TaxTMI Updates e-Newsletter
Sep 16,2023

Regular bail under Section 439 of the Code of Criminal Procedure, 1973 - charge-sheet filed but charge not framed - cooperation with investigation as condition for bail - parity with co-accused - consideration of nature and gravity of offence - non-misuse of liberty and conditions of bail - preliminary observations not to influence trial court - precedent of Sanjay Chandra v. Central Bureau of Investigation

Regular bail under Section 439 of the Code of Criminal Procedure, 1973 - charge-sheet filed but charge not framed - parity with co-accused - cooperation with investigation as condition for bail - non-misuse of liberty and conditions of bail - Applicant enlarged on regular bail subject to conditions - HELD THAT: - The Court, after noting that the applicant has been in custody since 14.02.2023, that the investigation is complete and the charge-sheet has been filed though charge has not yet been framed, and that no notice has been issued to the applicant by the GST authority, found no special circumstances to refuse bail. The Court recorded that other co-accused have been released on regular bail and that the learned Additional Public Prosecutor, under instructions of the Investigating Officer, was unable to point to any exceptional circumstance warranting continued detention. Reliance was placed on the law as laid down in Sanjay Chandra v. CBI. Considering the nature of allegations without traversing evidence in detail, the Court exercised its discretion to grant regular bail, subject to conditions including personal bond, monthly reporting, furnishing residence, cooperation with investigation, prohibition on leaving the State without permission, and undertaking not to misuse liberty; the Court also cautioned that the trial Court should not be influenced by preliminary observations made at the bail stage.

Application allowed; applicant released on regular bail on executing a personal bond and subject to specified conditions.

Final Conclusion: Bail application under Section 439 CrPC allowed; applicant ordered released on regular bail on executing bond and complying with enumerated conditions, with liberty for the trial Court to modify conditions and a direction that preliminary observations shall not influence trial.

Interest under Section 50(3) of Tamil Nadu Goods and Service Tax Act, 2017 - Penalty under Section 73(9) of Tamil Nadu Goods and Service Tax Act, 2017 - assessment order set aside for failure to consider reply - right to be heard / audi alteram partem - remand for fresh consideration

Assessment order set aside for failure to consider reply - remand for fresh consideration - right to be heard / audi alteram partem - Impugned assessment order was set aside and remitted for fresh decision because the assessing authority reproduced the petitioner's reply but did not consider or discuss it, rendering the order arbitrary. - HELD THAT: - The High Court noted that while the impugned order reproduces the petitioner's reply (Internal Page No.2 to Internal Page No.9), there is no discussion or consideration of the reply in the reasons recorded. For that reason the order was held to be arbitrary and unlawful. The Court directed that the impugned order be set aside and the matter remitted to the assessing authority for fresh adjudication on merits and in accordance with law. In the fresh proceeding the respondent is required to consider the petitioner's reply, afford the petitioner an opportunity of hearing, and decide the issues on merits. [Paras 3, 4, 5]

Impugned order set aside; matter remitted for fresh decision after considering the petitioner's reply and hearing the petitioner within six weeks.

Interest under Section 50(3) of Tamil Nadu Goods and Service Tax Act, 2017 - Penalty under Section 73(9) of Tamil Nadu Goods and Service Tax Act, 2017 - Assessment of interest under Section 50(3) and penalty under Section 73(9) was not finally adjudicated and must be reconsidered in the remand proceedings. - HELD THAT: - The impugned order quantified interest and penalty in relation to ineligible input tax credit for the months shown in the order, but because the order failed to consider the petitioner's reply and did not record reasons addressing the petitioner's contentions, those determinations cannot stand as finally adjudicated. The Court remitted the matters of interest and penalty to the respondent to be re-examined and decided on merits in accordance with law, having regard to the petitioner's submissions and after hearing the petitioner. [Paras 2, 4]

Determinations as to interest and penalty remitted for fresh consideration and adjudication on merits by the assessing authority within six weeks.

Final Conclusion: The High Court set aside the impugned assessment order for failure to consider the petitioner's reply, remitted the matter to the respondent for fresh adjudication on merits (including reassessment of interest under Section 50(3) and penalty under Section 73(9) of the TNGST Act, 2017), directed that the petitioner be heard, and fixed a period of six weeks for disposal.

Show cause notice - cancellation of GST registration - retrospective cancellation - requirement of reasoned order - failure to disclose grounds - opportunity to be heard

Show cause notice - failure to disclose grounds - opportunity to be heard - The Show Cause Notice was invalid for being cryptic and not disclosing the specific grounds or the retrospective effect proposed, thereby falling short of the standards required of a Show Cause Notice. - HELD THAT: - The Show Cause Notice merely alleged that registration was obtained by "fraud, wilful misstatement or suppression of facts" without identifying the alleged fraud, the statements said to be false, or the facts purportedly suppressed, and did not indicate that cancellation was proposed with retrospective effect. A notice proposing an adverse order must clearly indicate the reasons for the proposed action so that the noticee can effectively respond. The cryptic nature of the Show Cause Notice deprived the petitioner of a meaningful opportunity to meet the allegations and of fair notice of the retrospective character of the proposed cancellation. [Paras 4]

The Show Cause Notice is set aside as legally defective for failing to state intelligible grounds and for not disclosing retrospective cancellation.

Cancellation of GST registration - retrospective cancellation - requirement of reasoned order - The impugned order cancelling the petitioner's GST registration (with retrospective effect) was invalid because it was not informed by any intelligible reason and was passed suo motu after no reply was received. - HELD THAT: - The cancellation order records only that no reply was received and states that the registration was "Suo Moto cancelled"; it does not articulate any reasoned basis for cancelling registration or for making the cancellation retrospective to an earlier date. An order cancelling registration must reflect intelligible reasons supporting the decision; absence of such reasoning renders the order unsustainable. Although the authorities remain free to take action in accordance with law, the present order is set aside on this ground. [Paras 6, 7, 13]

The impugned cancellation order is set aside for want of reasoned decision-making and for effecting retrospective cancellation without disclosed grounds.

Final Conclusion: The petition is allowed: the Show Cause Notice and the order cancelling the petitioner's GST registration are set aside for being legally defective (cryptic notice and an order not informed by reason). The concerned officers remain free to proceed lawfully and in accordance with the requirements of reasoned notice and order.

Cancellation of registration - fresh registration under Form GST REG-05 - revocation of cancellation of registration - show cause notice under Section 63 read with Section 50(3) and Section 122(1)(x) - benefit of Notification No.3/2023-Central Tax (as extended) - conditional grant of registration subject to deposit - expeditious completion of assessment proceedings - revenue leakage

Fresh registration under Form GST REG-05 - cancellation of registration - revocation of cancellation of registration - Validity of the order rejecting the petitioner's application for fresh GST registration and relief to enable the petitioner to carry on business. - HELD THAT: - The petitioner, a person with disability, had his registration cancelled for failure to file returns and did not avail the statutory remedies in time. Despite this, the Court held that denial of fresh registration is not justified where the petitioner must earn a livelihood and denial would likely cause revenue leakage by driving unregistered business. Relying on the balance between regulatory compliance and the public interest in preventing evasion, the Court directed that the petitioner be permitted to carry on business either by allowing the petitioner to avail the benefit of the cited notification (as extended) or by accepting the fresh registration application. The direction is without prejudice to the respondent's right to proceed with assessment and recovery proceedings initiated by the show cause notice; those proceedings must be completed expeditiously. The Court conditioned the grant of registration on the petitioner depositing a specified sum in cash within thirty days, observing that a major part of the tax liability had already been discharged from the Electronic Credit Ledger. The Court's order thus allows provisional relief to prevent revenue leakage while preserving the Department's substantive rights to adjudicate and recover any past dues. [Paras 14, 15, 16, 17, 18]

Respondent directed to permit the petitioner to carry on business by allowing the benefit of the notification or by accepting the fresh registration application; petitioner to deposit the specified sum within thirty days; registration to be revoked or fresh registration issued subject to such compliance; assessment/recovery proceedings under the show cause notice to be completed expeditiously and without prejudice to the respondent's rights.

Final Conclusion: Writ petition disposed by directing conditional grant of registration (or acceptance of fresh registration) subject to the petitioner depositing the stipulated sum within thirty days; the Department's assessment and recovery proceedings initiated by the show cause notice are to proceed and be completed expeditiously; no costs.

Parallel proceedings by investigative and audit authorities - Audit under Section 65 of CGST Act - Proceedings under Section 74 of CGST Act - Principles of natural justice - supply of documents and fair opportunity - Duty to consider documents seized by another authority

Parallel proceedings by investigative and audit authorities - Proceedings under Section 74 of CGST Act - Whether initiation of proceedings by the respondent under Section 65/Section 74 for the same period in which DGGI had already initiated investigation rendered the respondent's action impermissible - HELD THAT: - The Court noted that the Directorate General of GST Intelligence had conducted inspection and taken custody of documents for the period July 2017 to March 2021 and that the DGGI investigation had been ongoing. The learned Judge had held that Section 65 audit preceded issuance of the show cause notice under Section 74 in the factual chronicle of the case and therefore the petitioner's primary argument failed. This Court observed that copies of documents sought by the respondent were in the custody of the DGGI and acknowledged the contention that parallel proceedings by different agencies may cause prejudice. However, the Court did not finally strike down the respondent's initiation of proceedings as impermissible; instead it directed the respondent to consider the documents in possession of the other authority and the replies already filed by the appellant and to pass appropriate orders on merits and in accordance with law. Thus the question of permissibility was not finally adjudicated on merits but was remitted for fresh consideration in light of the factual position regarding custody of documents and prior investigation. [Paras 9, 10]

No final adjudication that parallel proceedings are impermissible; matter remitted to respondent to consider custody of seized documents, the appellant's replies and thereafter pass appropriate orders on merits.

Principles of natural justice - supply of documents and fair opportunity - Duty to consider documents seized by another authority - Whether the respondent was required to take into account that the documents sought were seized by DGGI and the appellant's written replies before proceeding - HELD THAT: - The Court recorded that communications between the parties established that the documents demanded by the respondent were already seized by the DGGI and therefore not available with the appellant. The appellant had furnished replies asserting that material had been produced to DGGI and sought exemption from producing the same to the respondent. In view of these facts, the Court directed that the respondent shall consider the documents which are in possession of the other authority as well as any documents in the respondent's custody, and shall consider the appellant's replies dated 10.09.2022 and 29.11.2022, and thereafter decide the matter on merits and in accordance with law. The Court's direction requires the respondent to afford a decision after taking into account the seized documents and the appellant's contentions, thereby safeguarding the appellant's right to a fair opportunity. [Paras 9]

Respondent directed to consider the seized documents and the appellant's replies and then pass appropriate orders on merits, ensuring compliance with principles of natural justice.

Final Conclusion: Writ petition dismissed by the High Court below was the subject of this appeal; this Court did not quash the respondent's proceedings but remitted the matter directing the respondent to consider the documents already in possession of DGGI and the appellant's written replies and to pass appropriate orders on merits and in accordance with law. No order as to costs.

Consumer forum jurisdiction to adjudicate complaints against statutory authorities - whether statutory tax administration constitutes 'service' under Consumer Protection Act - joinder, mis-joinder and non-joinder principles in consumer proceedings - deletion of unnecessary party from consumer complaint

Consumer forum jurisdiction to adjudicate complaints against statutory authorities - whether statutory tax administration constitutes 'service' under Consumer Protection Act - deletion of unnecessary party from consumer complaint - joinder, mis-joinder and non-joinder principles in consumer proceedings - Whether the Joint Commissioner/Commercial Taxes Department is a proper or necessary party to consumer complaints and whether the Consumer Forum has jurisdiction to entertain and pass reliefs against the statutory tax administration - HELD THAT: - The Court held that the Commercial Taxes Department, executing statutory functions under the State GST Act, does not render 'service' within the meaning of the Consumer Protection Act and therefore is not a proper or necessary party to complaints alleging deficiency in services by hotels. The tribunal ought to apply the principles of joinder, mis-joinder and non-joinder (derived from the Code of Civil Procedure principles) in proceedings before it and delete names of parties which are unnecessary. If a complainant alleges excess tax collection by a hotel, the appropriate remedy is to pursue statutory mechanisms available under the tax law (for example, applications for refund) rather than seeking relief against the tax authority in consumer proceedings. Applying these principles, the Court directed that consumer forums should not entertain or pass orders against the statutory authority and that the names of such unnecessary statutory authorities be deleted from the consumer complaints. [Paras 4, 5, 6, 7]

The writ petition was allowed; the respondents were directed to forbear from entertaining petitions against the statutory tax authority and to delete the name of the petitioner/department from the consumer complaints.

Final Conclusion: The Court allowed the writ petition, holding that the Commercial Taxes Department, performing statutory GST functions, is not amenable to consumer complaints for deficiency of service and directing consumer fora to delete such statutory authorities as unnecessary parties and to refrain from granting relief against them.

Direct Tax Vivad se Vishwas Scheme - Finality of determination under Section 5 of the DTVSV Act - Bar on reopening matters settled under DTVSV Act - Section 263 of the Income-tax Act - revision of assessment

Direct Tax Vivad se Vishwas Scheme - Finality of determination under Section 5 of the DTVSV Act - Bar on reopening matters settled under DTVSV Act - Section 263 of the Income-tax Act - revision of assessment - Whether issuance of a notice under Section 263 of the Income-tax Act was permissible after the taxpayer had availed the DTVSV Scheme and the designated authority had determined the amount payable under Section 5. - HELD THAT: - The Court held that declarations and the certificate issued under Section 5 of the DTVSV Act are conclusive as to matters stated therein and, subject to conditions in the Act, bar reopening of those matters in proceedings under the Income-tax Act. Relying on the interpretation in the Madras High Court decision, once the taxpayer had complied with the Scheme (determination under Section 5 and related compliance), the tax dispute in respect of the subject matter stood settled for purposes of further proceedings and could not be re-opened under Section 263. The Court observed that the appeal/representation which the assessee sought to compromise under the Scheme concerned the same issue the revenue sought to revisit by invoking Section 263; accordingly, the revenue was barred from issuing the impugned notice. The Court noted the statutory scheme which renders orders under Section 5 conclusive and the provisions which deem declarations void only in specified circumstances (e.g., false particulars or breach of conditions), and found no such displacing fact on the record to permit reopening. [Paras 10, 11]

The notice dated 13th January, 2022 issued under Section 263 is quashed and set aside; petition allowed.

Final Conclusion: The High Court allowed the petition, holding that after settlement under the Direct Tax Vivad se Vishwas Act (determination under Section 5) the Revenue could not initiate proceedings under Section 263 in respect of the same subject matter; the impugned notice was quashed.

Interpretation of CBDT Office Memorandum dated 29.02.2016 read with amendment dated 25.08.2017 - Scope of the expression 'demand' in paragraph 2 of the Office Memorandum - Application of 20% recovery limit while appeal is pending - Treatment and adjustment of TDS/TCS and inter year refund in computing recoverable amount - Non invocation of conditions in paragraph 4(B) of the Office Memorandum

Scope of the expression 'demand' in paragraph 2 of the Office Memorandum - Application of 20% recovery limit while appeal is pending - Interpretation of CBDT Office Memorandum dated 29.02.2016 read with amendment dated 25.08.2017 - Whether the 20% recovery limitation in paragraph 2 of the OM is to be computed on the crystallized tax liability as per the assessment order or on the scaled down balance demand after giving credit for TDS/TCS and other adjustments reflected in the notice of demand. - HELD THAT: - The Court construed paragraph 2 of the OM in the context of the statutory definition of 'demand' under Section 156 of the Act. The order framing the assessment crystallized the tax liability at Rs. 44,10,05,569/-, and the Court held that any amount recoverable while an appeal is pending must be measured against that crystallized liability. The respondents' contention that the base for computing 20% should be the reduced figure appearing in the notice of demand (i.e., after giving credit for TDS/TCS and adjustments) was rejected. The Court reasoned that 'demand'-as used in the OM-must be understood against the ingredients set out in Section 156 (tax, interest, penalty, fine or any other sum payable in consequence of an order), and therefore the 20% limitation applies to the crystallized amount as per the assessment order. The Court further noted that paragraph 4(B) exceptions, which could enlarge the amount recoverable, were not invoked by the revenue in this case, and therefore were not applicable. [Paras 4, 17, 21, 22, 23]

20% is to be calculated on the crystallized tax liability as per the assessment order and not on the scaled down balance demand after credit for TDS/TCS; the revenue's contrary contention is untenable.

Treatment and adjustment of TDS/TCS and inter year refund in computing recoverable amount - Application of 20% recovery limit while appeal is pending - Whether amounts recovered by way of TDS/TCS and adjustment of an AY 2022 23 refund against the AY 2021 22 demand must be taken into account and whether excess recovery beyond 20% of the crystallized liability must be refunded. - HELD THAT: - The Court recorded that TDS and TCS already deposited by third parties and the adjustment of the petitioner's AY 2022 23 refund had resulted in recoveries totaling Rs. 25,15,55,227/-, which constituted 57.04% of the crystallized liability of Rs. 44,10,05,569/-. The Court held that amounts collected by way of TDS/TCS and by adjustment of inter year refunds must be considered when computing the overall recovery effected against the crystallized demand. Applying the 20% rule to the crystallized liability, the Court found that the revenue had recovered an amount in excess of what the OM permitted and directed the revenue to verify and refund the excess amount. The Court directed that the amounts already collected by TDS/TCS shall be adjusted against the 20% of crystallized tax for the purpose of determining the refundable amount and that any payable amount shall carry applicable interest and be remitted within four weeks after verification. [Paras 19, 20, 24, 25, 26]

Amounts recovered by way of TDS/TCS and by adjustment of the AY 2022 23 refund must be taken into account; revenue to refund the excess over 20% of the crystallized tax liability after verification, with applicable interest, within four weeks.

