TaxTMI Updates e-Newsletter
Sep 18,2019

Classification of royalty as licensing services for right to use minerals under Heading 99733/997337 - reverse charge liability on services supplied by Government to a business entity - treatment of statutory contributions to DMF and NMET as part of consideration/royalty and inclusion in value of supply - concept of "supply" and "consideration" under Section 7 (GST)

Classification of royalty as licensing services for right to use minerals under Heading 99733/997337 - reverse charge liability on services supplied by Government to a business entity - Royalty paid for mining lease is a taxable service classifiable under tariff heading 99733/997337 and is liable to GST on reverse charge basis payable by the recipient. - HELD THAT: - The Authority found that the grant of licence by the Government to extract minerals constitutes a supply within the meaning of Section 7 and, being an activity undertaken by the Government as a public authority, is in the course or furtherance of business (paras 7.1, 7.4, 7.5). The Annexure to Notification No. 11/2017 and CBIC guidelines identify licensing services for the right to use minerals including exploration and evaluation under service code 997337; the grant of mining rights fits within that description and falls under the residual entries of Heading 9973 (paras 7.4-7.6). Notification No. 13/2017 (Sl. No. 5) makes services supplied by Central/State Government to a business entity chargeable under reverse charge except specified exceptions; the transaction between the State Government and the applicant is not within those exceptions, and therefore the recipient is liable to pay tax under reverse charge (paras 7.7-7.8). The Authority accordingly classified the royalty as service under Heading 99733/997337 and held that tax is payable on reverse charge by the recipient. [Paras 7, 8]

Royalty for mining lease is classifiable under Heading 99733/997337 and taxable under reverse charge payable by the recipient.

Treatment of statutory contributions to DMF and NMET as part of consideration/royalty and inclusion in value of supply - concept of "supply" and "consideration" under Section 7 (GST) - Statutory contributions to District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) are in addition to royalty, constitute part of the consideration for the grant of mining rights, and are taxable as part of the value of the original supply. - HELD THAT: - The Authority examined whether payments to DMF and NMET constitute a separate supply by those trusts and whether such payments are consideration in relation to the grant of mining rights. Section 7 requires a supply to be for a consideration and in the course or furtherance of business (para 7.9). The Authority observed that Sections 9B and 9C of the MMDR Act require contributions 'in addition to the royalty' (para 7.16), and that the statutory scheme treats these amounts as part of the overall payment relating to mining rights. Consequently, the contributions are payments 'in respect of' the mining rights and fall within the definition of consideration; they are therefore part of the original supply and must be added to the value of the supply for GST purposes (paras 7.13-7.17). The Authority also noted the policy intent that the contributions transfer rehabilitation and related costs to the lessee, reinforcing their character as part of consideration (para 7.18). [Paras 7, 8]

Contributions to DMF and NMET are additions to royalty, form part of the consideration for the mining-rights supply, and are includible in the value of the original supply for GST.

Final Conclusion: The Authority ruled that (i) the grant of mining rights and the royalty paid therefor are services classifiable under Heading 99733/997337 and taxable under reverse charge by the recipient; and (ii) statutory contributions to DMF and NMET are additions to royalty and must be included in the value of the original supply for GST purposes.

Import of services - Reverse charge mechanism - Exemption for services to Government under Notification No. 9/2017 - Business or profession by a governmental entity - Place of supply of services - Section 5(3) IGST - notification for reverse charge

Import of services - Reverse charge mechanism - Section 5(3) IGST - notification for reverse charge - Place of supply of services - Liability to pay IGST under reverse charge on services procured from a supplier located in a non taxable territory - HELD THAT: - The Authority held that the transaction falls within the definition of import of services as the supplier is located outside India, the recipient is located in India and the place of supply is in India. Section 5(3) of the IGST Act empowers the Government to notify supplies on which tax shall be paid by the recipient under reverse charge. Notification No.10/2017 IT(R) brings within its ambit any service supplied by a person located in a non taxable territory to a person located in the taxable territory (other than a non taxable online recipient). Applying these provisions to the facts, the Authority concluded that the applicant is liable to pay IGST on the imported consultancy services on reverse charge basis. [Paras 7, 8]

The applicant is liable to pay IGST on import of services under the reverse charge mechanism in terms of Notification No.10/2017 IT(R).

Exemption for services to Government under Notification No. 9/2017 - Business or profession by a governmental entity - Notification No.9/2017 - condition of purpose other than commerce, industry or any other business or profession - Whether the exemption in Notification No.9/2017 applies to the applicant so as to exclude the reverse charge liability - HELD THAT: - Notification No.9/2017 exempts services received from a provider located in a non taxable territory by Central/State Government or similar authorities only where such services are for purposes other than commerce, industry or any other business or profession. The Authority examined the objectives and constitution of the Global Skill Park and found that, pursuant to the scheme and objects, the activities fall within the definition of "business or profession" under Section 2(17) of the CGST Act. Since the services were received for purposes connected with business/profession, the exemption condition is not satisfied. Consequently, the exemption in Notification No.9/2017 does not apply and the reverse charge liability subsists. [Paras 7, 8]

The exemption under Notification No.9/2017 is not available to the applicant because the services are received for purposes of business/profession; therefore the applicant remains liable to pay IGST under reverse charge.

Final Conclusion: The Authority ruled that the Directorate of Skill Development is liable to pay IGST on the imported consultancy services under the reverse charge mechanism in terms of Notification No.10/2017 IT(R), because the services qualify as import of services and the exemption in Notification No.9/2017 does not apply as the services are for purposes of business/profession.

Value of supply includes interest, late fee or penalty for delayed payment - composite supply and principal supply imputes character to ancillary components - definition of services includes facilitating or arranging transactions in securities - exemption for services by way of extending loans, advances insofar as consideration is interest

Composite supply and principal supply imputes character to ancillary components - definition of services includes facilitating or arranging transactions in securities - Classification of the additional amount charged on delayed payment (interest/late fee/penalty) in transactions where the applicant acts as a stock broker. - HELD THAT: - The Authority held that the stock broking service is the principal supply and ancillary components, including any additional amount charged for delayed payment, derive their character from that principal supply. Section 15(2)(d) requires inclusion of interest/late fee/penalty in the value of the supply and the explanation to section 2(102) (w.e.f. 01-02-2019) clarifies that facilitating or arranging transactions in securities is a service. On these bases, the additional amount charged on delayed payment cannot be classified independently and must be treated as part of the stock broking service. [Paras 7]

The additional amount charged on delayed payment is to be classified as part of the stock broking service (principal supply).

Exemption for services by way of extending loans, advances insofar as consideration is interest - value of supply includes interest, late fee or penalty for delayed payment - Whether the exemption in Notification No. 12/2017 (entry no. 27) for services by way of extending deposits, loans or advances insofar as consideration is interest applies to the additional amount charged by the broker. - HELD THAT: - The Authority examined the nature of the transaction and concluded that the broker had not extended deposits, loans or advances to clients in the sense covered by entry no. 27 of Notification No. 12/2017. The additional amount charged on delayed payment was therefore not interest arising from a loan/advance as envisaged by the notification and could not attract that exemption. The Authority relied on the distinction between genuine interest on loans/advances and penal/ancillary charges in broker-client transactions, and the treatment given in the GST circular examples to determine applicability. [Paras 7]

Notification No. 12/2017 (entry no. 27) is not applicable; the additional amount cannot be treated as exempt interest under that notification.

Value of supply includes interest, late fee or penalty for delayed payment - composite supply and principal supply imputes character to ancillary components - Determination of GST liability on the additional amount charged for delayed payment. - HELD THAT: - Having held that the additional amount is part of the stock broking service (principal supply) and that the loan/advance exemption does not apply, the Authority concluded that the additional amount must be included in the value of the supply under section 15(2)(d) and is taxable accordingly at the rate applicable to stock broking services. The Authority therefore rejected treatment of the charge as an exempt interest and treated it as part of the taxable consideration for the service. [Paras 7]

The additional amount charged on delayed payment is taxable as part of the stock broking service at the applicable GST rate.

Final Conclusion: The Authority ruled that the additional amount charged on delayed payment by the stock broker is part of the principal stock broking service and is taxable; the exemption in Notification No. 12/2017 (entry no. 27) does not apply to these charges.

Classification under the GST Tariff (Chapter 85 / HSN 8513) - Eligibility for concessional rate as a Solar Based Device - Concessional GST rate under Serial Number 234 of Schedule I to Notification No.01/2017-CT(Rate) - Trade parlance vis-a -vis statutory language in classification

Classification under the GST Tariff (Chapter 85 / HSN 8513) - Nano Rechargeable LED Torch Light is classifiable under Chapter Head 8513 (HSN 8513). - HELD THAT: - The product is a rechargeable LED torch equipped with an inbuilt rechargeable battery and an AC adapter for recharging; its packaging and description identify it as a Rechargeable LED Torch Light. On the facts, the device merits classification under 85131010 of the GST Tariff as a torch/light apparatus. The Authority treated the product on its essential character and use, concluding that its predominant design and primary mode of charging (AC adapter) support classification under Chapter 85 rather than as a distinct renewable-energy product category. The finding on classification is dispositive of the tariff head under which GST is chargeable. [Paras 7, 8]

The product is classifiable under Chapter Head 8513 and attracts GST @18%.

Eligibility for concessional rate as a Solar Based Device - Concessional GST rate under Serial Number 234 of Schedule I to Notification No.01/2017-CT(Rate) - Trade parlance vis-a -vis statutory language in classification - The torch is not a 'Solar Based Device' within Serial Number 234 of Schedule I and is not eligible for the concessional 5% GST rate. - HELD THAT: - Serial Number 234 grants concessional rate to 'Renewable Energy Devices & parts for their manufacture' and specifically includes 'Solar Based Devices.' The Authority found that although the torch can be charged via a solar panel through an external socket and cable, the solar panel is not an integral or bundled part in all cases and solar charging is an alternate to the device's predominant AC charging. The product's capability for solar charging does not convert its essential character into a solar-based device where the solar panel is external, optionally supplied, and not indispensable to the product's operation. The Authority also considered the applicant's submission on trade parlance but concluded that the statutory wording is sufficiently clear and that trade usage could not expand the statutory category to cover a device whose primary design is AC-rechargeable with only an ancillary solar charging option. Accordingly the concessional rate under Sr.234 does not apply. [Paras 7, 8]

The product is not a 'Solar Based Device' for the purposes of Serial Number 234 and is not entitled to GST @5%.

