TaxTMI Updates e-Newsletter
Sep 20,2022

Input tax credit - eligibility and conditions for taking input tax credit - voucher - classification of supply as goods or services - goods disposed of by way of gift or free samples - in the course or furtherance of business

Input tax credit - voucher - classification of supply as goods or services - goods disposed of by way of gift or free samples - Whether the applicant is eligible to claim input tax credit on vouchers and subscription packages procured from third party vendors and supplied to customers under the loyalty program. - HELD THAT: - The Authority examined whether the inward supply of vouchers and subscription packages to the applicant qualifies as supply of goods or services and whether their issue on redemption of loyalty points amounts to disposal by way of gift. The definition of 'voucher' satisfies the statutory characteristics of an instrument redeemable as consideration for goods or services (para 15). The term 'goods' in Section 2(52) is not limited to tangible items and covers movable property capable of transmission; vouchers (including e vouchers) are movable and transmissible and thus qualify as intangible goods (paras 16.1-16.3). Schedule II treats transfers of title in goods as supply of goods and the transaction of supplying vouchers involves transfer of title (para 16.5). The loyalty scheme facts show that customers earn non transferable, non monetary loyalty points which are redeemed for vouchers without any monetary consideration flowing from the customer on redemption; the applicant recovers full consideration at the time of purchase and provides vouchers upon redemption of points (para 17-18). Redemption therefore results in vouchers being issued to customers free of charge and amounts to disposal by way of gift. Clause (h) of Section 17(5) excludes input tax credit in respect of goods disposed of by way of gift or free samples. Applying these principles, the inward tax paid on vouchers/subscription packages is rendered ineligible for ITC under Section 17(5)(h) (paras 16.2-16.5, 18-19). [Paras 15, 16, 17, 18, 19]

The applicant is not eligible to claim input tax credit on the vouchers and subscription packages procured for the loyalty program as the vouchers are goods and their issuance on redemption of loyalty points amounts to disposal by way of gift, attracting the exclusion under Section 17(5)(h).

Final Conclusion: Advance ruling: ITC on vouchers and subscription packages procured for issuance against loyalty points is disallowed under Section 17(5)(h) as the vouchers qualify as goods and their redemption constitutes disposal by way of gift; accordingly the applicant cannot claim input tax credit under Section 16.

Classification of goods under Chapter heading 2202 - Non-alcoholic beer vs. carbonated fruit beverages - General Rules for the Interpretation of the First Schedule to the Customs Tariff (Rule 2(b), Rule 3(a)) - Predominant material/substance rule for classification - Application of Harmonized System Explanatory Notes / Chapter Notes - Use of non GST regulator standards (FSSAI) in tariff classification

Non-alcoholic beer vs. carbonated fruit beverages - Application of Explanatory Note 3 to chapter 2202 - Classification of the product under tariff heading 2202 99 90 - Classification of 'Kingfisher Radler' as a carbonated beverage of fruit drink under heading 2202 99 90 rather than as non-alcoholic beer under 2202 91 00. - HELD THAT: - The Authority examined the statutory text, Chapter and Explanatory Notes to chapter 2202 and the product composition and labelling submitted by the applicant. The Explanatory Note to chapter 2202 indicates that 'non-alcoholic beer' ordinarily denotes beer made from malt whose alcoholic strength has been reduced to 0.5% vol or less. The impugned product is not fermented and contains no alcoholic strength; therefore it is not a beer reduced to 0.5% vol. The declared formulation and laboratory reports show that the product variants contain mixed fruit juice/ equivalent reconstituted juice in proportions (up to 4.3% equivalent) and that the percentage of mixed fruit juice is the predominant component when compared across listed ingredients in the variants considered. The product labels describe the variants as 'Carbonated Non-alcoholic Drink' and not as 'non alcoholic beer'. Applying Rule 2(b) of the General Rules for Interpretation (classification of mixtures according to predominant material/substance) and the principles of Rule 3 (specific over general), the Authority held that the product is to be classified according to its predominant constituent as a carbonated fruit based beverage. Consequently, all variants merit classification under tariff heading 2202 99 90 and attract the 28% GST rate and applicable compensation cess as provided by the amended notification. [Paras 14, 15, 16, 17, 21]

All variants of 'Kingfisher Radler' are classified as carbonated beverages of fruit drink under tariff heading 2202 99 90, attracting GST at 28% and Compensation Cess at 12% in terms of the amended notification.

Use of non GST regulator standards (FSSAI) in tariff classification - Primacy of Customs Tariff interpretation rules for GST rate notifications - Whether FSSAI categorisation and standards are determinative for GST tariff classification. - HELD THAT: - The Authority considered the applicant's reliance on FSSAI Regulations (classification thresholds for 'carbonated fruit beverages' and 'carbonated beverages with fruit juice') but held that the GST rate notifications must be interpreted with reference to the First Schedule to the Customs Tariff Act and its rules of interpretation, Explanatory Notes and Chapter/Section Notes as incorporated by the notifications. The Authority observed that FSSAI is constituted to set food safety and compositional standards and is not empowered under the GST scheme to issue binding directions on tax classification. In line with appellate jurisprudence cited in the order, the Authority rejected application of FSSAI definitions as determinative where the Customs Tariff interpretation and the material composition and labelling point to a different classification under the tariff. [Paras 13, 18, 19, 20]

FSSAI categorisation and standards cannot be applied mechanically as the controlling test for GST tariff classification; classification under GST notifications must follow the First Schedule to the Customs Tariff Act and its rules/explanatory notes.

Final Conclusion: The Advance Ruling holds that the product 'Kingfisher Radler' (all variants) is a carbonated beverage of fruit drink falling under tariff heading 2202 99 90 and, therefore, is taxable at 28% GST with applicable Compensation Cess of 12% under the amended rate notification; FSSAI classifications are not determinative for GST tariff classification.

Capital receipt - revenue receipt - book profit under Section 115JB - character of income under section 2(24) - entertaining claim by the Income-tax Appellate Tribunal under section 254 despite absence of revised return

Capital receipt - revenue receipt - book profit under Section 115JB - character of income under section 2(24) - Interest subsidy and excise refund (incentive subsidies) are capital receipts and therefore are not to be included in the computation of book profit under Section 115JB. - HELD THAT: - The Court held that the incentives in question are capital in character and not revenue. Relying upon the reasoning of the Supreme Court in Commissioner of Income-Tax-I, Kolhapur v. M/s. Chaphalkar Brothers Pune, the Court accepted that where the object of a subsidy is to promote industrialization and employment the subsidy has a capital character and that its form or timing does not alter that character. The Court further followed this Court's previous decision in Principal Commissioner of Income-Tax v. Ankit Metal And Power Ltd., where it was held that a receipt which is not income within the meaning of section 2(24) cannot be included in book profit under Section 115JB; by contrast, amounts which are taxable but exempt under a specific provision were to be included, whereas non-income receipts were not. Applying those principles, the Tribunal's conclusion that the interest and power (and analogous incentive) subsidies are capital receipts was upheld and such receipts must be excluded from book profit computation under Section 115JB.

The subsidies are capital receipts and are excluded from book profit under Section 115JB.

Entertaining claim by the Income-tax Appellate Tribunal under section 254 despite absence of revised return - The Tribunal was justified in entertaining the assessee's claim to treat the incentive subsidies as capital receipts despite no revised return being filed before the Assessing Officer. - HELD THAT: - The Court followed the view that the power of the Tribunal under section 254 to entertain claims is not curtailed by the absence of a revised return, as clarified by the Supreme Court in Goetze (India) Ltd. v. CIT (the judgment there limited its view to the power of the assessing authority and did not impinge on the Tribunal's powers). This Court's earlier decision in CIT v. Britannia Industries Ltd. was applied to hold that the Tribunal may entertain and allow a claim not pressed before the Assessing Officer by way of a revised return. Accordingly, the Tribunal's admission and allowance of the claim by the assessee without a prior revised return was upheld.

Tribunal validly entertained and allowed the claim under its powers under section 254 despite the absence of a revised return.

Final Conclusion: The appeal by the Revenue is dismissed on the substantial question of law: the incentive subsidies (interest subsidy and excise/power-related subsidies) are capital receipts and are not includible in book profit under Section 115JB, and the Tribunal rightly entertained the assessee's claim notwithstanding the absence of a revised return.

Principles of natural justice - faceless assessment - e-Assessment Scheme - personal hearing - service of notice - enabling of e-filing portal - remand for de novo assessment

Principles of natural justice - faceless assessment - service of notice - personal hearing - enabling of e-filing portal - remand for de novo assessment - Whether assessments framed under the Faceless/e-Assessment Scheme complied with principles of natural justice where notices were not served, website notifications/features were deficient and requests for personal hearing were not granted - HELD THAT: - The Court found recurring procedural infirmities in multiple faceless assessments: notices or show-cause communications were not sent to or received by the assessee or the assessee's registered contact; the e-assessment portal lacked or failed to operate requisite features to enable filing of replies or seeking/holding personal hearings; and requests for personal hearing were either not acted upon or not communicated as accepted or rejected. Such failures amounted to violation of the principles of natural justice and vitiated the assessments. In each matter the Court set aside the impugned assessment order and directed revival of the assessment process from the stage of filing reply to the show-cause notice (or from stage indicated in the order), with specific procedural directions: the Department to enable the website for uploading replies, permit the assessee to file or re-file responses, provide a link and opportunity for personal hearing, and to complete fresh proceedings and pass orders within prescribed timelines stated by the Court. The Court emphasised that if no reply is filed within the period granted, the impugned order shall stand revived without further reference to the petitioner. [Paras 68, 69, 70, 72, 73]

Assessments vitiated for breach of natural justice are set aside; the Department shall enable the portal, permit filing/re-filing of replies, grant personal hearing, and complete de novo assessment within the timelines directed by the Court; failure by the assessee to file reply within the time granted will revive the impugned order.

Faceless assessment - e-Assessment Scheme - remand for de novo assessment - Whether an assessment/draft order that traverses beyond matters raised in the show-cause notice or incorporates materials unrelated to the assessee (including materials from other assessees) is vitiated - HELD THAT: - In respect of the assessment challenged in W.P.No.14118 of 2021 (Assessment Year 2017-18), the Court noted that the draft and final assessment orders contained issues and materials not specified in the show-cause notice and, on the admitted position, included material belonging to other assessees. The assessment therefore went beyond the scope of the notice and denied the assessee a fair opportunity to meet the matters ultimately decided. For these reasons both the draft order and the final order were set aside and the procedure was ordered to be revived from the stage of filing the reply to the original show-cause notice, with directions to enable the portal and to complete fresh proceedings after hearing the assessee. [Paras 41, 42, 43, 44, 45]

Draft and final assessment orders that include issues or materials beyond the show-cause notice and unrelated material are set aside; assessment process to be revived from filing of reply and proceeded afresh after hearing the assessee.