Final Conclusion: The writ petition is allowed: the Court rules that the 20% recovery limit in the CBDT OM is to be calculated on the crystallized tax liability as per the assessment order (AY 2021 22); amounts recovered by TDS/TCS and by adjustment of an inter year refund must be accounted for, and the revenue is directed to verify and refund the excess recovery over 20% (with interest) within four weeks.

Taxability of concessional employer loans as per Section 17(2)(vi) - Validity of subordinate legislation and excessive delegation - Academic mootness of statutory challenge - Binding effect of judicial precedents on vires challenges

Taxability of concessional employer loans as per Section 17(2)(vi) - Academic mootness of statutory challenge - Challenge to the validity of Section 17(2)(vi) of the Income Tax Act, 1961 as inserted by the Finance Act, 2001. - HELD THAT: - The petition attacked Section 17(2)(vi) as inserted w.e.f. 01.04.2002. The Court observed that the provision has since been substituted by subsequent Finance Acts (Finance Act, 2005 and Finance (No. 2) Act, 2009). In view of these legislative substitutions, the challenge to the earlier version of Section 17(2)(vi) no longer survives and has been rendered academic by efflux of time. The Court therefore did not proceed to adjudicate the vires of the provision on merits. [Paras 5]

The challenge to Section 17(2)(vi) is rendered academic and is not adjudicated on merits.

Validity of subordinate legislation and excessive delegation - Binding effect of judicial precedents on vires challenges - Validity of Rule 3 of the Income Tax Rules, 1962 as substituted by the Income Tax (22nd Amendment) Rules, 2001 and alleged vice of excessive delegation. - HELD THAT: - The Court considered earlier decisions of Division Benches of High Courts (Allahabad, Karnataka, Madras) which upheld the validity of the substituted Rule 3. After perusal, the Court respectfully agreed with those precedents and accepted their reasoning. Having found the earlier High Court decisions persuasive and on point, the Court rejected the contention that Rule 3 suffers from excessive delegation and concluded that no fresh determination to the contrary was warranted in the present petition. [Paras 6, 7, 8]

The challenge to the validity of substituted Rule 3 is rejected; the Court upholds the rule in accordance with existing Division Bench precedents and dismisses the petition.

Final Conclusion: Writ petition dismissed: the challenge to Section 17(2)(vi) is academic due to subsequent legislative substitution, and the challenge to substituted Rule 3 is rejected with the Court following earlier Division Bench decisions; no costs.

Re-opening of assessment under Section 148 r/w Section 147 of the Income tax Act, 1961 - Violation of principles of natural justice - Requirement of adequate notice and opportunity of hearing before re-opening - Duty to pass a speaking order recording reasons for belief

Re-opening of assessment under Section 148 r/w Section 147 of the Income tax Act, 1961 - Violation of principles of natural justice - Requirement of adequate notice and opportunity of hearing before re-opening - Validity of the impugned notice and order re-opening assessment in view of denial of adequate time and personal hearing - HELD THAT: - The Court found that the show cause notice dated 25.03.2022 afforded the petitioner barely 24 hours to respond and that the petitioner had specifically sought a personal hearing which was not granted before passing the impugned order dated 29.03.2022. The short notice and denial of an opportunity of hearing constituted a breach of the principles of natural justice. Although the Revenue contended that the reopening was justified on alleged misrepresentation regarding ownership of the bank account, the procedural deficiency in providing insufficient time and refusing the requested hearing rendered the re-opening order unsustainable. The Court therefore set aside the impugned order and directed that the matter be remitted for fresh consideration after affording the petitioner a proper opportunity to be heard. [Paras 8, 13]

Impugned re-opening order dated 29.03.2022 set aside for violation of principles of natural justice; matter remitted for fresh decision after hearing the petitioner.

Duty to pass a speaking order recording reasons for belief - Re-opening of assessment under Section 148 r/w Section 147 of the Income tax Act, 1961 - Procedure and directions on remand for fresh consideration of re-opening and completion of assessment - HELD THAT: - The Court directed that, since the re-opening occurred prior to the amendment to Section 148 effective 01.04.2021, the respondents shall pass a speaking order within eight weeks of receipt of this order. Before passing the fresh order, the petitioner must be given opportunity to file a reply/representation to the recorded reasons and be heard. The respondents are to dispose of the petitioner's objection to the re-opening on merits and thereafter proceed to complete the assessment in accordance with law. The Court limited the exercise to a rehearing and fresh decision on merits and procedure, without adjudicating the substantive merits itself. [Paras 14]

Matter remitted to respondents to pass a speaking order on the reasons for re-opening and to decide the petitioner's objections after giving opportunity of filing reply/hearing, to be completed within eight weeks.

Final Conclusion: Writ petition allowed in part: impugned order dated 29.03.2022 set aside for denial of adequate notice and hearing; matter remitted to respondents to re-examine and decide the objections to re-opening and complete assessment by passing a speaking order within eight weeks; connected petitions closed, no costs.

Revisional jurisdiction under Section 263 - Erroneous and prejudicial to the interest of the revenue - Reassessment under Section 148 and verification by the Assessing Officer - Principles of natural justice in revisional proceedings

Revisional jurisdiction under Section 263 - Erroneous and prejudicial to the interest of the revenue - Whether the Tribunal was justified in setting aside the revisional order passed by the Principal Commissioner under Section 263. - HELD THAT: - The Court examined whether the Tribunal erred in quashing the revisional order of the Principal Commissioner which had set aside the AO's re-assessment and remitted the matter for fresh inquiry. Applying the settled test for exercise of jurisdiction under Section 263 (twin conditions of an order being erroneous and prejudicial to revenue), the Court found that the AO had conducted an inquiry-albeit not exhaustive-and had examined books, vouchers, audit report and accounts. As the AO had applied his mind and concluded that no escapement of income arose on reassessment, the revisional exercise could not rest merely on the revisional authority having a different view. The Tribunal therefore rightly concluded that the AO's order could not be branded erroneous or prejudicial to revenue so as to justify interference under Section 263, and the High Court found no reason to disturb that conclusion. [Paras 7, 8]

The Tribunal's order quashing the revisional order is upheld; the revisional order was not shown to be erroneous and prejudicial to the interest of revenue.

Reassessment under Section 148 and verification by the Assessing Officer - Principles of natural justice in revisional proceedings - Whether the Principal Commissioner could exercise revisional power under Section 263 after the AO had reopened assessment with prior approval. - HELD THAT: - The Court clarified that there is no bar on the Principal Commissioner invoking powers under Section 263 to examine and, if justified, revise an assessment order even though the AO had reopened the assessment after obtaining approval. The authority to revisit an assessment under Section 263 exists irrespective of prior approval for reopening; however, the power can be exercised only when the twin conditions of error and prejudice to revenue are satisfied following compliance with principles of natural justice. [Paras 8]

Principal Commissioner may exercise revisional jurisdiction despite prior approval for reopening, but such jurisdiction must be exercised only when the order is shown to be erroneous and prejudicial to revenue.

Reassessment under Section 148 and verification by the Assessing Officer - Erroneous and prejudicial to the interest of the revenue - Whether the AO's re-assessment was inadequate (no inquiry) such that the revisional order under Section 263 was warranted. - HELD THAT: - The Court considered the material on record, including the AO's order which recorded examination of books of account, vouchers, audit report and financial statements, and an office note reflecting verification during re-assessment. While the AO's order was not lengthy, the presence of inquiry and application of mind distinguishes the case from one where no verification was conducted. Precedents establish that an assessment cannot be invalidated merely because the revisional authority would have preferred a more elaborate order. In the facts, the AO had taken into account the available material and concluded no escapement of income; consequently, the revisional order could not be sustained on the ground of alleged lack of verification. [Paras 7, 8]

The AO had conducted verificatory inquiry; the assessment was not rendered erroneous for want of any verification, and therefore did not satisfy the condition for exercise of revisional power.

Final Conclusion: The appeal is dismissed. The High Court upholds the Tribunal's order quashing the revisional proceedings under Section 263, holding that the AO had made sufficient inquiry on re-assessment and the revisional jurisdiction was not attracted.

Vacant plot versus residential house - benefit under section 54F of the Income tax Act, 1961 - reinvestment exemption where multiple residential units exist prior to amendment - amendment replacing the phrase "a residential house" with "one residential house" and its applicability

Vacant plot versus residential house - The nature of the property at Plot No.6, Ganesh Nagar, Sholinganallur - whether it was a vacant plot or a residential house. - HELD THAT: - The Commissioner (Appeals) found, and this Tribunal has affirmed, that the Ganesh Nagar property was only a vacant plot and could not be characterised as a house property despite the existence of an electricity connection and any old dilapidated structure. The Tribunal concluded that the Assessing Officer's classification of the plot as a house property was not justified on the materials and explanations on record, and therefore the finding that the assessee owned only one residential house for the purpose of exemption under the relevant provision was correct. [Paras 6]

The Ganesh Nagar property is a vacant plot and not a residential house; the Revenue's grounds challenging that conclusion are dismissed.

Benefit under section 54F of the Income tax Act, 1961 - reinvestment exemption where multiple residential units exist prior to amendment - amendment replacing the phrase "a residential house" with "one residential house" and its applicability - Whether the assessee was entitled to claim deduction under section 54F for Assessment Year 2013 14 despite having multiple residential units/plots. - HELD THAT: - The Tribunal applied the temporal scope of the legislative amendment which replaced the words "a residential house" with "one residential house". That amendment, enacted by the Finance (No.2) Act, 2014, is prospective in operation and applies with effect from the relevant date specified (operationally from A.Y. 2014 15 / A.Y. 2015 16 as observed in the order). Since the assessment year before the Tribunal is 2013 14, the pre amendment position governed and permitted claim of reinvestment exemption even where there were multiple units. Relying on that temporal application and prior judicial exposition referenced in the proceedings, the Tribunal held the assessee was eligible to claim deduction under section 54F for A.Y. 2013 14. [Paras 7, 8]

The assessee is entitled to claim deduction under section 54F for AY 2013 14; the Revenue's appeal on this point is dismissed.

Final Conclusion: The Revenue's appeal is dismissed: the Ganesh Nagar property is held to be a vacant plot (not a house) and, on the authoritative construction of the amendment to the statutory provision, the assessee is entitled to claim deduction under section 54F for Assessment Year 2013 14.

Penalty under section 270A for underreported income - Estimation disallowance not constituting underreporting - Reduction of penalty to fifty percent of tax on underreported income - Levy of penalty under section 271B for non-filing of tax audit report - Bonafide mistake in electronic upload / reasonable cause under section 273B

Penalty under section 270A for underreported income - Estimation disallowance not constituting underreporting - Reduction of penalty to fifty percent of tax on underreported income - Validity and quantum of penalty levied under section 270A in respect of underreported income and estimated disallowance of expenses. - HELD THAT: - The Tribunal found that the assessee had omitted certain purchases and sales returns from the VAT returns but produced the purchase bills and sales-return details before the Assessing Officer and these items were recorded in the books of account. Consequently, the misstatement in the VAT returns arose from omission and not from deliberate misrepresentation or suppression of facts. In such circumstances the Tribunal held that penalty under section 270A could not be sustained at the maximum rate and was to be restricted to 50% of the tax on the underreported income. Separately, the Tribunal held that a disallowance made on an estimated basis (20% of contested expenses) constituted an estimation and not an underreporting arising from misrepresentation or suppression; therefore penalty could not be levied on that estimated disallowance. The Tribunal directed modification of the penalty accordingly and deleted the portion attributable to the estimated disallowance. [Paras 5, 6]

Penalty under section 270A restricted to 50% of tax on the underreported income; penalty attributable to the estimated 20% disallowance deleted.

Levy of penalty under section 271B for non-filing of tax audit report - Bonafide mistake in electronic upload / reasonable cause under section 273B - Whether penalty under section 271B is leviable where the tax audit report for the relevant year was prepared but erroneously uploaded on the portal for the earlier assessment year. - HELD THAT: - The Tribunal recorded that the audit report for the relevant previous year was prepared and dated appropriately and that the assessee had uploaded the audit report but mistakenly selected the earlier assessment year while e filing. The Revenue did not dispute the date of the audit report for the relevant year. Given that the accounts were audited as required by section 44AB and the failure was an apparent bonafide clerical mistake in selecting the assessment year during electronic upload, the Tribunal concluded that section 271B could not be invoked to levy penalty for non-submission of the audit report for the relevant year. The Tribunal therefore found that the facts disclosed reasonable cause and ordered deletion of the penalty under section 271B. [Paras 10, 11]

Penalty under section 271B deleted on account of bonafide mistake in uploading the audit report for the wrong assessment year; assessee found to have complied with section 44AB.

Final Conclusion: Appeal against the penalty under section 270A partly allowed by reducing the penalty to 50% of tax on the underreported income and deleting penalty relating to the estimated disallowance; appeal against the penalty under section 271B allowed and the penalty deleted.

Allocation of common expenses between business segments - Apportionment by sales ratio versus gross profit ratio - Arm's Length Price determination under TNMM - Applicability of CUP method as most appropriate method - Adjustments for higher custom duty under TNMM benchmarking - Working capital adjustment - computation and substantiation - Remand for fresh determination and opportunity of hearing

Allocation of common expenses between business segments - Apportionment by sales ratio versus gross profit ratio - Proper basis for allocation of common operating costs between trading and manufacturing segments - HELD THAT: - The Tribunal upheld the finding that the assessee failed to properly apportion employee cost, depreciation and other common expenses to the trading segment and accepted that certain manufacturing specific costs must be excluded from the common base. The Tribunal rejected the assessee's method of allocating common expenses on the basis of gross profit ratio because that percentage measure ignores the relative magnitudes of sales and would produce illogical allocations. In the absence of any rational alternative proposed by the assessee, allocation on the basis of segmental revenues (sales ratio) as adopted by the TPO was held to be a reasonable and correct basis for apportioning common expenses between the segments; allocation of costs peculiar exclusively to manufacturing (e.g., plant and machinery depreciation, site managers) was to be excluded from the common pool. [Paras 5, 6, 7, 8, 9]

Allocation of common expenses to the trading segment on the basis of sales ratio as done by the TPO is upheld and the assessee's gross profit ratio basis is rejected.

Adjustments for higher custom duty under TNMM benchmarking - Arm's Length Price determination under TNMM - Whether a separate adjustment is warranted for higher amount of custom duty paid by the assessee vis a vis comparables after applying TNMM - HELD THAT: - Under TNMM the operating margin is benchmarked to a common base, which incorporates operating revenues and operating expenses. If higher purchase costs (including higher absolute amounts of customs duty) result in correspondingly higher operating revenue, the operating margin comparison already equalises such differences. A separate adjustment is only warranted where the rate of custom duty differs between the assessee and comparables. In the present case the difference was only in the amount (not in the rate) of custom duty; therefore no separate adjustment was permissible and the Tribunal overturned the CIT(A)'s allowance of the custom duty adjustment. [Paras 10, 11]

No separate adjustment for higher custom duty is allowable where TNMM benchmarking has been applied and the difference is only in the amount (not the rate) of duty; the CIT(A)'s allowance is overturned.

Working capital adjustment - computation and substantiation - Remand for fresh determination and opportunity of hearing - Validity of the working capital adjustment computed by the assessee and directions of the CIT(A.) - HELD THAT: - The assessee failed to substantiate segmental figures for receivables, payables and inventories for the trading segment and accepted at least one error in inventory figures when confronted. The TPO identified additional defects in the working capital computations of the comparables. The CIT(A) accepted the assessee's submissions without adequately addressing the TPO's objections or ensuring proper substantiation. In these circumstances the Tribunal found it appropriate to set aside the impugned direction and remit the working capital adjustment to the AO/TPO for recomputation, directing that the assessee be given a reasonable opportunity to produce correct and complete particulars. [Paras 12, 13]

Matter remitted to AO/TPO for fresh computation of working capital adjustment after permitting the assessee to substantiate segmental figures; CIT(A)'s directions set aside.

Applicability of CUP method as most appropriate method - Arm's Length Price determination under TNMM - Whether CUP method was the most appropriate method for sale of finished goods or TNMM remained appropriate - HELD THAT: - CUP is only appropriate where the facts and circumstances of the international and comparable transactions are sufficiently similar. Significant differences in quantities sold to associated enterprises and to third parties (huge quantitative variances across months/items) undermine the comparability required for CUP. Given these substantial quantitative differences, CUP could not be regarded as the most appropriate method and TNMM remained the correct method to benchmark the sale of finished goods. The Tribunal therefore sustained the CIT(A)'s acceptance of the assessee's application of TNMM. [Paras 14, 15]

CUP method is not appropriate due to major quantitative differences between AE and third party sales; TNMM is the most appropriate method and the CIT(A)'s acceptance of TNMM is upheld.

Final Conclusion: The Revenue's appeal is partly allowed and the assessee's cross objection is dismissed. The Tribunal upholds the TPO's allocation of common expenses to the trading segment on a sales ratio basis and disallows the separate custom duty adjustment, remits the working capital adjustment to the AO/TPO for recomputation with opportunity to the assessee, and confirms that TNMM is the appropriate method for the sale of finished goods; matter remitted to AO/TPO for fresh determination of ALP in accordance with these directions.

Exemption under section 54 of the Income-tax Act - Construction of residential property treated as fulfilment of section 54 conditions - Three-year window for construction to claim section 54 exemption - Possession as completion of construction - Application of precedent Pr.CIT v. Akshay Sobti - Distinction between purchase/allotment and construction for section 54

Exemption under section 54 of the Income-tax Act - Construction of residential property treated as fulfilment of section 54 conditions - Three-year window for construction to claim section 54 exemption - Possession as completion of construction - Application of precedent Pr.CIT v. Akshay Sobti - Whether the assessee was entitled to claim exemption under section 54 where the agreement with the builder pre-dated the one-year period but possession (completion) of the constructed residential unit was taken within three years of transfer of the original asset. - HELD THAT: - The Tribunal applied the ratio of Pr.CIT v. Akshay Sobti as bindingly analogous. The Court held that where the terms of the arrangement with the builder amount to booking/construction of a flat, the assessee is entitled to the three-year period for construction under section 54. On the facts, although the agreement to purchase/book was dated before the one-year pre-transfer window, the arrangement was construed as construction and not a disqualifying prior purchase. The assessee was therefore entitled to the extended three-year window from the date of transfer (11.11.2011) to complete construction (till 11.11.2014). The date of grant of possession (23.04.2012) was treated as completion of construction within that three-year period and satisfied the condition for exemption. Reliance on CBDT circulars and the question of allotment letter did not alter the applicability of the construction-window under the precedent relied upon. [Paras 8, 10, 11]

Exemption under section 54 allowed as the agreement was construed as construction and possession taken within three years of transfer; claim of exemption accepted.