Final Conclusion: The Advance Ruling holds that the Nano Rechargeable LED Torch Light is classifiable under Chapter Head 8513 and attracts GST at the standard rate of 18%; it is not a 'Solar Based Device' and therefore not eligible for the concessional 5% rate under Serial Number 234 of Schedule I to Notification No.01/2017-CT(Rate).

Reopening of GST TRAN-1 portal - acceptance of GST TRAN-1 by manual filing - verification of transitional CENVAT credit claims - remedy for electronic portal failure - facilitation of electronic tax payment and credit utilisation

Reopening of GST TRAN-1 portal - remedy for electronic portal failure - facilitation of electronic tax payment and credit utilisation - Respondents directed to reopen the GST TRAN-1 portal or, failing that, to entertain the petitioner's GST TRAN-1 manually and to ensure access to the regular electronic system for payment and credit utilisation. - HELD THAT: - The Court found that the petitioner's inability to complete filing on the last date due to non-responsive electronic systems warranted remedial directions. In view of the contention that failure of the portal may cause loss of transitional credit, respondents were directed to reopen the portal within two weeks; alternatively, if the portal is not reopened, the respondents must accept the petitioner's GST TRAN-1 by manual mode and process it. The respondents were also directed to ensure that the petitioner is permitted to pay taxes through the regular electronic system and utilise any credit considered for it. The order is procedural and remedial, aimed at preventing prejudice to the petitioner caused by technological failure of the portal.

Direction issued to reopen portal within two weeks or otherwise to accept and process the petitioner's GST TRAN-1 manually and to facilitate electronic payment and credit utilisation.

Acceptance of GST TRAN-1 by manual filing - verification of transitional CENVAT credit claims - The petitioner's claimed transitional CENVAT credit to be verified and adjudicated by the respondents after acceptance of GST TRAN-1. - HELD THAT: - The Court did not decide the merits of the credit claim itself but directed that once the GST TRAN-1 is accepted (either through reopened portal or manual filing), the respondents shall verify the credits claimed by the petitioner and pass orders thereon after due verification. This mandates fresh consideration and adjudication of the credit claims by the respondents in the ordinary course but does not adjudicate entitlement on merits in the present order.

Credit claims to be subjected to verification and adjudicated by the respondents after acceptance of GST TRAN-1; remand for fresh consideration.

Final Conclusion: Petition allowed in part: respondents directed to reopen the GST TRAN-1 portal within two weeks or otherwise accept and process the petitioner's GST TRAN-1 manually; claimed transitional credits to be verified and adjudicated afresh; respondents permitted to file a counter affidavit within one month and matter listed on the specified date.

Interest on delayed GSTR-3B - adjudicatory process under Section 73 of the CGST Act - waiver of late fee under Notification No.76/2018 - stay of attachment pending adjudication - right of appeal under Section 107 of the CGST Act

Stay of attachment pending adjudication - interest on delayed GSTR-3B - Stay of the attachment of the petitioner's bank account consequent to the order dated 22.05.2019 was granted pending filing of the respondent's counter-affidavit. - HELD THAT: - The Court recorded that the petitioner was levied interest for delayed filing of GSTR-3B for February and March 2018 and that an attachment of the petitioner's bank account had been effected pursuant to the order dated 22.05.2019. In view of the pendency of the writ petition and on prayer of the respondents for time to file a detailed counter-affidavit, the Court stayed the operation of the attachment order until the counter-affidavit is filed and the matter is further considered by the Court. The Court did not adjudicate the validity of the interest levy on merits at this stage but issued interlocutory relief to preserve the petitioner's position pending further proceedings.

Operation of the order dated 22.05.2019 attaching the petitioner's bank account is stayed until the respondent files the counter-affidavit and the matter is next listed.

Adjudicatory process under Section 73 of the CGST Act - right of appeal under Section 107 of the CGST Act - Respondent authorities were permitted to undertake the adjudicatory process under Section 73 of the CGST Act while the writ petition is pending. - HELD THAT: - The Court noted the petitioner's contention that interest was levied without completing the adjudicatory process under Section 73 and that remedies including appeal under Section 107 are available. Rather than precluding further action, the Court left it open to the respondent authorities to proceed with the statutory adjudication if they are so advised, subject to the interim stay of the attachment. This preserves the authorities' statutory power to adjudicate while protecting the petitioner from immediate coercive recovery by attachment until the counter-affidavit and further orders.

Respondent authorities are at liberty to undertake adjudication under Section 73 of the CGST Act despite the interim stay of the attachment.

Waiver of late fee under Notification No.76/2018 - interest on delayed GSTR-3B - The Court recorded the parties' positions regarding Notification No.76/2018 (waiver of late fee) and the contention that the notification does not waive interest; no final adjudication on applicability was made. - HELD THAT: - The petitioner placed on record the notification providing waiver of late fee for delayed filing within a specified window and argued that returns were filed prior to that window. The respondents contended the notification applied only to late fee and not to interest. The Court noted these contentions and the supporting screenshots of the GSTN portal, but did not decide the substantive question whether the notification or any other provision precludes levy of interest. That substantive issue remains for adjudication in the statutory process or on the merits upon further hearing.

The Court recorded the competing contentions about Notification No.76/2018 and interest but did not decide the question; the matter remains for adjudication.

Final Conclusion: Interim directions: four weeks' time granted to the respondents to file a detailed counter-affidavit; operation of the attachment order dated 22.05.2019 stayed pending further orders; respondent authorities may proceed with adjudication under Section 73 of the CGST Act; matter listed for further hearing on 28.08.2019.

Identity, genuineness and creditworthiness as ingredients of section 68 - onus of proof and shifting burden in cash/credit entries - share capital credited in books and taxation under section 68 - taxation of share premium in closely held companies under section 56(2)(viib) - requirement of departmental inquiry and use of powers under notice u/s 133(6) and summons u/s 131 - remission/cessation of liability and deemed income under section 41(1)

Identity, genuineness and creditworthiness as ingredients of section 68 - share capital credited in books and taxation under section 68 - onus of proof and shifting burden in cash/credit entries - requirement of departmental inquiry and use of powers under notice u/s 133(6) and summons u/s 131 - taxation of share premium in closely held companies under section 56(2)(viib) - Deletion of additions made to share application money and share premium under section 68 (and the alleged applicability of section 56(2)(viib)) for A.Y. 2012-13. - HELD THAT: - The Tribunal found that the assessee had produced documentary evidence (PAN, addresses, IT acknowledgements, financial statements, bank statements showing payments through banking channels, share application forms, confirmations and a valuation report) which, on the material before the Assessing Officer, discharged the initial onus to establish identity, genuineness of transactions and creditworthiness of the investors. Once the initial burden was discharged, it was for the AO to carry out further inquiries (for example by invoking powers under section 133(6) or summons under section 131) before rejecting the explanations. The AO did not conduct such enquiries and reached adverse conclusions primarily by analysing the subscribers' financial statements; the Tribunal held that this was insufficient to treat the credits as unexplained income. The Tribunal further observed that the amendment bringing share premium within section 56(2)(viib) and the proviso to section 68 are prospective from A.Y. 2013-14 and, in any event, on the facts the assessee had furnished a valuation report and evidence to justify the premium. For these reasons the additions were deleted. [Paras 8, 10, 11, 15]

Addition towards share application money/share premium under section 68 (and the invoked section 56(2)(viib)) deleted; appeal allowed.

Identity, genuineness and creditworthiness as ingredients of section 68 - share capital credited in books and taxation under section 68 - onus of proof and shifting burden in cash/credit entries - requirement of departmental inquiry and use of powers under notice u/s 133(6) and summons u/s 131 - Deletion of addition made to share application money under section 68 in the second appeal (facts pari materia to the first appeal) for A.Y. 2012-13. - HELD THAT: - On facts identical to the co-pending appeal, the Tribunal applied the same reasoning: the assessee had discharged the initial onus by producing documentary evidence including bank statements evidencing payment through banking channels and other corroborative material. The AO had not carried out independent enquiries to test the veracity of those documents before making the addition. Accordingly, the Tribunal directed deletion of the addition under section 68. [Paras 18]

Addition towards share application money under section 68 deleted; appeal allowed.

Remission/cessation of liability and deemed income under section 41(1) - requirement of proof of benefit derived and writing off in books as condition precedent - Addition under section 41(1) in respect of alleged non existing creditors was set aside to the file of the AO for verification; not finally sustained by the Tribunal. - HELD THAT: - The Tribunal recalled the statutory tests for invoking section 41(1): (i) an earlier allowance/deduction in respect of the liability, and (ii) receipt of amount or benefit by way of remission or cessation of the liability in a subsequent year such that the assessee derives a benefit. The AO's additions were based on the mere fact that certain creditors remained on the books for years; he did not bring material showing that the assessee derived a benefit in the relevant year by remission/cessation. The assessee produced evidence that parts of the liabilities were later paid and remaining amounts were written off and offered to tax in subsequent years. As it was not clear whether those proof-documents had been examined by the AO, the Tribunal remanded the issue for the AO to verify payments/writings off and the factual position before making any addition under section 41(1). [Paras 19, 23, 25]

Additions under section 41(1) set aside for verification by the AO; matter remanded for factual verification (appeal partly allowed for statistical purposes).

Final Conclusion: For A.Y. 2012-13, additions made under section 68 (and the invoked section 56(2)(viib)) in both appeals were deleted as the assessee discharged the initial onus and the AO failed to conduct requisite inquiries; additions under section 41(1) were not upheld by the Tribunal and the matter is remanded to the Assessing Officer for verification of payments/writing offs and fact finding before any addition is made.

Assessment/penalty passed in the name of an amalgamating company which has ceased to exist - substantive illegality versus procedural defect - curability under Section 292B - estoppel by participation in proceedings against law - succession to business and liability of successor (Section 170)

Assessment/penalty passed in the name of an amalgamating company which has ceased to exist - substantive illegality versus procedural defect - curability under Section 292B - Validity of penalty order passed in the name of the amalgamating (ceased to exist) company and whether such defect is curable under Section 292B - HELD THAT: - The Tribunal held that the AO passed the penalty order in the name of the amalgamating company which, by an approved scheme of amalgamation, had ceased to exist with effect from the appointed date. Relying on the ratio of the Supreme Court in Principal CIT v. Maruti Suzuki India Ltd. (and the line of decisions summarized therein), the Tribunal treated framing of an order in the name of a non existent entity as a substantive illegality and not a mere procedural or clerical defect. The court observed that Section 292B applies only where the proceeding is in substance and effect in conformity with the intent and purpose of the Act; an assessment/penalty completed against an entity that no longer exists is fundamentally at odds with that principle. The Tribunal further noted the authorities (Spice Entertainment and related Delhi High Court decisions) distinguishing cases where abundant material showed the notice was clearly intended for the successor and the error was merely clerical, but found the present facts bring the matter within the rule that an order against a non existent amalgamating entity is void. Applying these principles, the Tribunal concluded the penalty order in the name of the dissolved/amalgamating company is a nullity and cannot be validated under Section 292B. [Paras 6, 7]

Impugned penalty order passed in the name of the amalgamating company is a substantive illegality and is quashed; it is not curable under Section 292B.