Penalty - remand for de novo assessment - Whether penalties levied consequent to assessments set aside for procedural infirmity must themselves be set aside - HELD THAT: - The Court held that penalties imposed pursuant to impugned assessments that are set aside on grounds of procedural infirmity (including breaches of natural justice) cannot stand. Accordingly, in the connected petition challenging penalties the impugned penalty orders were set aside. The revenue was, however, granted liberty to revive penalty proceedings subject to and in accordance with the law after completion of proper assessment proceedings. [Paras 11, 12]

Penalties levied pursuant to the vitiated assessments are set aside; the Department may revive penalty proceedings in accordance with law after valid completion of assessment proceedings.

Final Conclusion: The High Court, applying the principles of natural justice to challenges under the Faceless/e-Assessment Scheme, set aside multiple impugned assessments (and consequential penalties where levied) for defective service, portal deficiencies, denial of personal hearing and for traversal beyond show-cause notices; it remitted the matters for fresh compliance from the stage of filing replies, directed enabling of the e-filing portal, provision of personal hearings and completion of reassessments within the timelines specified, with the caveat that if the assessee does not file the reply within the time granted the impugned order shall stand revived.

Penalty under section 271(1)(c) - Furnishing inaccurate particulars of income - Revised return - Claim of deduction under section 80P(2)(d) on rental income - Bona fides of assessee's conduct in filing revised return

Penalty under section 271(1)(c) - Revised return - Furnishing inaccurate particulars of income - Bona fides of assessee's conduct in filing revised return - Whether penalty under section 271(1)(c) could be levied where the assessee filed a revised return offering the disputed rental income. - HELD THAT: - The Assessing Officer levied penalty under section 271(1)(c) after treating the assessee's omission to claim rental income as furnishing inaccurate particulars; the AO doubted the assessee's bona fides because the revised return was filed after initiation of statutory proceedings. The Tribunal noted that the assessee filed a rectification application and a revised return offering the rental income and accepted that the rental income was brought to tax by the revised return. In these circumstances the Tribunal held that levy of penalty for furnishing inaccurate particulars of income does not arise where the assessee has filed a revised return and offered the income to tax. The Tribunal therefore found it unnecessary to sustain the AO's conclusion on lack of bona fides and deleted the penalty. [Paras 6, 7]

Penalty under section 271(1)(c) deleted as the assessee filed a revised return offering the rental income.

Final Conclusion: Appeal allowed; penalty confirmed by lower authorities set aside and the penalty under section 271(1)(c) deleted for A.Y 2015-16.

Penalty under section 271(1)(b) - compliance with statutory notices under section 142(1) and section 143(2) - best judgment assessment under section 144 - service of notice and proof of service - adequacy of time to comply with notice - non-cooperation due to internal dispute among partners as justification for non-compliance

Penalty under section 271(1)(b) - service of notice and proof of service - adequacy of time to comply with notice - non-cooperation due to internal dispute among partners as justification for non-compliance - Whether the penalty under section 271(1)(b) could be sustained for non-compliance with notices issued under section 142(1)/143(2) in respect of the Assessment Years 2012-13 and 2013-14. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) had confined the penalty only to those notices which were shown to have been duly served and not complied with. On review of the record, the Tribunal found that only one notice was properly served on the assessee and that adequate time to respond to that notice had not been afforded. The assessee explained non-compliance by reason of internal disputes between partners resulting in total non-cooperation, and also contended that some notices were received after the hearing date. Having regard to these factual circumstances and the limited proof of service and inadequate opportunity to comply, the Tribunal concluded that the levy of penalty was unjustified. The Tribunal therefore accepted the assessee's explanation and interference by the Assessing Officer was not warranted. [Paras 6, 7]

Penalty under section 271(1)(b) is deleted for both Assessment Years; the appeals are allowed.

Final Conclusion: Both appeals are allowed and the penalty imposed under section 271(1)(b) for A.Y. 2012-13 and A.Y. 2013-14 is deleted owing to inadequate proof of service of notices, insufficient time to respond and the explained non-cooperation among partners.

Tax deduction at source (TDS) - agents of non-resident shipping companies - section 172 as a self-contained code for levy and recovery of tax on shipping - non-applicability of section 194C to payments covered by section 172 - principal-agent doctrine (agent steps into the shoes of the principal)

Tax deduction at source (TDS) - agents of non-resident shipping companies - section 172 as a self-contained code for levy and recovery of tax on shipping - non-applicability of section 194C to payments covered by section 172 - principal-agent doctrine (agent steps into the shoes of the principal) - Whether payments made to Indian agents/subsidiaries of foreign shipping companies were liable to deduction of tax at source under section 194C or were governed by section 172 as clarified by CBDT Circular No. 723 dated 19.09.1995 - HELD THAT: - The Tribunal accepted the assessee's reliance on CBDT Circular No. 723 (19.09.1995), which explains that section 172 operates as a self-contained code for levy and recovery of tax on voyages of non-resident ships from Indian ports and applies notwithstanding other provisions of the Act. The Circular further states that where payments are made to agents of non-resident ship-owners or charterers, the agent acts on behalf of the non-resident and "steps into the shoes" of the principal, such that section 172 applies and sections like 194C do not. Applying that determinative legal principle, the Tribunal found no error in the CIT(A)'s conclusion that payments made to agents/subsidiaries of foreign shipping companies were within the scope of section 172 as explained by the Circular and therefore not subject to TDS under section 194C. The Assessing Officer's treatment of the assessee as an assessee in default under sections 201/201(1A) for failure to deduct TDS under section 194C was accordingly not sustained. [Paras 13, 14, 15]

Payments to agents/subsidiaries of foreign shipping companies fall under section 172 as clarified by CBDT Circular No. 723 and are not liable to TDS under section 194C; the CIT(A)'s order is upheld.

Final Conclusion: The Revenue's appeal is dismissed; the order of the CIT(A) upholding that payments to agents/subsidiaries of foreign shipping companies are governed by section 172 (per CBDT Circular No. 723) and not subject to TDS under section 194C is affirmed.

Addition on basis of Form 26AS discrepancy - rectification under section 154 - opportunity to reconcile disputed ledger/statement entries - remand for fresh adjudication on facts and law - allowance of grounds for statistical purposes

Addition on basis of Form 26AS discrepancy - rectification under section 154 - opportunity to reconcile disputed ledger/statement entries - remand for fresh adjudication on facts and law - Whether the addition of Rs.40,95,794/- made on account of a difference between gross receipts as per Form 26AS and the return, and the rejection of the rectification application, should be finally sustained or require fresh consideration. - HELD THAT: - The Tribunal recorded that the Assessing Officer made an addition by comparing gross receipts shown by the assessee with entries in Form 26AS and that the assessee had filed a rectification application claiming the credits did not pertain to it and produced a certificate from the deductor. The AO rejected the rectification application on the ground that full details reconciling the difference were not furnished. The CIT(A)-NFAC upheld that rejection observing absence of evidence that certain correspondence and a rectified Form 26AS had been filed. The Tribunal noted the assessee's contention that it is able to reconcile the difference if given an opportunity and observed that the Revenue did not oppose restoration. Considering the factual matrix and in the interest of justice, the Tribunal did not adjudicate the merit of the addition on the record before it but directed that the issue be restored to the file of the Assessing Officer with a mandate to afford the assessee an opportunity to reconcile the discrepancy and to decide the matter afresh in accordance with fact and law. The Tribunal therefore declined to sustain the addition at this stage and remanded the matter for fresh consideration rather than deciding the substantive question on merits. [Paras 8, 9]

Issue restored to the Assessing Officer for fresh decision after giving the assessee opportunity to reconcile the difference; grounds allowed for statistical purposes.

Final Conclusion: Tribunal set aside the impugned orders on the disputed Form 26AS reconciliation, restored the matter to the Assessing Officer for fresh adjudication after affording the assessee an opportunity to reconcile the discrepancy, and allowed the appeal for statistical purposes.

Penalty under section 271(1)(c) of the Income Tax Act - Furnishing of inaccurate particulars of income - Bona fide claim and absence of culpable intent as a defence to penalty - Independence of assessment and penalty proceedings - Effect of agreed additions on levy of penalty

Penalty under section 271(1)(c) of the Income Tax Act - Furnishing of inaccurate particulars of income - Bona fide claim and absence of culpable intent as a defence to penalty - Independence of assessment and penalty proceedings - Effect of agreed additions on levy of penalty - Sustainability of penalty levied under section 271(1)(c) for claim of interest paid to partnership firm and set off resulting in loss - HELD THAT: - The Tribunal held that penalty proceedings under section 271(1)(c) must rest on a finding that the assessee furnished inaccurate particulars of income with culpable intent, and that assessment and penalty proceedings are independent. In the present case the interest paid to the partnership firm and remuneration received were disclosed in the return and treated as business/profession receipts and expenditure, and the particulars so furnished were not shown to be inaccurate. While delay in filing the return justified the Assessing Officer in restricting carry forward of loss, nothing in the orders or on record showed that the claim of set off during the year was impermissible or made dishonestly. The Tribunal noted that an identical claim in A.Y. 2014-15, on similar facts, resulted in deletion of penalty by the Commissioner (Appeals), and that the assessee had advanced a bona fide legal basis (derived from the partnership arrangement) for the claim. In absence of evidence of deliberate or conscious furnishing of incorrect particulars, and given that the claim was disclosed in the return and presented bona fide, the levy of penalty could not be sustained. The fact that an addition was ultimately sustained in assessment did not by itself demonstrate the requisite mens rea to attract section 271(1)(c). On these grounds the penalty was deleted.

Penalty under section 271(1)(c) deleted and the appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the levy of penalty under section 271(1)(c) and directed deletion of the penalty, holding that the claim was disclosed in the return, presented bona fide and did not constitute furnishing of inaccurate particulars warranting penalty.

