tribunal considered the requirement that profits and gains of business are excluded from exemption unless the business is incidental to attainment of the trust's objectives and separate books are kept. While noting the A.O.'s and CIT(A)'s view that microfinance was a business not incidental to the objects, the Tribunal applied the dominant purpose principle from Supreme Court authority and analysed the factual matrix (objects of the trust, use of funds for welfare activities, lack of evidence of profiteering or diversion). Concluding that the primary purpose of the trust remained charitable and that the financing operations were integrally linked to its poverty alleviation program (aimed at weaker sections, without collateral, with welfare corollaries), the Tribunal held that the business limb did not operate to deny exemption under section 11(4A) in the present facts. [Paras 37, 38]

Section 11(4A) does not operate to deny the exemption on the facts: the microfinance activity is not a separate business defeating the dominant charitable purpose.

Final Conclusion: The Tribunal allowed the appeal for A.Y. 2017-18, holding that the assessee's microfinance and related activities constitute charitable "relief of the poor" (not caught by the proviso to section 2(15)) and that section 11(4A) does not deny exemption; the assessment withdrawing exemption was set aside.

Revisionary jurisdiction under section 263(1) of the Income tax Act including Explanation 2(a) - Erroneous order prejudicial to the interests of revenue - Requirement of inquiries or verification which should have been made - Applicability of Explanation 2 to section 263 from 01/06/2015 - Assessment passed without adequate enquiry - Scope of Commissioner's power to travel beyond the terms of show cause notice

Revisionary jurisdiction under section 263(1) of the Income tax Act including Explanation 2(a) - Requirement of inquiries or verification which should have been made - Assessment passed without adequate enquiry - Erroneous order prejudicial to the interests of revenue - Whether the Principal Commissioner of Income Tax was justified in setting aside the assessment under section 263(1) read with Explanation 2(a) on the ground that the assessing officer passed the assessment without making inquiries or verifications which should have been made. - HELD THAT: - On the material on record the Tribunal found that the assessee failed to produce printouts of PDF attachments of replies relied upon to show that the Assessing Officer had made the requisite inquiries (notably bank certificates, cashbook and ledger printouts and licences). The assessee thereafter refrained from furnishing those printouts in appellate proceedings and did not place copies of licenses from the State Excise Department on record. In these circumstances the Tribunal held that the assessee failed to establish that necessary details were filed during assessment and that the AO had carried out the verifications required. Applying Explanation 2(a) to section 263(1) (which deems an order erroneous if passed without inquiries or verification which should have been made), the Tribunal concluded that the assessment was passed without making inquiries or verifications which a reasonable and prudent officer would have carried out, and therefore the PCIT was justified in treating the assessment as erroneous and prejudicial to the revenue and in directing de novo assessment after affording the assessee an opportunity of being heard.

The Tribunal upheld the Pr.CIT's exercise of revisionary jurisdiction under section 263(1) read with Explanation 2(a) and dismissed the assessee's challenge to that conclusion.

Applicability of Explanation 2 to section 263 from 01/06/2015 - Revisionary jurisdiction under section 263(1) of the Income tax Act including Explanation 2(a) - Whether earlier precedents decided before insertion of Explanation 2 (w.e.f. 01/06/2015) govern the present case and preclude exercise of revisionary powers. - HELD THAT: - The Tribunal noted that Explanation 2 to section 263(1) was inserted by Finance Act 2015 with effect from 01/06/2015 and that the assessment year and the orders in the present case fall after that date. Several authorities cited by the assessee were rendered without taking Explanation 2 into account; therefore those decisions do not advance the assessee's case on the facts before the Tribunal. The Tribunal distinguished earlier precedents where the assessing officer had in fact made the requisite enquiries or where facts were otherwise distinguishable, and held that the post 2015 statutory position (Explanation 2) is applicable and supports the Pr.CIT's action where enquiries or verifications that should have been made were not shown to have been carried out.

The Tribunal held Explanation 2 applicable to the matter and declined to treat pre 2015 authorities as controlling where they did not consider the amended statutory scheme.

Scope of Commissioner's power to travel beyond the terms of show cause notice - Revisionary jurisdiction under section 263(1) of the Income tax Act including Explanation 2(a) - Whether the Commissioner is confined to the grounds specified in the show cause notice when exercising revisionary powers under section 263. - HELD THAT: - Relying on Supreme Court authority that section 263 does not make the Commissioner confine himself to the terms of the show cause notice, the Tribunal observed that the power of revision is not contingent on the giving of a show cause notice and the Commissioner may form his opinion on the record. The Tribunal therefore rejected the assessee's contention that the Pr.CIT exceeded jurisdiction by acting beyond the notice, holding that the PCIT may examine records and pass an order after making or causing to be made such enquiry as he deems necessary, and need not be limited to the precise language of the notice issued earlier.

The Tribunal held that the Commissioner was not confined to the terms of the show cause notice and that ground 7 of the appeal (contending such confinement) lacked merit.

Final Conclusion: On the facts and material on record the Tribunal concluded that the Pr.CIT was justified in invoking his revisionary jurisdiction under section 263(1) read with Explanation 2(a), set aside the AO's assessment and directed de novo assessment after giving the assessee an opportunity of being heard; the assessee's appeal is dismissed.

Processing of return under section 143(1) - Scrutiny assessment initiated by notice under section 143(2) and assessment under section 143(3) - Prohibition on parallel proceedings under sections 143(1) and 143(2)/(3) - Merger of intimation under section 143(1) with subsequent assessment order under section 143(3) - Invalidity of orders passed without jurisdiction