Estoppel by participation in proceedings against law - succession to business and liability of successor (Section 170) - Effect of the assessee's participation/notice and whether participation operates as estoppel to validate the order - HELD THAT: - The Tribunal rejected the contention that participation by the amalgamated/successor company in proceedings cures the jurisdictional defect. Citing the Supreme Court's exposition, once an entity ceases to exist by virtue of an approved amalgamation scheme, proceedings initiated or orders passed in the name of that non existent entity are void; participation by the successor cannot operate as an estoppel against law to validate such substantive illegality. The Tribunal noted the statutory scheme on succession (Section 170) which deals with assessment of predecessor and successor but concluded that the procedural step of addressing notice or order to a non existent entity, when the AO had been informed of amalgamation, cannot be remedied by estoppel or treated as a clerical lapse. [Paras 6, 7]

Assessee's participation does not cure the substantive illegality; participation cannot operate as estoppel to validate an order made against a non existent amalgamating entity.

Final Conclusion: Following the Supreme Court's ratio in Maruti Suzuki and allied precedents, the Tribunal quashed the penalty orders framed in the name of the amalgamating company that had ceased to exist; the defect was held to be a substantive illegality not curable under Section 292B and participation by the successor did not validate the orders.

Application of CBDT litigation policy monetary threshold - retrospective application of CBDT circular on withdrawal of appeals - withdrawal/non-maintainability of departmental appeals below monetary limit - allowability of legal expenses incurred in Debts Recovery Tribunal proceedings

Application of CBDT litigation policy monetary threshold - withdrawal/non-maintainability of departmental appeals below monetary limit - retrospective application of CBDT circular on withdrawal of appeals - Whether the revenue's appeal for A.Y. 2012-13 is maintainable in view of the CBDT circular increasing monetary limits for filing appeals and its applicability to pending appeals - HELD THAT: - The Tribunal held that the CBDT circular dated 8th August 2019, read with CBDT circular No.3/2018, increases the monetary threshold for departmental appeals before the Tribunal to Rs. 50,00,000 and that the modifications are to be read with the earlier circular which already provided for retrospective application. Following a coordinate-bench decision addressing identical facts and construing the circular as applicable to pending appeals, the Tribunal found that the tax effect in the present appeal falls below the prescribed monetary limit and therefore the departmental appeal was not to be pressed. The Tribunal also recognised the department's limited remedy to seek recall where an appeal was inadvertently included or covered by exceptions. Having applied the CBDT policy on low tax-effect appeals, the Tribunal dismissed the revenue appeal in limine without adjudicating the merits. [Paras 5, 7]

Revenue appeal for A.Y. 2012-13 dismissed as withdrawn / non-maintainable under the CBDT circular on low tax-effect appeals

Allowability of legal expenses incurred in Debts Recovery Tribunal proceedings - Whether the disallowance of legal expenses of Rs. 1,00,000 sustained by the CIT(A) for A.Y. 2013-14 was justified - HELD THAT: - On the cross-objection for A.Y. 2013-14 the assessee produced evidences tracing the misplaced documents which established that the expenditure related to court fees and proceedings titled CPI Industrial Products Pvt. Ltd. v. SBI before the Debts Recovery Tribunal. The Tribunal examined the materials placed on record and concluded that the amount constituted expenditure incurred in recovery proceedings and was therefore allowable, directing the Assessing Officer to delete the addition. [Paras 11]

Cross-objection allowed; addition of Rs. 1,00,000 on account of disallowance of legal expenses deleted

Final Conclusion: The revenue appeal for A.Y. 2012-13 is dismissed in limine under the CBDT circular on low tax-effect appeals; the assessee's cross-objection for A.Y. 2013-14 is allowed and the disallowance of legal expenses is deleted.

Failure to deduct tax at source - penalty under section 271C - reasonable cause for non-deduction - contumacious conduct - overriding effect of section 196 (payments to Government) - section 194C applicability

Failure to deduct tax at source - penalty under section 271C - reasonable cause for non-deduction - contumacious conduct - section 194C applicability - overriding effect of section 196 (payments to Government) - Whether penalty under section 271C is leviable for non-deduction of TDS under section 194C on external development charges (EDC) paid to HUDA/DTCP for assessment years 2014-15 and 2015-16. - HELD THAT: - The Tribunal found that the assessee had a bona fide and reasonable cause for not deducting TDS. The license for development was granted by the Directorate of Town and Country Planning (DTCP), a department of the State Government of Haryana, and EDC payments, though routed to HUDA, were made pursuant to directions/obligations arising under the DTCP licence and in discharge of statutory obligations under the HDRUA Act. DTCP had issued a clarification stating that no TDS was required to be deducted on such EDC payments. On these facts the Tribunal held that the assessee's belief that TDS was not deductible was bona fide, and there was no finding of deliberate avoidance or contumacious conduct. The Tribunal relied on the principle, as applied in prior coordinate decisions and approved authorities, that levy of penalty under section 271C requires a finding of contumacious conduct and is not warranted where failure to deduct arises from a reasonable cause or bona fide belief. Applying these conclusions to the facts, the Tribunal reversed the findings of the lower authorities and directed deletion of the penalty for the stated assessment years. [Paras 8, 10, 11, 13]

Penalty under section 271C deleted for assessment years 2014-15 and 2015-16 as there was reasonable cause for non-deduction of TDS and no contumacious conduct by the assessee.

Final Conclusion: The appeals are allowed and the penalty imposed under section 271C is set aside for the assessment years 2014-15 and 2015-16.

Disallowance under section 40A(3) of the Income-tax Act - aggregate of payments - Rule 6DD exceptions - business exigency and genuineness of payment - principal-agent payments - nexus between non compliance and tax evasion object of section 40A(3)

Disallowance under section 40A(3) of the Income-tax Act - Rule 6DD exceptions - business exigency and genuineness of payment - aggregate of payments - Whether the addition disallowing cash payments of operational charges to Royal Calcutta Turf Club under section 40A(3) is sustainable. - HELD THAT: - The Tribunal found that the payments in issue were bona fide operational charges payable to RCTC by the assessee in his capacity as an authorised bookmaker and arose from contractual obligations requiring payment prior to the next race day. The payments related to receipts for Saturdays, Sundays and holidays when banking facilities were effectively unavailable for the appellant to make cheque payments before the deadline imposed by the club. The Tribunal accepted that the payments were genuine and that non compliance with the mode prescribed by section 40A(3) had no nexus with tax evasion or use of unaccounted money in the facts of the case. It considered and applied the reasoning of a co ordinate bench in Sri Manoranjan Raha (ITA No.1448/Kol/2011) which emphasises that where genuineness and business exigency are established, and the payee acknowledges receipt, the rigour of section 40A(3) should not be invoked. The Tribunal rejected Revenue's contention that amounts of two proprietary arms must be clubbed because the appellant had to demonstrate separate audited accounts; instead it accepted that the operational payments were compelled by the contract and by the club's practice. The Tribunal also found the club's certificate, coupled with the contractual obligation and the surrounding commercial reality, sufficient to demonstrate the necessity of cash payments and that Rule 6DD and the principle of business exigency accordingly applied to exempt the payments from disallowance. On this basis the Tribunal concluded that the disallowance lacked the requisite nexus to the preventive object of section 40A(3) and was not sustainable. [Paras 5, 6, 7]

Addition of Rs. 49,43,544 under section 40A(3) deleted and the appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2013-14, holding that the cash payments of operational charges to RCTC were genuine and occasioned by business exigency and contractual compulsion; consequently the disallowance under section 40A(3) was deleted.

Unexplained cash credits / share application money - onus to prove identity, genuineness and creditworthiness under section 68 - applicability of section 68 where shares allotted for consideration other than cash - change in shareholding and carry forward/set off of losses under section 79 - non applicability of section 79 to depreciation losses

Unexplained cash credits / share application money - onus to prove identity, genuineness and creditworthiness under section 68 - applicability of section 68 where shares allotted for consideration other than cash - Deletion of addition made u/s 68 in respect of share application money of Rs. 7.02 crores. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the assessee had discharged its onus to prove the nature and source of the impugned credit. The assessee produced bank receipts for the cheque component, purchase invoices and challans showing supply of machinery (on which depreciation was allowed), bills for pathological tests, PAN, VAT/CST/Service Tax registrations and MCA/ROC documents evidencing existence and filings of the paying entity which held substantial shareholding in the assessee. The AO relied on MCA site information without making corroborative enquiries (for example, from the paying entity's assessment records or PAN data) and did not rebut the explanation with cogent material. Applying precedents that section 68 cannot be invoked where there is no receipt of money (shares allotted for consideration other than cash or bona fide non-cash transactions), the Tribunal found the addition unsustainable and directed its deletion. [Paras 6, 7]

Addition under section 68 in respect of share application money of Rs. 7.02 crores deleted.

Change in shareholding and carry forward/set off of losses under section 79 - non applicability of section 79 to depreciation losses - Allowability of set off of brought forward losses (including depreciation loss) despite change in shareholding. - HELD THAT: - The Tribunal affirmed the CIT(A)'s finding that more than fifty-one percent of the voting power was held by the same persons in the year of loss (AY 2009-10) and in the year of set off (AY 2010-11), having regard to the shareholding percentages of the principal shareholders. Independently, the Tribunal relied on binding authority that section 79 does not apply to brought forward depreciation losses, and therefore directed allowance of the set off subject to verification of material facts by the AO. [Paras 8]

Set off of brought forward losses (including depreciation loss) allowed; AO directed to verify and give effect to the set off.

Final Conclusion: Revenue's appeal dismissed: the Tribunal affirmed deletion of the section 68 addition in respect of the share application money and upheld allowance of the brought forward losses (including depreciation), directing the Assessing Officer to give effect after verification.