Disallowance under Section 40(a)(ia) - TDS liability on interest from savings, compulsory and recurring deposits - amendment by Finance Act 2014 restricting disallowance to 30% - treatment of interest on Non-Performing Assets (NPA) in light of RBI income recognition policy - mercantile system of accounting vis-a -vis RBI guidelines for income recognition - amortization of premium on government securities and classification under HTM/HFT/AFS as per RBI guidelines

Disallowance under Section 40(a)(ia) - TDS liability on interest from savings, compulsory and recurring deposits - amendment by Finance Act 2014 restricting disallowance to 30% - Deletion or restriction of additions made under Section 40(a)(ia) in respect of various categories of interest paid during AY 2013-14 - HELD THAT: - The Tribunal held that there was no liability to deduct TDS on interest on savings bank accounts and on compulsory deposit accounts for the year under consideration, and therefore the additions in respect of those heads were to be deleted. Explanation 1 to sub section (3) of section 194A, relied upon by the CIT(A) for recurring deposits, has prospective effect from 1 June 2015 and is not applicable to AY 2013 14, hence the addition relating to recurring deposits was deleted. In respect of interest on FDRs paid to non members, the Tribunal noted the Finance Act 2014 amendment which restricts the disallowance for default in TDS deduction from 100% to 30%; treating that amendment as curative and removing undue hardship, the Tribunal limited the disallowance to 30% for the defaulting payments. For these reasons Ground No.1 was partly allowed (deletions and restriction to 30%). [Paras 10, 11, 13]

Additions in respect of interest on savings bank accounts and compulsory deposits deleted; addition on recurring deposits deleted; disallowance in respect of defaulting TDS on FDRs restricted to 30%.

Treatment of interest on Non-Performing Assets (NPA) in light of RBI income recognition policy - mercantile system of accounting vis-a -vis RBI guidelines for income recognition - Whether accrued interest on NPAs is taxable on accrual for the assessee engaged in banking activities for AY 2013-14 - HELD THAT: - Relying on RBI guidelines and consistent Tribunal precedents concerning co operative banks and similar entities, the Tribunal held that banks/cooperative societies engaged in banking activities must follow RBI's income recognition policy which provides that interest on NPAs is not to be recognized on an accrual basis but only when actually received. The Tribunal rejected the Assessing Officer's treatment which sought to tax hypothetical accrual under the mercantile system despite the RBI regime and accepted that interest on NPAs need not be offered to tax until actually received. Consequently, the addition of accrued interest on NPAs was deleted. [Paras 14, 19]

Addition of accrued interest on NPAs deleted; assessee not required to include such interest on accrual where RBI guidelines preclude recognition.

Amortization of premium on government securities and classification under HTM/HFT/AFS as per RBI guidelines - Allowability of deduction for amortization of premium on government securities claimed by the assessee for AY 2013-14 - HELD THAT: - The Tribunal noted that the assessee followed RBI guidelines for classification of investments (HTM/HFT/AFS) and that amortization of premium for HTM securities is an accepted accounting treatment under those guidelines. The Tribunal observed precedent in favour of the assessee, including decisions in the assessee's own case for earlier years and other cooperative bank decisions, and found the CIT(A)'s characterisation of the premium as capital to be inconsistent. Applying the RBI classification and consistent Tribunal rulings, the Tribunal held that the amortization claim was allowable and deleted the disallowance. [Paras 20, 22]

Disallowance of amortization of premium on government securities deleted.

Final Conclusion: The appeal is partly allowed: disallowances under Section 40(a)(ia) were deleted or restricted (as detailed), the addition for accrued interest on NPAs was deleted, and the disallowance of amortization of premium on government securities was deleted; the matter is disposed of accordingly.

Comparability of entities for transfer pricing - exclusion of comparable on account of accounting year mismatch - exclusion of comparable on account of abnormal profit margins - Transactional Net Margin Method and arithmetic mean for determination of arm's length price - condonation of delay due to COVID-19 - extension of limitation

Exclusion of comparable on account of accounting year mismatch - comparability of entities for transfer pricing - Exclusion of Ma Foi Global Search Services Limited and Ma Foi Management Consultants Ltd. from the list of comparables on account of different year end accounting periods. - HELD THAT: - The Tribunal accepted the approach that comparability for transfer pricing requires alignment of accounting year conventions where relevant. The jurisdictional High Court's decision in CIT v. PTC Software (I) Pvt. Ltd. was held to be binding precedent that companies maintaining accounts on a calendar year basis cannot be treated as comparable to an assessee following a financial year for the purposes of selecting comparables. The assessee conceded the applicability of this principle. Accordingly, the two Ma Foi companies were rightly excluded from the comparable set. [Paras 4, 5]

The exclusion of the two Ma Foi companies from the comparable set is upheld.

Exclusion of comparable on account of abnormal profit margins - Transactional Net Margin Method and arithmetic mean for determination of arm's length price - comparability of entities for transfer pricing - Whether ICC International Agencies Limited (Segment) could be excluded from the comparable set solely because it showed a high or fluctuating profit margin. - HELD THAT: - Under section 92C and the methodology adopted in India, where the most appropriate method yields multiple prices, the arithmetic mean of comparable margins is to be used as the arm's length benchmark. Differences in individual companies' profit rates are accommodated by averaging; therefore a company that is otherwise functionally comparable cannot be excluded merely because it has a high or low profit margin. Exclusion is permissible only where the high or low margin results from abnormal business conditions specific to the relevant year. In the present case the assessee did not demonstrate that ICC's high or fluctuating margins were due to abnormal, non recurring business conditions; the TPO had applied consistent filters and included both high margin and negative margin comparables. The assessee's subsequent, unverified recalculations and reliance on a different Tribunal decision were insufficient to displace the conclusion that ICC was functionally comparable and properly included. [Paras 6, 9, 12]

The inclusion of ICC International Agencies Limited (Segment) in the list of comparables is sustained; it cannot be excluded merely for having high or fluctuating profit margins absent proof of abnormal business conditions.

Final Conclusion: Delay in filing the appeal was condoned on account of COVID 19 limitations extension and, on merits, the Tribunal upheld exclusion of the two Ma Foi companies for accounting year mismatch and rejected the assessee's plea to exclude ICC International Agencies (Segment) for high/fluctuating margins; the appeal is dismissed.

Disallowance of bogus purchases - profit element disallowance principle - admissibility of third-party statements and right to cross-examination - reliance on investigation wing report as basis for addition

Disallowance of bogus purchases - profit element disallowance principle - reliance on investigation wing report as basis for addition - Extent to which purchases shown as from identified entry-provider concerns can be disallowed - HELD THAT: - The Tribunal found that the Assessing Officer disallowed 100% of purchases from five parties on the basis of the Investigation Wing's report and recorded statements, without rejecting the assessee's books, disputing the assessee's sales, or giving any finding on the documentary evidence (ledgers, invoices, bank payments, stock records, confirmations) produced by the assessee. Reliance was placed on the principle, as applied by the High Court and Tribunal decisions, that where purchases are alleged to be bogus the proper approach is to disallow only the profit element embedded in such purchases to prevent revenue leakage, rather than disallowing the entire purchase value. Having considered past orders of the Bench in analogous beneficiary cases and seeking consistency, the Tribunal held that the Assessing Officer's 100% disallowance was not justified and modified the quantum of disallowance to 6% of purchases from the specified parties. [Paras 10, 11, 12]

AO's 100% disallowance set aside; disallowance restricted to 6% of purchases from the five parties.

Admissibility of third-party statements and right to cross-examination - reliance on investigation wing report as basis for addition - Whether Assessing Officer erred in making additions without considering documentary evidence and without providing assessee opportunity to test third-party statements - HELD THAT: - The Tribunal noted that the Assessing Officer did not record any finding on the documentary evidence furnished by the assessee and proceeded to make additions relying on material produced by the Investigation Wing, including third-party statements. The assessee contended that it was not supplied copies of those statements and was denied opportunity to cross-examine. The Tribunal observed the procedural lacuna in that the AO failed to address the ledger, invoices, bank payments and stock records submitted by the assessee, and that in such circumstances a blanket 100% disallowance was unsustainable. The Tribunal also observed that the assessee's inconsistent stance-claiming denial of cross-examination while filing retraction affidavits-undermined the assessee's argument that it could not have produced the third parties for verification. [Paras 10, 11]

AO erred in not considering the assessee's documentary evidence and in relying solely on Investigation Wing material to disallow purchases in full; this contributed to reducing the disallowance to 6%.

Final Conclusion: Revenue's appeal is partly allowed and the Assessing Officer's addition of 100% of disputed purchases is modified; disallowance of purchases from the five specified parties is restricted to 6%. The assessee's appeal is dismissed to the extent it sought complete deletion of the disallowance.

Transfer pricing adjustment on corporate guarantee commission - Applicability of section 14A and Rule 8D; requirement of AO's recorded satisfaction - Capital versus revenue character of foreign travel expenses - Classification of laboratory stainless steel items as plant and machinery for depreciation - Weighted deduction under section 35(2AB) for clinical trial expenditure and role of DSIR certification - Allowability of product development expenditure under section 35(1)/37(1) - Deduction under section 10AA for SEZ units; treatment of deemed exports (supplies to UN agencies) - Depreciation and additional depreciation on civil and electrical works integral to windmills - Allowability of sales promotion discounts to doctors; non application of Explanation 1 to section 37 where no freebies/gifts - Treatment of wealth tax in book profit for computation under section 115JB

Transfer pricing adjustment on corporate guarantee commission - Whether the CIT(A) was justified in restricting the TP adjustment on corporate guarantee commission to 0.5% - HELD THAT: - The Tribunal held that furnishing corporate guarantees to AEs constitutes an international transaction but the arm's length commission cannot be universally fixed; it depends on terms, risks and commercial relations. The CIT(A)'s reliance on the Bombay High Court's authority in Everest Kanto (and subsequent precedents) to restrict commission to 0.5% was found not to be illegal or perverse. The TPO's uniform 2% approach was rejected as untenable on facts and law. [Paras 9, 10]

The CIT(A)'s restriction of the TP adjustment on corporate guarantee commission to 0.5% is upheld; Revenue's ground dismissed.

Applicability of section 14A and Rule 8D; requirement of AO's recorded satisfaction - Whether the Assessing Officer could apply Rule 8D and make a larger disallowance under section 14A without recording satisfaction that the assessee's suo moto apportionment was incorrect - HELD THAT: - Following Supreme Court and High Court precedents, the Tribunal reiterated that s.14A(2) requires the AO to record an objective satisfaction that the assessee's claimed apportionment is incorrect before applying Rule 8D. Mere rejection of the assessee's explanation or brief observations do not amount to the required satisfaction. On the facts the AO failed to record such satisfaction, hence the CIT(A)'s deletion of the AO's larger disallowance was correct. [Paras 14]

Disallowance made by AO under section 14A/Rule 8D deleted; CIT(A) upheld and Revenue's ground dismissed.