Processing of return under section 143(1) - Scrutiny assessment initiated by notice under section 143(2) and assessment under section 143(3) - Prohibition on parallel proceedings under sections 143(1) and 143(2)/(3) - Invalidity of orders passed without jurisdiction - Validity of intimations issued by CPC under section 143(1) after the assessing officer had initiated scrutiny proceedings by issuing notices under section 143(2) for the same assessment years. - HELD THAT: - The Tribunal found as an undisputed fact that for A.Y.2016-17 and A.Y.2017-18 notices under section 143(2) had been issued by the Assessing Officer prior to the intimations processed by CPC under section 143(1). Relying on the reasoning of the High Courts and the Supreme Court reproduced in the order, the Tribunal observed that once scrutiny proceedings are initiated by issuance of notice under section 143(2) the processing of the return under section 143(1) cannot legitimately proceed in parallel since the outcome of scrutiny must determine whether any refund or adjustment indicated in the intimation is sustainable. The Tribunal referred to the decisions invoked in the order - Gujarat Poli-Aux Electronics Ltd. vs. DCIT , Vodafone Idea Limited vs. ACIT , and CESC Ltd. vs. DCIT - and held that where section 143(2)/(3) proceedings have been lawfully commenced, any subsequent order under section 143(1) passed after such commencement is without jurisdiction and therefore liable to be set aside. Applying that principle to the facts, the intimations issued by CPC under section 143(1) for the two assessment years, having been made after the AO had initiated scrutiny by issuing notices under section 143(2), were held invalid. [Paras 5, 6, 8]

Intimations/orders passed by CPC under section 143(1) after the Assessing Officer had initiated scrutiny proceedings by issuing notices under section 143(2) are invalid and are set aside for A.Y.2016-17 and A.Y.2017-18.

Merger of intimation under section 143(1) with subsequent assessment order under section 143(3) - Prohibition on parallel proceedings under sections 143(1) and 143(2)/(3) - Effect of subsequent assessment under section 143(3) on an earlier intimation under section 143(1) in cases where scrutiny proceedings have been initiated. - HELD THAT: - The Tribunal noted the precedent that where regular assessment under section 143(3) is initiated or completed after issuance of an intimation under section 143(1)(a), the intimation either ceases to be operative or merges into the subsequent assessment order. The order reproduces the reasoning of the Calcutta High Court and other authorities that the summary procedure under section 143(1)(a) cannot be resorted to after notice under section 143(2) has been issued, and that any assessment made under section 143(3) supersedes the earlier intimation. Applying this doctrine, the Tribunal held that the intimation processed by CPC, being subsequent to the initiation of scrutiny, could not stand independently and was not operative. [Paras 7, 8]

The intimation under section 143(1) either merges in or ceases to be operative in the face of assessment proceedings under section 143(3); accordingly the impugned intimations ceased to be operative and are set aside.

Final Conclusion: Appeals by the assessee for A.Y.2016-17 and A.Y.2017-18 are allowed: intimations/orders passed by CPC under section 143(1) after the Assessing Officer had initiated scrutiny by issuing notices under section 143(2) are invalid, and an intimation under section 143(1) merges in or ceases to be operative upon initiation/completion of assessment under section 143(3).

Revision under section 263 of the Income Tax Act - erroneous and prejudicial to the interest of the revenue - allowability of depreciation and treatment of capital versus revenue receipt - carry forward of business loss and depreciation under section 72 - assessment completed under section 143(3) of the Income Tax Act

Revision under section 263 of the Income Tax Act - erroneous and prejudicial to the interest of the revenue - allowability of depreciation and treatment of capital versus revenue receipt - Validity of the Pr. CIT's exercise of jurisdiction under section 263 in setting aside the assessment for A.Y. 2015-16 on the ground that the assessing officer had not made inquiry into the claim of depreciation and carry forward loss. - HELD THAT: - The Tribunal examined the material on record including the assessee's explanation and documents showing that receipts earlier capitalized (supply affording charges and electrification charges) were consciously offered as revenue in revised returns for preceding years, and that the assessee subsequently revised the return for A.Y.2015-16 to reflect the consequential increase in opening WDV and depreciation. The assessee demonstrated that the increase in depreciation by the stated amount flowed directly from the revision in opening WDV brought about by suo moto reclassification and by revision of the prior year return. The Tribunal found that the AO had sought and received explanations and documents (as recorded in the assessment-file notices) and that the assessee had given a detailed reply to the Pr. CIT's show-cause. Where the claim accepted by the AO was a correct and allowable claim demonstrably arising from the revised opening balances, mere absence of further inquiry by the AO did not render the assessment order "erroneous as prejudicial to the interest of the revenue" within the meaning of section 263. The twin conditions for exercise of revision under section 263 - that the order of the AO is erroneous and that it is prejudicial to the revenue - were not satisfied on the facts. Accordingly, the Pr. CIT's invocation of section 263 was held not sustainable and the revision order was quashed. [Paras 5, 7, 8]

Impugned order passed by the Pr. CIT under section 263 quashed; appeal allowed.

Final Conclusion: The Tribunal held that the twin conditions for invoking section 263 were not satisfied in respect of A.Y. 2015-16 because the increased depreciation claim legitimately resulted from the assessee's revision of prior-year returns and the consequent change in opening WDV; the Pr. CIT's order under section 263 was therefore quashed and the appeal was allowed.

Royalty - use of, or the right to use, any copyright - information concerning industrial, commercial or scientific experience - use of, or right to use, any industrial, commercial or scientific equipment - non exclusive, non transferable licence / access to database - Article 12(3) of India-US DTAA - distinction between access to copyrighted material and transfer of copyright

Use of, or the right to use, any copyright - distinction between access to copyrighted material and transfer of copyright - non exclusive, non transferable licence / access to database - Article 12(3) of India-US DTAA - Subscription fees received by the assessee do not constitute royalty as payment for the use of, or the right to use, any copyright under Article 12(3)(a) of the India-US DTAA. - HELD THAT: - Applying the definition of 'royalties' in Article 12(3) and the concept of 'copyright' under the Copyright Act, the Tribunal held that only transfers conferring exclusive rights under section 14 would amount to a payment for use of copyright. The assessee granted subscribers a non exclusive, non transferable licence to access and view pre recorded videos; all intellectual property rights remained with the assessee and the MSA expressly reserved proprietary rights and prohibited reproduction, distribution, creation of derivatives, decompilation or sublicensing. Reliance was placed on the principle in Engineering Analysis Centre of Excellence (supra) that mere access or a licence to use (without conferring exclusive rights to reproduce or exploit the work) does not amount to transfer of copyright attracting royalty. In view of the contractual restrictions and the nature of access provided, the payments were for access to copyrighted content and not for the use of, or right to use, copyright itself; accordingly, they do not fall within Article 12(3)(a). [Paras 12, 13, 14, 15, 16]

Addition deleted: subscription fees are not royalty as consideration for use of or right to use copyright.