Exemption under section 10(23C)(iv) - first proviso to section 2(15) - exclusion for activities carried on for profit - predominant object test - principle of mutuality - double deduction - depreciation where capital expenditure previously allowed as application of income - principle of consistency

Exemption under section 10(23C)(iv) - first proviso to section 2(15) - exclusion for activities carried on for profit - predominant object test - principle of mutuality - principle of consistency - Whether the assessee is entitled to exemption as a charitable institution (under section 10(23C)(iv) and sections 11/12) and whether the proviso to section 2(15) excludes the assessee's activities as being 'for profit'. - HELD THAT: - The Tribunal held that the facts and circumstances for AY 2012-13 are identical to earlier assessment years in which the assessee was held to be a charitable institution and granted exemption. The authorities below had relied on the same reasoning as in earlier years, which orders were set aside by the ITAT in the assessee's own case. Applying the predominant object test, the Tribunal found that the assessee's main objects are cultural and intellectual and that incidental activities (hostel, catering, limited residential accommodation to members/guests) were in furtherance of those objects, operated on a no-profit no-loss or cost-recovery basis, and lacked a profit-making motive. The Tribunal also relied on the assessee's continuous registration/approval under relevant provisions, prior administrative scrutiny by CBDT when granting notification, and consistent past treatment of the assessee's affairs; recent precedents (including High Court and Supreme Court authorities cited in the record) reinforce that charging fees for incidental activities does not ipso facto render an institution non-charitable where the dominant object is not profit. Revenue admitted that identical issues were decided in earlier years and did not point to distinguishing facts for the year under appeal. Respectfully following the earlier ITAT/High Court decisions in the assessee's own case and applicable precedents, the Tribunal concluded that the mischief of the proviso to section 2(15) is not attracted on these facts and that exemption must be allowed.

The denial of exemption was reversed; the assessee is entitled to exemption under sections 11 and 10(23C)(iv) for AY 2012-13.

Double deduction - depreciation where capital expenditure previously allowed as application of income - Whether the claim for depreciation can be disallowed on the ground that the capital expenditure had earlier been allowed as application of income, giving rise to a double deduction. - HELD THAT: - The Tribunal noted that the third ground raised by Revenue is covered by binding and persuasive precedents cited in the record, including decisions of the Supreme Court and the Delhi High Court as well as a coordinate bench decision in the assessee's own case. On the basis of those authorities and the fact that Revenue advanced no distinguishing facts for the year under appeal, the Tribunal accepted that the assessee's claim on depreciation is to be decided in accordance with those precedents and that Revenue's disallowance could not be sustained.

The disallowance of depreciation as constituting a double deduction was rejected and the assessee's depreciation claim is to be allowed in accordance with the cited precedents.

Final Conclusion: Following earlier orders in the assessee's own case and applicable judicial precedents, the Tribunal dismissed the appeal filed by Revenue and upheld the CIT(A)'s order allowing exemption under sections 11 and 10(23C)(iv) and rejecting the depreciation disallowance for Assessment Year 2012-13.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - Validity of notice issued under section 274 - Failure to specify the limb of section 271(1)(c) - Principles of natural justice in penalty proceedings

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - Validity of notice issued under section 274 - Failure to specify the limb of section 271(1)(c) - Principles of natural justice in penalty proceedings - Whether the penalty under section 271(1)(c) is sustainable where the notice issued under section 274 did not specify whether proceedings were initiated for concealment of particulars of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal examined the show-cause notice issued under section 274 read with section 271(1)(c) and found it to be vague and ambiguous because it recited both limbs of section 271(1)(c) without specifying which limb the Assessing Officer had applied. The Court applied the principle that a penal provision and the notice initiating penalty proceedings must be strictly construed and the assessee must be made aware of the precise grounds so as to have a fair opportunity to meet them. Reliance was placed on decisions holding that initiation and imposition of penalty must be on the same specified ground and that a standard proforma notice enumerating all grounds without specific application indicates non-application of mind and offends natural justice. In view of the unspecified notice, the Tribunal held that the penalty, though levied and confirmed by the Commissioner (Appeals), was not sustainable. [Paras 9, 10, 13, 14]

Penalty under section 271(1)(c) deleted as the notice under section 274 was vague for not specifying the limb of section 271(1)(c), rendering the penalty unsustainable.

Final Conclusion: The appeal is allowed; the penalty under section 271(1)(c) is set aside because the show-cause notice under section 274 failed to specify whether proceedings were for concealment of particulars of income or for furnishing inaccurate particulars, thereby offending principles of natural justice.

Charitable purpose - advancement of any other object of general public utility - first proviso to section 2(15) - exclusion where activity involves trade, commerce or business or rendering of service for consideration - application of income under section 11 - principle of mutuality - predominant object test - incidental business receipts threshold (ten lakh rupees) - double taxation of share distributed by an AOP

First proviso to section 2(15) - exclusion where activity involves trade, commerce or business or rendering of service for consideration - predominant object test - Whether the assessee's involvement in hosting and commercial exploitation of IPL matches disentitles it from being a 'charitable purpose' under the definition in section 2(15) and thereby from exemption under section 11 for AY 2010-11. - HELD THAT: - The Tribunal held that the assessee was not merely a passive stadium-owner but was systematically and substantially involved in the commercial exploitation of IPL matches. On the material placed (including the tripartite agreement, BCCI documents, parliamentary and judicial reports) the commercial character of IPL and the active obligations and commercial concessions undertaken by the assessee made the commercial activity an integral part of its operations. Applying the test in Surat Art Silk and subsequent legislative changes embodied in the proviso to section 2(15), the Bench concluded that where the purpose of an institution involves carrying on activities in the nature of trade or rendering services for consideration, the activity falls outside 'charitable purpose' irrespective of subsequent application of surplus. The Tribunal further observed that the assessee's objects and subsequent amendment of its memorandum indicate revenue/ commercial orientation. Consequently the assessee's receipts from IPL-related activities for the year under consideration are not within charitable purpose and exemption under section 11 is not available for that year. [Paras 33, 38, 40, 42]

Assessee not entitled to exemption under section 11 for receipts from IPL-related commercial activities for AY 2010-11 as these activities fall within the scope of the first proviso to section 2(15).

Application of income under section 11 - payment by BCCI as revenue-sharing / quid pro quo - not voluntary grant - double taxation of share distributed by an AOP - Whether amounts received by the assessee from BCCI (TV subsidy, IPL subvention, etc.) are voluntary grants (application of income) or consideration/revenue-sharing for services, and whether amounts already taxed at BCCI can be taxed again in the hands of the assessee. - HELD THAT: - The Tribunal examined BCCI's consistent position and books which treat payments to State Associations as part of an arrangement for sharing revenues (and in practice booked as expenditure by BCCI). On the evidence the payments were held to flow under a revenue-sharing/quid pro quo arrangement (70% media share practice and express obligations in the tripartite agreement), not as unilateral discretionary largesse. The Bench further noted that, as per the factual position then before tax authorities, the receipts had been treated and/or assessed in BCCI's hands; consequently to tax the same amounts again in the hands of the member association would amount to double taxation. The Tribunal left open that if a higher authority in BCCI's own appeals were to treat those payments differently (for example allow them as deductible expenditure of BCCI), the assessing officer could reopen the assessee's case as necessary. [Paras 21, 22, 42]

Payments from BCCI were not to be treated as voluntary grants in the circumstances; sums which have already been taxed at BCCI's/AOP's level cannot be taxed again in the hands of the assessee for AY 2010-11; possibility of reopening left open subject to outcome of BCCI's own appeals.

Incidental business receipts threshold (ten lakh rupees) - principle of mutuality - Whether receipts from club facilities and catering are charitable receipts (mutuality) or taxable business income; and what further inquiry is necessary. - HELD THAT: - The Tribunal declined to finally adjudicate the character of club house and catering receipts on the record before it. It observed that the Assessing Officer must verify accounts to determine how much of the club/catering income is from members (mutuality) and how much from non-members (commercial). The Tribunal directed reassessment/verification by the AO on these factual aspects to determine whether the principle of mutuality applies and to tax accordingly in accordance with law. [Paras 43, 44]

Issue remanded to the Assessing Officer for verification of accounts and factual determination whether club and catering receipts arise from members (mutuality) or from non-members (taxable business income).

Final Conclusion: The appeal is partly allowed. For AY 2010-11 the Tribunal holds that the assessee's involvement in IPL-related commercial activities brings those receipts outside 'charitable purpose' under section 2(15) and exemption under section 11 is not available; amounts already taxed at BCCI/AOP level are not to be taxed again in the assessee's hands (subject to the outcome of BCCI's own appeals); the question of club/catering receipts is remanded to the Assessing Officer for factual verification under the principle of mutuality.

Levy of penalty for concealment of particulars of income under section 271(1)(c) - Explanation 1 to section 271(1)(c) - rebuttable presumption and shifting of onus - voluntary disclosure versus disclosure under compulsion - benefit of telescoping of income/outgoings requires documentary substantiation - strict liability/absence of mens rea for penalty under section 271(1)(c)

Levy of penalty for concealment of particulars of income under section 271(1)(c) - Explanation 1 to section 271(1)(c) - rebuttable presumption and shifting of onus - voluntary disclosure versus disclosure under compulsion - benefit of telescoping of income/outgoings requires documentary substantiation - Validity of penalty imposed under section 271(1)(c) for undisclosed sale proceeds and undisclosed bank credits for assessment year 2009-10 - HELD THAT: - The Tribunal found on the material on record that the assessee sold land for Rs. 1.90 crores which was not shown in the return and that substantial credit entries and cash deposits in a bank account remained undisclosed; the assessee admitted these transactions only when confronted with documentary evidence and had not filed any return or supporting books and records. Explanation 1 to section 271(1)(c) raises a rebuttable presumption that additions/disallowances represent income the particulars of which were concealed and places the initial onus on the assessee to furnish acceptable and substantiating material. The Appellate Authority and the Tribunal concluded that the assessee failed to discharge this onus: no balance sheet, bank statements or other primary documents were produced, and the claimed transfers to relatives could not be substantiated. The Tribunal held that the surrender/acceptance of additions made after detection was not a voluntary disclosure in the sense of being out of free will, and that mere desire to "buy peace" or avoid litigation does not rebut the presumption of concealment. The benefit of telescoping of income/outgoings could not be allowed in absence of requisite documentary proof. Reliance on precedents did not afford parity with the facts here, and earlier Tribunal order upholding enhancement of part of the income in the same assessment year reinforced the conclusion. Applying the statutory scheme and settled jurisprudence that Explanation 1 operates as a rule of evidence and that mens rea is not an essential requirement for levy of penalty, the Tribunal found no infirmity in the appellate authority's exercise of satisfaction for levy of penalty. [Paras 5]

Penalty under section 271(1)(c) sustained and the assessee's appeal dismissed.

Final Conclusion: The Tribunal dismissed the appeal and upheld the penalty imposed by the CIT(A) under section 271(1)(c) for assessment year 2009-10, holding that the assessee concealed particulars of income, failed to rebut the presumption under Explanation 1, and did not furnish substantiating evidence to avoid penalty.