Capital versus revenue character of foreign travel expenses - Whether foreign travel expenses of employees (and of director's spouse) were capital in nature or allowable as revenue expenditure - HELD THAT: - Applying the authorities (including Bralco and Alfa Laval) and on facts that visits were to evaluate suitability of machinery and not in connection with a completed acquisition, the Tribunal held such visits to be for running the business and revenue in nature. The spouse's travel could not be treated as personal where, in commercial view, it was incidental to the director's business trip. Prior remand findings in earlier assessment years removing the foundation for the AO's addition reinforced the conclusion. [Paras 18]

Foreign travel expenses allowed as revenue expenditure; CIT(A) upheld and Revenue's ground dismissed.

Classification of laboratory stainless steel items as plant and machinery for depreciation - Whether stainless steel tables, stools and trollies used in the laboratory qualify as plant and machinery for depreciation rates - HELD THAT: - The Tribunal applied the functional test and followed its earlier decision in the assessee's own case and Bombay High Court authority (Parke Davis): when such items are used by scientists/technicians as part of production/testing, they form part of plant and machinery. The CIT(A)'s reliance on precedent was proper and there was no reason to disturb that classification. [Paras 22]

Items treated as plant and machinery and higher rate of depreciation allowed; Revenue's ground dismissed.

Weighted deduction under section 35(2AB) for clinical trial expenditure and role of DSIR certification - Whether clinical trial expenditure incurred outside in house/approved facilities is eligible for weighted deduction under section 35(2AB) - HELD THAT: - Relying on the Gujarat High Court's decision in Cadila, the Tribunal held that clinical trial expenditure may legitimately be incurred outside in house facilities and still qualify for s.35(2AB) benefit; the DSIR's segregated listing of expenditures does not ipso facto deny deduction. The CIT(A)'s allowance of the clinical trial component was in consonance with that precedent. [Paras 26]

Weighted deduction under s.35(2AB) for the clinical trial expenditure allowed; Revenue's ground dismissed.

Allowability of product development expenditure under section 35(1)/37(1) - Whether the product development expenditure not qualifying for weighted deduction can be allowed as revenue expenditure under section 35(1)/37(1) - HELD THAT: - The Tribunal reiterated that absence of DSIR approval for weighted deduction does not preclude allowability under s.35(1)(iv) or s.37(1) where the expenditure is revenue in nature for a running business. Accounting treatment is not determinative; the approach follows Supreme Court precedent and the Tribunal's earlier decisions in the assessee's own case. [Paras 30]

Product development expenditure allowed as revenue expenditure under s.35(1)/37(1); Revenue's ground dismissed.

Deduction under section 10AA for SEZ units; treatment of deemed exports (supplies to UN agencies) - Whether sales made by an SEZ unit to UNICEF for its India projects (goods not physically exported) qualify for deduction under section 10AA - HELD THAT: - The Tribunal construed s.10AA in light of SEZ Act, EXIM policy and relevant authorities, holding that the provision was enacted to give effect to SEZ/EXIM concepts and that 'export' for s.10AA must be read in harmony with the SEZ/EXIM meaning which embraces deemed exports. Literal reading of sub section (7) to deny benefit would produce absurdity and defeat the purpose. Precedents on 'two way traffic' and deemed exports supported a purposive construction in favour of the assessee. On the facts, supplies to UNICEF for its India projects, receivable in convertible foreign exchange and treated as deemed exports under policy/rules, fell within s.10AA relief. [Paras 34]

Deduction under s.10AA allowed for sales to UNICEF treated as deemed exports; CIT(A) upheld and Revenue's ground dismissed.

Depreciation and additional depreciation on civil and electrical works integral to windmills - Whether civil and electrical works integral to windmills form part of the cost of the windmills for depreciation and additional depreciation rates - HELD THAT: - Applying Supreme Court authority (Challapalli Sugars) and judicial precedents, the Tribunal held that civil foundation and electrical works are integral to windmills and necessary to bring the asset into existence; such costs must be capitalized and depreciated at the rate applicable to the windmill. Authorities cited supported allowing higher/additional depreciation on those components. [Paras 38]

Civil and electrical works capitalized and depreciation/additional depreciation at windmill rates allowed; Revenue's ground dismissed.

Allowability of sales promotion discounts to doctors; non application of Explanation 1 to section 37 where no freebies/gifts - Whether discounts/incentives linked to doctors' purchases under the sales promotion scheme constitute impermissible freebies attracting Explanation 1 to section 37 - HELD THAT: - On the scheme's terms the payments were discounts/incentives linked to purchases through stockists and not freebies/gifts or hospitality to medical professionals. There was no finding of professional misconduct or distribution of free gifts that would invoke Explanation 1. The CIT(A)'s factual conclusion that the expenditure was a sale promotion discount and allowable was upheld. [Paras 42]

Sales promotion discounts to doctors treated as allowable business expenditure; disallowance deleted and Revenue's ground dismissed.

Treatment of wealth tax in book profit for computation under section 115JB - Whether wealth tax included in current tax in P&L charge must be added back while computing book profit under section 115JB - HELD THAT: - Following the Tribunal's earlier decision in the assessee's own case for AY 2009 10, the CIT(A) correctly excluded the component of wealth tax from book profits. No contrary authority was placed before the Tribunal to warrant interference. [Paras 44]

Wealth tax treatment in computing book profit under s.115JB as per CIT(A)/ITAT precedent upheld; Revenue's ground dismissed.

Final Conclusion: All grounds of the Revenue's appeal against the CIT(A)'s order for Assessment Year 2013-14 were considered and rejected; the CIT(A)'s deletions and allowances were upheld and the Revenue's appeal is dismissed.

Weighted deduction under section 35(2AB) - in-house research and development - DSIR certification in Form No. 3CL - verification of documentary evidence - remand for fresh adjudication

Weighted deduction under section 35(2AB) - in-house research and development - DSIR certification in Form No. 3CL - verification of documentary evidence - remand for fresh adjudication - Whether the revenue expenditure paid as consultancy fees (disallowed by authorities) qualifies for weighted deduction under section 35(2AB) and whether the claim can be allowed in the absence of DSIR certification. - HELD THAT: - The Assessing Officer disallowed the portion of revenue expenditure paid as consultancy fees on the ground that the persons engaged did not form part of in house R&D and that DSIR's Form No. 3CL did not certify the disputed amount. The CIT(A) upheld the disallowance observing that deduction under section 35(2AB) cannot be allowed without certification by the DSIR. On appeal the assessee filed an affidavit asserting that the agreements with the R&D professionals had been placed on record before the AO and the CIT(A) and offered to demonstrate the merits again. The Tribunal found that the relevant evidences and materials substantiating the claim were not apparent on the record of the subordinate authorities and that factual verification was necessary. In view of the absence of clear, adjudicated evidence on whether the consultancy payments could be characterized as qualifying in house R&D expenditure and whether DSIR certification ought to have included them, the Tribunal directed restoration of the matter to the AO for fresh adjudication. The AO is to receive and examine the documentary evidence, complete hearing in accordance with principles of natural justice and decide the eligibility for weighted deduction under section 35(2AB). [Paras 6, 7, 8]

Set aside the CIT(A) order on this issue and remitted the matter to the Assessing Officer for fresh adjudication and verification of the documentary evidence; directed the AO to complete the hearing afresh in accordance with natural justice.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes by setting aside the CIT(A)'s order on the disputed weighted deduction and remanding the issue to the Assessing Officer for fresh consideration of the documentary evidence and adjudication in accordance with law.

Levy of late fee under Section 234E - Prospective operation of amendment to Section 200A w.e.f. 01.06.2015 - Validity of demands issued under Section 200A for periods prior to 01.06.2015 - Interaction between fee under Section 234E and penal provisions

Levy of late fee under Section 234E - Prospective operation of amendment to Section 200A w.e.f. 01.06.2015 - Validity of demands issued under Section 200A for periods prior to 01.06.2015 - Whether late fee under Section 234E could be levied by issuance of intimation under Section 200A for TDS statements pertaining to periods prior to 01.06.2015 - HELD THAT: - The Tribunal accepted the reasoning of the Hon'ble Karnataka High Court in Fatheraj Singhvi that the mechanism for computation and enforcement of fee under Section 234E by way of demands/intimations under Section 200A was introduced only with effect from 01.06.2015 and, in the absence of such mechanism prior to that date, demands under Section 200A for fees under Section 234E relating to earlier periods are without authority. The Tribunal distinguished the decision of the Bombay High Court (which upheld constitutional validity of Section 234E) on the ground that that Court did not consider the question of retrospective operation of the Section 200A amendment. Relying on coordinate Bench decisions applying Fatheraj Singhvi, the Tribunal held that the substituted provisions of Section 200A(1) must be read as prospective, and therefore intimations issued under Section 200A for computation/demand of fees under Section 234E for periods prior to 01.06.2015 are illegal and are to be set aside. The Tribunal accordingly directed deletion of the late fee levied under Section 234E for the assessment years before 01.06.2015, leaving open the constitutional question of Section 234E to a Division Bench. [Paras 7, 8, 9]

Intimations/demands issued under Section 200A for computation and payment of fee under Section 234E insofar as they relate to periods prior to 01.06.2015 are without authority and are set aside; the late fee levied for the relevant assessment years is deleted.

Final Conclusion: All nine appeals for A.Ys. 2014-15 and 2015-16 are allowed; intimations/demands under Section 200A for fee under Section 234E for periods prior to 01.06.2015 are quashed and the late fee is directed to be deleted, while the question of constitutional validity of Section 234E remains open for consideration by a Division Bench.

Estimation of income on account of unverifiable/bogus purchases - application of gross profit rate for computation of income after rejection of books of account - imputation of profit on bogus purchases at a judicially recognised percentage - disallowance of commission paid to accommodation-entry providers - use of third party/investigation material and requirement of opportunity to rebut

Estimation of income on account of unverifiable/bogus purchases - application of gross profit rate for computation of income after rejection of books of account - imputation of profit on bogus purchases at a judicially recognised percentage - Appropriate method and rate to compute income attributable to alleged bogus purchases - HELD THAT: - The Tribunal examined the assessing officer's addition made by disallowing a portion of purchases treated as accommodation entries and the CIT(A)'s alternative approach of applying a GP rate of 6% on total turnover. Having considered the parties' submissions and binding guidance of the jurisdictional High Court (and subsequent Tribunal authority cited), the Bench held that the correct approach is to estimate profit only on the amount of purchases found to be bogus, rather than applying an across the board GP on total turnover. The Tribunal noted the absence of convincing rebuttal by the assessee to the departmental information but placed reliance on the jurisdictional High Court's direction regarding the quantum to be imputed. On that basis the Tribunal reversed the CIT(A)'s order and directed the assessing officer to compute the unaccounted profit at the rate of 12% on the amount of bogus purchases. [Paras 11, 12, 18, 21]

The CIT(A)'s direction to apply GP @ 6% on total turnover is set aside; AO directed to compute income by applying 12% profit on the amount of bogus purchases.