Final Conclusion: The appeal is allowed: the Tribunal held that the agreement with the builder constituted construction for the purposes of section 54, possession dated 23.04.2012 amounted to completion within three years of the transfer (11.11.2011), and the assessee is entitled to the claimed exemption.

Fee for technical services - Royalty under Article 12 of DTAA - Non-taxability of payments for resale/use under end-user licence agreements - Application of Supreme Court decision in Engineering Analysis Centre of Excellence

Fee for technical services - Royalty under Article 12 of DTAA - Application of Supreme Court decision in Engineering Analysis Centre of Excellence - Whether receipts from sale and maintenance of software licences are taxable in India as fee for technical services/royalty - HELD THAT: - The Tribunal examined the Assessing Officer's characterization of receipts from sale and maintenance of software licences as taxable 'fee for technical services' under the Act and Article 12 of the India-Singapore DTAA. It treated the issue in light of the Tribunal's earlier order in the assessee's own case for AY 2016-17 and the decision of the Hon'ble Supreme Court in Engineering Analysis Centre of Excellence Pvt. Ltd. The Supreme Court held that amounts paid by resident Indian end-users/distributors to non-resident software suppliers for resale/use under distribution agreements/EULAs do not constitute royalty or give rise to income taxable in India, and that there is no TDS obligation under section 195 in such cases. Following and applying that authoritative precedent, and the prior ITAT ruling in the assessee's own case, the Tribunal concluded that the impugned addition could not be sustained and directed the Assessing Officer to delete it. [Paras 9, 10, 11]

Impugned addition held unsustainable; Assessing Officer directed to delete the addition and appeals allowed.

Final Conclusion: Following the Supreme Court decision in Engineering Analysis Centre of Excellence and the Tribunal's earlier ruling in the assessee's own case, the Tribunal set aside the addition treating software licence receipts as taxable and allowed the appeals for AY 2018-19 and AY 2019-20.

Fee for Technical Services (FTS) - Most Favoured Nation (MFN) clause / paragraph 7 of Protocol to India-France DTAA - Application of Article 12(4)(a) - ancillary and subsidiary services connected to royalty - Application of Article 12(4)(b) - make available condition - Cost to cost reimbursement and its characterisation

Fee for Technical Services (FTS) - Most Favoured Nation (MFN) clause / paragraph 7 of Protocol to India-France DTAA - Application of Article 12(4)(a) - ancillary and subsidiary services connected to royalty - Characterisation of business support service fees as FTS under Article 12(4)(a) of India-Portugal DTAA, invoked via MFN under the Protocol to India-France DTAA. - HELD THAT: - The first appellate authority accepted MFN applicability and applied Article 12(4) of the India-Portugal DTAA. The Tribunal examined the management services agreement and the trademark and technology licence agreement and found them to be distinct: the licence is with a different group affiliate, relates to a non exclusive licence to use IP for manufacturing and is quantified on net sales; the management services agreement covers separate functions, is payable on cost plus markup and is in a different field. The finding of the appellate authority that the royalty and service payments formed a combined agreement is contrary to the documentary record. Therefore the business support services cannot be regarded as ancillary and incidental to royalty paid to another group affiliate and do not qualify as FTS under Article 12(4)(a). [Paras 17, 18, 19, 20, 21]

Fees from business support services are not FTS under Article 12(4)(a) of the India-Portugal DTAA; the appellate authority's conclusion on this point is reversed.

Fee for Technical Services (FTS) - Application of Article 12(4)(b) - make available condition - Whether the business support services satisfy the make available test under Article 12(4)(b) of the India-Portugal DTAA. - HELD THAT: - On examination of the nature, mode and regularity of services rendered, the Tribunal found no material demonstrating that the assessee made available technical knowledge, know how or skill so as to enable the Indian recipient to apply them independently in future without the assessee's assistance. The services were ongoing, day to day support used in various business operations and not one time transfers producing durable know how resident with the recipient. Revenue did not establish the make available condition. [Paras 22, 23]

Business support service fees do not qualify as FTS under Article 12(4)(b) because the make available condition is not satisfied.

Cost to cost reimbursement and its characterisation - Characterisation of Rs. 5,09,07,356 claimed as cost to cost reimbursement - whether it constitutes FTS. - HELD THAT: - The assessee claims the amount represents reimbursements of actual event and promotional costs incurred on behalf of the Indian entity and seeks to place additional evidence on record. The Revenue contends that facts were not examined earlier and that clear evidence is lacking. Because the factual record on the nature of these payments is incomplete and additional evidence has been filed, the Tribunal directed that the issue be restored to the Assessing Officer for fresh examination, with opportunity of hearing to the assessee, to determine whether such reimbursements qualify as FTS under Article 12(4). [Paras 24, 25, 26, 27, 28]

Issue remanded to the Assessing Officer for fresh adjudication of the cost to cost reimbursements, after affording the assessee a reasonable opportunity of hearing.

Fee for Technical Services (FTS) - Treatment of Rs. 4,80,198 received towards repair services which the assessee abandoned in appeal. - HELD THAT: - At hearing the assessee gave up its claim in respect of the amount received for repair services. The Tribunal therefore upheld the departmental authorities' decision in respect of that surrendered component. [Paras 15]

The departmental treatment of the Rs. 4,80,198 for repair services is upheld.

Final Conclusion: The appeal is partly allowed: the Tribunal holds that the business support service fees do not constitute FTS under Article 12(4)(a) or (b) of the India-Portugal DTAA (applied via MFN from the India-France Protocol); the departmental treatment of the small repair services amount is upheld; the claimed cost to cost reimbursements are remitted to the Assessing Officer for fresh examination after giving the assessee an opportunity to be heard.

Approval under section 80G - scope of charitable objects - use of public donations for building construction - Member of Parliament Local Area Development Scheme (MPLADS) funding and execution - evidentiary burden to rebut administrative findings

Approval under section 80G - scope of charitable objects - use of public donations for building construction - Member of Parliament Local Area Development Scheme (MPLADS) funding and execution - Denial of approval under section 80G on the ground that the society's activities and receipts demonstrated collection of funds for construction (which was to be financed and executed under MPLADS by the Government of Haryana) and no discernible application of funds to the stated charitable objects. - HELD THAT: - The Tribunal upheld the findings of the CIT(E) that the agreement between the society and the Government of Haryana mandated that the Government would undertake construction of Patel Gurjar Bhawan under the MPLADS and hand the completed building over to the society. The CIT(E) recorded that the society's receipts consisted largely of corpus donations directed to construction, that grants from the Deputy Commissioner were credited to the society's account, and that the society had not incurred expenditure toward the stated charitable objects. On that basis the CIT(E) concluded that the real purpose appeared to be building construction (not an expressed object in the memorandum) and that donations were generated notwithstanding government financing for the same work. The Tribunal found no infirmity in concluding that, given these facts, approval under section 80G could be denied. [Paras 7, 8, 9]

Approval under section 80G refused; the order of the CIT(E) rejecting approval is upheld.

Evidentiary burden to rebut administrative findings - approval under section 80G - Whether the assessee produced evidence to controvert the CIT(E)'s finding that the Government of Haryana was to finance and undertake the construction and that the society had not applied funds to its stated objects. - HELD THAT: - The assessee expressly contested the CIT(E)'s conclusion but failed to produce any evidence or documents to contradict the agreement or the financial entries relied upon by the CIT(E). The Tribunal noted the absence of any material from the assessee to show that funds collected were handed over to the Government or that the society had applied receipts to declared charitable activities. In the absence of such rebuttal, the Tribunal found no error in the Administrative finding and declined to interfere. [Paras 9]

Assessee's challenge rejected for lack of evidentiary support; no interference with CIT(E)'s findings.

Final Conclusion: The appeal is dismissed; the Tribunal upholds the CIT(E)'s refusal to grant approval under section 80G on the facts that construction was to be financed and undertaken under MPLADS by the Government of Haryana and the assessee failed to demonstrate application of funds to its stated charitable objects or to rebut the administrative findings.

Comparability of comparables - functional comparability - government company as comparable - Transactional Net Margin Method (TNMM) - operating profit/operating cost as profit level indicator - capacity utilization adjustment (idle manpower) - arm's length price

Comparability of comparables - functional comparability - government company as comparable - Transactional Net Margin Method (TNMM) - operating profit/operating cost as profit level indicator - Exclusion of three of the four comparables (Engineers India Ltd., Tata Consulting Engineers Ltd., Mahindra Consulting Engineers Ltd.) from the final set of comparables for benchmarking the assessee's international transactions. - HELD THAT: - The Tribunal held that a government company cannot be excluded from comparability analysis merely because it is government owned; each comparable must be examined on its own functional profile. The DRP rightly examined functions, services and responsibilities and found that Engineers India Ltd., Mahindra Consulting Engineers Ltd. and Tata Consulting Engineers Ltd. provide integrated engineering, design, project management and commissioning services which are functionally dissimilar to the assessee's business of providing homeland security solutions and deputation of technical personnel. Accordingly, the DRP's rejection of these three comparables was upheld. The TNMM at entity level with OP/OC as the profit level indicator, as the MAM, remained the accepted methodology, but the three listed comparables were excluded on grounds of functional dissimilarity rather than merely on government ownership. [Paras 8, 11, 12, 13, 14]

The exclusions of Engineers India Ltd., Mahindra Consulting Engineers Ltd. and Tata Consulting Engineers Ltd. as comparables are sustained; ground Nos. 1 to 3 are decided against the Revenue.

Capacity utilization adjustment (idle manpower) - idle manpower adjustment - remit to TPO's findings - Validity of the adjustment on account of capacity utilization/idle manpower of Rs. 10,72,349/- allowed in the transfer pricing computation. - HELD THAT: - The Tribunal noted that the adjustment for idle manpower was made and accepted by the Transfer Pricing Officer, who expressly recorded acceptance of the assessee's computation of the idle manpower adjustment as a first year operations related measure to improve comparability with older comparables. Since the TPO himself granted the adjustment, the Revenue's challenge to the DRP's allowance of that adjustment was held to be not maintainable. [Paras 15, 16, 17]

The Revenue's grounds challenging the capacity utilization/idle manpower adjustment are dismissed.

Infructuous cross objections - final disposal of appeals - Disposition of the cross objections filed by the assessee and the final outcome of the appeal/cross objections. - HELD THAT: - The Tribunal recorded that the assessee's cross objections had become infructuous, as admitted by the assessee's representative, and therefore had no surviving merit. In light of the foregoing decisions on comparables and the capacity utilization adjustment, the Revenue's appeal was dismissed and the assessee's cross objections were dismissed as infructuous. [Paras 18, 19]

The Revenue's appeal is dismissed; the assessee's cross objections are dismissed as having become infructuous.

Final Conclusion: The Tribunal upheld the DRP's rejection of three comparables on the ground of functional dissimilarity (not merely government ownership), sustained the idle manpower/capacity utilization adjustment as granted by the TPO, dismissed the Revenue's appeal, and held the assessee's cross objections to be infructuous and dismissed.

Cost of improvement - indexed cost of acquisition - fair market value as on 01.04.2001 - inherited property / family settlement - cost to previous owner - inclusion of period for which asset was held by previous owner (Explanation 1(b) to section 2(42A)) - exemption under section 54 of the Act - effect of COVID-19 limitation orders on time limits for completion/registration

Cost of improvement - Allowability of claimed cost of construction / improvement for computation of long term capital gains - HELD THAT: - The Tribunal found that the existence of the building was reflected in the registered sale deed and valued by the stamp valuation authority. The assessee had declared cost of construction / improvement aggregating to the claimed amount. On the materials before it the Tribunal accepted the assessee's claim of cost of improvement and directed that the same (as originally claimed) be allowed for computation of capital gains. [Paras 6]

Claim of cost of construction / improvement in the amount declared by the assessee is allowed.

Indexed cost of acquisition - fair market value as on 01.04.2001 - inherited property / family settlement - cost to previous owner - inclusion of period for which asset was held by previous owner (Explanation 1(b) to section 2(42A)) - Whether for an asset received by way of family settlement / inheritance the assessee can adopt guideline/fair market value as on 01.04.2001 and claim indexation from that date rather than indexation from the date of family settlement - HELD THAT: - Having examined the authorities and statutory scheme, the Tribunal held that where an asset has been received by the assessee by inheritance / family settlement the cost of acquisition to be taken into account is the cost to the previous owner (i.e., the original cost to the father acquired in 1980). However, for computing indexed cost the second proviso to section 48 read with Explanation (iii) thereto and Explanation 1(b) to section 2(42A) require that the indexation be computed with reference to the first year in which the asset was held by the assessee or the year beginning 01.04.2001, whichever is later. On these principles the Tribunal directed the Assessing Officer to adopt the fair market / guideline value as on 01.04.2001 (as claimed by the assessee) as the cost of acquisition for indexation purposes and to allow indexation benefit from 01.04.2001. [Paras 7]

Assessing Officer to adopt the guideline fair market value as on 01.04.2001 as the cost of acquisition for the assessee and allow indexation from 01.04.2001 in accordance with the statutory provisions.

Cost of improvement - indexed cost of acquisition - fair market value as on 01.04.2001 - Applicability of indexation to the allowed cost of improvement from 01.04.2001 - HELD THAT: - Following the direction on adoption of fair market value as on 01.04.2001 for cost of acquisition, the Tribunal further directed that the allowed cost of construction / improvement be taken at the declared amount and the Assessing Officer should determine its fair market value as on 01.04.2001 and allow indexation accordingly. [Paras 8]

Indexation of the allowed cost of improvement to be allowed from 01.04.2001; Assessing Officer directed to adopt fair market value as on that date and compute indexed amount.

Exemption under section 54 of the Act - effect of COVID-19 limitation orders on time limits for completion/registration - Entitlement to exemption under section 54 where registration of the new residential property was not completed within three years due to delay in possession/completion attributable to COVID 19 related disruptions - HELD THAT: - The assessee executed an agreement to purchase and made payments in 2018-2019 and produced payment receipts and a project completion certificate showing handing over on 01.04.2022. The Tribunal accepted the assessee's submission that delay in completion/handing over was attributable to COVID 19 restrictions and reliance was placed on the Supreme Court orders excluding the period from 15.03.2020 to 28.02.2022 for limitation purposes (extended to a later date). On the facts and documents produced, the Tribunal held that the assessee had complied with the requirements for claiming exemption under section 54 and allowed the exemption. [Paras 9]

Exemption under section 54 allowed; Assessing Officer directed to give effect to the claim.

Final Conclusion: Both appeals are allowed in part: the Tribunal allowed the claimed cost of improvements, directed adoption of the fair market / guideline value as on 01.04.2001 and corresponding indexation (including for improvements), and allowed the exemption under section 54 on the facts, directing the Assessing Officer to recompute the assessments accordingly.

Faceless Assessment u/s 144B - violation of principle of natural justice - not providing opportunity of hearing to the petitioner giving no response to the request made by the petitioner for grant of opportunity of hearing through video conferencing - HC [2022 (12) TMI 701 - ALLAHABAD HIGH COURT] remitting matter back to the competent authority/National Faceless Assessment Centre for passing fresh assessment order after providing due opportunity of hearing to the petitioner by fixing a date for personal hearing through video conferencing

HELD THAT:- As we find that the matter has been remitted in order to give an opportunity to the petitioner of being heard. However, learned counsel for the petitioner submitted that certain contentions touching upon the constitutional validity of Section 144-B(9) as well as the exercise of jurisdiction under Section 143(2) were raised in the writ petition and being aggrieved by the impugned order, this special leave petition has been filed.

We note that since the matter has been remitted to the Assessing Authority to be considered on merits, we dispose of this Special Leave Petition reserving liberty to the petitioner to revive this petition in the event the petitioner is unsuccessful before the statutory authorities so as to raise the contentions raised in this special leave petition on the other aspects of the matter.

Doctrine of proportionality in administrative punishment - High Sea Sale (HSS) - legal characterisation for customs purposes - revocation of Customs Broker licence as disciplinary measure - requirement to consider proportionality and revenue impact in imposing punitive sanctions - admissions and requirement to examine explanation before treating them as conclusive - relevance of Customs Manual on Self Assessment in valuation/HSS enquiries

Doctrine of proportionality in administrative punishment - revocation of Customs Broker licence as disciplinary measure - requirement to consider proportionality and revenue impact in imposing punitive sanctions - Whether revocation of the appellant's Customs Broker licence was disproportionately excessive and liable to be set aside. - HELD THAT: - The Court applied the principle of proportionality to disciplinary action under CBLR 2013 and held that although the Commissioner has discretion to impose a range of punishments (including revocation under Regulation 18), that discretion must be exercised so that the punishment is commensurate with the contravention. The Court noted the proceedings were essentially disciplinary and ordinarily deserving of deference, but interference is warranted where the punishment is disproportionate or shocks conscience. The Court found that the transaction in dispute was revenue neutral (no loss to revenue) and that the respondent had not taken the revenue neutrality and lack of material harm into account when imposing the extreme sanction. The Court therefore concluded that revocation was disproportionately excessive and set aside the impugned order insofar as it revoked the appellant's licence, directing that any renewal or fresh application be considered in accordance with law. The Court confined relief to revocation because the appellant accepted levy of a penalty instead of pressing for remand on merits. [Paras 44, 48, 50, 51, 52]

Revocation of the Customs Broker licence was disproportionately excessive; the order revoking the licence is set aside and renewal or fresh application is to be considered in accordance with law.