Unexplained investment - deemed income under provision of section 69 / 69C - capital gains attributable to actual seller (not GPA holder) - onus on revenue to displace explanation where assessee has no source of income

Capital gains attributable to actual seller (not GPA holder) - Sale consideration of the immovable property is to be assessed in the hands of the actual owner (the father), and not in the hands of the assessee who acted as GPA holder. - HELD THAT: - The Tribunal noted that the sale deed recitals establish that the transfer was by the father and that the assessee merely acted under a General Power of Attorney. The Assessing Officer did not dispute that the cheque amounts forming part of the sale consideration were not assessed as capital gains in the assessee's hands. It is a settled principle that capital gains arising on sale of property are to be assessed in the hands of the actual seller and not the GPA holder; this principle was applied to accept that the sale consideration must be regarded as attributable to the father and not the assessee. [Paras 3]

The capital gains arising from the sale are to be assessed in the hands of the father (the actual seller), not the assessee who was a GPA holder.

Unexplained investment - deemed income under provision of section 69 / 69C - onus on revenue to displace explanation where assessee has no source of income - Cash deposits of Rs.16,80,500/- in the assessee's bank account, explained as part of the sale consideration of the father's immovable property, do not constitute unexplained investment in the assessee's hands and the addition under section 69/69C is deleted. - HELD THAT: - The Tribunal found the assessee to be a student with no independent source of income and accepted the factual link between the cash deposits and the property sale: the bank account shows only the cheque advance and the impugned cash deposits, and the father thereafter filed a return showing the entire sale consideration including the cash component. Reliance was placed on the principle that where an assessee has no source of income the presumption of undisclosed income cannot be mechanically applied; the deeming provision under section 69 / 69C is not automatic. Having regard to the pleaded explanation, the documentary link with the advance (cheque) and the father's return, the Tribunal concluded that the AO's inference of unexplained investment was untenable and that the explanation was plausible and should have been accepted. [Paras 3, 4]

The addition of Rs.16,80,500/- as unexplained investment is deleted; the assessee's explanation that the cash deposits formed part of the sale consideration of the father's property is accepted.

Final Conclusion: The assessee's appeal is allowed: the cash deposits shown in her bank account are accepted as part of the sale consideration of the father's immovable property and not unexplained investment in her hands, and the sale consideration (capital gains) is attributable to the father, not the GPA holder.

Disallowance under the provisions of section 40A(2)(b) in respect of income instead of expenses - excessive or unreasonable expenditure judged by fair market value - treatment of a joint venture as a pass through where the JV incurred no independent expenditure

Disallowance under the provisions of section 40A(2)(b) in respect of income instead of expenses - excessive or unreasonable expenditure judged by fair market value - treatment of a joint venture as a pass through where the JV incurred no independent expenditure - Validity of the disallowance made by the Assessing Officer under section 40A(2)(b) on payments to a related party in the facts of the joint venture - HELD THAT: - The Tribunal held that the statutory scheme of section 40A(2) permits disallowance only in respect of expenditure which is excessive or unreasonable having regard to fair market value; it does not apply to the income side by imputing income that the assessee 'ought to have earned'. The Assessing Officer estimated that the joint venture ought to have earned income from subcontracting and disallowed a portion on that basis, but did not doubt the actual expenses. The Tribunal, following earlier coordinate Bench and High Court decisions concerning similar joint venture facts where the JV was a pass through and work was carried out by a partner, found the AO's invocation of section 40A(2)(b) to be misplaced. In view of these precedents and the fact that no material was produced to show the expenditure itself was excessive or unreasonable vis a vis fair market value, the disallowance was deleted and the CIT(A)'s confirmation upheld only to the extent it followed the contrary group decisions; accordingly the Assessing Officer was directed to delete the addition. [Paras 13, 14, 15]

The disallowance under section 40A(2)(b) was not sustainable and is deleted; the Assessing Officer is directed to delete the addition.

Final Conclusion: Both appeals are allowed; the orders of the Assessing Officer are set aside and the disallowances under section 40A(2)(b) are deleted for Assessment Year 2015-16.

Amendment of Shipping Bills under Section 149 of the Customs Act - Conversion/registration of Free Shipping Bills to Export Promotion Scheme/MEIS - Requirement of documentary evidence existing at time of export - Physical examination norms for SEZ exports - Illegality of imposing time-limits by circulars contrary to statute - Verification by Development Commissioner/Customs in SEZ

Amendment of Shipping Bills under Section 149 of the Customs Act - Requirement of documentary evidence existing at time of export - Illegality of imposing time-limits by circulars contrary to statute - Conversion/registration of Free Shipping Bills to Export Promotion Scheme/MEIS - Physical examination norms for SEZ exports - Verification by Development Commissioner/Customs in SEZ - Amendment of shipping bills to record intention to claim MEIS for exports made from SEZ during 29.10.2015 to 30.03.2016 is permissible and the orders refusing such amendment are unsustainable. - HELD THAT: - The Tribunal found that Section 149 permits amendment where documentary evidence existed at the time of export and contains no statutory time-limit; consequently a circular or administrative instruction cannot impose a contrary temporal restriction. The authorities declined amendment on grounds of delay and reliance on CBEC Circulars treating conversion of 'Free Shipping Bills' differently and prescribing examination norms. The Tribunal observed that during the relevant period there was no statutory requirement for physical examination of SEZ exports under MEIS (the requirement being introduced only on 19.09.2018), and that SEZ operations and records are within the control of the Development Commissioner and Customs officers who could verify the statutory registers and documents. Having regard to binding decisions relied on by the appellant and an NOC issued in identical circumstances, the Tribunal held that the denial of amendment was contrary to law and that documentary evidence available from the time of export justified amendment under Section 149. [Paras 6]

Impugned orders rejecting amendment of the Shipping Bills set aside; respondent directed to carry out amendment and appeal allowed.

Final Conclusion: The appeal is allowed: the refusal to permit amendment of shipping bills to enable MEIS registration for exports made from the SEZ during 29.10.2015 to 30.03.2016 was set aside and the Customs authorities were directed to amend the shipping bills in accordance with Section 149.

Operational debt - default - admissibility of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - existence of dispute / pre existing dispute - appointment of Interim Resolution Professional - moratorium under Section 14 - public announcement and call for claims

Operational debt - default - Existence of an operational debt and occurrence of default by the corporate debtor in favour of the operational creditor. - HELD THAT: - The Tribunal found on the record that the applicant was engaged as a financial consultant and rendered the agreed services, raised invoices and received part payment. The corporate debtor admitted the outstanding liability in its reply and by affidavit, and the account is reflected in its books. On the materials filed (appointment letter, invoices, ledger, bank statements and demand notice) the Adjudicating Authority concluded that an operational debt exists and that a default has occurred, satisfying the requirements for a claim under the Code. [Paras 3, 4, 7, 8, 11]

Operational debt is due to the applicant and default has occurred.

Existence of dispute / pre existing dispute - Whether any dispute existed between the parties or any suit/arbitration was pending prior to receipt of the demand notice. - HELD THAT: - The Tribunal noted that no dispute was raised by the corporate debtor in response to the demand notice and that the respondent had admitted the claim in pleadings. Having regard to the absence of any pre existing suit or arbitration or any substantive dispute recorded on the file, the Authority held that there was no legitimate dispute which would preclude admission of the Section 9 application. [Paras 3, 8, 11]

No dispute or pending suit/arbitration existed that would bar admission of the application.

Admissibility of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Whether the Section 9 application was complete and maintainable and should be admitted to initiate corporate insolvency resolution process. - HELD THAT: - On examination of the documentary record and the statutory tests (existence of operational debt, debt due and payable, and absence of dispute), the Tribunal found the application to be complete and that the pre conditions for admission under Section 9(5)(i) were satisfied. The Authority applied the relevant statutory framework and international guidance by reference and concluded that admission was appropriate under the Code. [Paras 9, 10, 11, 12, 15]

The Section 9 application is admitted and the corporate insolvency resolution process is initiated.

Appointment of Interim Resolution Professional - Appointment of the Interim Resolution Professional (IRP). - HELD THAT: - The operational creditor initially proposed one name and later submitted a purshis seeking replacement; a letter of consent was produced. On that basis the Adjudicating Authority appointed the proposed individual as Interim Resolution Professional and recorded his registration details for carrying out duties under the Code. [Paras 13]

Mr. Parag Sheth is appointed as Interim Resolution Professional.

Public announcement and call for claims - moratorium under Section 14 - Direction for public announcement, calling for claims and declaration of moratorium consequent to admission of the Section 9 application. - HELD THAT: - Pursuant to Section 13 and Section 14 of the Code, the Tribunal directed the IRP to make the public announcement and call for submission of claims immediately after appointment. The Authority declared the moratorium prohibiting institution or continuation of suits, transfer or disposition of assets, enforcement of security and recovery of property in possession of the corporate debtor, and directed continuity of supply of essential goods and services during the moratorium, with effect from receipt of authenticated copy of the order until completion of CIRP or further orders. [Paras 14, 16, 17, 18]

Public announcement and call for claims directed; moratorium declared in terms of Section 14.

Final Conclusion: The Tribunal admitted the Section 9 application, holding that an operational debt existed and default had occurred, no dispute barred admission, appointed the Interim Resolution Professional as requested, directed the public announcement and call for claims, and declared the statutory moratorium; the petition is disposed of with no order as to costs.