Disallowance of commission paid to accommodation-entry providers - use of third party/investigation material and requirement of opportunity to rebut - Sustainability of addition on account of alleged commission paid in relation to bogus purchases - HELD THAT: - The assessing officer had made an addition on account of commission alleged to have been paid for obtaining bogus bills; the CIT(A) restricted that addition by applying 6% commission on the portion of addition he sustained. The Tribunal observed that the jurisdictional High Court's decision relied upon for imputation of profit did not direct separate addition for commission. Applying that precedent and following its reasoning on quantum, the Tribunal found no merit in the revenue's plea to sustain a separate commission addition and accordingly declined to confirm the commission addition made by the AO. The Tribunal's view was reached while noting procedural and evidentiary contentions raised by the assessee relating to third party material and opportunity to rebut, but the operative outcome follows the precedent relied upon. [Paras 11, 12, 21, 22]

Addition on account of commission is reversed (no separate commission addition sustained); commission confirmed by CIT(A) is set aside.

Final Conclusion: Both cross appeals are partly allowed. The CIT(A)'s estimate by applying GP @ 6% on total turnover is set aside; the AO is directed to compute unaccounted profit at 12% on the amount of bogus purchases for AY 2012 13. The separate addition for commission is not sustained.

Deductibility of employees' contribution to EPF/ESI where deposited before filing return - application of Section 36(1)(va) read with Section 2(24)(x) to delayed statutorily mandated deposits - non-retrospectivity of Explanation 5 to section 43B as introduced by Finance Act, 2021 - limitation of disallowance under section 14A to the amount of exempt income - treatment of section 14A disallowance for computation of book profit under section 115JB

Deductibility of employees' contribution to EPF/ESI where deposited before filing return - application of Section 36(1)(va) read with Section 2(24)(x) to delayed statutorily mandated deposits - non-retrospectivity of Explanation 5 to section 43B as introduced by Finance Act, 2021 - Addition made by invoking section 36(1)(va) read with section 2(24)(x) in respect of employees' contribution to EPF/ESI, which was deposited after statutory due date but before filing of return, deleted in favour of the assessee. - HELD THAT: - The Tribunal examined that although employees' and employer's contributions were deposited after the statutory due dates under EPF/ESI Acts, the amounts were paid before the due date for filing the return under section 139(1). Reliance was placed on the binding decision of the Calcutta High Court in CIT vs. Vijayshree Ltd. and the Coordinate Bench decision in Harendra Nath Biswas v. DCIT, which hold that where employees' contribution is deposited before filing the return the disallowance under section 36(1)(va) read with section 2(24)(x) is not warranted. The Tribunal noted that Explanation 5 to section 43B (inserted by Finance Act, 2021) is not applicable to the assessment year under consideration and therefore did not alter the applicable law. Consequently the addition of the claimed amount was set aside. [Paras 4, 5, 6]

Addition under section 36(1)(va)/section 2(24)(x) deleted; appeal allowed on this ground.

Limitation of disallowance under section 14A to the amount of exempt income - Disallowance under section 14A directed to be restricted to the amount of exempt income earned by the assessee. - HELD THAT: - The Tribunal recorded the undisputed fact that the assessee had earned exempt income of Rs. 3,906/-. Applying the settled principle that disallowance under section 14A cannot exceed the exempt income, the Tribunal set aside the CIT(A)'s order and directed the assessing officer to restrict the disallowance to Rs. 3,906/-. The Tribunal expressly noted that grounds 3 and 4 (which challenged the CIT(A)'s refusal to delete the original addition) were not adjudicated in consequence of this direction. [Paras 7, 8]

Disallowance under section 14A to be limited to the exempt income of Rs. 3,906/-, direction to AO accordingly.

Treatment of section 14A disallowance for computation of book profit under section 115JB - Disallowance under section 14A shall not be added back to book profit for computation under section 115JB. - HELD THAT: - Having considered submissions and applicable law, the Tribunal concluded that the disallowance made under section 14A should not be treated as an addition to the book profit for computing tax under section 115JB. The Tribunal set aside the CIT(A)'s confirmation of such addition and directed the assessing officer not to make any addition to book profit on account of the section 14A disallowance. [Paras 9, 10]

AO directed not to add the section 14A disallowance to book profit under section 115JB; ground allowed.

Final Conclusion: The assessee's appeal is allowed: the addition under section 36(1)(va)/section 2(24)(x) in respect of employees' EPF/ESI contribution deposited before filing the return is deleted; the section 14A disallowance is restricted to the exempt income of Rs. 3,906/-; and no part of the section 14A disallowance shall be added to book profit for section 115JB purposes.

Exemption under Notification No. 21/2002-Cus (Sr. No. 477) for HDPE - treatment of polymer compounded with carbon black as HDPE - trade parlance test and commercial identity - reliance on supplier's test certificate versus government laboratory testing - binding precedent and finality of tribunal decisions

Exemption under Notification No. 21/2002-Cus (Sr. No. 477) for HDPE - treatment of polymer compounded with carbon black as HDPE - trade parlance test and commercial identity - reliance on supplier's test certificate versus government laboratory testing - HDPE compounded with 2% carbon black is eligible for exemption under Serial No. 477 of Notification No. 21/2002-Cus, and the impugned denial of exemption was set aside. - HELD THAT: - The Tribunal found the facts of the present case identical to earlier decisions of the same Tribunal in which HDPE compounded with small percentages of carbon black was held to attract the exemption. The Tribunal applied the commercial identity/trade parlance approach adopted in those precedents, noting absence of any reliable material to establish that addition of carbon black resulted in chemical modification removing the product from being HDPE. The revenue had not produced a government laboratory test or technical literature to contradict the supplier's test certificate; having relied upon the supplier's certificate, the whole certificate had to be considered including the statement that there was no chemical modification. In light of the Tribunal's prior authoritative decisions and the Revenue's acceptance of those decisions in subsequent matters, the issue was treated as no longer res integra and the benefit of exemption extended to the appellant. [Paras 4, 5]

Impugned order set aside and appeal allowed; exemption under Sr. No. 477 of Notification No. 21/2002-Cus granted to HDPE compounded with 2% carbon black.

Final Conclusion: The Tribunal, following its earlier decisions and on the material before it, allowed the appeal and held that HDPE compounded with 2% carbon black is entitled to exemption under Serial No. 477 of Notification No. 21/2002-Cus; the impugned order denying exemption was set aside.

Non-scheduled (passenger) service - Condition No. 104 - undertaking to use aircraft only for specified purpose - air transport service - charter operations under non-scheduled (passenger) service - private aircraft versus public transport aircraft - jurisdiction to monitor compliance of certificate/permit conditions

Non-scheduled (passenger) service - Condition No. 104 - undertaking to use aircraft only for specified purpose - air transport service - Whether use of the imported aircraft to provide passenger transport services to a group company for remuneration amounted to violation of Condition No. 104 of the exemption notification. - HELD THAT: - The Tribunal held that Condition No. 104 requires (i) use for an "air transport service" and (ii) that such service be other than a "scheduled (passenger) air transport service". "Air transport service" covers carriage of persons for any kind of remuneration and does not restrict mode of charging or the class of persons carried. "Scheduled" service requires operation between the same places, according to a published timetable or recognizably systematic series, and open to the public. The appellant's operations did not satisfy those three features and therefore fell within the definition of non-scheduled (passenger) service. Consequently, carrying personnel of a group company for remuneration did not, by itself, amount to misuse or private use in breach of the undertaking under Condition No. 104. [Paras 25, 32, 33, 34, 35]

Use of the aircraft to provide passenger transport to the group company for remuneration did not constitute a violation of Condition No. 104.

Charter operations under non-scheduled (passenger) service - requirement to issue passenger tickets - private aircraft versus public transport aircraft - Whether chartering the aircraft, non-issuance of passenger tickets, or carriage of group-company personnel took the operation outside non-scheduled (passenger) service or rendered the aircraft a private aircraft. - HELD THAT: - The Tribunal (following the Larger Bench) held there is no prohibition in the Aircraft Rules, Civil Aviation Requirements or Condition No. 104 against providing non-scheduled (passenger) services by chartering the entire aircraft; charter is one mode of rendering passenger service. The definitions do not mandate issuance of passenger tickets for non-scheduled operators and relevant policy/CAR provisions confirm non-scheduled operators are not required to publish time-tables or issue tickets. Further, carriage of persons for remuneration renders the aircraft a public transport aircraft; absence of a published tariff or carriage for group companies does not convert the use into private use. [Paras 68, 71, 86, 100, 102]

Charter operations are permissible under non-scheduled (passenger) service; non-issuance of tickets does not negate non-scheduled status; such use is not private use of the aircraft.

Jurisdiction to monitor compliance of certificate/permit conditions - Condition No. 104 - undertaking to use aircraft only for specified purpose - Whether Customs has jurisdiction to determine breach of the undertaking under Condition No. 104 and to demand duty on that basis when DGCA has not found a breach. - HELD THAT: - The Tribunal agreed with the Larger Bench that the exemption and its Condition No. 104 were framed having regard to approvals and conditions specified by the Civil Aviation Ministry and DGCA. The competent authority under the Civil Aviation Ministry (DGCA) is empowered to issue and monitor Civil Aviation Requirements and permits. The Larger Bench held that Customs may invoke the undertaking and demand duty only when the authority under the Civil Aviation Ministry finds that the permit-holder has violated the conditions of the permit. In the present case DGCA had not found any violation and had renewed permits; therefore Customs could not treat the undertaking as breached and demand duty. [Paras 35, 91, 92, 99]

Customs cannot invoke the undertaking to demand duty unless the DGCA or the competent Civil Aviation authority finds that the permit conditions have been violated.

Final Conclusion: The impugned order of the Commissioner dated 31.08.2010 was set aside; both Customs Appeal No. 640 of 2010 and Customs Appeal No. 642 of 2010 were allowed as the Tribunal found no breach of Condition No. 104, charter operations and non-issuance of tickets did not negate non-scheduled (passenger) status, and Customs could not demand duty in the absence of a DGCA finding of permit violation.