High Sea Sale (HSS) - legal characterisation for customs purposes - admissions and requirement to examine explanation before treating them as conclusive - relevance of Customs Manual on Self Assessment in valuation/HSS enquiries - Whether the appellate authority (CESTAT) and respondent failed to consider the appellant's specific contention and explanation that the HSS agreement was valid (and whether the appellant's admission-letter could be treated as conclusive without examining its plausibility). - HELD THAT: - The Court observed that the CESTAT rejected the appeal largely on the basis of a letter from the appellant admitting that the HSS agreement was incorrect, without considering the appellant's explanation that the letter was written to assist clients and resolve an impasse, and without examining the plausibility of that explanation. The Court emphasised that, in the absence of a statutory definition of HSS and where heightened punishment affecting livelihood was imposed, the understanding of the parties and the appellant's explanation were relevant and ought to have been examined. The Court found that strict application of rules on admission was not appropriate without assessing the appellant's plausible explanation, and noted that the authorities relied on the Customs Manual's discussion of HSS but did not show how statutory provisions (e.g., Sales of Goods Act or Central Sales Tax Act) were contravened. Although the Court did not finally adjudicate the substantive validity of the HSS transaction on merits, it recorded that the CESTAT erred in failing to consider the appellant's submissions and explanation before upholding the punitive measure. [Paras 36, 37, 38, 50, 51]

CESTAT and the respondent erred in treating the appellant's admission-letter as conclusively establishing guilt without examining the appellant's explanation; the appellate authority failed to consider the appellant's specific submissions regarding the validity of the HSS agreement.

Final Conclusion: The Court set aside the order revoking the appellant's Customs Broker licence as disproportionate and directed that any renewal or fresh application be considered in accordance with law; the Court also held that the appellate authority erred in treating the appellant's admission as conclusive without examining the explanation, but did not finally decide the substantive validity of the High Sea Sale on merits, the appellant having accepted levy of penalty.

Duty drawback entitlement - Bank Realization Statement - verification of bank records by authority - quashing of order for failure to consider material - personal hearing before adjudication - remand for fresh consideration

Duty drawback entitlement - Bank Realization Statement - quashing of order for failure to consider material - The petitioner is entitled to relief based on the Bank Realization Statement which the authority failed to verify before passing the impugned order. - HELD THAT: - The Court found that the petitioner had exported goods and was eligible for duty drawback, but the respondents denied benefit for lack of submission of the relevant document. The petitioner demonstrated that the Bank had uploaded the Bank Realization Statement on 02.09.2013 and that the respondents had access to the same. The respondents did not verify the uploaded statement before passing the impugned order and did not issue a show cause notice, depriving the petitioner of an opportunity to explain. In view of these omissions, the Court concluded that the petitioner was entitled to have the claimed document considered and therefore quashed the impugned order. [Paras 3, 5, 6]

Impugned order dated 22.09.2020 quashed and petitioner entitled to have the Bank Realization Statement considered.

Verification of bank records by authority - personal hearing before adjudication - remand for fresh consideration - The respondents are to issue notice, grant personal hearing, accept submission of the Bank Realization Statement and pass a fresh order after verification. - HELD THAT: - The Court directed that, in light of the uploaded Bank Realization Statement and the absence of prior verification and opportunity to be heard, the respondents must now issue notice to the petitioner, afford personal hearing, permit submission of the bank statement, verify the record and then decide the matter afresh. The exercise was ordered to be completed within six weeks from receipt of the order, thereby remanding the substantive adjudication to the respondents for fresh consideration confined to verification and adjudication on merits. [Paras 6]

Respondents to issue notice, grant personal hearing, accept and verify the Bank Realization Statement and pass a fresh order within six weeks.

Final Conclusion: The writ petition is allowed: the impugned order dated 22.09.2020 is quashed and the matter is remitted to the respondents to provide notice, personal hearing and to verify and decide the claim based on the Bank Realization Statement within six weeks.

Anti-dumping duty - Refund of excess anti-dumping duty - Revocation/rescission of anti-dumping notification and its retrospective effect - Saving clause preserving acts "done or omitted to be done before such rescission" and its vires - Duty withdrawal following a negative/lesser dumping finding by the Designated Authority - Scheme of anti-dumping rules preventing preservation of levy after negative final finding

Anti-dumping duty - Refund of excess anti-dumping duty - Revocation/rescission of anti-dumping notification and its retrospective effect - Saving clause preserving acts "done or omitted to be done before such rescission" and its vires - Duty withdrawal following a negative/lesser dumping finding by the Designated Authority - Whether the appellants are entitled to refund of anti-dumping duty paid for imports during April 2010 to February 2012 in view of the DGAD's mid term finding of lower dumping margin/negative injury and the subsequent rescinding notification, notwithstanding the saving language in the rescission notification. - HELD THAT: - The Tribunal found that the impugned order rejected the refund solely on the basis of the saving phrase in the rescinding Notification which purported to preserve consequences of "things done or omitted to be done before such rescission." The Tribunal relied on the reasoning in the Madras High Court's decision in Vetcare Organics (extracted at length) which holds that, in the scheme of the anti dumping rules, a final negative finding by the Designated Authority requires withdrawal of duty and the Government cannot, by a saving clause, preserve a levy or retain authority to impose or reimpose duty inconsistent with the statutory scheme. The Tribunal applied that principle to the DGAD's mid term findings which determined lower dumping margin and negative injury and to the Ministry's implementation revoking the anti dumping duty, concluding that the saving language could not be used to deny refund where the statutory scheme and final findings negate the basis for levy. The impugned order was therefore set aside and the appeal allowed.

The impugned order is unsustainable and is set aside; the appeal is allowed, granting the appellants the relief claimed in respect of the specified import period.

Final Conclusion: The Tribunal allowed the appeal and set aside the order denying refund, holding that the rescission of anti dumping duty following the Designated Authority's findings precludes preservation of the levy by reliance on the saving clause and that the appellants are entitled to relief in respect of imports during April 2010 to February 2012.

Penal liability under Section 114 of the Customs Act, 1962 - Requirement of specific investigation and service of show cause notice before imposing penalty - Liability of banker/approved banker for irregular export - Role and duties of bank under Rupee Rouble Trade and RBI Circular No.4 dated 19.05.1999 - Temporal relation of bank's role to Let Export Order (LEO) and physical export

Penal liability under Section 114 of the Customs Act, 1962 - Requirement of specific investigation and service of show cause notice before imposing penalty - Validity of imposition of penalty under Section 114 on Shri Sanjay D. Bhalerao in absence of specific investigation and proper service of show cause notice. - HELD THAT: - The Tribunal found that no summons were issued to Shri Sanjay D. Bhalerao for recording statements or for ascertaining his specific role in the alleged irregular exportation. The impugned order asserted that the appellant earned a profit share but failed to elaborate findings on the appellant's actual involvement. The departmental proceedings were initiated casually and the appellant's name was not correctly reflected in the show cause notice or in the adjudication, undermining substantive nexus between the appellant and the alleged offence. In these circumstances the penal provision under Section 114 cannot be routinely invoked without proper substantiation of culpability and without having afforded fair opportunity and concrete evidentiary basis to link the appellant to the unlawful exportation. [Paras 6]

Penalty under Section 114 imposed on Shri Sanjay D. Bhalerao set aside for lack of specific investigation, deficient service/particularisation and absence of findings establishing his role.

Liability of banker/approved banker for irregular export - Role and duties of bank under Rupee Rouble Trade and RBI Circular No.4 dated 19.05.1999 - Temporal relation of bank's role to Let Export Order (LEO) and physical export - Whether an approved banker (M/s HDFC Bank / Centurian Bank of Punjab) can be held liable under Section 114 for alleged irregular exportation where the bank's role was limited to document scrutiny and forwarding under the Rupee Rouble Trade procedure. - HELD THAT: - RBI Circular No.4/1999 delineates the bank's function in the Rupee Rouble Trade as registration of the LC, advising the exporter, scrutinising shipping documents and forwarding them to the foreign designated bank; where no discrepancy is reported within the prescribed period by the overseas bank the documents are treated as compliant and claim is lodged with RBI. In this case the records show that the overseas bank did not report discrepancies within the stipulated time and RBI remitted rupees to the exporter through the approved banking channel. The bank's actions, as an approved banker carrying out post export documentation and transmission after issuance of LEO and physical export, do not demonstrate active involvement in irregular exportation of goods. Precedent and the objective of Section 114 indicate penal liability is aimed at persons directly involved in unlawful acts concerning the goods and not at an approved banker performing specified documentary and banking functions. [Paras 7, 8]

Penalty under Section 114 imposed on the bank set aside; the bank exonerated from penal consequences as its role was limited to documentary scrutiny and forwarding under the Rupee Rouble Trade and occurred after export/LEO.

Final Conclusion: The impugned order insofar as it imposed penalties under Section 114 of the Customs Act, 1962 on the appellants is set aside; the appeals are allowed and the appellants are exonerated from the penal consequences contested in these proceedings.

Clean slate principle - waterfall mechanism under the Insolvency and Bankruptcy Code, 2016 - payment of corporate debtor's arrears for grant or restoration of electricity connection - jurisdiction under section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 - overriding effect of the Code under section 238 - payment in terms of section 53 of the Code - distinguishing the decision in K.C. Ninan - Embassy Property - public law decisions versus crystallised operational dues

Clean slate principle - waterfall mechanism under the Insolvency and Bankruptcy Code, 2016 - payment of corporate debtor's arrears for grant or restoration of electricity connection - The appellant cannot insist on payment of the corporate debtor's arrears, payable under the waterfall mechanism, as a condition for grant or restoration of an electricity connection to the successful resolution applicant. - HELD THAT: - The Court applied the ratio in Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Private Limited and Others and held that the clean slate principle prevents a distribution of corporate debtor dues outside the Code's prescribed waterfall. Accordingly, arrears due from the corporate debtor must be paid in the manner and order prescribed by the Code and cannot be insisted upon as a precondition for granting or restoring an electricity connection in the name of the successful resolution applicant. The successful resolution applicant, however, remains obliged to satisfy other statutory or regulatory requirements for the connection unrelated to recovery of the corporate debtor's dues.

The appellant's claim to insist on payment of corporate debtor arrears for grant/restoration of electricity connection is barred; such dues must be dealt with under the Code's waterfall and the clean slate principle.

Distinguishing the decision in K.C. Ninan - overriding effect of the Code under section 238 - payment in terms of section 53 of the Code - The judgment in K.C. Ninan is not applicable to disputes governed by the Code; the Code's provisions, having overriding effect, govern payment of debts in insolvency resolution. - HELD THAT: - The Court observed that K.C. Ninan does not deal with the Insolvency and Bankruptcy Code, 2016, and therefore cannot displace the Code's scheme. Section 238 gives the Code overriding effect over inconsistent laws, and Section 53 prescribes the manner of distribution of the corporate debtor's debts. Therefore, claims to recover corporate debtor dues must be adjudicated and satisfied in accordance with the Code rather than by invoking principles from K.C. Ninan.

K.C. Ninan is inapposite where the Code applies; the Code's overriding provisions and the distribution under Section 53 govern the recovery of corporate debtor dues.

Embassy Property - public law vs operational debt - jurisdiction under section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 - An electricity connection is not an asset or property whose renewal is a public-law decision akin to a mining-lease renewal; demands for payment of corporate debtor dues by a distribution licensee fall within the scope of matters 'arising out of or in relation to insolvency resolution' under section 60(5)(c) of the Code. - HELD THAT: - While Embassy Property Developments Pvt. Ltd. recognises that certain public-law decisions (such as renewal of a mining lease) may fall outside the Code unless dues are crystallised, the Court distinguished that context from the present case. An electricity connection is not an 'asset' in the same sense, and where a distribution licensee seeks payment of the corporate debtor's dues as condition for connection, that claim concerns amounts payable by the corporate debtor and therefore falls within the jurisdiction of the adjudicating authority under section 60(5)(c). Where dues are operational and crystallised, they must be adjudicated and paid as prescribed in the approved resolution plan.

Claims by the distribution licensee to recover corporate debtor dues for connection/restoration are matters within the Code's jurisdiction under section 60(5)(c) and must be governed by the resolution process; Embassy does not compel a different result here.

Final Conclusion: The appeals are dismissed. The distribution licensee cannot insist on payment of the corporate debtor's arrears outside the Code's waterfall and resolution process; such dues must be addressed and paid in accordance with the Code and any approved resolution plan, subject only to the successful resolution applicant meeting other lawful requirements for an electricity connection. Pending applications stand disposed of.

Admission of claims in Corporate Insolvency Resolution Process - burden of proof on claimant to substantiate claims - verification of claims by Resolution Professional based on corporate records - approval of resolution plan including admitted claims

Admission of claims in Corporate Insolvency Resolution Process - burden of proof on claimant to substantiate claims - verification of claims by Resolution Professional based on corporate records - Whether the Resolution Professional and the Adjudicating Authority erred in admitting only Rs.96,83,497/- of the workmen's claim while rejecting the higher claim asserted by the appellant. - HELD THAT: - The Adjudicating Authority found that the appellant did not substantiate the asserted claim (originally Rs.12 crores revised to Rs.26.87 crores) by producing supporting documents, whereas the Resolution Professional verified corporate records and admitted Rs.96,83,497/- as due to workmen which was reflected in the corporate debtor's balance sheet. The Court held that it is the claimant's responsibility to produce relevant records to substantiate its claim; in the absence of such substantiation, the Resolution Professional's admission based on the corporate records could not be faulted. On these findings the Adjudicating Authority's conclusion rejecting the appellant's application was upheld. [Paras 5, 7]

The challenge to the admission of only Rs.96,83,497/- was rejected; no error was found in the Resolution Professional's admission or in the Adjudicating Authority's order dismissing the appellant's application.

Approval of resolution plan including admitted claims - verification of claims by Resolution Professional based on corporate records - Whether the Adjudicating Authority erred in approving the resolution plan which provided for payment of the admitted workmen's claim of Rs.96,83,497/-. - HELD THAT: - The Court noted that the resolution plan provided for payment of the entire amount admitted as due to the workmen (Rs.96,83,497/-). Given that the admitted claim had been verified and that there was no demonstration of error in the admission process, there was no valid ground to interfere with the Adjudicating Authority's approval of the resolution plan. The Court therefore declined to disturb the approval. [Paras 8]

The approval of the resolution plan was upheld; no interference was warranted.

Final Conclusion: Both appeals were dismissed: the Adjudicating Authority's rejection of the appellant's application challenging the quantum of admitted workmen's claim was upheld, and the approval of the resolution plan that provided for payment of the admitted claim was sustained.

Anticipatory bail under Section 438 CrPC and restrictions of Section 45 of PMLA - Interpretation of Sections 44 and 45 of PMLA-saving of High Court's powers under Section 439 CrPC - Applicability of PMLA bail restrictions to Constitutional Courts - Distinction between quashing under Section 482 CrPC and grant of anticipatory bail - Principles for grant of bail in economic offences - Delay in prosecution and absence of recovery/attachment as factors in bail

Interpretation of Sections 44 and 45 of PMLA-saving of High Court's powers under Section 439 CrPC - Applicability of PMLA bail restrictions to Constitutional Courts - Whether the restrictions in Section 45 of the PMLA operate to bar Constitutional Courts (High Courts) from exercising their special powers under Section 439 Cr.P.C. - HELD THAT: - The Court examined the placement and effect of Section 44(2) and Section 45 of the PMLA and, by harmonious construction, held that the provision saving the High Court's special powers under Section 439 Cr.P.C. (found in Section 44(2)) must be read with Section 45 so as to give effect to Parliament's intention. Noting the apparent misplacement (a "copy-paste error") which would otherwise render Section 44(2) redundant, the Court construed Sections 44 and 45 together so that the restrictions in Section 45 apply to Courts other than Constitutional Courts. Consequently, Constitutional Courts retain their special bail jurisdiction under Section 439 Cr.P.C. and need not apply the prima facie satisfaction requirement of Section 45 when deciding anticipatory bail applications under their inherent powers. [Paras 31, 32, 46, 50, 52]

Sections 44 and 45 of the PMLA must be read harmoniously; the saving of High Court powers under Section 439 Cr.P.C. applies, and the restrictions in Section 45 do not fetter Constitutional Courts in exercising their bail jurisdiction.

Distinction between quashing under Section 482 CrPC and grant of anticipatory bail - Anticipatory bail under Section 438 CrPC and restrictions of Section 45 of PMLA - Whether dismissal of petitions under Section 482 Cr.P.C. (quashing of charge-sheets/FIRs) conclusively establishes prima facie guilt and precludes grant of anticipatory bail. - HELD THAT: - The Court explained that the scope and standards of scrutiny under Section 482 (power to quash) are different from those applicable to anticipatory bail; a dismissal under Section 482 is not conclusive proof of prima facie guilt for the purpose of bail. Reliance on precedents (including Bhajan Lal, P. Chidambaram and subsequent authorities) led to the conclusion that anticipatory bail applications must be considered on their own merits and not disposed of merely because Section 482 petitions were rejected. The Court therefore rejected the submission that dismissal of quashing petitions establishes a bar to anticipatory bail. [Paras 53, 55, 56, 61, 63]

Rejection of Section 482 petitions does not automatically preclude grant of anticipatory bail; the High Court must decide bail applications on their own merits.

Principles for grant of bail in economic offences - Delay in prosecution and absence of recovery/attachment as factors in bail - Anticipatory bail under Section 438 CrPC and restrictions of Section 45 of PMLA - On the facts of these matters, whether interim anticipatory bail previously granted to the applicants should be confirmed. - HELD THAT: - The Court considered the nature of allegations (alleged diversion/sale of coal in breach of FSA), the long delay between the joint inspection/FIRs and filing of ED complaints (7-12 years), absence of recovery of proceeds of crime from the applicants and absence of attachment of their properties, cooperation of the applicants with investigation, medical/age-related infirmity of one applicant, and lack of any pointed material showing risk of tampering/witness intimidation. Applying established bail principles in economic offences and bearing in mind that Constitutional Courts retain their special bail powers, the Court found that the circumstances justified confirmation of the interim anticipatory bail orders. All interim conditions previously imposed were to continue and no fresh bonds were required as bonds were already furnished. [Paras 66, 70, 71, 73, 74]

Interim anticipatory bail granted earlier is confirmed for all applicants; conditions of interim orders continue and no fresh bail bonds are required.