Approval of resolution plan - Validity of Committee of Creditors' commercial decision - Admission of claims and exclusion of time barred interest - Related party treatment under insolvency proceedings - Investigation of preferential, undervalued and fraudulent transactions and remand to monitoring agency - Implementation and supervision by monitoring agency - Termination of moratorium upon approval - Compliance with Form H

Approval of resolution plan - Validity of Committee of Creditors' commercial decision - Compliance with Form H - Final approval of the resolution plan and its binding effect - HELD THAT: - The Tribunal considered the resolution plan unanimously approved by the Committee of Creditors (with Oriental Bank of Commerce holding 100% voting share) together with the compliance certificate in Form H filed by the Resolution Professional. The CoC's commercial decision in favour of the plan was accepted; the resolution professional's record that the plan factors the interests of stakeholders and statutory dues was noted. The Tribunal found no sufficient ground to interfere with the plan as submitted, subject to specified directions, and directed that the plan be declared binding on the company and its stakeholders in accordance with Section 31 read with Section 30 of the Code. [Paras 23, 24, 27, 31]

Resolution plan approved and to be declared binding, subject to the Tribunal's directions

Admission of claims and exclusion of time barred interest - Admissibility of the dissenting financial creditor's claim for interest and its exclusion on limitation grounds - HELD THAT: - The Resolution Professional did not admit the claimant's demand for interest where no documentary evidence of an agreed interest rate was furnished despite repeated requests. The RP also applied limitation principles, observing that the claim for interest related to periods beyond three years and therefore was not admitted. The Tribunal accepted the RP's approach and declined to interfere with the valuation of the claim as admitted by the RP. [Paras 19, 21, 28]

Claim for interest not admitted by RP and Tribunal will not disturb the admitted claim reflected in the resolution plan

Related party treatment under insolvency proceedings - Treatment of related party financial creditors and their inability to influence the CoC decision - HELD THAT: - The record shows that, except OBC, other financial creditors were related parties and therefore were not in a position to influence the CoC (OBC held 100% voting share). The Tribunal observed that related parties cannot be equated with outsiders on an arm's length basis and differential treatment may result; nevertheless the RP had categorised related parties consistently in the plan. Given that the plan treats related parties under a single scheme and that the CoC exercised commercial wisdom, the Tribunal did not find grounds to upset the plan while directing specific protection for the dissenting related party creditor in the implementation sequence. [Paras 24, 27, 28]

Related party creditors' treatment upheld as per the admitted claims; dissenting related party FC to be paid principal before equity as directed

Investigation of preferential, undervalued and fraudulent transactions and remand to monitoring agency - Implementation and supervision by monitoring agency - Whether alleged preferential, undervalued, extortionate or fraudulent transactions would be adjudicated prior to approval - remand and investigation directed - HELD THAT: - The RP had filed a separate application alleging transactions under Sections 43, 45, 50 and 66, but had not pursued disposal of that application before the resolution plan was approved. The Tribunal noted that such allegations cannot be brushed aside and, instead of deciding those allegations on the merits at this stage, kept the related application in abeyance and directed the Monitoring Agency (including a nominee of OBC) to conduct a transaction wise investigation, obtain replies from the corporate debtor and other respondents, and file a report within three months. The Monitoring Agency is empowered to report deviations from the plan and losses attributable to promoters' pre CIRP conduct. [Paras 29, 30, 31]

Application alleging preferential/undervalued/fraudulent transactions kept in abeyance; detailed investigation remitted to the Monitoring Agency with a report due in three months

Termination of moratorium upon approval - Effect of approval on moratorium - HELD THAT: - On approval of the resolution plan the Tribunal directed that the moratorium under Section 14 shall cease to have effect henceforth. The Tribunal also ordered that records collected by the RP during CIRP be handed over to the Monitoring Agency and subsequently to the Resolution Applicant upon implementation. [Paras 31]

Moratorium terminated upon approval; RP to hand over CIRP records to Monitoring Agency and thereafter to Resolution Applicant

Final Conclusion: The Tribunal approved the resolution plan as approved by the Committee of Creditors and declared it binding subject to directions: the dissenting related party financial creditor shall be paid the principal due prior to payment to equity shareholders; the Monitoring Agency (including OBC's nominee) shall conduct a transaction wise investigation into alleged preferential/undervalued/fraudulent transactions and file a report within three months; the Monitoring Agency may report any deviations or losses attributable to pre CIRP promoter conduct; the moratorium shall cease; and CIRP records shall be handed over to the Monitoring Agency and thereafter to the Resolution Applicant.

Definition of Person resident in India under Section 2(v) of FEMA - prior permission of Reserve Bank of India for acquisition of immovable property - requirements of Section 3(c) of FEMA - foreign inward remittance certificates (FIRC) as proof of legal receipt - confiscation under Section 13(2) of FEMA - penalty and adjudication under FEMA

Definition of Person resident in India under Section 2(v) of FEMA - Appellants satisfied the residency test and were persons resident in India for FEMA purposes - HELD THAT: - The Tribunal accepted documentary evidence of continuous presence in India from 08.08.2008 to 31.03.2009 amounting to more than 182 days in the relevant previous year. The immigration stamps and visa records filed by the appellants were considered and the adjudicating authority's finding that the appellants met the residency criterion was affirmed. The court therefore held that the appellants fell within the statutory definition of a person resident in India under Section 2(v). [Paras 12, 18]

Appellants were persons resident in India at the relevant time

Foreign inward remittance certificates (FIRC) as proof of legal receipt - requirements of Section 3(c) of FEMA - Receipts alleged to be donations/remittances were received through authorized banking channels and the ingredients of Section 3(c) of FEMA were not established - HELD THAT: - The Tribunal noted production of FIRCs and bank records showing inward remittances into the appellants' bank account prior to the purchase. On the evidence, the adjudicating authority's finding that the consideration for the immovable property and the funds received were routed through legal channels was accepted. Because the threefold test under Section 3(c) (receipt, receipt otherwise than through an authorised person, and receipt by or on behalf of a person resident outside India) was not established on the record, the alleged contravention under Section 3(c) was not made out. [Paras 14, 17, 18]

Alleged receipt in violation of FEMA not proved; requirements of Section 3(c) not satisfied

Prior permission of Reserve Bank of India for acquisition of immovable property - No prior RBI permission was required once residency criterion under Section 2(v) was satisfied and appellants had sought RBI guidance before purchase - HELD THAT: - The appellants had approached the Reserve Bank of India before acquiring the property and produced the RBI communication which indicated that prior approval from RBI was not required if the residency condition under Section 2(v) was met and that residency proof could be furnished if required. The Tribunal accepted that the appellants had taken steps to obtain RBI guidance and that, given their established resident status, no separate prior permission obligation survived to invalidate the purchase. [Paras 13, 18]

No prior RBI permission was required once residency was established; appellants had sought RBI guidance

Confiscation under Section 13(2) of FEMA - penalty and adjudication under FEMA - Confiscation and penalties imposed by the adjudicating authority were unsustainable and set aside - HELD THAT: - Having found that the appellants qualified as residents and that the funds were received through authorised channels with FIRCs on record, the Tribunal concluded that the foundational allegations of contravention were not established. In consequence, the Tribunal held that the confiscation order and the imposition of penalties were not sustainable on law or facts and therefore quashed the confiscation and set aside the penalties. [Paras 18, 19]

Order of confiscation and penalty set aside

Final Conclusion: The appeal is allowed: the appellants were held to be residents for FEMA purposes, the receipts were established to have come through authorised channels (FIRCs produced) and the RBI had indicated no prior permission was required if residency was satisfied; consequently the adjudicating authority's findings of contravention, the confiscation order and the penalties are set aside.

Management or business consultant service - business auxiliary service - management, maintenance or repair (software) service - advertising agency service - interior decorator (design and consultancy) service - convention service - reverse charge / recipient liability (Section 66A) - valuation and reimbursed expenses (Section 67) - limitation and penalties in context of reverse charge

Management or business consultant service - agency versus consultant (actual operation v. advisory) - Fee paid to Hyatt International for operation of the hotel is not a taxable management consultancy service for the period 18.04.2006 to 31.03.2007. - HELD THAT: - The Tribunal examined the Sales & Marketing and Management Services Agreement and held that Hyatt International, through the General Manager, was actually operating and managing the hotel-exercising complete control and discretion over operations, entering into contracts, running facilities and undertaking activities customarily performed by an operator. The definition of "management consultant" (as it stood prior to 01.06.2007) contemplates a person providing services in connection with management or rendering advice, consultancy or technical assistance. Where a party is itself running or managing the business (and not rendering advice or consultancy), that relationship falls outside the scope of a management consultant. The "means" and "includes" parts of the statutory definition were read so as not to conflate an actual manager with an advisory consultant. On that basis the confirmation of service tax under the head "management consultancy service" could not be sustained (see findings recorded at paragraph 31.3). [Paras 16, 17, 18, 26, 31]

Demand confirmed as management consultancy service set aside for the stated period.

Business auxiliary service - reimbursement of expenses and valuation - procuring services for operation v. separate taxable service - Miscellaneous payments reimbursed to Hyatt International are not taxable as business auxiliary services for the period 18.04.2006 to 31.03.2007. - HELD THAT: - The Agreement (Section 10 of Article III) expressly provided for Hyatt to be reimbursed for expenses incurred on behalf of the hotel and such reimbursements were on actual basis. Section 67 taxes the gross amount charged by a service provider as consideration for the service actually provided. Following the reasoning in Intercontinental Consultants (as explained by the Supreme Court), reimbursed out of pocket expenses that do not constitute consideration for provision of the taxable service cannot be included in the value. The Tribunal therefore held that amounts reimbursed to Hyatt International for operating expenses, promotion and related items (claimed as services arranged by Hyatt) are reimbursements and not consideration for a separate taxable business auxiliary service and the confirmation under the head "business auxiliary service" cannot be sustained (see findings recorded at paragraph 32.4 and the valuation discussion at paragraphs 37-41). [Paras 32, 37, 39, 40, 41]

Demand under business auxiliary service on such reimbursements set aside for the stated period.

Management, maintenance or repair (software) service - statutory interpretation of 'goods' and retrospective circulars - Subscription and maintenance of software are not taxable as maintenance or repair services for the period 18.08.2006 to 31.03.2007. - HELD THAT: - The period pre-dates the Explanation (effective 01.06.2007) declaring that "goods" includes computer software. The Tribunal reviewed earlier Board circulars and judicial decisions and observed that prior to the statutory amendment the position was that maintenance of software was not chargeable under maintenance or repair; subsequent circulars and the Explanation could not be applied retroactively to the period in dispute. Accordingly the Commissioner's reliance on the post 2007 Explanation and circular to tax software maintenance for the 2006-07 period was held unsustainable (see findings recorded at paragraph 30.2 and discussion at paragraphs 46-53). [Paras 30, 46, 47, 52, 53]

Demand under maintenance or repair service for software set aside for the stated period.

Business auxiliary service - joint promotional expenses and sharing of costs - Reservation expenses, Hyatt Gold Passport and chain services charges are not taxable as business auxiliary services for the period 18.04.2006 to 31.03.2007. - HELD THAT: - The Tribunal analysed the nature of the chain promotional arrangements and the Hyatt Gold Passport scheme and found they represented sharing of joint promotional expenses and facilitation of inter hotel settlements rather than the provision of a taxable service to the appellant. The Commissioner's brief conclusion that all such expenditures fell under the business auxiliary service definition lacked identification of the specific sub clause and reasons. Reliance was placed on Tribunal precedent (Historic Resort Hotels) and Supreme Court authority that sharing of common promotional or facility expenses does not, without more, create a taxable service from one group company to another. On that basis the demand under this head was not sustained (see findings at paragraphs 29.1, 29.3 and discussion at paragraphs 60-63). [Paras 29, 61, 62, 63]

Demand under business auxiliary service on these items set aside for the stated period.