Restoration of company under Section 252 of the Companies Act, 2013 - striking off of name by Registrar under Section 248 of the Companies Act, 2013 - principles of natural justice in administrative action - restoration in the interest of justice where company was carrying on business or in operation - conditional restoration subject to filing outstanding statutory documents and payment of fees

Striking off of name by Registrar under Section 248 of the Companies Act, 2013 - principles of natural justice in administrative action - Validity of the Registrar's suo moto striking off of the company's name without issuance of Form STK-1 notice and its compatibility with procedural requirements and natural justice. - HELD THAT: - The Tribunal found that the Registrar struck off the company's name by publishing the notification without issuing the statutory notice under the prescribed procedure, thereby denying the company an opportunity to explain. The absence of notice under Section 248(1) resulted in a breach of the procedural safeguards and principles of natural justice. Having examined the record and submissions, the Tribunal concluded that the impugned order of striking off cannot stand and therefore is liable to be set aside. [Paras 2]

Impugned order dated 29.10.2019 striking off the company's name set aside for lack of required notice and breach of principles of natural justice.

Restoration of company under Section 252 of the Companies Act, 2013 - restoration in the interest of justice where company was carrying on business or in operation - conditional restoration subject to filing outstanding statutory documents and payment of fees - Whether the company's name should be restored on the register and on what terms, having regard to evidence of activity/assets and statutory criteria for restoration. - HELD THAT: - Applying the statutory criteria under Section 252(3), the Tribunal accepted that restoration is permissible where the company was carrying on business, was in operation, or where restoration is otherwise just. The Tribunal considered the company's ownership of land and prior filings (ITRs for specified years), along with authorities permitting restoration where a company was operational despite non-filing due to managerial lapses. It observed that no party, including the Income Tax Department or the ROC, raised a substantive objection to restoration, and that no prejudice would arise. The Tribunal treated the non-filing as inadvertent, capable of being cured by late filings and fees, and noted that any managerial lapses could be addressed by imposition of costs. Consequently, the Tribunal ordered restoration on specified conditions including filing of outstanding documents, completion of formalities, payment of late fees and other charges, and deposit of a cost in the Prime Minister Relief Fund. [Paras 6, 11, 12, 13]

Appeal allowed; the company's name restored to the register as if not struck off, subject to filing all outstanding statutory documents, payment of late fees/charges, and deposit of the directed cost.

Final Conclusion: The Tribunal set aside the ROC's striking-off order for failure to issue the requisite notice and restored the company's name under Section 252 on terms - filing all outstanding statutory returns, payment of applicable late fees/charges, and deposit of the specified cost - finding restoration to be in the interest of justice.

Locus of suspended director to file application under Section 60(5) of the IBC - overriding effect of moratorium under Section 14(1)(c) of the IBC on SARFAESI proceedings and statutory sale - remand for fresh consideration by the Adjudicating Authority - continuation of interim order

Locus of suspended director to file application under Section 60(5) of the IBC - overriding effect of moratorium under Section 14(1)(c) of the IBC on SARFAESI proceedings and statutory sale - The suspended Managing Director had locus to file I.A. No. 1047/2020 under Section 60(5) of the IBC challenging the SARFAESI sale of the corporate debtor's asset and the Adjudicating Authority erred in rejecting the application solely for want of locus. - HELD THAT: - The Tribunal examined the Adjudicating Authority's conclusion that the Code does not permit filing of applications by members of the suspended board after commencement of CIRP and found that conclusion erroneous. The Tribunal relied on the Supreme Court's exposition that a statutory sale under SARFAESI is complete only on fulfillment of the conditions in the sale rules and that actions to enforce security interests after commencement of CIRP are prohibited by the moratorium under Section 14(1)(c) of the IBC. Having regard to those principles, the Tribunal held that the suspended Managing Director was entitled to invoke the jurisdiction of the Adjudicating Authority under Section 60(5) to challenge the SARFAESI sale and that the Adjudicating Authority should have considered the merits rather than rejecting the application on locus alone. [Paras 6, 11, 12, 13, 14]

The Adjudicating Authority's rejection of the application for lack of locus was set aside and the appellant was held entitled to have the application adjudicated on merits.

Remand for fresh consideration by the Adjudicating Authority - The application I.A. No. 1047/2020 is revived and remitted to the Adjudicating Authority for consideration in accordance with law. - HELD THAT: - Having set aside the impugned order which declined to entertain the application on locus grounds, the Tribunal directed that the application be restored before the Adjudicating Authority. The Adjudicating Authority was instructed to proceed to consider and decide the application on merits and in conformity with the legal principles regarding moratorium and statutory sale articulated by the Supreme Court and applied by the Tribunal. [Paras 14, 17]

I.A. No. 1047/2020 is revived and remitted to the Adjudicating Authority for fresh consideration and decision in accordance with law.

Continuation of interim order - The interim order passed on 19.08.2020 is continued for a limited period. - HELD THAT: - In view of the revival and remand of the application, and on the appellant's representation about the interim order earlier passed and continued by the Tribunal, the Tribunal extended the interim protection previously granted. The continuation was ordered for a specified short period to preserve the status quo while the Adjudicating Authority takes up the matter. [Paras 15, 16]

The interim order dated 19.08.2020 is continued for a period of four weeks from the date of the Tribunal's order.

Final Conclusion: The appeal is allowed insofar as the Adjudicating Authority's order rejecting the application for lack of locus is set aside; I.A. No. 1047/2020 is revived and remitted to the Adjudicating Authority for fresh consideration in accordance with law, and the interim order dated 19.08.2020 is continued for four weeks.

Liquidator's duty to issue public notice for auction - time for payment of balance sale consideration and extension during COVID-19 - reserve price reduction under the liquidation regulations for subsequent auctions - liquidator's commercial wisdom in choosing mode and quantum of sale - constitution of stakeholders/consultation committee and applicability of post amendment rules - power of the Adjudicating Authority to review or recall its own orders

Liquidator's duty to issue public notice for auction - Validity of the auction insofar as notice to shareholders/stakeholders was concerned - HELD THAT: - The Tribunal examined the liquidation regulations requiring the liquidator to issue public notices and marketing steps prior to auction. It found that the liquidator had issued the first and second sale notices in newspapers and followed the prescribed procedure for public announcement. On the facts, there was no infringement of the appellant's rights for want of notice and no error in the impugned order on this ground.

The auction was valid; the notice requirement was complied with and the challenge on this ground fails.

Time for payment of balance sale consideration and extension during COVID-19 - Whether the sale is vitiated because the auction purchaser did not pay the balance within ninety days and whether extension could be granted - HELD THAT: - Schedule I provides for payment of balance consideration within 90 days and cancellation if not received. The Tribunal treated the model timeline as directory and noted precedents and the Supreme Court's suo moto orders relating to COVID 19 which extended limitation timelines. Given the lockdown, intervening attachments and difficulties in registration, the Adjudicating Authority's grant of extension was held to be sustainable. The Tribunal also noted that the liquidator and Adjudicating Authority may, in appropriate circumstances, permit reasonable delay exercising inherent powers.

The extension granted was valid and the sale was not invalidated for delayed payment.

Reserve price reduction under the liquidation regulations for subsequent auctions - Validity of reducing the reserve/upset price for a subsequent auction and sale at the reduced price - HELD THAT: - Regulations permit the liquidator to reduce the reserve price by up to 25% where an auction fails at the reserve price (and further reductions in subsequent auctions within prescribed limits). The liquidator obtained two registered valuers and fixed the reserve as the average liquidation value; on failure he reduced the reserve for the second auction in accordance with the rules. The Tribunal emphasised that valuation and commercial response at the time of sale are material and found no basis to infer collusion or fraudulent undervaluation on the record before it.

Reduction of the reserve price and sale at the reduced upset price were valid.

Liquidator's commercial wisdom in choosing mode and quantum of sale - Whether the liquidator erred in selling the entire asset instead of selling part of it to meet creditors' claims - HELD THAT: - Regulation 32 allows the liquidator discretion to sell assets standalone, in parcels, as slump sale or as a going concern; amended Regulation 32A directs endeavour to sell as a going concern where it maximises value. The Tribunal recognised that the liquidator exercises commercial wisdom in selecting the mode of sale and that such commercial choices are not ordinarily open to judicial interference. On the facts the Adjudicating Authority found the liquidator's decision justified and the Tribunal saw no error.

Sale of the entire asset was within the liquidator's discretion and is not amenable to interference.

Constitution of stakeholders/consultation committee and applicability of post amendment rules - Whether the liquidator was obliged to constitute a stakeholders consultation committee for this liquidation - HELD THAT: - The Tribunal noted the July 25, 2019 amendment requiring constitution of a consultation committee within sixty days of liquidation commencement date but relied on IBBI's clarification that this amendment does not apply to liquidation processes commenced before that date. As the present liquidation had commenced prior to the amendment coming into force, the requirement was not applicable. The Tribunal declined to give retrospective effect to the amendment.

No fault in not constituting a stakeholders consultation committee; the amendment was not applicable retrospectively.

Power of the Adjudicating Authority to review or recall its own orders - Whether the Adjudicating Authority had power to review or recall its earlier order dated 05.05.2020 - HELD THAT: - The Tribunal distinguished rectification/amendment provisions (Rules 154-155) from review/recall and reiterated that review is limited and cannot be used as an appeal in disguise. Citing settled principles, the Tribunal held that the Adjudicating Authority does not possess unfettered power to review or recall its order beyond the statutory scope and that the Authority correctly declined to exercise review/recall in the circumstances.

The Adjudicating Authority was right in holding it could not review/recall its order; the challenge on this ground fails.

Final Conclusion: All three appeals are dismissed. The Tribunal found no infirmity in the auction process, the reduction of reserve price, the grant of extension for payment in light of COVID 19 and attendant circumstances, the liquidator's choice to sell the whole asset, or in the Adjudicating Authority's view on review/recall; connected interlocutory applications are closed and no costs were awarded.