Information concerning industrial, commercial or scientific experience - access to database vs imparting of experience - Article 12(3) of India-US DTAA - Subscription fees are not royalty as payment for information concerning the assessee's industrial, commercial or scientific experience. - HELD THAT: - The Tribunal found that the assessee's skill lies in compiling and maintaining a database of video content, but the subscribers paid only to access the information contained in that database and were not being imparted the assessee's proprietary knowledge, techniques, methodologies or experience. The assessee did not transfer or communicate its own experience or skill to subscribers; the accessible information was the end product content. Decisions of appellate authorities and the AAR (on analogous facts) were applied to conclude that payment for access to compiled information does not constitute payment for information concerning the payor's experience under the DTAA definition of royalties. [Paras 17, 18, 19]

Addition deleted: subscription fees are not royalty as payment for information concerning industrial, commercial or scientific experience.

Use of, or right to use, any industrial, commercial or scientific equipment - server as point of interface - Article 12(3)(b) of India-US DTAA - Subscription fees are not royalty as consideration for use of, or right to use, any equipment because subscribers have no access, control or dominion over the servers hosting the database. - HELD THAT: - The Tribunal rejected the Revenue's contention that subscribers use the assessee's servers as a 'point of interface' thereby creating an equipment royalty. The factual matrix and precedents demonstrate that the consideration was for accessing collated data/information and not for any right to use physical or virtual equipment. Subscribers neither control nor obtain any rights in the servers; therefore the payments cannot be characterized as consideration for use of equipment under the DTAA. [Paras 20, 21, 22]

Addition deleted: subscription fees are not royalty as consideration for use of or right to use equipment.

Final Conclusion: The Tribunal allowed the appeal and deleted the addition: subscription revenues received by the non resident assessee from Indian subscribers during AY 2016 17 are not taxable as 'royalty' under Article 12(3) of the India-US DTAA, because they represent payment for access to a database under a non exclusive, non transferable licence and do not amount to payment for use of copyright, for information concerning the assessee's experience, or for use of equipment.

Borrowed satisfaction - reasons to believe - non-application of mind - principles of natural justice - disposal of objections by a speaking order - reliance on survey report under section 133A of the Income-tax Act, 1961 - retractions and need for corroboration of confessional statements - reassessment under section 147 of the Income-tax Act, 1961 - addition of opening balance under section 68

Borrowed satisfaction - reasons to believe - non-application of mind - principles of natural justice - disposal of objections by a speaking order - reliance on survey report under section 133A of the Income-tax Act, 1961 - reasssessment under section 147 of the Income-tax Act, 1961 - retractions and need for corroboration of confessional statements - Validity of reassessment proceedings and consequent additions in view of the assessing officer's reliance on survey report and third party statements without independent application of mind, non disposal of assessee's objections by a speaking order, and failure to furnish or confront the material relied upon - HELD THAT: - The Tribunal held that the Assessing Officer's reasons to believe were founded entirely on the Investigation Wing's survey report and on third party statements, without any independent enquiry or verification by the AO, amounting to a mechanical or borrowed satisfaction and non application of mind. The AO admitted that objections filed by the assessee to the reopening were not disposed of by any written/speaking order; following the mandate in GKN Driveshafts and related authorities, failure to pass a speaking order on objections and to furnish/confront the material relied upon with the assessee offended the principles of natural justice. The Tribunal also noted that statements relied upon had been retracted and that no corroborative material was produced or opportunity given for cross examination, further undermining the basis for reassessment. In view of these deficiencies, the reassessment proceedings were held invalid and quashed, and the consequential additions could not be sustained. [Paras 6, 7, 8, 10]

Reassessment proceedings quashed as invalid for borrowed satisfaction, non application of mind and breach of principles of natural justice; consequential additions set aside.

Addition of opening balance under section 68 - Validity of the addition made under section 68 in respect of an opening balance in the creditors' account - HELD THAT: - The Tribunal, after considering the documentary material placed before the First Appellate Authority and the assessee's corroborative documents (loan confirmation, balance sheet, bank statement and affidavit), agreed with the CIT(A)'s finding that the amount treated as opening balance related to earlier years and was not a credit in the year under consideration. Applying the principle that liabilities already reflected from prior years cannot be treated as fresh unexplained credits in the relevant year, the Tribunal found no reason to interfere with the deletion of the addition under section 68. [Paras 9]

Addition of opening balance under section 68 deleted; revenue's ground on this point dismissed.

Final Conclusion: The appeal by the Revenue is dismissed. The reassessment under section 147 is quashed for borrowed satisfaction, failure to apply independent mind and breach of natural justice, and the addition relating to the opening balance under section 68 is disallowed.

Summary order. The special leave petition is dismissed; pending applications, if any, are disposed of.

Anticipatory bail - conscious physical possession - confessional statement of co-accused as basis for implication - offence under the Customs law attracting sentence of seven years - conditions of anticipatory bail under Section 438(2) of the Cr.P.C. - co-operation in trial and cancellation of bail for non-appearance

Anticipatory bail - conscious physical possession - confessional statement of co-accused as basis for implication - co-operation in trial and cancellation of bail for non-appearance - Whether the petitioner is entitled to anticipatory bail despite being implicated in a smuggling case where recovered goods were not in his conscious possession and implication rests on statements of co-accused and investigative material. - HELD THAT: - The Court noted that no incriminating article was recovered from the petitioner and he was not apprehended at the spot; he was implicated primarily on the statement of the co-accused. There is no specific allegation that the petitioner tampered with witnesses. The recovered gold bullions have already been confiscated and the offence carries a sentence of seven years. Having regard to the material on record, the nature of the accusation, absence of conscious possession, and the appellate authority cited by the Court, the balance favours granting anticipatory bail subject to appropriate conditions. The Court directed release on bail while emphasising that the petitioner must cooperate in the trial and that failure to appear twice will render bail liable to cancellation; surrender of passport was also ordered as a condition. [Paras 6, 7, 8]

Anticipatory bail granted; petitioner to be released on bail on furnishing bond with sureties and subject to conditions including cooperation in trial, surrender of passport and cancellation of bail on two defaults in appearance.

Final Conclusion: Petition allowed. Anticipatory bail granted to the petitioner in connection with DRI, Patna Unit Case No.23 of 2022-2023 on the specified bail terms and conditions; petitioner to cooperate in the trial and surrender passport, failing which bail is liable to be cancelled.