Interior decorator (design and consultancy) service - penalty and reverse charge (recipient liability) - Design and consultancy charges were held to be taxable as interior decorator service for the period 18.04.2006 to 31.03.2007, but penalties imposed were set aside. - HELD THAT: - The Commissioner's classification of the design and consultancy payments as interior decorator service was accepted by the Tribunal (paragraph 28). However, imposition of penalty was examined in the wider context of reverse charge law being in flux and the legal uncertainty surrounding recipient liability during the relevant timeframe (including the significance of Section 66A and later judicial clarification). Citing precedent, the Tribunal held that penalties (and extended period demands) could not be sustained where liability under reverse charge was a contentious legal question later settled by higher authorities; accordingly penalties under this head were set aside (see paragraphs 66-71). [Paras 66, 68, 69, 70, 71]

Service tax confirmed on design and consultancy charges; penalties imposed set aside.

Advertising agency service - penalty and reverse charge (recipient liability) - Expenditure in foreign currency on advertising was held taxable as advertising agency service for the period 18.04.2006 to 31.03.2007, but penalties imposed were set aside. - HELD THAT: - The Commissioner's classification of foreign advertising payments as falling within advertising agency services and taxable on the recipient under reverse charge was upheld (paragraph 26.2). The appellant did not contest the underlying taxability but challenged penalties. For the reasons explained in relation to reverse charge uncertainty and settled precedents (see discussion under Section 66A and penalty jurisprudence), the Tribunal found penalties unjustified and set them aside (see paragraphs 73-75 and 66-71). [Paras 66, 68, 73, 74, 75]

Service tax confirmed on advertising expenditure; penalties imposed set aside.

Business auxiliary service - service provider v. independent activity (currency conversion fees) - Currency conversion/transaction charges collected from guests are not taxable as business auxiliary services for the period 01.04.2003 to 31.03.2005. - HELD THAT: - The Tribunal accepted the appellant's contention that these charges were collected for conversion services provided directly to guests and were not services performed on behalf of a third party or as procurement of services for a client. Relying on Tribunal precedents addressing analogous charges (document processing, etc.), where no third party service relationship existed, such receipts could not be treated as business auxiliary services. The Commissioner's confirmation was therefore set aside (see paragraph 23.2 and discussion at paragraphs 76-81). [Paras 23, 80, 81]

Demand on currency conversion charges under business auxiliary service set aside for the stated period.

Convention service - ancillary services and scope of 'convention' - Miscellaneous revenues (photocopy, courier, secretarial, lost key etc.) are not taxable as part of convention service for the period 01.10.2002 to 31.03.2004. - HELD THAT: - The Tribunal examined the statutory definition of "convention" and the taxable entry for convention services, and concluded that the incidental receipts in question bore no direct connection with the holding of a formal meeting or assembly (the statutory meaning of convention). The charges were for discrete services provided to guests and did not form part of the convention service value; accordingly the Commissioner's inclusion of such miscellaneous receipts in the convention service value was held unsustainable (see paragraphs 22, 22.2 and 85-87). [Paras 22, 85, 86, 87]

Demand on miscellaneous business centre receipts as part of convention service set aside for the stated period.

Limitation and penalties in context of reverse charge - recipient liability (Section 66A) - Penalties and extended period demands arising from reverse charge liabilities during the relevant period are not sustainable in view of the legal uncertainty and later judicial clarification. - HELD THAT: - The Tribunal noted that the concept of reverse charge/recipient liability was subject to extensive litigation and that the legal position crystallised only after judicial decisions (Indian National Shipping Owners Association) and subsequent Board instructions. Where the liability was a contested legal question, invoking extended limitation or penalties for alleged suppression or willful mis statement was inappropriate. Precedent was cited in which penalties under comparable circumstances were set aside. Applying that reasoning to the present demands (notably those contested under serials dealing with reverse charge), the Tribunal held penalties and extended period demands unjustified (see paragraphs 68-71 and related discussion). [Paras 68, 69, 70, 71]

Penalties and extended period demands in respect of reverse charge liabilities set aside.

Final Conclusion: The appeal is allowed in part. Confirmations of service tax (and related interest/penalty where indicated) under the heads of management consultancy, business auxiliary (various reimbursements and chain/reservation items), maintenance/repair of software (for the pre amendment period), currency conversion charges and miscellaneous business centre receipts are set aside for the periods stated. Service tax confirmed on advertising agency services and interior decorator (design and consultancy) services for 18.04.2006-31.03.2007, but penalties imposed thereon are set aside.

Renting of immovable property service - exclusion for buildings used for accommodation (hotels) - abatement of 40% for renting of hotels under Notification No.26/2012 ST - supply of tangible goods service - right to use, possession and effective control - classification of fixtures and embedded plant and machinery as immovable - penalties under Section 77 and Section 78 - interpretational dispute and absence of contumacious conduct

Renting of immovable property service - exclusion for buildings used for accommodation (hotels) - Explanation I (d) to the definition of renting of immovable property service - Whether the hotel buildings at Corbett (Ramnagar) and Naukuchiyatal for the period August, 2008 to 30.06.2012 fall within the exclusion for buildings used for accommodation and are not taxable as renting of immovable property service. - HELD THAT: - On true and fair construction of Explanation I, sub clause (d) to the definition of renting of immovable property service, renting of a building used for the purpose of accommodation including hotels falls within the exclusion and does not amount to taxable renting of immovable property. The Tribunal found the facts of the present case akin to Jai Mahal Hotels and distinguished Revenue reliance on Ramkumar Giri. The facilities available at the hotels (pool, bar, restaurant, conference halls, fitness centre) did not change the character of the buildings so as to take them outside the exclusion for accommodation for the disputed period. Consequently the appellants are not liable to service tax for the period August, 2008 to 30.06.2012. [Paras 13]

For August, 2008 to 30.06.2012 the buildings are excluded from renting of immovable property service and no service tax is leviable on that account.

Abatement of 40% for renting of hotels under Notification No.26/2012 ST - condition as to non availability of cenvat credit - Whether w.e.f. 01.07.2012 the appellants are entitled to 40% abatement on renting of hotels. - HELD THAT: - The Tribunal observed that the appellants had admitted liability for the post 1.7.2012 period and had deposited service tax subject to abatement. Applying Notification No.26/2012 ST, the Tribunal held that hotels/places meant for residential or lodging purposes are entitled to 40% abatement (taxable at 60%), subject to the statutory condition that cenvat credit on inputs and capital goods used for providing the taxable service has not been availed. On the facts and in view of the admitted deposits and the nature of the dispute, the Tribunal held the appellants entitled to the abatement and liability limited to 60% of the receipts. [Paras 13, 14]

W.e.f. 01.07.2012 the appellants are entitled to 40% abatement and taxable only on 60% of the lease receipts, subject to the statutory condition regarding cenvat credit.

Supply of tangible goods service - right to use, possession and effective control - classification of fixtures and embedded plant and machinery as immovable - Whether amounts received for letting out plant, machinery and fixtures to the lessee fall under supply of tangible goods service (SOTG) and are taxable as such. - HELD THAT: - The Tribunal found that some plant and machinery and fixtures were embedded or fixed to the hotel premises and could not be removed without destruction, and therefore were immovable in character. The appellant, as owner of the premises, retained constructive possession of such embedded items so that there was no delivery of movable goods entitling levy under SOTG. However, the Tribunal did not finally quantify or determine the extent to which goods are movable and liable to SOTG. In view of these findings it remanded the matter to the Adjudicating Authority for re determination and directed the appellant to furnish details and value of plant and machinery/fixtures distinguishing immovable items from movable goods so that proportionate tax, if any, on movable goods may be worked out. [Paras 14]

Liability under SOTG on embedded and immovable fittings is negatived; issue as to movable goods remanded for fresh adjudication and quantification.

Penalties under Section 77 and Section 78 - interpretational dispute and absence of contumacious conduct - Whether penalties under Section 77 and Section 78 are imposable on the appellants. - HELD THAT: - The Tribunal held the dispute to be essentially interpretational. The transactions were recorded in the books of account maintained in the ordinary course of business and there was no contumacious conduct by the appellant. Given the interpretational nature of the case and absence of culpable conduct, the Tribunal set aside the penalties under Sections 77 and 78. [Paras 15]

Penalties under Section 77 and Section 78 are set aside.

Final Conclusion: The appeal is allowed in part: the hotel buildings for August, 2008 to 30.06.2012 are excluded from renting of immovable property service; w.e.f. 01.07.2012 the appellants are entitled to 40% abatement (taxable at 60%), subject to the cenvat condition; liability under SOTG for embedded/immovable fittings is negatived but the question of movable goods is remanded for re determination; penalties under Sections 77 and 78 are set aside. The Department's cross appeal is rejected.

Rule 3(5A) of Cenvat Credit Rules, 2004 - Cenvat credit on capital goods - capital goods cleared as waste and scrap - excisable goods and marketability - manufacture under Section 2(f) and conjunctive application of Section 2(d) and Section 2(f) - deeming effect of tariff/section notes

Rule 3(5A) of Cenvat Credit Rules, 2004 - Cenvat credit on capital goods - capital goods cleared as waste and scrap - Whether demand under Rule 3(5A) could be sustained without establishing that the goods removed as waste or scrap were capital goods on which Cenvat credit had been availed. - HELD THAT: - The Tribunal examined Rule 3(5A) which mandates payment equal to duty leviable on transaction value only where capital goods, on which credit had been taken, are cleared as waste and scrap. The provision therefore presupposes two facts: (i) the goods must be capital goods; and (ii) Cenvat credit must have been availed on those capital goods. The assessee consistently denied having availed Cenvat credit on the disputed items. Revenue did not establish that the items were capital goods on which credit had been taken. In the absence of such foundational proof, Rule 3(5A) cannot be invoked to fasten liability. The Tribunal set aside the demand under Rule 3(5A) for lack of requisite establishment by Revenue. [Paras 7, 8]

Demand under Rule 3(5A) of the Cenvat Credit Rules, 2004 is set aside as Revenue failed to establish that the goods were capital goods on which Cenvat credit had been availed.