Replacement of Insolvency Resolution Professional by Committee of Creditors - 66% voting requirement of Committee of Creditors for change of IRP/RP - Forwarding appointment to Insolvency and Bankruptcy Board for confirmation - Independence of Resolution Professional - Ineligibility for appointment due to statutory defaults - Location of Resolution Professional not a bar to appointment

Replacement of Insolvency Resolution Professional by Committee of Creditors - 66% voting requirement of Committee of Creditors for change of IRP/RP - Forwarding appointment to Insolvency and Bankruptcy Board for confirmation - Validity of CoC resolution under Section 22 to replace the IRP and appointment of the proposed RP - HELD THAT: - The Tribunal held that Section 22 permits the Committee of Creditors to replace the IRP by appointing another professional as the RP provided the requisite threshold (not less than 66% votes) is met, and that the Adjudicating Authority ordinarily accepts such recommendation and forwards the name to the IBBI for confirmation. The CoC's resolution passed in the second meeting on 15.07.2022 with 92.76% votes appointing Mr. Ashish Chhawchharia as RP was valid. The proposed RP had given written consent and the IRP candidly stated he did not wish to continue; accordingly the Tribunal approved the appointment, directed handover of records and assets to the new RP and directed the Registry to refer the appointment to the IBBI under the statutory procedure. [Paras 3, 4, 5, 16, 17]

CoC's resolution replacing the IRP is valid; Mr. Ashish Chhawchharia is appointed as RP and his appointment is to be forwarded to the IBBI.

Independence of Resolution Professional - Objection that the proposed RP was not independent qua the Corporate Debtor due to alleged association with an auditor of a subsidiary - HELD THAT: - The Suspended Management relied on a supposed connection between the proposed RP and an auditor of a wholly owned subsidiary. The CoC clarified that the proposed RP is partner in M/s. GT Reconstructing Services LLP, a distinct entity from the auditor firm referred to. No material was placed on record to demonstrate lack of independence. In absence of supporting evidence establishing non-independence, the Tribunal rejected the objection. [Paras 7, 9]

Objection on grounds of non-independence is not sustained and is rejected.

Ineligibility for appointment due to statutory defaults - Objection that the proposed RP (or his firm) cannot be appointed because the firm was a defaulter on the MCA website - HELD THAT: - The allegation that M/s. GT Reconstructing Services LLP appeared as a defaulter on the MCA website was contested by the CoC, who explained it was due to a technical glitch and that annual returns were filed on time. The Tribunal observed that, if any statutory default exists, it is a matter for the Companies Act fora, and found no evidence on record to establish that the firm is actually a defaulter. Consequently, the objection could not be sustained and did not bar the appointment. [Paras 7, 10, 11]

Objection based on alleged MCA default is rejected for lack of evidence and is not a ground to deny appointment.

Location of Resolution Professional not a bar to appointment - Objection that the proposed RP being based outside the local area (non-local) disentitles him from appointment - HELD THAT: - The Tribunal examined the relied-upon earlier order and found its facts distinguishable: there the CIRP was near conclusion and replacement was unexplained. The Tribunal held there is no legal prohibition on appointing a non-local RP. Noting that the corporate debtor has assets both within Gujarat and internationally, and that the proposed RP's firm has international presence in relevant reconstruction work, the Tribunal accepted these as permissible considerations and held locality is not a ground to deny appointment. [Paras 8, 12, 13, 14]

Objection based on non-local status of the proposed RP is rejected; location alone is not a bar to appointment.

Final Conclusion: IA No. 624 of 2022 is allowed and Mr. Ashish Chhawchharia is appointed as the Resolution Professional in place of the IRP; IA No. 650 of 2022 (opposition by the Suspended Management) is rejected. The IRP is directed to hand over documents and custody of assets to the new RP and the appointment is to be forwarded to the IBBI for confirmation.

Initiation of CIRP under Section 9 of the Insolvency & Bankruptcy Code, 2016 - Operational creditor - Operational debt and default - Pre-existing dispute - Scope of adjudicating authority on pre-existing dispute (Mobilox test) - Counterclaim and recovery claim not constituting pre-existing dispute - Appointment of Interim Resolution Professional - Moratorium under Section 14 of the IBC, 2016 - Duties of Interim Resolution Professional and public announcement

Pre-existing dispute - Scope of adjudicating authority on pre-existing dispute (Mobilox test) - Counterclaim and recovery claim not constituting pre-existing dispute - Whether a pre-existing dispute existed on the date of issuance of the Section 8 demand notice such as to render the Section 9 application not maintainable. - HELD THAT: - The Tribunal examined the corporate debtor's contention that email correspondence and a later invoice dated 09.05.2019 evidenced a pre-existing dispute. It noted that the operational creditor had supplied goods and that the corporate debtor continued making payments after the emails were exchanged, which indicated that the parties had resolved or negotiated earlier issues up to the last payment. The invoice of 09.05.2019 was characterised as a recovery/ liquidated damages claim which this Adjudicating Authority is not empowered to adjudicate in the Section 9 summary proceeding. Reliance on the Mobilox principle was considered but, on facts, the defence raised by the corporate debtor was held to be either resolvable by negotiation or a counterclaim/recovery claim and not a bona fide pre-existing dispute that would disentitle the operational creditor to invoke Section 9. The Tribunal also applied the principle from NCLAT authority that mere counterclaims do not by themselves establish a pre-existing dispute defeating the claim. On this basis the Tribunal found that no pre-existing dispute barred the application. [Paras 6]

The plea of a pre-existing dispute was rejected and the Section 9 petition was held maintainable.

Initiation of CIRP under Section 9 of the Insolvency & Bankruptcy Code, 2016 - Appointment of Interim Resolution Professional - Moratorium under Section 14 of the IBC, 2016 - Duties of Interim Resolution Professional and public announcement - Whether CIRP should be initiated and consequential reliefs (appointment of IRP, declaration of moratorium and related directions) should be granted. - HELD THAT: - Having held the Section 9 application maintainable and that operational debt and default stood established, the Tribunal proceeded to initiate the Corporate Insolvency Resolution Process of the corporate debtor. No IRP had been proposed by the operational creditor; accordingly the Tribunal appointed an IRP from the IBBI panel and directed him to submit consent and declarations, take charge of management, and make the statutory public announcement. The moratorium under Section 14 was declared with the usual prohibitions on suits, transfers, enforcement of security and recoveries for the duration of CIRP. The IRP was directed to comply with statutory duties, and the directors and persons associated were ordered to cooperate. The operational creditor was directed to provide initial finance as an advance towards CIRP costs, adjustable by the Committee of Creditors. [Paras 7, 8, 10, 11, 13]

CIRP was ordered to be initiated; Mr. Rahul Khanna was appointed as IRP; moratorium declared and directions given for public announcement, IRP duties, cooperation and provision of initial finance.

Final Conclusion: The Tribunal dismissed the plea of a pre-existing dispute and held the Section 9 application maintainable; it ordered initiation of CIRP against the corporate debtor, appointed an Interim Resolution Professional, declared the moratorium and issued incidental directions including public announcement, cooperation by management and provision of initial finance.

Refund of transitional Cenvat credit - service tax paid under reverse charge mechanism - transitional provision under section 142(3) of the CGST Act - limitation - unjust enrichment - interest under section 11BB of the Central Excise Act

Refund of transitional Cenvat credit - service tax paid under reverse charge mechanism - transitional provision under section 142(3) of the CGST Act - limitation - Claim for refund of Cenvat credit relating to service tax paid under reverse charge mechanism after 30.06.2017 despite expiry of transitional credit mechanism. - HELD THAT: - The Tribunal held that the transitional provision embodied in section 142(3) of the CGST Act governs claims for refund of amounts of Cenvat credit or tax paid under the erstwhile law and removes any limitation bar that would otherwise prevent adjudication of such claims. On the facts, although the appellant could not carry forward the said Cenvat credit in TRAN-1, the claim for refund is maintainable and not barred by limitation because section 142(3) requires disposal of such claims in accordance with the existing law and contemplates payment in cash where applicable. [Paras 7]

Refund claim is maintainable despite expiry of transitional credit mechanism and limitation is not a bar under section 142(3).

Unjust enrichment - service tax paid under reverse charge mechanism - Whether unjust enrichment doctrine prevents refund where service tax under reverse charge was paid after migration to GST. - HELD THAT: - The Tribunal found that unjust enrichment does not arise because the appellant had paid the service tax out of pocket in August 2018 and therefore did not retain any benefit that would amount to unjust enrichment. The adjudicatory authority's concerns on unjust enrichment were negatived on the facts which show payment by the appellant and inability to claim credit in the GST regime. [Paras 7]

Unjust enrichment is not attracted; it does not preclude the refund.

Refund of transitional Cenvat credit - interest under section 11BB of the Central Excise Act - Relief to be granted and consequential directions in respect of the refund claim adjudicated in favour of the appellant. - HELD THAT: - Having held the refund claim to be maintainable and unjust enrichment not attracted, the Tribunal set aside the impugned order rejecting the refund and directed the adjudicating authority to grant the refund. The Tribunal further directed payment of interest under section 11BB of the Central Excise Act and fixed a timeline of 60 days from receipt of the order for compliance. [Paras 7]

Adjudicating authority directed to grant refund with interest under section 11BB within 60 days.

Final Conclusion: Appeal allowed; refund of Cenvat credit paid as service tax under reverse charge after migration to GST is to be granted as section 142(3) removes limitation and unjust enrichment is not attracted, with interest under section 11BB to be paid and the adjudicating authority directed to comply within 60 days.

Liability under commercial training or coaching service - tax paid by principal/franchisor absolves business partner - revenue sharing arrangement / co-venture - franchise service as independent transaction

Liability under commercial training or coaching service - tax paid by principal/franchisor absolves business partner - revenue sharing arrangement / co-venture - Whether the appellant is liable to pay service tax under the category of commercial training or coaching service for April 2009 to March 2010 and April 2010 to March 2011 where MAAC discharged service tax on the gross receipts and remitted a revenue share to the appellant. - HELD THAT: - The Tribunal applied its earlier decision in Samadhan Systems (covering 2004-05 to 2008-09) to the present periods and found the facts indistinguishable. The Agreement shows MAAC provided course material, training of personnel, audits and issued completion certificates, while the appellant provided premises, marketing and administrative support; students' fees were credited to MAAC which discharged service tax on the full consideration and repatriated about 80% net to the appellant. The appellants did not receive consideration directly from students and acted as an instrument implementing the course designed and managed by MAAC. On a conjoint reading of the Agreement the arrangement was a revenue sharing co-venture; accordingly the service tax paid by MAAC on the gross consideration precluded a separate service tax liability on the appellant. The Tribunal also relied on the principle affirmed in Niraj Prasad that where fees are subjected to service tax by the principal on a revenue sharing basis, the recipient of the remitted share cannot be taxed again on the same fee. For these reasons the confirmation of demand against the appellant could not be sustained.

The appeal is allowed; the order confirming service tax demand for the periods April 2009 to March 2010 and April 2010 to March 2011 is set aside.

Final Conclusion: The Tribunal allowed the appeal and set aside the order confirming service tax demand, holding that where MAAC discharged service tax on the gross fees and the arrangement is a revenue sharing co venture, the business partner (the appellant) is not liable to a separate service tax for the stated periods.