Return of seized goods where no notice under Section 124 issued within six months - Extension of the six-month period by the Principal Commissioner of Customs under the proviso to Section 110(2) - Provisional release under Section 110A and exclusion of the six-month period

Return of seized goods where no notice under Section 124 issued within six months - Extension of the six-month period by the Principal Commissioner of Customs under the proviso to Section 110(2) - Whether the respondents were obliged to return the mobile phones seized on 19.10.2022 in the absence of a notice under Section 124 or an extension under the proviso to Section 110(2) of the Customs Act, 1962. - HELD THAT: - Section 110(2) mandates that goods seized under Section 110(1) must be returned to the person from whose possession they were seized if no notice under clause (a) of Section 124 is given within six months of seizure. The provision permits the Principal Commissioner of Customs to extend that six-month period by a further period not exceeding six months, by reasons recorded in writing. The phones in question were seized on 19.10.2022 and the six-month statutory period therefore expired on 19.04.2023. The Principal Commissioner did not record any extension under the proviso to Section 110(2). In those circumstances, continued detention of the mobile phones is contrary to the statutory requirement and therefore illegal. The court accordingly directed immediate return of the phones in accordance with law. [Paras 5, 7, 8, 9]

The respondents must return the petitioner's mobile phones forthwith; the court directed return within one week from receipt of certified copy of the judgment.

Final Conclusion: Writ petition allowed: in view of expiry of the six-month period under Section 110(2) without any valid extension, the continued detention of the seized mobile phones was held unlawful and the respondents were directed to return them within one week.

Revocation of customs broker licence - confessional statements and retraction - natural justice - cross examination of witnesses - due diligence and KYC obligations of customs broker - authorization by actual exporter and benami/ sub letting of IEC - forgery and fabrication of documents vitiating transactions - connivance and circumstantial corroboration of guilt

Revocation of customs broker licence - Whether there were sufficient grounds for revocation of the appellant's customs broker licence, forfeiture of security and imposition of penalty. - HELD THAT: - The Tribunal examined the evidence including confessional statements of the appellant and corroborative statements of other persons involved, findings of the Inquiry Officer and the Commissioner's detailed discussion of violations under CBLR. The record showed that invoices and packing lists were prepared in the appellant's office, stuffing was supervised in the presence of the appellant's representative, and other declarants admitted sub letting of the IEC and use of another's IEC for export of prohibited Gutkha. These facts established failure to obtain authorisation from the actual exporter, failure to discharge KYC and due diligence obligations, and active involvement in fabrication of documents. The Tribunal accepted the Commissioner's conclusion that the appellant contravened the CBLR provisions and that the misconduct warranted disciplinary action. [Paras 11, 14]

The revocation of the customs broker licence, forfeiture of security and penalty were justified and are not interfered with.

Confessional statements and retraction - natural justice - cross examination of witnesses - Whether the appellant's retraction of earlier confessional statements and the denial of his request for cross examination vitiated the inquiry or deprived him of natural justice. - HELD THAT: - The Tribunal held that the appellant's confessional statements retained evidentiary value despite retraction because they were corroborated by independent statements of others implicated in the offence. Reliance was placed on the distinction between confessions made to Customs officers and police confessions and the precedent that a confession, though retracted, constitutes an admission which may bind the maker. Given the existence of corroborative evidence, the refusal to permit the particular cross examinations did not amount to a denial of natural justice in the circumstances described. [Paras 10]

Retraction did not negate the evidentiary value of the confessional statements and denial of the requested cross examination did not vitiate the inquiry.

Due diligence and KYC obligations of customs broker - authorization by actual exporter and benami/ sub letting of IEC - forgery and fabrication of documents vitiating transactions - connivance and circumstantial corroboration of guilt - Whether the appellant fulfilled his regulatory duties (verification, authorization, advising/reporting) under the CBLR and whether fabrication/forgery and sub letting of IEC established connivance. - HELD THAT: - The Tribunal found that the appellant failed to verify the actual exporter, allowed use of an IEC by third parties, prepared fabricated invoice and packing list in his office, and that stuffing and customs formalities were aided by the appellant's representative. Statements of other participants admitted sub letting of the IEC and payments to facilitate export. The Tribunal applied authority that a customs broker must exercise due diligence, perform KYC, seek or obtain proper authorization, and report violations; forgery and collusion negate asserted compliance. On these findings, the appellant's conduct amounted to deliberate contravention and connivance. [Paras 11, 14]

The appellant breached his obligations under the CBLR by failing KYC/verification, aiding fabrication and using a sub let IEC, establishing connivance and justifying disciplinary action.

Final Conclusion: The Tribunal dismissed the appeal, upholding the Commissioner's order: the evidence and corroboration established the appellant's contravention of CBLR obligations, the confessional statements retained evidentiary value despite retraction, and the revocation of licence, forfeiture of security and penalty were justified.

Jurisdictional competence of appellate authority - prematurity of appeal where no final detrimental order exists - limits of advisory/recommendatory function of Special Valuation Branch/GATT Valuation Cell - distinction between recommendation and exercise of statutory powers under sections 17, 18 and 28 of the Customs Act, 1962 - prohibition against issuing advance rulings by appellate fora

Jurisdictional competence of appellate authority - prematurity of appeal where no final detrimental order exists - Whether the first appellate authority and the Tribunal had jurisdiction to entertain and decide the appeals in the absence of any final order causing detriment to the appellant - HELD THAT: - The Tribunal held that no specific impugned consignment, quantification of differential duty, or record of implementation of the loading order was placed before it; there was no material showing that any import had been assessed or that revenue collection had been affected. In these circumstances the directive to "load" value by the GATT Valuation Cell operated, at best, as a recommendation and not as a final exercise of statutory assessment or adjudication. The Court relied on the principle that a valid order detrimental to an assessee must be preceded by statutory show cause/adjudicatory steps and must exist as a decision before an appellate remedy arises. Entertaining an appeal in respect of a merely academic or unimplemented recommendation would amount to issuing an advance ruling, which the appellate forum is not empowered to do. Consequently the appeals were premature and outside the jurisdiction of the first appellate authority and this Tribunal to adjudicate on merits. [Paras 3, 5, 7, 11]

Appeals are premature and the appellate authorities lacked jurisdiction to decide merits in the absence of any final detrimental order; the appeals cannot be sustained on that basis.