Final Conclusion: The High Court construed Sections 44 and 45 of the PMLA harmoniously to preserve the High Court's special bail jurisdiction under Section 439 Cr.P.C., held that rejection of Section 482 petitions does not preclude grant of anticipatory bail, and on the facts (delay in prosecution, cooperation, absence of recovery/attachments, age/health and other circumstances) confirmed interim anticipatory bail for the applicants subject to the existing conditions.

Non-bailable warrant - bailable warrant - personal liberty - exercise of judicial discretion in issuance of warrants - issuance of process for securing attendance - gravity of economic offences / money laundering

Non-bailable warrant - bailable warrant - exercise of judicial discretion in issuance of warrants - personal liberty - gravity of economic offences / money laundering - Validity of the trial Court's issuance of non-bailable warrants (NBW) against the petitioners for non appearance and the appropriate process that ought to have been adopted to secure their attendance. - HELD THAT: - The Court examined the order sheet and facts: summons were issued after cognizance under the PML Act, the accused initially appeared through counsel and sought adjournments, and on several dates proceedings were also stalled due to Bar abstentions. On 20.04.2023 no steps were taken on behalf of the accused and the trial Court issued NBW. Applying the principle in Inder Mohan Goswami (that NBWs interfere with personal liberty and should not be issued mechanically and that ordinarily summons or bailable warrants should precede NBWs unless there is reason to believe the accused will evade process, tamper with evidence, or otherwise pose a risk), the High Court found no reasons recorded in the impugned order to justify issuance of NBWs at the first instance. Reliance on the general gravity of economic offences was not reflected in the trial Court's reasoning and therefore could not sustain the NBWs. Given there was nothing on record to show deliberate evasion by the accused, the judicious course would have been to issue bailable warrants before resorting to NBWs. The Court therefore held the impugned order issuing NBWs to be unsustainable, while directing that the accused should physically surrender and seek bail, to be granted on such terms as the trial Court may impose. [Paras 6, 8, 10, 11, 12]

The NBWs issued by the trial Court are quashed; petitioners shall physically surrender before the trial Court and may move for bail, and on such application they shall be released on bail subject to terms as the trial Court deems fit; the CRLMCs are allowed.

Final Conclusion: The High Court set aside the non bailable warrants as issued without proper application of mind and without recorded reasons; it directed the petitioners to surrender and permitted them to seek bail, and allowed the Criminal Miscellaneous Cases.

Power of arrest under Section 19 of the PMLA - Reason to believe recorded in writing - Material in possession of the authorised officer - Non-application of Section 41A Cr.P.C. to arrests under the PMLA - Judicial review of remand orders by Designated Courts - Remand for fresh consideration by the Designated Court - Initiation of action under Section 62 of the PMLA for non-compliance

Power of arrest under Section 19 of the PMLA - Reason to believe recorded in writing - Material in possession of the authorised officer - Judicial review of remand orders by Designated Courts - Validity of the Designated Court's rejection of the ED's remand application dated 14.06.2023 - HELD THAT: - The High Court held that the impugned remand-rejection order dated 14.06.2023 cannot stand and is liable to be set aside. The learned Metropolitan Sessions Judge had rejected remand on two grounds: non-compliance of Section 41A Cr.P.C. and that the reasons stated for arrest were not supported by justifiable material. The High Court observed that the Designated Court did not have the benefit of the Apex Court's decision in V. Senthil Balaji (delivered after the impugned order) which categorically held that Section 41A Cr.P.C. does not apply to arrests under the PMLA. With respect to the contention that reasons for arrest lacked supporting material, the High Court recorded a dispute about what documents were filed by the ED and noted that the Designated Court did not refer to or adjudicate those factual aspects in its order. For these reasons the High Court set aside the impugned order and directed fresh consideration, indicating that the Designated Court must examine the material submitted by the ED and the recorded reasons to believe in accordance with law and established principles. The High Court emphasised that the authorised officer's discretion under Section 19 is conditioned on material in possession and reasons to believe recorded in writing, and that the Designated Court must consider such material without venturing into trial-type appreciation of evidence. [Paras 10, 11, 12]

Impugned remand-rejection order dated 14.06.2023 set aside; matter remitted for fresh consideration by the Designated Court with directions to consider the remand application and the material in accordance with law.

Non-application of Section 41A Cr.P.C. to arrests under the PMLA - Remand for fresh consideration by the Designated Court - Initiation of action under Section 62 of the PMLA for non-compliance - Scope of further proceedings after setting aside the remand order and the limited nature of the High Court's intervention - HELD THAT: - The High Court remanded the matter to the Designated Court for fresh adjudication of the remand application, directing the Designated Court to place the parties on notice, to afford opportunity to file and rely upon all material and contentions, and to apply the principles laid down by the Apex Court (including the decision that Section 41A does not apply to PMLA arrests). The High Court made clear that it did not decide the legality of the arrest on merits; that question is to be determined by the Designated Court on fresh consideration. The High Court also observed that any claim for compensation or action under Section 62 of the PMLA arising from alleged illegality of arrest is to be sought before the appropriate forum after the Designated Court decides the remand/legality issue. The Designated Court was directed not to insist on the physical presence of the respondents in the present revision proceedings but to require their appearance when the matter is posted for orders. [Paras 11, 12]

Matter remanded to the Designated Court for fresh consideration strictly in accordance with law; respondents may pursue compensation or Section 62 proceedings thereafter.

Final Conclusion: The High Court set aside the Designated Court's remand-rejection order dated 14.06.2023 and remanded the matter to the learned Metropolitan Sessions Judge/Designated Court for fresh consideration of the ED's remand application; the Designated Court is directed to consider all material and authorities (including the Apex Court's ruling on non-application of Section 41A Cr.P.C. to PMLA arrests) and to decide the legality of the arrests, after which the respondents may seek compensation or initiation of proceedings under Section 62 of the PMLA.

Eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 for cases under investigation, enquiry or audit - quantified amount requirement on or before 30.06.2019 - meaning of 'quantified' as a written communication of the amount of duty payable - administrative rejection without reasons

Eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 for cases under investigation, enquiry or audit - quantified amount requirement on or before 30.06.2019 - meaning of 'quantified' as a written communication of the amount of duty payable - Application filed under Form SVLDRS-1 dated 07.11.2019 was eligible for acceptance under the Scheme despite communication timelines, and rejection was unsustainable. - HELD THAT: - The Court examined whether the petitioner's liability had been 'quantified' for the purposes of the Scheme category 'Investigation, Enquiry or Audit' on or before 30.06.2019. The Scheme's requirement that duty be quantified by 30.06.2019 was interpreted to include written communications of duty demand or audit worksheets. The audit communication of 31.05.2019 and subsequent audit communications (including the communication reflected on 29.06.2020 and 21.08.2019 worksheets) establish that a tax liability had been quantified by the audit department on or before 30.06.2019. The amount declared by the petitioner in Form SVLDRS-1 (07.11.2019) was marginally higher than the quantified amount and thus did not disentitle the petitioner. Reliance on Circular No.1071/4/2019-CX (para.10(g)) confirming that 'quantified' includes letters intimating duty demand or audit reports supports eligibility. Consequently, the petitioner satisfied the sine qua non for the audit category and was entitled to the Scheme's benefit. [Paras 8, 9, 10, 11, 12]

The petitioner's SVLDRS application was eligible and the rejection was set aside; the writ petition allowed.

Administrative rejection without reasons - Rejection of the petitioner's SVLDRS application by communication dated 07.01.2020 without stating reasons was untenable. - HELD THAT: - The impugned communication merely informed rejection but gave no reasons. The respondent's counter-affidavit relied on the absence of quantification before 30.06.2019; however, the record showed quantification by audit on 31.05.2019 and related follow-ups. Since the rejection lacked stated reasons and was contradicted by the audit communications and the Scheme's criteria, the rejection could not stand. [Paras 2, 3, 10, 12]

Impugned communication of rejection without reasons set aside.

Final Conclusion: Writ petition allowed; the impugned rejection of the SVLDRS application is set aside and the petitioner is entitled to the benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 in respect of its audit-category declaration.

Cenvat credit - input service - admissibility of credit for repair and renovation - invoice identification - PAN based service tax number - nexus requirement for input services - onus on Revenue to disprove nexus - reliance on CBEC clarification and tribunal precedents

Cenvat credit - input service - admissibility of credit for repair and renovation - reliance on CBEC clarification and tribunal precedents - Cenvat credit denied in respect of architect services and office renovation services was admissible to the appellant. - HELD THAT: - The Tribunal examined the CBEC circular relied upon by the appellant and the precedents cited. Applying the clarification in the CBEC circular and the Tribunal's earlier decisions, the Tribunal held that expenditure on repair and renovation and architect services qualify as input services for the purpose of Cenvat credit. The appellant's contentions based on the circular and the cited authorities were accepted and found sufficient to establish entitlement to credit.

Cenvat credit in respect of architect services and office renovation services allowed.

Cenvat credit - invoice identification - PAN based service tax number - reliance on tribunal precedent - Cenvat credit denial solely on account of non-mentioning of PAN based service tax number on invoices issued after performance of service was not sustainable. - HELD THAT: - The Tribunal relied on the precedent cited by the appellant which held that where invoices are issued after performance of service, the service receiver cannot be held liable for non-mentioning of PAN based service tax number on the invoices. Applying that principle, the Tribunal concluded that denial of credit for lack of PAN based service tax number on the invoices was not justified.

Denial of credit for absence of PAN based service tax number on invoices set aside; credit allowed.

Cenvat credit - nexus requirement for input services - onus on Revenue to disprove nexus - Cenvat credit of service tax paid to a hotel for hiring a hall for a business conference could not be denied without Revenue establishing lack of nexus with output service. - HELD THAT: - The Tribunal noted the appellant's reliance on precedent placing the burden on Revenue to demonstrate absence of nexus between the hired facility and the output service. In absence of such a demonstration, and applying the cited authority, the Tribunal found that the denial of credit on this ground was unsustainable.

Denial of credit for hotel charges alleged to lack nexus set aside; credit allowed.

Final Conclusion: The Tribunal set aside the impugned part of the order denying Cenvat credit and allowed the appeal, holding that the appellant is entitled to Cenvat credit of Rs.10,93,877/- in light of the CBEC clarification and the relied upon tribunal precedents.

Manufacture - Business Auxiliary Service - exclusion clause - activity-specific test - applicability of Notification No.8/2005-ST

Manufacture - exclusion clause - Business Auxiliary Service - Whether the welding, fabrication, cutting, bending, coating, painting and related activities undertaken by the respondent amount to "manufacture" within the meaning of Section 2(f) of the Central Excise Act and therefore fall within the exclusion from the definition of Business Auxiliary Service. - HELD THAT: - The appellate authority analysed the nature of the processes performed by the respondent and applied the tests articulated in the decisions referred to, including the principle that "manufacture" includes any process incidental or ancillary to completion of the manufactured product and a process which effects change or transformation in the raw material or is integrally connected to manufacture such that the end product's manufacture would be impossible or commercially inexpedient without it. Applying that principle to the facts, the authority found that activities such as welding, fabrication, cutting, bending, coating and painting effected change/ transformation and were integrally connected to the manufacture of ships; consequently those activities fall within the definition of "manufacture" under Section 2(f). Since the definition of Business Auxiliary Service expressly excludes any activity that amounts to "manufacture of excisable goods," the activities in question are excluded from BAS and do not attract service tax under that category. [Paras 9, 10, 11, 14, 17]

Activities carried out by the respondent constitute "manufacture" under Section 2(f) and are therefore excluded from the definition of Business Auxiliary Service.

Applicability of Notification No.8/2005-ST - manufacture - Whether Notification No.8/2005-ST applies to the respondent's activity so as to render it taxable under BAS despite the activity amounting to manufacture. - HELD THAT: - The authority considered the explanation to Notification No.8/2005-ST which limits its scope to "production of goods" that does not amount to "manufacture" within the meaning of Section 2(f). Having held that the respondent's processes amount to "manufacture," the condition in the notification is not satisfied. The authority also relied on departmental instructions consistent with this interpretation and concluded that the notification cannot be applied where the activity amounts to manufacture. [Paras 13, 17]

Notification No.8/2005-ST is not applicable to the respondent's activities because those activities amount to "manufacture" within clause (f) of Section 2 and thus fall outside the notification's scope.

Activity-specific test - Business Auxiliary Service - Whether the Revenue's contention that M/s L&T being the owner/controller and actual manufacturer renders the respondent a mere service provider and liable to BAS despite the activity itself amounting to manufacture. - HELD THAT: - The authority addressed the contention that control by M/s L&T at the site, provision of materials, machinery and designs, and supervision establish M/s L&T as the manufacturer and relegate the respondent to a service-provider role. The appellate view rejected a person-specific approach and held that the exclusion in the definition of BAS operates on the nature of the activity and not on the identity of the person performing it. Thus, even if M/s L&T is the owner or ultimate manufacturer, the processes carried out by the respondent, if they amount to manufacture within Section 2(f), are activity-wise manufacturing and are excluded from BAS. [Paras 4, 17]

Revenue's contention premised on ownership/control by M/s L&T does not convert an activity that amounts to "manufacture" into a BAS; the exclusion is activity-specific and the respondent is not liable to service tax under BAS on these activities.

Final Conclusion: The impugned order upholding that the respondent's welding, fabrication and allied activities amount to "manufacture" and are excluded from Business Auxiliary Service is affirmed; Notification No.8/2005-ST is inapplicable, the Revenue's contrary contention is rejected, and the appeal is dismissed.

Information Technology Service - Business Auxiliary Service exclusion - reverse charge mechanism - extended period of limitation / time-bar - revenue neutrality by availment of cenvat credit - waiver / set aside of penalties in absence of mala fide

Information Technology Service - Business Auxiliary Service exclusion - reverse charge mechanism - Classification of ERP system services received from foreign parent as Information Technology Service and not as Business Auxiliary Service for the periods in dispute - HELD THAT: - The Tribunal held that the ERP system procured from the foreign head office constituted Information Technology Service (implementation and use of IT software for business processes) and therefore must be classified as such in the hands of the assessee even where liability arises on reverse charge. Because the relevant period pre-dates the Government's subsequent amendment expanding Business Auxiliary Service, the ERP service could not be validly taxed under the residual head of Business Auxiliary Service when it was expressly of an IT nature. The Revenue's later acceptance of the same service as IT Service for subsequent periods reinforces that the identical service could not be retrospectively reclassified under BAS for the earlier period. Applying these principles, the demand confirmed under BAS for 2006-07 and 2007-08 was not sustainable.

Demand under Business Auxiliary Service set aside; ERP services held to be Information Technology Service and not taxable under BAS for the periods in dispute.

Extended period of limitation / time-bar - revenue neutrality by availment of cenvat credit - waiver / set aside of penalties in absence of mala fide - Maintainability of the demand having regard to limitation, revenue neutrality and imposition of penalties - HELD THAT: - The Tribunal found that the show cause notice issued on 12.01.2010 attacking payments for 2006-07 and 2007-08 was liable to be examined in the light of limitation and the fact that any tax, if at all payable, would be neutralized by availment of cenvat credit. Given the interpretational nature of the classification issue, absence of mens rea or suppression precluded attribution of mala fide. In these circumstances, the demand was vulnerable to time-bar and, independently, penalties could not be sustained; the Tribunal therefore set aside the penalties and refused to sustain the extended-period demand.

Demand not sustained on time-bar and revenue-neutrality grounds; penalties set aside.

Final Conclusion: Appeal allowed: impugned order set aside - ERP services received from foreign parent held to be Information Technology Service (not taxable under Business Auxiliary Service for 2006-07 and 2007-08); extended-period demand and penalties unsustainable in the facts and are set aside.

Refund of Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004 - Definition of input service and scope of 'used' under Rule 2(l) of the Cenvat Credit Rules, 2004 - Registration of premises not prerequisite for claim of Cenvat credit/refund - Requirement of invoice particulars and proviso to Rule 9(2) of the Cenvat Credit Rules, 2004 - Acceptance of photocopies of invoices / non-requirement of original invoices for claiming Cenvat credit - Export of services - benefit accruing outside India as determinative for export under the Export Rules - Substantive relief not to be denied on account of procedural lapses

Registration of premises not prerequisite for claim of Cenvat credit/refund - Refund of Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004 - Denial of refund on ground that input service invoices were received at premises not registered with Service Tax authorities. - HELD THAT: - The Tribunal examined Rule 5 of the Cenvat Credit Rules and Rule 4 of the Service Tax Rules and held that the statutory scheme for refund does not stipulate registration of premises as a condition precedent to claim refund of unutilized Cenvat credit. Reliance upon and consistency with decisions of High Courts and the Tribunal were noted, and the factual distinction in authorities relied upon by Revenue was addressed. In the absence of any statutory provision making registration a precondition for refund, the rejection of refund solely on that ground was held not justified. [Paras 7]

Denial of refund on grounds of non-registration of premises set aside.

Definition of input service and scope of 'used' under Rule 2(l) of the Cenvat Credit Rules, 2004 - Substantive relief not to be denied on account of procedural lapses - Denial of Cenvat credit in respect of various office and employee-related services on the ground of absence of nexus with output services. - HELD THAT: - The Tribunal applied the wide and inclusive definition of 'input service' under Rule 2(l), observing that services 'used' by a provider to render output services fall within the definition, and that the phrase 'in relation to' is broad. Having considered precedent authorities which have held similar categories of office, hospitality and staff-related services to be input services when used in connection with the business of providing output services, the Tribunal concluded that the appellant's claimed credits were legitimately in relation to its business and therefore admissible. [Paras 7]

Rejection of refund on the ground of lack of nexus with output services set aside.