Excisable goods and marketability - manufacture under Section 2(f) and conjunctive application of Section 2(d) and Section 2(f) - deeming effect of tariff/section notes - Whether the disputed waste and scrap items (e.g., empty MS oil paint drums, spent zinc based catalyst, used therminol, comox catalyst) are exigible to excise duty under Section 2(d) absent any process amounting to manufacture under Section 2(f). - HELD THAT: - Section 2(d) defines excisable goods by reference to tariff schedules but, under settled authority relied upon in the order, goods become chargeable to excise only if they are manufactured in India within the meaning of Section 2(f). The Tribunal applied the principle that mere sale or marketability of an item does not convert rubbish or residues into an excisable manufactured product. It followed the reasoning in Hindalco and related authorities that the conditions in Section 2(d) and Section 2(f) must be satisfied conjunctively; a tariff entry or section/chapter note cannot, without an express deeming statement that a process amounts to manufacture, render a by product or residue excisable. The disputed items were not shown to have passed through a process amounting to manufacture and therefore could not be subjected to excise duty merely on the basis of marketability or sale. [Paras 9, 10]

Demand under Section 2(d) is unsustainable because the items did not satisfy the requirement of being manufactured goods under Section 2(f); accordingly the appeal is allowed on this count.

Final Conclusion: The Tribunal allowed the appeal in entirety: the demand under Rule 3(5A) was set aside for failure of Revenue to show the items were capital goods on which Cenvat credit was availed, and the demand under Section 2(d) was rejected because the disputed waste/residue items did not satisfy the requirement of manufacture under Section 2(f).

Reversal of CENVAT credit on written-off inputs - Applicability of Rule 3(5B) of CENVAT Credit Rules, 2004 - Partial write-off versus full write-off of inputs - Prospective operation of amendment to Rule 3(5B) - Limitation for recovery based on audit of assessee's books of account

Reversal of CENVAT credit on written-off inputs - Applicability of Rule 3(5B) of CENVAT Credit Rules, 2004 - Partial write-off versus full write-off of inputs - Prospective operation of amendment to Rule 3(5B) - Whether CENVAT credit was required to be reversed where only part of the value of inputs was written off for the Financial Year 2007-08 under Rule 3(5B) of the CENVAT Credit Rules, 2004. - HELD THAT: - The Tribunal found as an admitted fact that the appellant had partially written down the value of certain inputs and had not written them off fully. Rule 3(5B) then in force required reversal of CENVAT credit only when the value of inputs was written off fully. The provision rendering reversal necessary for partial write-off was introduced later with effect from 1.4.2011 (amendment prospective). Accordingly, for the period in issue (prior to 1.4.2011) there was no legal obligation to reverse credit on account of a partial write-off. The Tribunal followed earlier decisions on identical facts which held that prior to the amendment a partial write-off did not attract reversal of credit, and applied that ratio to set aside the impugned order on merits. [Paras 6]

Impugned demand based on Rule 3(5B) is unsustainable on merits because the inputs were only partially written off and the provision requiring reversal for partial write-off applied only prospectively from 1.4.2011.

Limitation for recovery based on audit of assessee's books of account - Whether the show-cause notice issued on 10.1.2011 arising from an AG audit (conducted March 2009) was time-barred. - HELD THAT: - The appellant contended that the demand was barred by limitation because the show-cause notice was issued beyond the normal one-year period and the Revenue did not demonstrate suppression with intent to evade duty. The Tribunal noted the audit basis and reliance on the assessee's own records and accepted that extended period provisions were not invocable where the demand arises from audit of the assessee's books without evidence of suppression. Having found the legal position favouring the appellant and in view of relevant precedents relied upon by the appellant, the Tribunal held the show-cause notice to be barred by limitation. [Paras 4, 6]

The demand is also unsustainable as barred by limitation insofar as it was raised on the basis of the AG audit without evidence of suppression.

Final Conclusion: Appeal allowed; impugned order of the Commissioner (A) dated 23.4.2019 set aside - demand and penalty set aside because (i) partial write-off of inputs for Financial Year 2007-08 did not attract reversal under Rule 3(5B) as applicable then, and (ii) the recovery was barred by limitation.

Exercise of writ jurisdiction - alternative efficacious remedy - availability of statutory appellate remedy under section 26 of the Maharashtra Value Added Tax Act, 2002 - breach of principles of natural justice

Exercise of writ jurisdiction - alternative efficacious remedy - availability of statutory appellate remedy under section 26 of the Maharashtra Value Added Tax Act, 2002 - breach of principles of natural justice - Whether the High Court should exercise its writ jurisdiction to entertain a challenge to the order dated 31st March, 2018 when an alternative remedy of appeal under the Act is available, including where defect of natural justice is alleged. - HELD THAT: - The Court recorded that the impugned order relates to the financial year 2013-14 and that an alternative and efficacious remedy in the form of appeal under the Act is available to the petitioner. The Court noted that the alleged breach of the principles of natural justice (reliance on a report of which no copy was given) was not pleaded in the petition and appeared to be an afterthought raised only upon new counsel taking the brief. The Court observed that issues of breach of natural justice, if factually established, could be considered by the Appellate Authority on appeal. In these circumstances the Court found no reason to invoke its extraordinary writ jurisdiction when a statutory remedy existed and dismissed the petition. [Paras 1, 4, 5, 6, 7]

Petition dismissed for non-interference by writ jurisdiction in presence of an efficacious statutory appeal; alleged breach of natural justice may be ventilated before the Appellate Authority.

Final Conclusion: Writ petition dismissed: the High Court declined to exercise extraordinary writ jurisdiction in view of the available appeal under section 26 of the Maharashtra Value Added Tax Act, 2002; alleged breach of natural justice not entertained in writ proceedings and can be raised before the Appellate Authority.

Review under Order 47 Rule 1 CPC - Doctrine of precedent / issue already decided by Full Bench - Repeal and savings - effect of Section 61 of the Haryana Value Added Tax Act, 2003 - Condonation of delay

Review under Order 47 Rule 1 CPC - Doctrine of precedent / issue already decided by Full Bench - Maintained review application filed by the State is not sustainable as the grounds urged had already been considered and rejected by the Full Bench in Review Application No. 71 of 2019. - HELD THAT: - The Court recorded that the Full Bench in CWP No. 12139 of 2006 and its subsequent Review Application No. 71 of 2019 had considered and rejected the very contentions now advanced by the State. Learned State Counsel expressly conceded that the grounds raised in the present review had already been dealt with and negatived by the re constituted Full Bench. In view of that concession and the prior adjudication by the Full Bench, no ground survives for entertaining a fresh review under Order 47 Rule 1 CPC, and the review petition must be dismissed. [Paras 2, 3]

Review Application dismissed.

Condonation of delay - Application for condonation of delay in filing the review application disposed of consequent to dismissal of the review. - HELD THAT: - An application (CM No. 2219 of 2019) for condonation of 101 days' delay in filing the Review Application was listed along with the review. Having dismissed the substantive review on the basis that the grounds were already decided by the Full Bench and in view of the State's concession, the Court observed that no separate order was required on the pending miscellaneous application and disposed of it accordingly. [Paras 1, 3]

Miscellaneous application for condonation disposed of; no orders required.

Final Conclusion: The Review Application filed by the State is dismissed as the issues raised had been previously considered and rejected by the Full Bench; the ancillary application for condonation of delay is disposed of in consequence.

Assessment under the Tamilnadu Value Added Tax Act, 2006 - quashing of assessment - violation of principles of natural justice - non-application of mind in assessment proceedings - confirmation of pre-assessment notice without reasons - double taxation arising from duplication of returned turnover - pre-assessment verification based on check-post extract

Violation of principles of natural justice - non-application of mind in assessment proceedings - confirmation of pre-assessment notice without reasons - Validity of the assessment order dated 21.09.2016 in light of alleged procedural infirmities and failure to consider the assessee's submissions - HELD THAT: - The assessment order under challenge is composed largely of extracts from the assessment proposal and contains a one line rejection of the assessee's detailed reply. The Assessing Officer recorded that the assessee had filed replies but declined the objections by a perfunctory statement without addressing the specific submissions, without recording reasons, and without granting the requested personal hearing. The order therefore manifests a failure to apply mind to the material placed before the authority and a breach of the principles of natural justice. The impugned assessment proceeds to fasten tax liability and penalty without consideration of the supporting auction sale notes and documents tendered by the petitioner and without any reasoned conclusion on the contested transactions. For these reasons the order cannot stand. [Paras 8, 9, 10, 11]

Impugned assessment order quashed for want of application of mind and for violation of principles of natural justice; writ petition allowed.

Final Conclusion: The High Court quashed the assessment order dated 21.09.2016 for the tax period 2013-14 on grounds of procedural infirmity, failure to consider the assessee's objections and denial of the requested personal hearing; the writ petition was allowed.

Right to privacy as protected under Article 21 - bank account details as personal and private information - income-tax returns as personal information - Puttaswamy three-fold test of legality, need and proportionality - requirement of a law (procedure established by law) to justify encroachment on privacy - contractual term cannot substitute for statute to authorize infringement of fundamental rights

Right to privacy as protected under Article 21 - bank account details as personal and private information - income-tax returns as personal information - Puttaswamy three-fold test of legality, need and proportionality - requirement of a law (procedure established by law) to justify encroachment on privacy - contractual term cannot substitute for statute to authorize infringement of fundamental rights - Whether the oil marketing companies could require retail dealers to furnish bank account statements and income tax returns and whether such demand infringed the dealers' right to privacy and was legally sustainable. - HELD THAT: - The court held that bank account statements and income tax returns constitute personal information and their disclosure amounts to an invasion of the right to privacy. Bank statements disclose financial capacity, transactions, associations and other intimate financial details and privacy attaches to the person notwithstanding that the information is held by a bank (paras 15-16). Income tax returns similarly disclose personal financial information (paras 17-18). Any encroachment on privacy must satisfy the three-fold Puttaswamy test: (i) legality (existence of law/procedure established by law), (ii) need (legitimate aim), and (iii) proportionality (rational nexus/minimal intrusion) (paras 12-13). The oil companies failed the first limb: no statutory provision or law was shown that empowered them to demand such information from dealers (para 20). A contractual provision cannot substitute for a statute and cannot authorize infringement of fundamental rights (para 22). Because the demand lacked legal sanction, the court did not need to examine necessity or proportionality further (para 23). The Single Judge erred in upholding the demand on the basis that the information related only to dealership, since segregation of dealership related data from the wider contents of bank statements or tax returns is not practicable (para 19), and the Single Judge failed to consider the legality requirement under Puttaswamy (para 24). [Paras 20, 22, 23, 24, 25]

The demands for bank account statements and income tax returns made by the respondents as a condition for continuing retail petroleum dealership were unlawful for want of statutory basis; Ext.P2 circular is quashed and the respondents have no right to require such documents.

Final Conclusion: The appeals are allowed; the circular demanding dealers' income tax returns and bank statements is quashed and the oil marketing companies have no right to require those documents as a condition of continuing the retail dealership.