Limits of advisory/recommendatory function of Special Valuation Branch/GATT Valuation Cell - distinction between recommendation and exercise of statutory powers under sections 17, 18 and 28 of the Customs Act, 1962 - prohibition against issuing advance rulings by appellate fora - Whether the GATT Valuation Cell/SVB could, by its directive, supplant the statutory role of the 'proper officer' under the Customs Act and whether the Tribunal should entertain or approve/disapprove such internal advisory guidelines in appeal - HELD THAT: - The Tribunal observed that the GVC/SVB is an internal advisory mechanism without statutory authority to exercise the statutory powers vested in the "proper officer" under sections 17, 18 or 28 of the Customs Act, 1962. The Customs Valuation Rules, including the specific treatment of services under Rule 10, prescribe the legal framework for valuation; an internal recommendation based on relationship alone cannot displace the statutory decision-making process. Allowing appellate fora to pronounce on such advisory directives would amount to issuing an advance ruling and would improperly appropriate functions reserved to the 'proper officer' and subsequent statutory appeal channels. The Tribunal therefore declined to approve or disapprove the advisory directive in the present circumstances and noted that intervention at this stage would erase remedial tiers contemplated by the statute. [Paras 6, 8, 9, 10]

The GVC/SVB advisory directive does not possess statutory force to bind the proper officer; the Tribunal will not, at this stage, entertain or convert such advisory recommendations into binding assessments and will not act as an advance ruling body in respect thereof.

Final Conclusion: Impugned order set aside on jurisdictional grounds; appeals restored to the first appellate authority for adjudication in accordance with law if and when a valid, final order causing grievance exists, and without treating internal advisory recommendations as binding assessments.

Classification of imported goods - reliability of laboratory test report - compliance with Indian Standard IS 1459:2018 - confiscation and redemption under the Customs Act - waiver of detention and demurrage charges

Classification of imported goods - reliability of laboratory test report - compliance with Indian Standard IS 1459:2018 - Whether the adjudication sustaining reclassification and demands can stand when the testing agency did not examine all parameters required by IS 1459:2018 and the test report was the primary basis for the Department's action. - HELD THAT: - The Tribunal found that the Department's case rested mainly on the CRCL test report which certified the imported goods as Kerosene (SKO). The testing agency, however, did not test all ten parameters prescribed under IS 1459:2018 and relied on only a subset of parameters to render its technical opinion. Having regard to the insufficiency of the investigative/testing process and the Tribunal's reasoning in Shri Jethanand Rohra (extracted in the order) that product classification as SKO must be supported by testing in accordance with the IS specifications, the adjudged demands and reclassification based on the incomplete test report cannot be sustained. On this determinative legal basis the Tribunal set aside the impugned order and allowed the appeal. [Paras 5, 6]

Adjudication and reclassification founded on the incomplete CRCL test report set aside; appeal allowed.

Confiscation and redemption under the Customs Act - waiver of detention and demurrage charges - Relief to be granted in respect of seized goods and consequential charges where impugned order is set aside. - HELD THAT: - Having set aside the impugned order and allowed the appeal, the Tribunal directed that, since the goods have been in departmental custody for over three years, the authorities shall issue a certificate waiving detention and demurrage charges within four weeks of receipt of the order. This direction flows from the setting aside of the confiscation and related orders and constitutes the relief granted to the appellant. [Paras 6]

Authorities directed to issue certificate waiving detention and demurrage charges within four weeks; appeal disposed accordingly.

Final Conclusion: The appeal is allowed: the adjudication based on the incomplete CRCL test report is set aside and the impugned order is quashed; authorities to issue a certificate waiving detention and demurrage charges within four weeks and the appeal is disposed of.

Financial creditor - Financial debt - Inclusion of homebuyers/allottees within Section 5(8)(f) of the Code - Interest payable under agreement treated as part of financial debt - Threshold limit for filing Section 7 petition

Financial creditor - Inclusion of homebuyers/allottees within Section 5(8)(f) of the Code - The 1st Respondent is a financial creditor and the amounts paid by the allottee constitute financial debt. - HELD THAT: - Relying on the distinctions drawn between operational and financial debts in the judgment reproduced from Pioneer Urban Land and Infrastructure Ltd., the Tribunal held that advances by an allottee to a real estate developer fall within the scope of financial debt. The Tribunal found the facts distinguishable from precedents where claimants were held to be speculative investors because here the Agreement contained a conditional provision for repayment with interest upon failure to obtain statutory approval. Thus, the allottee is not a mere speculative investor and is properly classed as a financial creditor under the Code; the amounts advanced are financial debt within Section 5(8)(f). [Paras 6, 7]

The 1st Respondent is a financial creditor and the amounts paid by the allottee are financial debt.

Interest payable under agreement treated as part of financial debt - Threshold limit for filing Section 7 petition - Interest accrued pursuant to the Agreement of Sale is rightly included in the claim and counted towards the threshold amount for admission of the Section 7 petition. - HELD THAT: - The Tribunal examined Clause 3 of the Sale Agreements read with related clauses and noted an express contractual obligation to repay advances with interest (24% p.a.) if HMDA approval was not obtained within the stipulated time. The Tribunal rejected the contention that the amount admitted in proceedings before the civil court (CMA 296/2021) equated to the claim in the insolvency petition, distinguishing the remedies sought (specific performance in the civil suit versus recovery of amounts due under the Code). Finding that final HMDA approval and registration were delayed and that the vendor neither registered the plots nor refunded amounts, the Tribunal held that contractual interest becomes part of the financial debt and may be aggregated to meet the statutory threshold for initiating insolvency proceedings under Section 7. [Paras 8, 9, 10]

Contractual interest is includible in the financial debt and may be aggregated to satisfy the threshold for admission of the Section 7 petition.

Final Conclusion: The Appeal is dismissed; the admission of the Section 7 petition is sustained as the allottee qualifies as a financial creditor and contractual interest forms part of the financial debt for meeting the threshold under the Code.