Requirement of invoice particulars and proviso to Rule 9(2) of the Cenvat Credit Rules, 2004 - Substantive relief not to be denied on account of procedural lapses - Denial of refund on account of incomplete invoices which did not contain the name/address of the appellant. - HELD THAT: - The Tribunal noted that Rule 9(2) (proviso) recognises that where certain prescribed particulars are present (such as description of services, assessable value and registration number of the provider), the absence of other particulars (including name/address of recipient) is not fatal. The factual matrix showed that the services were received, accounted for and paid, and in at least one instance the vendor furnished a certificate admitting the omission. Consistent with precedents, the Tribunal held that refund cannot be denied merely for such omissions by vendors. [Paras 7]

Rejection of refund for invoices missing recipient details set aside.

Acceptance of photocopies of invoices / non-requirement of original invoices for claiming Cenvat credit - Refund of Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004 - Denial of refund on ground that original invoices were not produced and credits were claimed on photocopies. - HELD THAT: - The Tribunal observed that Rule 9 and the Notification prescribing enclosures require 'copies of invoices' as supporting documents and do not mandate submission of originals as a condition for entitlement to Cenvat credit or refund. Authorities were considered which held that credit cannot be denied where correctness of photocopies is not disputed and the receipt and payment for services are established. Accordingly, non-production of originals was not a valid basis to reject the refund. [Paras 7]

Rejection of refund for claims supported by photocopies of invoices set aside.

Export of services - benefit accruing outside India as determinative for export under the Export Rules - Refund of Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004 - Denial of refund in respect of input services used for providing output services to foreign affiliates where the project location was in India. - HELD THAT: - The Tribunal applied the Export Rules and Circular interpreting 'used outside India' to mean that the benefit of the service should accrue outside India. On the facts, the appellant's services (designs, layouts, drawings) were used by overseas affiliates and the benefit accrued outside India, satisfying the export conditions. Consistent judicial guidance was relied upon to hold that such services qualify as export of services and therefore the related Cenvat credit refund could not be denied. [Paras 7]

Rejection of refund for services rendered to foreign affiliates set aside.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned appellate and original orders and directed grant of refund of the disputed Cenvat credit amounts in accordance with law, with consequential relief if any.

Service Tax on liquidated damages - Liquidated damages as declared service under Section 66E(e) - Precedential effect of Tribunal orders and administrative non-pursuit (Circular No. 214/1/2023 Service Tax)

Service Tax on liquidated damages - Liquidated damages as declared service under Section 66E(e) - Precedential effect of Tribunal orders and administrative non-pursuit (Circular No. 214/1/2023 Service Tax) - Demand of Service Tax on liquidated damages recovered from suppliers/contractors was not justified. - HELD THAT: - The Tribunal examined earlier coordinate decisions of the CESTAT which had held that amounts recovered as liquidated damages do not attract Service Tax. The appellant relied on those decisions and on Circular No. 214/1/2023 Service Tax, whereby the Board has chosen not to pursue departmental appeals to the Supreme Court against such Tribunal orders. Having perused the orders cited and the Board's circular, the Tribunal accepted the appellant's contention and followed the ratio of the earlier Tribunal decisions. Applying those precedents and the administrative position reflected in the Circular, the Tribunal found no justification for confirming the demand of Service Tax on the liquidated damages. [Paras 10, 11, 12]

Impugned order confirmed by the adjudicating authority set aside; demand of Service Tax on liquidated damages quashed and the appeal allowed with consequential relief as per law.

Final Conclusion: Following earlier Tribunal precedents and the Board's Circular declining to pursue appeals, the demand of Service Tax on liquidated damages for the period 01.07.2012 to 30.06.2017 was quashed and the appeal allowed.

Classification of services as Works Contract Service - installation of electrical and electronic devices - general wiring and fitting not covered under works contract - invocation of extended period of limitation for tax recovery - requirement of suppression or mala fide to invoke extended period - penalty linked to time-barred demand

Classification of services as Works Contract Service - installation of electrical and electronic devices - general wiring and fitting not covered under works contract - Service tax demand under Works Contract Service insofar as electrical works carried out by the appellant. - HELD THAT: - The Tribunal examined the statutory definition of Works Contract Service and observed that the entry applies where there is erection, commissioning or installation of electrical and electronic devices. The material on record did not establish that the appellant undertook installation of electrical or electronic devices; instead the activity comprised general wiring contracts and supply/fitting of electrical material under government tenders. Revenue did not produce invoices or documents demonstrating erection/installation as contemplated by the definition. On that basis the Tribunal concluded that the appellant's activities do not fall within the scope of Works Contract Service and the service-tax demand under that head is unsustainable. [Paras 8]

Service tax demand confirmed under Works Contract Service set aside for lack of classification as erection/installation; demand not sustainable.

Invocation of extended period of limitation for tax recovery - requirement of suppression or mala fide to invoke extended period - penalty linked to time-barred demand - Validity of invoking extended period of limitation and sustaining penalties. - HELD THAT: - The Tribunal held that the controversy was essentially one of legal interpretation and classification, not suppression or willful misstatement by the appellant. The appellant had represented facts to the department and the figures relied upon by Revenue were from the appellant's balance sheet and profit & loss account. Absent evidence of mala fide suppression, the proviso for extended limitation could not be invoked. Further, there was no proof of intent to evade; mere misclassification does not amount to fraud, collusion, or willful suppression. In view of time-bar and absence of requisite culpability, the extended period was not invokable and penalties based on the time-barred demand could not be sustained. [Paras 12, 13]

Invocation of extended period of limitation rejected; related penalties set aside.

Final Conclusion: The impugned adjudication confirming service-tax demand and imposing penalties is set aside: demand under Works Contract Service held unsustainable and extended period and penalties not invokable; appeal allowed with consequential reliefs as per law.

Manpower Recruitment or Supply Agency Service - lump sum contract / piece rate work - supply of manpower - Business Auxiliary Service / production or processing on behalf of client - tenor of agreement / contract interpretation - Master Circular clarification on supply of manpower

Manpower Recruitment or Supply Agency Service - lump sum contract / piece rate work - supply of manpower - tenor of agreement / contract interpretation - Business Auxiliary Service / production or processing on behalf of client - Master Circular clarification on supply of manpower - Whether the services rendered by the appellant fall within the definition of Manpower Recruitment or Supply Agency Service or constitute lump sum production/processing (business auxiliary) not liable to service tax under that category - HELD THAT: - The Tribunal examined the work order and invoices which established that the appellant was engaged to perform a specific job (wax repairing and assembly) and was paid on a per kg (piece rate/lump sum) basis. The terms of the contract made the labourers and supervisors the appellant's employees, left statutory obligations (PF, insurance, etc.) with the appellant, disavowed any employer-employee relationship with the company, and granted the company no control or supervision over the appellant's labour. On these facts the service recipient contracted for execution of a particular processing job irrespective of the number or nature of personnel used by the appellant. Reliance on the Master Circular was held inapposite because that clarification addresses cases of actual supply of manpower where the agency agrees for use of an individual's services by another for consideration. The Tribunal followed consistent precedents which require reading the contract as a whole and, where the agreement evidences a lump sum or piece rate production contract (and not an arrangement to supply manpower), the activity does not fall within manpower recruitment/supply services. Applying that principle to the contractual terms and invoices in this case, the Tribunal found that the department failed to establish supply of manpower and that the activity was of execution of work (business auxiliary/production processing) rather than manpower supply. [Paras 4, 12]

Demand under Manpower Recruitment or Supply Agency Service set aside; impugned order quashed and appeal allowed.

Final Conclusion: On the facts and contract terms (piece rate per kg, contractor's responsibility for labour and statutory liabilities, absence of control by the recipient), the Tribunal held the activity to be execution of lump sum production/processing work and not supply of manpower; the demand under Manpower Recruitment or Supply Agency Service was unsustainable and the appeal was allowed.

Sovereign function / instrumentality of the State - storage and warehousing service - cargo handling service - taxable service / consideration versus statutory fee - extended period of limitation / extended time limit for issue of show cause notice - remand for fresh consideration

Sovereign function / instrumentality of the State - taxable service / consideration versus statutory fee - Whether TNMSCL is an instrumentality of the sovereign State and hence exempt from service tax for the activities in dispute. - HELD THAT: - The Tribunal found that TNMSCL was incorporated under the Companies Act pursuant to a Government Order and functions as a separate legal entity with multifarious commercial objects in its Memorandum and Articles. Its activities (procurement, storage, sale/distribution, warehousing, packing, transport, testing, repair and other commercial functions) are not primary inalienable functions that only the State can perform. The existence of a State notification exempting TNMSCL from sales tax on specified supplies demonstrated that the State itself did not treat those activities as sovereign and that the company's receipts are its own income. The Tribunal applied the principle in In re. The Bill to Amend the Sea Customs Act that immunity under Article 289(1) does not extend to indirect taxes, and concluded that absent a specific central exemption TNMSCL cannot claim exemption from service tax on the basis of sovereign function. Consequently the claim of sovereign immunity was rejected.

TNMSCL is not an instrumentality enjoying sovereign immunity; its activities in dispute are taxable and the claim of exemption on sovereign-function grounds is rejected.

Storage and warehousing service - taxable service / consideration versus statutory fee - Whether the services rendered by TNMSCL in respect of warehousing and related activities are classifiable as 'storage and warehousing' and thus taxable. - HELD THAT: - The Tribunal observed that TNMSCL operates its own warehouses for storing medicines prior to distribution and undertakes activities customary to a storage/warehouse keeper (space provision, loading/unloading, stacking, inventory, security etc.). The Board's clarifications and Education Guide relied on by the appellant post date the relevant dispute period and do not negate that the appellant provided services for consideration rather than statutory fee. Having rejected the sovereign function exemption, the Tribunal held that the storage and warehousing activities fall within the statutory definition and are taxable.

The warehousing and related activities are classifiable as 'storage and warehousing' and are taxable services; the appellant's claim of non-taxability on sovereign/statutory fee grounds is negatived.

Cargo handling service - taxable service / consideration versus statutory fee - remand for fresh consideration - Whether the activities of loading, unloading, packing, unpacking and related testing/handling are classifiable as 'cargo handling service' and the correctness of valuation and characterization of the amounts withheld as handling and testing charges. - HELD THAT: - On the facts the Tribunal found that the appellant performed packing, repacking, loading and unloading as part of dispatching medicines and that the Memorandum specifically contemplates packing/forwarding activities, indicating cargo handling type functions. However, factual aspects relevant to classification, segregation of amounts for testing versus handling, the contractual tender conditions, and the appellant's accounting disclosure required further examination. Consequently the Tribunal did not finally decide the cargo handling classification and valuation issues but remanded the matter to the Original Authority for fresh adjudication after affording the appellant opportunity to present factual and legal submissions, and to permit bifurcation of receipts if appropriate.

Issue of classification and valuation of cargo handling activities is remanded to the Original Authority for fresh, time bound consideration after giving the appellant full opportunity to be heard.

Extended period of limitation / extended time limit for issue of show cause notice - taxable service / suppression and evasion - Whether the extended limitation period for issuance of the show cause notice was valid and whether demand, interest and penalties could be imposed. - HELD THAT: - The Tribunal noted that TNMSCL was registered for certain taxable services and had not disclosed the impugned activities in returns, nor paid service tax; the company's own conduct and failure to disclose taxable activities in the self assessment regime amounted to suppression with intent to evade. The Tribunal rejected the contention that absence of a statutory fee or confusion over sovereign status prevented invocation of extended limitation. In view of non disclosure and the magnitude of the omission, the Tribunal upheld invocation of extended limitation and the imposition of interest and penalties in principle.

Extended period of limitation was validly invoked; the imposition of interest and penalties is upheld.

Final Conclusion: The appeal is dismissed except that the Tribunal remands the issue of 'cargo handling services' (classification and valuation, and bifurcation of handling versus testing receipts) to the Original Authority for fresh adjudication after affording full opportunity to the appellant; the remaining findings in the impugned order-including taxable character of storage/warehousing and validity of extended limitation with attendant interest and penalties-are upheld.

Declared service by way of agreeing to an obligation to tolerate an act or a situation - consideration and necessary nexus between supply and consideration - liquidated damages - encashment of performance guarantee / bank guarantee - non-taxability of compensation for breach of contract - CBIC Circulars clarifying taxability

Encashment of performance guarantee / bank guarantee - consideration and necessary nexus between supply and consideration - declared service by way of agreeing to an obligation to tolerate an act or a situation - Legality of service tax demand on amounts received by encashment of performance guarantees as consideration for tolerating breach of contract. - HELD THAT: - The Tribunal found that encashment of bank guarantees invoked on account of contractors' default did not arise from any independent contractual arrangement under which CMRL agreed to tolerate breaches in return for consideration. Relying on the Board's clarification, the activity covered by the declared service must be an independent contractual agreement specifically referring to an obligation to do, abstain or tolerate, with a sufficient nexus between that supply and consideration. No such independent agreement or flow of consideration in respect of tolerating breaches was pointed out by Revenue in CMRL's case. Consequently, amounts realised by encashment of performance guarantees are not consideration for a declared service under section 66E(e) and therefore not exigible to service tax. [Paras 5]

Demand of service tax insofar as it related to encashment of performance / bank guarantees is set aside.

Liquidated damages - declared service by way of agreeing to an obligation to tolerate an act or a situation - CBIC Circulars clarifying taxability - Legality of service tax demand on amounts retained/collected as liquidated damages for contractors' non-performance. - HELD THAT: - The Tribunal applied the Board's Circulars and evolved jurisprudence to hold that retention or recovery of liquidated damages does not necessarily constitute consideration for agreeing to tolerate an act or situation unless there is an independent contractual arrangement specifically constituting such an agreement with a flow of consideration. The contracts between CMRL and contractors imposed liabilities for delay and provided for liquidated damages as a contractual remedy for breach, not as consideration for tolerating a breach. In absence of an independent agreement to tolerate breaches and the requisite nexus between supply and consideration, the retained liquidated damages cannot be treated as a declared service under section 66E(e). Accordingly, the demand, interest and penalties based on classification of such amounts as service receipts failed. [Paras 5]

Demand of service tax, interest and penalties insofar as they relate to liquidated damages/retentions is set aside.

Final Conclusion: The Tribunal allowed the appeal filed by Chennai Metro Rail Ltd., set aside the impugned demands (including interest and penalties) insofar as they related to encashment of performance guarantees and collection/retention of liquidated damages for the period 2013-14 to 2017-18 (upto June 2017), and dismissed the Revenue's appeal; consequential relief granted as per law.

Eligibility for exemption under Notification No. 01/2009-ST in respect of services provided to a goods transport agency - retrospective operation of exemption by Finance (No. 2) Bill, 2009 - requirement of invoice mentioning name and date of consignment note as condition of exemption - denial of exemption for mere procedural lapse - remand for verification of use of supplied service in the GTA's output service - taxability of services rendered prior to levy

Eligibility for exemption under Notification No. 01/2009-ST in respect of services provided to a goods transport agency - requirement of invoice mentioning name and date of consignment note as condition of exemption - retrospective operation of exemption by Finance (No. 2) Bill, 2009 - denial of exemption for mere procedural lapse - Whether the appellant is entitled to exemption under Notification No. 01/2009 ST for manpower supply services provided to a goods transport agency despite invoices not mentioning the consignment note details. - HELD THAT: - The Court examined the Notification and the retrospective deeming provision in the Finance (No.2) Bill, 2009 and observed that the exemption is subject to the condition that the invoice should mention the name and date of the consignment note. However, the retrospective deeming took effect only upon enactment and could not be expected to have been complied with before assent. The Tribunal held that mere non mention of the consignment note in the invoice is a procedural lapse which, by itself, should not automatically defeat the exemption where it is otherwise established that the services were provided to and used by a goods transport agency in its output GTA service. The factual question whether the services supplied by the appellant were so used can be established by documents other than the invoice and therefore requires fresh verification by the adjudicating authority. Accordingly, the question of entitlement to exemption was remitted for verification of whether the services were used in the GTA's output service; denial of exemption solely on the ground of non mention of consignment note was disapproved. [Paras 4, 5]

Entitlement to the Notification cannot be denied solely for non mention of consignment note; matter remanded to adjudicating authority to verify on evidence whether the services were used by the GTA in its output service.

Taxability of services rendered prior to levy - remand for verification of actual computation and timing of receipts - Whether the demand in respect of cargo handling services for the financial years in question is sustainable, having regard to timing of levy and actual receipts. - HELD THAT: - The Commissioner (Appeals) found that records were insufficient to determine whether the services or receipts fell before or after levy and therefore remanded the matter for fresh adjudication on that factual question. The Tribunal upheld the remand, observing that the adjudicating authority should re examine whether the relevant services were rendered prior to the levy of service tax and verify computations of taxable value against payments actually received. The Tribunal also kept open the question of limitation/time bar for reconsideration by the adjudicating authority. [Paras 4, 5]

Demand in respect of cargo handling services remanded to the adjudicating authority for fresh verification of timing of levy, computation and receipts; question of time bar left open for reconsideration.

Final Conclusion: The appeal is disposed of by partly modifying the impugned order and remanding the matters to the adjudicating authority: (a) entitlement to Notification No. 01/2009 ST for manpower supply services is not to be denied solely for non mention of consignment note and requires verification whether the services were used by the GTA in its output service; and (b) the demand in respect of cargo handling services is remanded for fresh adjudication on timing and computation, with the question of limitation left open.