Operational debt - maintainability of Section 9 application under the IBC - breach of settlement agreement and operational debt - final bill and subsequent settlement as mode of payment - effect of claim admitted in third party CIRP on independent liability of corporate debtor

Operational debt - final bill and subsequent settlement as mode of payment - maintainability of Section 9 application under the IBC - Debt arising from RA Bills (final bills) which were certified and later the subject matter of a settlement qualifies as operational debt and permits filing of a Section 9 application. - HELD THAT: - The Tribunal examined the nature of the claim and held that the underlying liability arose from certified RA Bills issued for work executed under contract awarded by the Corporate Debtor; the subsequent settlement dated 16.12.2017 recorded the Corporate Debtor's undertaking to pay but only regulated the mode and timeline of payment. Applying the principle that a post certification memorandum or settlement which prescribes mode/manner of payment does not extinguish the underlying operational liability, the Tribunal found the Adjudicating Authority erred in treating the claim as merely a contractual breach that fell outside the definition of operational debt. The Tribunal relied on its earlier decision in Ahluwalia Contracts vs. Logix Infratech (where a memorandum of understanding post final bill was held to be only about payment mode) to conclude that the present claim is an operational debt and the Section 9 application was wrongly dismissed as not maintainable. The Tribunal contrasted the facts with authorities concerning financial debt or guarantor settlements and found those inapplicable where the debt originally arose from supply of goods or services and was evidenced by certified bills. [Paras 9, 11, 18, 19]

Impugned order rejecting the Section 9 application on the ground that the debt was not an operational debt is set aside; the Section 9 application is revived to be proceeded with in accordance with law.

Effect of claim admitted in third party CIRP on independent liability of corporate debtor - breach of settlement agreement and operational debt - Filing of a claim (and its admission or partial allowance) in the CIRP of a third party who was party to the settlement does not extinguish or bar the Operational Creditor's independent Section 9 claim against the Corporate Debtor. - HELD THAT: - The Tribunal considered the appellant's claim that it had filed and had its claim admitted in the CIRP of VentaRealtech (a party to the settlement) and rejected the contention that such filing affects maintainability of the Section 9 application against Jasmine Buildmart Pvt. Ltd. The Tribunal observed that amounts recoverable in the third party CIRP and any sum ultimately received therefrom are distinct issues of quantification and adjustment; acceptance of a claim in another CIRP does not absolve the Corporate Debtor of its independent liability to the Operational Creditor nor operate as a ground to refuse to proceed with the Section 9 application. [Paras 16, 17]

Filing and admission of the claim in the CIRP of VentaRealtech does not preclude the Section 9 petition against the Corporate Debtor; any amounts recovered in that CIRP can be adjusted but do not extinguish the independent claim.

Final Conclusion: The appeal is allowed; the order dated 12.01.2023 of the Adjudicating Authority is set aside and the Section 9 application is revived for adjudication in accordance with law, the Tribunal holding that the claimed liability arose from certified RA Bills (an operational debt) and that a settlement recording mode of payment did not extinguish the underlying operational claim; admission of a claim in a third party CIRP does not bar the Section 9 proceeding.

Designation of Special Courts under Section 43(1) of the PMLA Act - territorial jurisdiction of a Special Court as fixed by Central Government notification - competence of trial court to try offences punishable under Section 4 of the PMLA Act - validity of made-over/transfer of case contrary to statutory designation - entertainment and numbering of bail application by competent Special Court

Designation of Special Courts under Section 43(1) of the PMLA Act - territorial jurisdiction of a Special Court as fixed by Central Government notification - competence of trial court to try offences punishable under Section 4 of the PMLA Act - Whether the Special Court-I established by State G.O. could exercise jurisdiction to try the offence under Section 4 of the PMLA Act when the Central Government notification had designated the Principal District Judge, Chennai as the Special Court for the territorial area. - HELD THAT: - The Court examined Section 43(1) of the PMLA Act and the Central Government notification issued in exercise of powers under that provision which specifically designated the Principal District Judge, Chennai as a Special Court for offences punishable under Section 4 within the territorial limits specified. The language of Section 43(1) makes the designation the prerogative of the Central Government in consultation with the High Court. Having regard to the notification S.O.372(E) dated 05.02.2016 and the territorial coverage it specifies (including Chennai), the Court held that cases alleging offences under Section 4 must be tried by the Courts so designated by the Central Government. The transfer/made over of C.C.No.9 of 2023 to Special Court-I constituted under the State G.O. was therefore inconsistent with the statutory designation and could not confer jurisdiction on that Special Court to try the offence charged under Section 4 of the PMLA Act. [Paras 21, 28, 29, 30, 31]

The transfer/made over to Special Court-I was not in consonance with Section 43(1) and the Central Government notification; the Principal District Judge, Chennai is the competent Special Court to try the offence charged under Section 4 in the territorial area.

Validity of made-over/transfer of case contrary to statutory designation - entertainment and numbering of bail application by competent Special Court - Whether the return of the bail application by both the Principal Judge and Special Court-I was correct and what relief should follow. - HELD THAT: - Having concluded that the Principal District Judge, Chennai is the specially designated Court under the Central notification for offences punishable under Section 4, the Court found that the endorsement/return by the Principal Judge and the consequent refusal by Special Court-I to entertain the bail petition were unsustainable. The appropriate remedy is to set aside the impugned return/endorsement, direct withdrawal/re-transfer of the made-over file from Special Court-I back to the Principal Judge, Chennai, and require the Principal Judge to number and entertain the unnumbered bail application if in order and decide it after hearing both sides at the earliest. Ancillary directions were given for return of original bail papers to the petitioner's counsel after retaining photocopies. [Paras 32, 33]

The impugned endorsement/return is set aside; the made-over file shall be withdrawn from Special Court-I and the Principal Judge, Chennai shall number, entertain and decide the bail application after hearing both parties.

Final Conclusion: The petition is allowed: the Principal Judge, Chennai being the Special Court designated by the Central Government under Section 43(1) of the PMLA Act is to hear and decide the bail application in C.C.No.9 of 2023; the return/endorsement is set aside and the made-over file shall be re-transferred to the Principal Judge who shall number and dispose of the bail petition after hearing both sides at the earliest; registry to return original bail papers to the petitioner's counsel after retaining photocopy.