Liability for service tax on Goods Transport Agency service - Definition of Goods Transport Agency requiring issuance of consignment note - Person liable to pay service tax under reverse charge for Goods Transport Agency services

Liability for service tax on Goods Transport Agency service - Definition of Goods Transport Agency requiring issuance of consignment note - Appellant was not providing Goods Transport Agency service to NTPC on the 2% transportation charges collected and therefore was not liable to service tax as provider of such service. - HELD THAT: - The contracts between the appellant and NTPC were for supply of goods and related erection, commissioning and maintenance services; transportation to site formed part of performance and the appellant invoiced NTPC a contractual 2% of sale value as transportation charge irrespective of actual transport cost. The records do not show that the appellant issued any consignment note or otherwise carried out activities that would establish it as a Goods Transport Agency as defined under the statutory definition which requires issuance of a consignment note. The appellant had engaged third party transporters and, as recipient of their services, discharged service tax on amounts actually paid to those transporters. On the material before the Tribunal there is nothing to establish that the appellant itself provided GTA services to NTPC or assumed the role of a GTA vis a vis NTPC; the 2% charge was a contractual reimbursement/charge for arranging transport as part of the broader supply and services contract rather than proof of provision of GTA services. [Paras 9, 10, 11]

Demand and penalties confirmed on the basis that the appellant had provided Goods Transport Agency service were unsustainable and set aside.

Person liable to pay service tax under reverse charge for Goods Transport Agency services - Even if the appellant were held to have provided Goods Transport Agency service, the liability to pay service tax would rest on the service recipient NTPC under the statutory rule and not on the appellant. - HELD THAT: - Rule 2(1)(d)(i)(B) designates, for specified persons including a body corporate, the person who pays or is liable to pay freight as the person liable to pay service tax in relation to services provided by a goods transport agency. NTPC, being a corporate entity constituted under law, would therefore be the person liable to pay service tax on GTA services provided in relation to transportation of goods to it. The Tribunal noted that the appellant itself had already discharged service tax as a recipient on payments made to actual transporters, reinforcing that the statutory liability in respect of GTA services, as between provider and a specified recipient, is allocated to the recipient. [Paras 9, 10]

In the alternative, any finding that the appellant provided GTA service would not sustain a demand against the appellant because NTPC would be the statutory person liable to pay the service tax.

Final Conclusion: The appeal is allowed; the order confirming demand of service tax and penalties on the appellant in respect of the 2% transportation charge for the period 2007-2008 to 2011-2012 is set aside, with consequential relief to the appellant.

Export of service - Business Auxiliary Services - delivered outside India and used outside India - consideration received in convertible foreign exchange - rule 3 of the 2005 Export Rules

Export of service - Business Auxiliary Services - delivered outside India and used outside India - consideration received in convertible foreign exchange - rule 3 of the 2005 Export Rules - Services rendered by the appellant to Sun Microsystems PTE Ltd., Singapore qualify as export of service and are not leviable to service tax. - HELD THAT: - The Tribunal applied the principles laid down by the Larger Bench in M/s Arcelor Mittal Stainless India Pvt. Ltd., which held that where a service provider in India renders Business Auxiliary Services to a recipient situated outside India, and the service is delivered outside India and used outside India, with consideration received in convertible foreign exchange, the transaction falls within the definition of export of service under rule 3 of the 2005 Export Rules. On the facts, the appellant provided marketing and pre-sales support exclusively to Sun Singapore, there was no agreement between the appellant and prospective Indian customers, and the services were performed at the request and direction of the foreign principal and remunerated in convertible foreign exchange. Applying the Larger Bench's findings to these identical factual circumstances, the Tribunal concluded that the services were exported and thus not liable to service tax. The impugned orders of the Commissioner confirming demand, interest and penalty were therefore unsustainable.

Orders of the Commissioner are set aside; appeals allowed and the services held to be export of service with consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeals, holding that the marketing/pre-sales support services rendered to the foreign principal qualify as export of service under the 2005 Export Rules and therefore the demands confirmed by the Commissioner cannot be sustained.

Refund of CENVAT credit - surrender of central excise registration to avail exemption - exemption notification proviso excluding goods for which credit has been taken - adjustment of input credit against output liability - CENVAT Credit Rules - Rule 5 refund/adjustment regime - remand for determination of relevant tax period and entitlement

Refund of CENVAT credit - surrender of central excise registration to avail exemption - exemption notification proviso excluding goods for which credit has been taken - adjustment of input credit against output liability - Whether the question of entitlement to refund of excise input credit could be finally determined on the record before this Court or required remand for ascertainment of the relevant period and resulting entitlement. - HELD THAT: - The Court found that the findings of the lower authorities were unclear as to the exact period in respect of which refund of credit was claimed, and that such temporal determination is decisive of the controversy. The bench observed that if the appellant had sought refund of excess credit lying in its account as on the date it applied for exemption by surrendering its central excise registration, that contention would justify relief. Conversely, the revenue's case concerned adjustment of output liability for the period after the exemption was sought. In view of this factual and temporal uncertainty the Court set aside the impugned orders and remitted the matter to the appellate commissioner to determine whether the appellant had claimed refund for the period prior to seeking the exemption and, if so, to quantify and decide the entitlement. The adjudicating authority was directed to decide the question within six months.

Impugned orders set aside; matter remitted to the appellate commissioner to determine the relevant period of claim and any refundable entitlement, to be decided within six months; appeal allowed.

Final Conclusion: The appeal is allowed: the orders under challenge are set aside and the matter is remitted for fresh determination by the appellate commissioner on the limited question of the period in respect of which refund of input credit was claimed and the consequent entitlement, to be decided within six months.

CENVAT credit admissibility of input services - nexus between input services and manufacture - Commercial & Industrial Construction Service prior to 01.04.2011 - Customs Clearance Services and Tour & Travels Services - remand for verification of evidence - penalty for duty evasion - intention to evade

CENVAT credit admissibility of input services - Commercial & Industrial Construction Service prior to 01.04.2011 - Admissibility of credit on Commercial & Industrial Construction Service and certain other input services - HELD THAT: - The Tribunal found that the appellants are eligible to avail credit on Commercial & Industrial Construction Service for the period prior to 01.04.2011, except for a negligible amount of credit which was held to be inadmissible. The Tribunal further held that credit on Photocopy Service and on Repair Services is admissible. The appellants had conceded reversal of credit on Renting of Property Service and that reversal was accepted. These findings reflect the Tribunal's application of the nexus principle between the input service and manufacture and its acceptance of earlier Tribunal precedents favourable to the appellants insofar as Construction Service is concerned. [Paras 5]

Credit on Commercial & Industrial Construction Service (prior to 01.04.2011) largely allowed except Rs.207; Photocopy Service and Repair Services credit allowed; Renting of Property Service credit not admissible as reversed by appellants (total not admissible Rs.3,71,007/-).

Customs Clearance Services and Tour & Travels Services - remand for verification of evidence - nexus between input services and manufacture - Admissibility of credit on Customs Clearance Services and Tour & Travels Services remanded for fresh adjudication - HELD THAT: - Although the Tribunal observed in principle that credit on Customs Clearance Services and Tour & Travels Services is admissible, the impugned order recorded absence of requisite invoices and documentary proof before the Commissioner. The appellants, acknowledging that the show-cause arose from an audit which examined documents, were permitted to produce and rely upon those documents. Consequently the Tribunal remanded the matter to the Adjudicating Authority to calculate admissible credit on these two services after considering evidence that the appellants may produce within the time directed. [Paras 6, 8]

Matter remanded to the Adjudicating Authority to verify evidence and compute admissible credit on Customs Clearance Services and Tour & Travels Services; appellants to file documents within four weeks and Adjudicating Authority to decide within twelve weeks.

Penalty for duty evasion - intention to evade - Imposability of penalty for alleged CENVAT credit irregularities - HELD THAT: - The Tribunal held that most issues turned on interpretation and that subsequent decisions of the Tribunal favoured the appellants; accordingly there was no finding of an intention to evade duty. In view of absence of intent to evade, penalties were held to be not imposable against the appellants. [Paras 7]

Penalties are not imposable as appellants cannot be held to have intended to evade payment of duty.

Final Conclusion: Appeals allowed in part: credits on Construction (pre-01.04.2011), Photocopy and Repair Services upheld and Renting of Property credit not admissible; matters relating to Customs Clearance and Tour & Travels Services remanded to the Adjudicating Authority for verification and computation of admissible credit; penalties set aside for lack of intention to evade.

Exemption Notification No.108/95-CE not extendable to 100% EOU - aggregate of customs duties to be taken for calculating excise duty on clearances by 100% EOU - applicability of Customs Notification No.84/97-Cus for 100% EOU clearances - legal fiction treating clearances by 100% EOU as imports under Section 3A

Exemption Notification No.108/95-CE not extendable to 100% EOU - applicability of Customs Notification No.84/97-Cus for 100% EOU clearances - aggregate of customs duties to be taken for calculating excise duty on clearances by 100% EOU - legal fiction treating clearances by 100% EOU as imports under Section 3A - Benefit of Customs Notification No.84/97-Cus must be applied for calculating duty on clearances by the appellant's 100% EOU to UNICEF though Exemption Notification No.108/95-CE does not extend to 100% EOU, resulting in no duty payable. - HELD THAT: - The Tribunal found that while Exemption Notification No.108/95-CE is not available to a 100% EOU, the statutory scheme treats clearances by a 100% EOU as equivalent to imports by a legal fiction under Section 3A; therefore duties for excise-calculation must be measured by the aggregate of customs duties payable on such imports. Customs Notification No.84/97-Cus, which exempts the relevant customs duty for clearances to organisations like UNICEF, is therefore applicable for computing the duty payable by the 100% EOU. The Tribunal accepted and followed the reasoning of the Commissioner (Appeals) in the appellant's earlier order, which in turn relied on precedents (including Ratnagiri Textiles, Handum Industries and General Optics) holding that customs notifications like 84/97-Cus apply to 100% EOUs when the legal fiction of import is invoked. The Commissioner (Appeals) order, though not binding, is persuasive and has not been challenged by the department. Applying these principles, the Tribunal concluded that the benefit of Notification No.84/97-Cus eliminates any liability to pay duty on the impugned clearances.

Impugned order set aside; appeal allowed and demand held unsustainable.

Final Conclusion: The appeal is allowed: although Notification No.108/95-CE does not extend to the 100% EOU, Customs Notification No.84/97-Cus applies for computing aggregate customs duty by virtue of the legal fiction treating EOU clearances as imports, and consequently no duty is payable; the impugned order is set aside.

Liability under Rule 14 of the CENVAT Credit Rules for recovery of inadmissible credit - issuance of show-cause notice to an Input Service Distributor (ISD) - recoverability only against the person who availed the credit - admissibility of CENVAT credit on services availed through or by a related/controlled entity - CBEC Board Circular dated 10.03.2014 on show-cause notices to ISDs

Issuance of show-cause notice to an Input Service Distributor (ISD) - liability under Rule 14 of the CENVAT Credit Rules for recovery of inadmissible credit - recoverability only against the person who availed the credit - CBEC Board Circular dated 10.03.2014 on show-cause notices to ISDs - Whether the show-cause notice and demand under Rule 14 could be validly issued against the Appellant functioning as an Input Service Distributor (ISD). - HELD THAT: - The Tribunal held that Rule 14 can be invoked only against the person who availed the allegedly inadmissible CENVAT credit and not against an ISD which merely distributes input service credit to manufacturing units. The CBEC Board Circular dated 10.03.2014 was treated as a reaffirmation of that legal position. Reliance placed by the Revenue on precedents said to support issuance of notices to ISDs was examined and distinguished: SKF India Ltd. was noted to have lost precedential value due to subsequent remand, and Clariant Chemicals (I) Ltd. was interpreted as not contradicting the Board Circular. Applying these authorities and the Circular, the Tribunal concluded that the demand raised against the ISD was legally unsustainable and liable to be set aside.

Show-cause notice and demand under Rule 14 as issued to the Appellant in its capacity as ISD are unsustainable and are set aside.

Admissibility of CENVAT credit on services availed through or by a related/controlled entity - admissibility of credit for advertisement, technical testing, analysis, consultancy and tour operator services - Whether the disputed CENVAT credits (including those on advertisement painted on wagons, physical stock verification, technical testing/analysis, consultancy and tour operator services) were admissible to the Appellant or otherwise rightly disallowed by the adjudicating authorities. - HELD THAT: - The Tribunal, after considering precedents cited by the Appellant and the material on record, treated the disputed credits as admissible. It accepted the line of authority and Board guidance relied upon by the Appellant that credits in the present factual matrix could not be denied merely because services or invoices were routed through or recorded in the name of a related entity (BCCL) in which the Appellant had overwhelming shareholding and control. The Tribunal found no sustainable legal basis for the Commissioner (Appeals) to have disallowed those credits and, in light of the primary conclusion that recovery could not be made from the ISD, concluded that the adjudicated disallowances could not stand.

The disputed credits are to be regarded as admissible and the disallowance by the Commissioner (Appeals) is set aside.

Final Conclusion: The appeals are allowed: the order of the Commissioner (Appeals) confirming demand, interest and penalty against the Appellant as an ISD is set aside, with consequential reliefs; the Tribunal held that Rule 14 recovery cannot be validly issued against an ISD and that the disputed credits are admissible on the facts and authorities considered.

Admissibility of CENVAT credit on input services - input service used directly or indirectly in relation to manufacture or business - Commercial and Industrial Construction Service as input service - Rent-a-Cab Service as input service - Outdoor Catering Service as input service - Real Estate Agent Service as input service - non-retrospective effect of 2011 amendment excluding construction services

Commercial and Industrial Construction Service as input service - non-retrospective effect of 2011 amendment excluding construction services - Credit of CENVAT on Commercial and Industrial Construction Service availed for setting up factory premises held admissible for the period in question. - HELD THAT: - The Tribunal accepted the principle that the definition of "input service" prior to the 2011 amendment included services used in relation to setting up of a factory and premises of the provider of output service. Reliance was placed on the Punjab & Haryana High Court decision in Belsonica Auto Components Pvt. Ltd., which held that services for construction of factory premises are used, at least indirectly, in relation to manufacture and clearance of final products and thus fall within Rule 2(l). The 2011 amendment excluding construction services was held to be not retrospective and therefore inapplicable to the period (February-December 2008) under dispute. On this basis the impugned denial of credit for construction-related services was held legally unsustainable. [Paras 4, 8]

Credit availed on Commercial and Industrial Construction Service is allowable and the denial in the impugned order is set aside.

Rent-a-Cab Service as input service - input service used directly or indirectly in relation to manufacture or business - CENVAT credit on Rent-a-Cab Service used to transport employees to/from factory held admissible. - HELD THAT: - The Tribunal followed High Court authorities (including Maruti Suzuki and Karnataka decisions) which held that transportation of employees to the factory has a direct bearing on manufacturing activities, increases efficiency and production capacity, and therefore constitutes an input service when used directly or indirectly in or in relation to manufacture or activities relating to business. Applying that reasoning, the Tribunal found the rent a cab service utilised to facilitate employee movement to be within the scope of "input service" and not a welfare or personal expense that would disentitle credit. [Paras 5, 8]

Credit availed on Rent-a-Cab Service is allowable and the impugned denial is set aside.

Outdoor Catering Service as input service - input service used in relation to business of manufacture - CENVAT credit on Outdoor Catering Services engaged to provide canteen/food for employees held admissible where service has nexus or integral connection with the business of manufacture. - HELD THAT: - Relying on the Bombay High Court in Ultratech Cement and the Apex Court's ratio applied to the broader definition of "input service," the Tribunal held that services which have a direct nexus or are integrally connected with the business of manufacturing (including statutory obligations under the Factories Act to provide canteen facilities) qualify as input services. Consequently, outdoor catering services used to ensure employees are fed within the factory premises and to comply with statutory requirements were concluded to be within the admissible scope for CENVAT credit. The Tribunal also noted that a minor amount reversed by the assessee (collected from employees) had been accounted for. [Paras 6, 8]

Credit availed on Outdoor Catering Service is allowable and the impugned denial is set aside.

Real Estate Agent Service as input service - input service used in relation to activities relating to business - CENVAT credit on Real Estate Agent Service used to procure residential accommodation for certain employees held admissible. - HELD THAT: - The Tribunal followed the Coordinate Bench (Axis Bank) and other precedents which recognised CENVAT credit for real estate agent services engaged to find residential accommodation for employees where such accommodation arrangements are required by the employer and relate to business operations. The service was treated as used in relation to activities relating to the appellant's business and therefore falls within the definition of "input service." On that basis the denial of credit in respect of real estate agent services was held unsustainable. [Paras 7, 8]

Credit availed on Real Estate Agent Service is allowable and the impugned denial is set aside.

Final Conclusion: Applying settled authorities and the wider pre 2011 scope of the definition of "input service," the Tribunal held that the credits availed on Commercial and Industrial Construction Service, Rent a Cab Service, Outdoor Catering Service and Real Estate Agent Service were admissible; the impugned adjudication denying these credits was set aside and the appeal allowed.

Interest on delayed refund - date of entitlement to interest from three months after refund claim - unjust enrichment verification - refund of duty paid on imported inputs where transitional credit not available - failure to comply with appellate direction and insubordination

Interest on delayed refund - date of entitlement to interest from three months after refund claim - unjust enrichment verification - Entitlement to interest on the sanctioned refund and the relevant date from which interest is payable. - HELD THAT: - The appellant filed refund claims on 9.5.2019 for duties (CVD and SAD) paid on imported inputs after implementation of GST. The Adjudicating Authority sanctioned the refund on 30.12.2020 but denied interest on the ground that certain documents were filed on 7.12.2020 and the refund was thus granted within three months. The Commissioner (Appeals) held that no requisition had been raised when the claim was initially filed in May 2019, relied on precedents to hold interest payable and directed payment of interest under the statutory provision for delayed refunds, subject to verification of unjust enrichment. The Tribunal found the Adjudicating Authority's subsequent denial of interest contrary to the Commissioner (Appeals)'s direction, and on that basis held the appellant entitled to interest. The Tribunal directed interest to run from three months after the date of filing the refund claim (treated as starting 9th August 2019) until the date of disbursement (30th December 2020), with adjustment for any interest already paid and disbursement within 45 days. [Paras 9, 10, 11, 12, 13]

The appellant is entitled to interest on the sanctioned refund from 9th August 2019 to 30th December 2020; the Adjudicating Authority's denial of interest is set aside and interest is to be paid within 45 days, adjusting any amount already paid.

Refund of duty paid on imported inputs where transitional credit not available - failure to comply with appellate direction and insubordination - Validity of the Adjudicating Authority's conduct in refusing to follow the Commissioner (Appeals)'s direction to grant interest and the consequences thereof. - HELD THAT: - The Tribunal observed that the Commissioner (Appeals) had expressly directed payment of interest after finding no requisition had been raised at the time of initial filing. The Adjudicating Authority thereafter denied interest, which the Tribunal characterised as illegal and as insubordination for not following the appellate direction. The Tribunal noted that such conduct was contemptuous of the superior authority's order and accordingly set aside the impugned order and directed compliance by granting interest as ordered by the Commissioner (Appeals). [Paras 11, 12, 13]

The Adjudicating Authority's refusal to follow the Commissioner (Appeals)'s direction is set aside as illegal; the authority is directed to comply by paying the interest as ordered.

Final Conclusion: Appeal allowed; impugned order set aside and the Adjudicating Authority directed to pay interest on the sanctioned refund from 9th August 2019 to 30th December 2020, adjusting any interest already paid, with payment to be made within 45 days.

Abatement of duty for non-production for continuous period of fifteen days or more - pro rata recalculation of monthly duty on commencement or discontinuance of production - no pre-condition of depositing duty before claiming abatement/refund - self-assessment under capacity-determination and collection of duty rules - intimation and sealing requirement under Rule 10 of the Rules 2010

Abatement of duty for non-production for continuous period of fifteen days or more - pro rata recalculation of monthly duty on commencement or discontinuance of production - no pre-condition of depositing duty before claiming abatement/refund - intimation and sealing requirement under Rule 10 of the Rules 2010 - Whether duty for December 2011 was payable for the entire month or only on pro rata basis for the four days of production, and whether the manufacturer was obliged to pre pay duty for the month and thereafter claim abatement/refund. - HELD THAT: - The Revenue conceded that duty is not payable for days when production did not take place and its case was that duty for the entire month must be prepaid with abatement claimed subsequently. The Tribunal's statutory scheme under the Rules 2010 (notably Rule 7, Rule 9 and Rule 10 read with the proviso to Section 3A(3)) permits proportionate reduction of monthly duty where a factory did not produce notified goods for any continuous period of fifteen days or more, subject to filing the prescribed intimation and sealing procedure. Rule 10 expressly contemplates that the duty 'shall be abated' on a proportionate basis if the conditions (intimation to Deputy/Assistant Commissioner and sealing) are satisfied; there is no provision requiring prior deposit of full monthly duty as a pre condition for claiming abatement. The Tribunal has consistently applied this construction and declined to insist on prepayment, treating the matter as revenue neutral where abatement is allowable. In the present facts (production from 28.12.2011 to 31.12.2011), the identical issue has been previously decided in favour of the respondent by the Tribunal on the same impugned order, and no further appeal was taken by Revenue. Having regard to those conclusions, the demand confirmed by the revenue in respect of the month was unsustainable and was required to be set aside. [Paras 1, 4, 5]

The demand for full month duty was set aside and the Revenue's appeal dismissed; duty is to be treated on pro rata basis where Rule 10 conditions for abatement are met and pre payment is not a mandated prerequisite.

Final Conclusion: The Tribunal's view that abatement under Rule 10 (Rules 2010) permits pro rata reduction of monthly duty where conditions are satisfied, without a mandatory requirement of prior full month payment, is affirmed; the revenue's appeal is dismissed and the demand set aside in respect of December 2011.

Summary order. Delay condoned; Special Leave Petition dismissed in view of this Court's earlier order dated 01.05.2023 in Special Leave Petition (C) Diary No. 11013 of 2023 and connected cases.

Interpretation of tax statutes - Specific provision prevails over general provision - Literal rule of statutory interpretation - Exemption of feed and fodder - Taxability of bran after deletion of "if sold for use as cattle feed" - Use of subsequent statute as clarificatory

Taxability of bran after deletion of "if sold for use as cattle feed" - Exemption of feed and fodder - Specific provision prevails over general provision - Whether wheat bran was taxable for the assessment year 1999-2000 despite Entry 30-D exempting feed and fodder. - HELD THAT: - The Court held that the notification dated 08.02.1999 amended the taxable schedule by deleting the qualifying condition "if sold for use as cattle feed", thereby excluding bran from the exemption in Entry 30-D and making bran exigible to sales tax at 4%. Where the tax provision is clear, unambiguous and direct, the Court must give effect to the literal wording; it is not called upon to reinterpret or displace a specific statutory provision by reference to broader exemption entries. The Tribunal's conclusion that the sale of wheat bran was tax-free under Entry 30-D was therefore unsustainable and inappropriate in view of the specific amendment making bran taxable. [Paras 19, 20]

The order of the Tribunal allowing exemption was quashed and the First Appellate Authority's order holding bran taxable was restored.

Use of subsequent statute as clarificatory - Interpretation of tax statutes - Literal rule of statutory interpretation - Whether the Tribunal could rely on subsequent legislative changes or a later statute as a clarificatory aid to interpret and override an existing specific tax provision. - HELD THAT: - The Court examined the contention that a subsequent amendment or insertion may be clarificatory in nature and referred to the principle in Laxmi Agency concerning clarificatory legislation. However, the Court emphasised that where a specific provision in a tax statute clearly excludes an exemption, a later or subsequent provision cannot be used to nullify the clear and unambiguous earlier enactment. The Tribunal's reliance on a subsequent change to read bran back into the exemption conflicted with the specific amendment which had removed the exemption; therefore such interpretative aid could not be employed to defeat the specific provision. [Paras 16, 18, 19]

The Tribunal's reliance on subsequent legislative change as a clarificatory ground was rejected; the specific statutory provision excluding exemption governs.

Final Conclusion: The revision petition is allowed; the Tribunal's order granting exemption for sale of wheat bran for the assessment year 1999-2000 is quashed and the First Appellate Authority's order treating bran as taxable is restored.

Limitation under Section 30 of the Puducherry Value Added Tax Act, 2007 - commencement of assessment by issuance of summons/notice - re-assessment / continuity of assessment proceedings - appellate remedy under Section 47 of the Puducherry Value Added Tax Act, 2007

Limitation under Section 30 of the Puducherry Value Added Tax Act, 2007 - commencement of assessment by issuance of summons/notice - re-assessment / continuity of assessment proceedings - Whether the assessment orders dated 10.05.2022 for Assessment Year 2012-2013 to 2015-2016 are barred by limitation under Section 30 of the Puducherry Value Added Tax Act, 2007. - HELD THAT: - The Court held that the challenge based on limitation could not be sustained. The proceedings were traced to earlier steps - including summons/notice and the composite notice dated 09.08.2018 which the petitioner had not challenged in the manner known to law - and the Assessing Officer was required thereafter to pass final orders pursuant to that earlier notice. The subsequent notice dated 19.04.2022 was treated as a continuation of the assessment process initiated earlier (including steps from 01.04.2014 and summons referred to in the record), and the petitioner was obliged to meet the allegations on merits rather than raise a fresh limitation objection to the later communication. Consequently there was no scope to hold the impugned assessment orders time barred merely because a further notice was issued on 19.04.2022. [Paras 17, 18, 19]

Limitation plea rejected; assessment proceedings are a continuation of earlier proceedings and not barred by limitation.

Appellate remedy under Section 47 of the Puducherry Value Added Tax Act, 2007 - Whether the petitioner is precluded from pursuing statutory appellate remedy and whether the writ petitions should be entertained in view of availability of alternate remedy. - HELD THAT: - The Court observed that the petitioner had an alternate statutory remedy before the Appellate Commissioner under Section 47 of the Puducherry Value Added Tax Act, 2007. Exercising judicial restraint, the Court dismissed the writ petitions while granting the petitioner liberty to file statutory appeals before the Appellate Commissioner within a limited period. The Appellate Commissioner was directed to decide such appeals on merits subject to the Act's requirements. [Paras 19, 20]

Writ petitions dismissed with liberty to file appeals under Section 47; Appellate Commissioner to decide on merits.

Final Conclusion: The writ petitions are dismissed. The petitioner is granted liberty to file statutory appeals before the Appellate Commissioner under Section 47 of the Puducherry Value Added Tax Act, 2007 within thirty days from receipt of this order, and the Appellate Commissioner shall dispose of the appeals on merits; no costs.

Principles of natural justice - personal hearing - adjournment/request for time - assessment de novo - statutory appeal remedy - fresh assessment after hearing - direction to fix date of hearing

Principles of natural justice - personal hearing - adjournment/request for time - The assessment order passed without affording the appellant a hearing after his request for time is vitiated for violation of the principles of natural justice. - HELD THAT: - The Court found that although the appellant had sought fifteen days to collect and produce documents, the Assessing Authority passed the assessment order without fixing a date for hearing or expressly denying the request. The appellant reasonably expected a further notice fixing a hearing date and should not be penalised merely because the Assessing Authority proceeded to pass the order after the period requested had elapsed. The absence of an opportunity to be heard rendered the assessment contrary to the principles of natural justice and unsustainable. [Paras 6, 7]

Assessment order dated 27.07.2021 set aside as it was passed in violation of the principles of natural justice.

Fresh assessment after hearing - direction to fix date of hearing - opportunity to produce documents - assessment de novo - The matter is remitted to the Assessing Authority to afford one more hearing and to pass a fresh assessment order on merits. - HELD THAT: - Rather than quashing the proceedings permanently, the Court directed that the Assessing Authority shall fix a date for hearing and afford the appellant an opportunity to appear and produce documents without seeking further extension. On conclusion of that enquiry, the Assessing Authority is to pass a fresh assessment order on merits and in accordance with law within four weeks from the date of first hearing. This constitutes a remand for fresh consideration rather than an adjudication on the merits of the tax liability. [Paras 7]

Assessment remitted: Assessing Authority to fix hearing, allow submissions and documents, and pass fresh assessment within four weeks.

Final Conclusion: Writ appeal allowed; the Single Judge's order is set aside, the impugned assessment order is quashed for denial of hearing, and the matter is remitted to the Assessing Authority to afford one more opportunity of hearing and thereafter pass a fresh assessment order on merits within four weeks.

Limitation for initiation of reassessment - reasonableness of delay in completion of reassessment - vice of arbitrariness due to inordinate delay - no statutory limitation for completion of reassessment - obligation to act within reasonable time - power of High Court under Article 226 to determine reasonable time - misquotation of statutory provision not necessarily fatal if intention to initiate reassessment is clear

Limitation for initiation of reassessment - reasonableness of delay in completion of reassessment - vice of arbitrariness due to inordinate delay - Validity of the reassessment proceedings and consequential order in view of limitation and delay - HELD THAT: - The Court examined the sequence of notices arising from the deemed assessment dated 29.04.2011 (assessment year 2010-11). Section 27 imposes a six-year period for initiation of reassessment proceedings; if the notice dated 23.06.2020 is treated as the initiating notice, initiation was time barred. Even assuming the notice of 23.07.2014 (purportedly under Section 84) is treated as having initiated reassessment within the six-year period, the revenue thereafter remained inactive for over six years before issuing a firm notice on 23.06.2020 and completing the order on 05.02.2021. The Court applied established principles that, where no statutory period is prescribed for completion, actions must be taken within a reasonable time and that an unexplained, prolonged slumber by the authority renders subsequent proceedings arbitrary and vitiates them. Reliance was placed on precedents establishing (i) the six year rule is for initiation and (ii) that inordinate delay in concluding proceedings after initiation can invalidate the action. In the facts of this case the respondent failed to explain the long interregnum and consequent delay, and the reassessment order suffered from arbitrariness and was unsustainable. [Paras 6, 7, 11]

The reassessment proceedings and the order dated 05.02.2021 are set aside as vitiated by unreasonable delay and arbitrariness.

Power of High Court under Article 226 to determine reasonable time - no statutory limitation for completion of reassessment - obligation to act within reasonable time - Whether the High Court could determine what constitutes a reasonable period for completion of reassessment proceedings under Article 226 - HELD THAT: - The Court held that, in absence of a statutory period for completion of reassessment, it is for the High Court in exercise of its plenary jurisdiction under Article 226 to determine what constitutes a reasonable period for passing orders. The decision cited authority holding that statutory authorities, being creatures of statute, cannot themselves prescribe the outer limits of 'reasonable time' for exercise of such powers; the writ court may adjudicate whether delay is reasonable in the circumstances. Applying that principle, the Court found the delay here unreasonable and therefore amenable to judicial review under Article 226. [Paras 9]

The High Court may determine the reasonable period for completion of reassessment proceedings and, applying that power, found the delay in this case unreasonable.

Final Conclusion: Writ petition allowed. The reassessment order for the assessment year 2010-11 (order dated 05.02.2021) is quashed on the ground of unreasonable and inordinate delay in completion of proceedings; connected matters closed. No costs.

Transfer of criminal liability on amalgamation - continuation of legal proceedings after amalgamation - attribution of corporate criminal liability - scheme of amalgamation under the Banking Regulation Act - effect of amalgamation on corporate existence - proviso preserving individual criminal liability in an amalgamation scheme - interpretation clause of the amalgamation scheme and reference to RBI

Transfer of criminal liability on amalgamation - proviso preserving individual criminal liability in an amalgamation scheme - attribution of corporate criminal liability - continuation of legal proceedings after amalgamation - Whether criminal proceedings could be continued against the transferee bank (DBS) for offences alleged to have been committed by officials of the transferor bank (LVB) and whether summons issued to DBS should be quashed. - HELD THAT: - The Court examined the scheme of amalgamation and relevant legal principles of attribution of corporate criminal liability. Clause 3(3) of the amalgamation scheme provides that proceedings pending against the transferor bank may be prosecuted by or against the transferee bank, but its proviso preserves liability of directors, officers or employees of the transferor bank to be proceeded against as if the transferor had not been dissolved. The Court applied established principles on corporate criminal liability, observing that a company can be held criminally liable only where the offending acts or mens rea are attributable to persons in control of its affairs; however, criminal liability does not transfer automatically to a successor merely by virtue of amalgamation. The scheme's object - protection of depositors and public confidence in banking - must inform its interpretation; the express proviso limits continuation of criminal liability to individuals who committed the offence. The charge-sheet implicated specific LVB officials and did not disclose involvement of DBS itself. Permitting prosecution of DBS for acts of LVB officials, in the factual matrix and given the scheme's proviso, would be a travesty of justice. Applying these considerations, the Court held that insofar as the proceedings concerned DBS (the transferee bank), they should be quashed. [Paras 31, 32, 34, 35, 36]

Criminal proceedings to the extent they involved DBS were quashed and the summons to DBS set aside; the impugned High Court order is set aside.

Final Conclusion: The impugned judgment of the High Court is set aside. The appeal by DBS is allowed, the appeal by RFL is dismissed, and the criminal proceedings insofar as they pertain to DBS (the transferee bank) are quashed.

Compliance with Section 202 of the Code of Criminal Procedure, 1973 - Validity of issuance of process in proceedings under Section 138 of the Negotiable Instruments Act, 1881 - Magistrate's power to conduct inquiry under Section 202 by affidavit and document-only examination - Modification of appellate order and remand for fresh inquiry under Section 202

Compliance with Section 202 of the Code of Criminal Procedure, 1973 - Validity of issuance of process in proceedings under Section 138 of the Negotiable Instruments Act, 1881 - Whether the High Court was justified in setting aside the order issuing process on the ground of non-compliance with Section 202 of the CRPC in a complaint under Section 138 of the NI Act. - HELD THAT: - The High Court set aside the order issuing process on the ground that, because the respondent's office was outside the Magistrate's jurisdiction, the Magistrate was obliged to hold an inquiry under Section 202 CRPC and failure to do so rendered issuance of process illegal (impugned judgment para.15). The Supreme Court noted the Constitution Bench directions in In Re: Expeditious Trial of Cases Under Section 138 of N.I. Act, 1881 which permit, for the conduct of inquiry under Section 202, taking evidence of complainant's witnesses on affidavit and, in suitable cases, restricting the inquiry to examination of documents without insisting on oral examination of witnesses. Applying that guidance, the Supreme Court modified the High Court's order and directed that the trial court proceed from the stage of Section 202, thereby directing a remedial course rather than permanent setting aside of process. The Court therefore did not sustain the High Court's order insofar as it terminated the proceedings without directing the Section 202 inquiry; instead it remanded the matter for fresh inquiry under the prescribed guidelines.

High Court's order setting aside the process was modified; matter remanded to the Trial Court to proceed from the stage of Section 202 CRPC guided by the Constitution Bench directions.

Magistrate's power to conduct inquiry under Section 202 by affidavit and document-only examination - Modification of appellate order and remand for fresh inquiry under Section 202 - Direction as to the manner and timeframe in which the Section 202 inquiry is to be conducted on remand. - HELD THAT: - Relying on the Constitution Bench directions in the expeditious trial judgment, the Supreme Court directed that evidence of the complainant's witnesses may be taken on affidavit and, in suitable cases, the Magistrate may confine the inquiry to documents without insisting upon oral examination. The Court ordered that the inquiry under Section 202 shall be conducted expeditiously and in any event within one month from the date the Trial Court receives a copy of this order. The High Court's failure to give such a direction was corrected by the Supreme Court through modification and remand for fresh inquiry within the specified timeframe.

Trial Court directed to conduct the Section 202 inquiry in accordance with the Constitution Bench guidelines and complete the inquiry within one month from receipt of the order.

Final Conclusion: The appeal is partly allowed: the High Court's order setting aside the issuance of process is modified and the matter is remanded to the Trial Court to proceed from the stage of Section 202 CRPC, conducting the inquiry in accordance with the Constitution Bench directions (permitting affidavit evidence and document-only inquiry in suitable cases) and to complete the inquiry expeditiously and within one month of receipt of this order.