Taxable event is rendition of service - applicable rate determined by date on which services were rendered and not date of receipt of payment - invalidity of departmental circular which is contrary to judicially declared law

Taxable event is rendition of service - applicable rate determined by date on which services were rendered and not date of receipt of payment - Whether the enhanced rate of service tax at 4% applies where the works contract services were rendered prior to 01.03.2008 but payment was received thereafter - HELD THAT: - The Tribunal examined whether the Board's instruction treating receipt of payment on or after 01.03.2008 as attracting the enhanced rate could sustain. It relied on the principle, as affirmed by the Supreme Court, that the taxable event for service tax is the rendition of service and not the receipt of payment. Applying that principle, where the works contract services were completed prior to 01.03.2008 the rate in force on the date of rendition (2.06%) governs, and a subsequent increase in rate effective from 01.03.2008 does not operate to tax those earlier renditions at the enhanced rate. The Tribunal accepted the Commissioner (Appeals) conclusion and followed the reasoning of the Delhi High Court which held the Board's instruction invalid as being contrary to the judicially declared position that rendition is the taxable event. [Paras 8, 10, 11]

Demand of service tax at the enhanced rate of 4% in respect of services rendered prior to 01.03.2008 is unsustainable; departmental demand dismissed.

Final Conclusion: The departmental appeal is dismissed: the enhanced rate of service tax effective from 01.03.2008 cannot be applied to works contract services rendered prior to that date, and the demand based on the Board's instruction is not sustainable.

Interest cannot be imposed where there is no service tax liability - Taxability of advance consideration and refund under Rule 6(3) of the Service Tax Rules, 1994 - Reimbursable expenses not includible in taxable value where only actual amounts are collected - Penalties cannot be sustained where the underlying demand is set aside - Reliance on Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd.

Interest cannot be imposed where there is no service tax liability - Taxability of advance consideration and refund under Rule 6(3) of the Service Tax Rules, 1994 - Penalties cannot be sustained where the underlying demand is set aside - Demand of interest and related penalties in respect of an advance received and subsequently refunded by the assessee - HELD THAT: - The adjudicating authority had held that the advance of Rs.85 crores was ultimately not liable to service tax because no service was provided and the advance was refunded, and noted that tax paid on such advance could be taken back as credit on refund in terms of Rule 6(3) of the Service Tax Rules, 1994. Notwithstanding the conclusion that there was no tax liability on the advance, the authority confirmed interest on the proposed tax. The Tribunal found this inconsistent: where there is no service tax liability (tax liability having been nullified by refund and Rule 6(3) operation), no interest can be imposed on that non-existent tax. For the same reason, penalties levied in respect of that demand were set aside. The Tribunal therefore set aside the confirmed interest and related penalties while leaving the remaining portions of the order undisturbed. [Paras 7, 9, 14]

Demand of interest and penalties in respect of the refunded advance are set aside.

Reimbursable expenses not includible in taxable value where only actual amounts are collected - Reliance on Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd. - Penalties cannot be sustained where the underlying demand is set aside - Demand of service tax and related penalties on electricity, water/CMWSSB, sewerage and infrastructure charges collected from allottees as reimbursable expenses - HELD THAT: - The Department alleged that the assessee collected amounts in excess of actual charges and thus included them in the taxable value. The adjudicating order did not identify from which allottees any alleged mark-up was collected. Applying the principle from the cited decision of the Apex Court, the Tribunal held that where only actual amounts are collected as reimbursements, such amounts are not includible in the taxable value and a demand of service tax cannot be sustained. Consequently, the Tribunal set aside the demand of service tax on these reimbursable expenses for the period under consideration and also set aside the penalties imposed in respect of that demand. [Paras 8, 9, 17]

Demand of service tax and penalties on reimbursable electricity, water/CMWSSB, sewerage and infrastructure charges are set aside.

Final Conclusion: The appeal is partly allowed: the Tribunal sets aside the confirmed interest and penalties relating to the refunded advance and sets aside the demand of service tax and penalties on reimbursable utility and infrastructure charges (period 2009-10 to 2010-11), without disturbing the remaining findings of the impugned order.

Reverse Charge Mechanism - no service tax payable by recipient of services from abroad prior to 18.04.2006 - Banking and Other Financial Services - taxability of legal services under service tax from 01.09.2009 - benefit of section 80 of the Finance Act, 1994 - penalty not imposable where tax is paid immediately on detection

Reverse Charge Mechanism - no service tax payable by recipient of services from abroad prior to 18.04.2006 - Banking and Other Financial Services - Tax demand in respect of External Commercial Borrowings obtained from non-resident banks for periods prior to 18.04.2006 - HELD THAT: - The Tribunal accepted that before 18.04.2006 the recipient of services from non-resident banks located outside India was not liable to pay service tax under the Reverse Charge Mechanism, following the view in Indian National Shipowners Association (as noted in the judgment). Applying that principle to the facts, the demand of service tax computed in respect of loans obtained prior to 18.04.2006 was held unsustainable and was set aside. [Paras 8]

Demand of Rs.19,09,550/- in respect of ECBs obtained prior to 18.04.2006 set aside.

Taxability of legal services under service tax from 01.09.2009 - Service tax liability on legal charges paid to non-resident lawyers/foreign legal service providers for the period in dispute - HELD THAT: - The Tribunal found that legal services became taxable under service tax w.e.f. 01.09.2009 and that the legal charges in question were paid by the appellant prior to that date. Consequently, those legal charges did not attract service tax under the Reverse Charge Mechanism for the period before 01.09.2009 and the related demand was disallowed. [Paras 9]

No service tax payable by the appellant for legal charges paid prior to 01.09.2009.

Appropriation of amount paid - Effect of admission and payment by the appellant on remaining demand - HELD THAT: - The Tribunal recorded that the appellant admitted liability for the remaining portion of the demand and paid the same on being pointed out during investigation. As the adjudicating authority has appropriated the amount already paid, and the other contested demands were held not payable, there remains no further amount payable by the appellant beyond the sum already appropriated. [Paras 10, 11]

No further amount payable by the appellant except the amount already paid and appropriated by the adjudicating authority.

Benefit of section 80 of the Finance Act, 1994 - penalty not imposable where tax is paid immediately on detection - Imposition of penalty where disputed tax amount was paid immediately on detection during investigation - HELD THAT: - Given that the appellant paid the disputed service tax immediately when the liability was pointed out during investigation, the Tribunal applied the benefit of section 80 of the Finance Act, 1994 and concluded that penalty was not imposable. The penalties confirmed by the adjudicating authority were therefore set aside. [Paras 12]

Penalties imposed on the appellant set aside.

Final Conclusion: The appeal is allowed: demands in respect of ECBs prior to 18.04.2006 and legal charges paid prior to 01.09.2009 are set aside; only amounts already paid and appropriated remain, and penalties are vacated in view of immediate payment and benefit of section 80 of the Finance Act, 1994.

Liability of sub-contractor to pay service tax - cum-tax valuation under Section 67(2) - double taxation - extended period of limitation - suppression and misstatement - penalty for failure to register under Section 77 - interest on reassessed value under Section 75

Liability of sub-contractor to pay service tax - cum-tax valuation under Section 67(2) - double taxation - Service-tax liability of the sub-contractor where the main contractor had discharged service tax, and the method of valuation to be adopted. - HELD THAT: - The Tribunal held that in light of the Larger Bench decision addressing conflicting views, a sub-contractor who renders taxable works-contract service is liable to discharge service tax notwithstanding that the main contractor has paid tax. However, where the gross amount charged is inclusive of service tax, Section 67(2) requires valuation by determining the taxable value which, when added to tax payable, equals the gross amount charged. Accordingly the sub-contractor is entitled to the cum-tax benefit under Section 67(2) and the demand must be confined to the normal period computed on the cum-tax value rather than on the plain gross receipts, thereby avoiding impermissible double taxation to the extent permitted by the statutory valuation rule. The Tribunal accepted that prior confusion on taxability justified the Larger Bench reference and applied that precedent together with the statutory provision to restrict the demand to the normal period with cum-tax adjustment. [Paras 5, 6]

Appellant is liable to pay service tax but the liability is confined to the normal period and computed with cum-tax benefit under Section 67(2).

Extended period of limitation - suppression and misstatement - penalty for failure to register under Section 77 - interest on reassessed value under Section 75 - Whether the extended period for assessment could be invoked on grounds of suppression/misstatement and whether penalty and interest should be imposed. - HELD THAT: - The Tribunal found that because there was genuine confusion on taxability and the Larger Bench had to resolve conflicting decisions, the extended period based on alleged suppression or misstatement could not be invoked against the Appellant. Nevertheless, the Tribunal held that the Appellant had an obligation to register when rendering services above the threshold and had not done so; on that basis the penalty under Section 77 for failure to register was confirmed. The Tribunal also confirmed levy of interest under Section 75 on the reassessed (cum-tax adjusted) value and directed reassessment for the normal period with payment directions. [Paras 5, 6]

Extended period cannot be invoked for suppression/misstatement; penalty under Section 77 and interest under Section 75 on the reassessed value are confirmed.

Final Conclusion: Appeal allowed in part: demand confined to the normal period with cum-tax benefit under Section 67(2); extended period not invokable for suppression/misstatement; penalty under Section 77 and interest under Section 75 confirmed; appellant directed to compute and discharge liability within two months or seek officer's assistance.

Constitution of larger Bench - question of law - sine die adjournment - placement of matter before judicial head for reconstitution

Constitution of larger Bench - question of law - sine die adjournment - Adjournment of the main tax appeal until a larger Bench of the Tribunal is constituted to decide the question of law framed by the Tribunal. - HELD THAT: - The Tribunal's judgment dated 04th August, 2023 records that the matter and case records are to be placed before the President of the Tribunal for consideration and constitution of a larger Bench to decide the question of law framed in paragraph 76. Because the Tribunal has not reached a conclusive determination in compliance with this Court's earlier direction, the High Court found that the appropriate course is to suspend further adjudication in the main appeal. Consequently, the main matter (Tax Appeal No. 01/2019) is adjourned sine die pending constitution of the larger Bench and its pronouncement on the question of law identified by the Tribunal.

Main tax appeal adjourned sine die until a larger Bench of the Tribunal is constituted and pronounces judgment on the question of law framed in paragraph 76 of the Tribunal's judgment dated 04th August, 2023.

Disposal of interlocutory application - Disposition of the interlocutory application filed to place the Tribunal's judgment on record. - HELD THAT: - An interlocutory application (I.A. No. 05 of 2023) was filed to place the Tribunal's judgment of 04th August, 2023 on record. The Court recorded receipt of that judgment and, in view of its decision to adjourn the main appeal until the larger Bench decides the framed question of law, disposed of the interlocutory application accordingly.

Interlocutory application I.A. No. 05 of 2023 disposed of.

Final Conclusion: The High Court recorded the Tribunal's direction to place the matter before the President for constitution of a larger Bench, adjourned the main tax appeal sine die pending that constitution and decision on the question of law in paragraph 76 of the Tribunal's judgment, and disposed of the interlocutory application filed to place that judgment on record.

Applicability of Rule 6(2) of the Cenvat Credit Rules, 2004 - Waste heat as a by-product not constituting a final product - Captive generation of electricity from waste heat - Inputs/input services used for by-products excluded from Rule 6(2) - Principle in Union of India v. Hindustan Zinc Ltd. applied

Applicability of Rule 6(2) of the Cenvat Credit Rules, 2004 - Waste heat as a by-product not constituting a final product - Captive generation of electricity from waste heat - Principle in Union of India v. Hindustan Zinc Ltd. applied - Electricity generated from waste heat emerging in the course of manufacture of sponge iron is not amenable to Rule 6(2) of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal held that Rule 6(2) is directed to inputs and input services used in the manufacture of 'final products', and the expression 'final products' in the Rule has remained unchanged. Heat entrapped in flue gases that emerges as waste or a by-product during the manufacturing process cannot be treated as a 'final product' merely because it is subsequently used to generate electricity. The appellants did not deliberately adopt a process to manufacture electricity; the electricity generation is from waste heat incidental to the manufacture of sponge iron. Applying the ratio of Union of India v. Hindustan Zinc Ltd., and following the Tribunal's earlier decision in Trimula Industries Ltd., inputs/services used for producing such incidental by-products are outside the ambit of Rule 6(2). Accordingly the demands founded on Rule 6(2) were unsustainable. [Paras 6]

Demand confirmed under Rule 6(2) of the Cenvat Credit Rules, 2004 in the impugned orders set aside; appeals allowed.

Final Conclusion: The Tribunal allowed the appeals, holding that electricity generated captively from waste heat arising incidentally during the manufacture of sponge iron does not fall within Rule 6(2) of the Cenvat Credit Rules, 2004, and thus the demands premised on that provision could not be sustained.