Goods Transport Agency services - Exemption for giving vehicle on hire to a goods transport agency (entry No. 22(b) of Mega Exemption Notification No. 25/2012-ST) - Issuance of consignment note as sine-qua-non for classification as a Goods Transport Agency - Tax liability of individual truck owner giving vehicle on hire - Invocation of extended period of limitation requires positive evidence of suppression or evasion

Goods Transport Agency services - Exemption for giving vehicle on hire to a goods transport agency (entry No. 22(b) of Mega Exemption Notification No. 25/2012-ST) - Tax liability of individual truck owner giving vehicle on hire - Issuance of consignment note as sine-qua-non for classification as a Goods Transport Agency - Whether amounts received by the appellant (an individual truck owner) from registered GTAs for giving trucks on hire are taxable as GTA services or are exempt under entry No. 22(b) of the Mega Exemption Notification. - HELD THAT: - The Tribunal held that the admitted factual findings - that amounts received by the appellant from certain parties were truck rent paid by registered Goods Transport Agencies which had provided GTA services and issued consignment notes - bring those receipts squarely within the exemption in entry No. 22(b) of the Mega Exemption Notification. The adjudicating forum below rejected the appellant's appeal solely for want of documentary proof identifying which truck was used for providing the taxable service, but the Commissioner (Appeals) himself recorded that the recipients were registered GTAs who had issued consignment notes and used the trucks for transportation. The Tribunal emphasised that issuance of a consignment note is the sine qua non of a GTA; a supplier who merely owns and lets out trucks on hire (and is not issuing consignment notes) does not become a taxable GTA. Consequently, where a registered GTA hires a truck and issues consignment notes, the amount paid to the truck owner is covered by the exemption and no service tax liability arises on the owner. The sole ground relied upon below for confirming demand was therefore unsustainable. [Paras 6, 7, 8, 9, 11]

Demand confirmed on the ground that appellant had not produced documentary proof is set aside; amounts received by the appellant as truck rent from registered GTAs are exempt under entry No. 22(b) and the appellant has no service tax liability in respect thereof.

Invocation of extended period of limitation requires positive evidence of suppression or evasion - Whether the Department was justified in invoking the extended period of limitation for the show cause notice covering October 2014 to June 2017. - HELD THAT: - The Tribunal found that the show cause notice was issued beyond the normal period of limitation and that the Department had not alleged or produced positive evidence of any mala fide conduct, conscious withholding of information, or other positive act attracting extended limitation. Reliance was placed on the principle that invocation of the extended five year period requires something positive beyond mere inaction or failure to file, citing the requirement that suppression or deliberate withholding be shown before invoking extended limitation. Absent such positive material, the extended period could not be validly invoked. [Paras 10, 11]

Invocation of the extended period of limitation is held to be unjustified and the demand based on extended limitation is not sustainable.

Final Conclusion: The appeal is allowed. The Order in Original and the impugned Order in Appeal confirming service tax demand, interest and penalty are set aside insofar as they relate to amounts received by the appellant as truck hire from registered GTAs for the period October 2014 to June, 2017; the extended period of limitation was wrongly invoked.

Abatement under Notification No. 1/2006-ST - non-availment of CENVAT credit condition - contract-wise option to avail or not avail CENVAT credit - use of accumulated CENVAT credit to discharge service tax liability - centralised registration not affecting entitlement to exemption

Abatement under Notification No. 1/2006-ST - non-availment of CENVAT credit condition - contract-wise option to avail or not avail CENVAT credit - Entitlement to abatement under Notification No. 1/2006 ST for specific commercial construction contracts despite availing CENVAT credit in other contracts - HELD THAT: - The Tribunal applied the plain language of Notification No. 1/2006 ST and held that the proviso operates in respect of a "case" or contract in which CENVAT credit on inputs, capital goods or input services has been taken. If, in a particular contract, the service provider has not availed such CENVAT credit and otherwise satisfies the notification's conditions, the abatement (33%) is available for that contract. The notification does not require uniform exercise of the option to avail or not avail CENVAT credit across all contracts of an assessee. Therefore, the fact that the appellant availed CENVAT credit and paid tax on full value in some contracts does not preclude claiming the abatement in other contracts where no CENVAT credit was taken.

Abatement under Notification No. 1/2006 ST is available contract wise where no CENVAT credit is availed in that contract; availing credit in other contracts does not defeat the exemption for contracts where credit was not taken.

Use of accumulated CENVAT credit to discharge service tax liability - non-availment of CENVAT credit condition - Permissibility of utilising accumulated CENVAT credit to discharge the service tax liability arising on the non abated portion where abatement is availed in a contract - HELD THAT: - The Tribunal interpreted the notification as restricting only the taking of CENVAT credit on inputs, capital goods or input services in a contract where abatement is availed. It distinguished this restriction from the mechanism of discharging service tax liability. There is no bar in the notification on using accumulated CENVAT credit to discharge the service tax liability for the non abated portion, provided no CENVAT credit has been taken in respect of inputs/input services used in that specific contract. Thus utilisation of accumulated credit for payment of tax does not negate entitlement to abatement so long as the substantive condition (non availment of credit in that contract) is complied with.

Accumulated CENVAT credit may be used to discharge service tax liability on the non abated portion where abatement is claimed, subject to the condition that no CENVAT credit has been taken in respect of inputs/input services used in that particular contract.

Centralised registration not affecting entitlement to exemption - abatement under Notification No. 1/2006-ST - Effect of centralised registration on entitlement to benefit under Notification No. 1/2006 ST - HELD THAT: - The Tribunal observed that the notifications do not refer to or impose any condition relating to centralised registration. Centralised registration is a procedural facility for accounting and return filing and does not bear upon substantive eligibility for the exemption. Therefore, an assessee with centralised registration remains eligible for the notification's benefit so long as the terms and conditions of the notification are satisfied for the relevant contract.

Centralised registration does not preclude availing the abatement under Notification No. 1/2006 ST; entitlement depends solely on satisfying the notification's conditions for the particular contract.

Final Conclusion: The impugned order is set aside and the appeal is allowed: the Tribunal applied its earlier decision that Notification No. 1/2006 ST may be claimed contract wise where no CENVAT credit is availed in that contract; accumulated CENVAT credit may be used to discharge tax on the non abated portion; and centralised registration does not affect eligibility for the exemption.

Capital goods - CENVAT credit eligibility - eligibility of credit for structural items used in fabrication and erection of plant - ownership not relevant for availing credit - inapplicability of erstwhile MODVAT/Rule-based decisions to post-2004 CENVAT regime

Capital goods - CENVAT credit eligibility - eligibility of credit for structural items used in fabrication and erection of plant - ownership not relevant for availing credit - inapplicability of erstwhile MODVAT/Rule-based decisions to post-2004 CENVAT regime - Credit availed on MS sheets, SS sheets and zinc sheets used for fabrication, erection and installation of a paint plant within the appellant's premises is eligible as CENVAT credit for the stated period. - HELD THAT: - The Tribunal found on the material that the impugned MS/SS/zinc items were used for fabricating and installing a paint plant which is integral to the appellant's manufacturing of wheel rims and without which the final products cannot be suitably finished for clearance. The authorities below relied on decisions under the erstwhile MODVAT/earlier rules and on a Larger Bench view that an amendment effective from 7.7.2009 applied retrospectively; those authorities were held inapplicable. The Tribunal accepted the reasoning in the jurisdictional High Court decision in India Cements Ltd., which, following the Supreme Court in Rajasthan Spinning & Weaving Mills Ltd., recognised that structural items used in erection of machinery or plant that form an integral part of the manufacturing process qualify as capital goods for CENVAT purposes. The fact that the goods were purchased by a contractor was immaterial to entitlement, since ownership is not the criterion for availing credit where the goods are used as inputs/capital goods in manufacture. Applying these principles to the facts for the period 28.1.2008 to 30.7.2008 (which is prior to the restriction introduced on 7.7.2009), the Tribunal held that the credit must be allowed.

The disallowance of CENVAT credit on the structural items is set aside and the credit availed is held to be allowable; appeal allowed with consequential relief, if any.

Final Conclusion: For the period 28.1.2008 to 30.7.2008 the credit availed on MS/SS/zinc sheets used in fabrication and installation of the paint plant was correctly held to be allowable as CENVAT credit; the impugned orders disallowing the credit are set aside and the appeal is allowed with consequential relief.

Cenvat Credit entitlement - Rule 9(1)(b) of the CENVAT Credit Rules, 2004 - bar on credit on supplementary invoices - Supplementary invoice issued consequent to enhanced assessment for undervaluation - Sale versus non-sale (conversion/return of processed goods) for applicability of credit restriction

Cenvat Credit entitlement - Rule 9(1)(b) of the CENVAT Credit Rules, 2004 - bar on credit on supplementary invoices - Sale versus non-sale (conversion/return of processed goods) - Restriction under Rule 9(1)(b) does not apply where the supplier has not sold the goods to the recipient and credit was claimed in respect of supplementary invoices issued by a conversion agent for enhanced duty. - HELD THAT: - The Tribunal examined the scope of Rule 9(1)(b) and concluded that the statutory bar on availing credit on the basis of supplementary invoices is attracted only where the goods are sold to the recipient who claims credit on such supplementary invoices. There is no requirement in the Rule that the supplier must be a sister unit or related entity; the determinative criterion is whether a sale has taken place. The factual findings recorded by the authorities (not disputed by Revenue) establish that the conversion agents processed aluminium waste/scrap supplied free of cost and did not sell the converted ingot to the appellant - the arrangement being principal-to-principal with conversion charges and permitted melting loss. In these circumstances, and having regard to earlier decisions of the High Court and coordinate Tribunal benches applying the same legal principle, the prohibition in Rule 9(1)(b) is not attracted and the Cenvat credit availed by the appellant on the basis of the supplementary excise invoices is admissible. [Paras 8, 9]

Restriction under Rule 9(1)(b) held inapplicable; demand set aside and appeal allowed with consequential relief.

Final Conclusion: The appeal is allowed: the disallowance of Cenvat credit (and consequential demand and penalty) based on supplementary invoices is set aside for the period 2005-06 to 2008-09, since the conversion agents did not sell the goods to the appellant and Rule 9(1)(b) is therefore not attracted.

Refund of excise duty - excess payment due to bona fide mistake - non-submission of documents as a ground for rejection - unjust enrichment - remand for fresh adjudication - opportunity of hearing and filing additional documents

Refund of excise duty - non-submission of documents as a ground for rejection - The rejection of the refund claim on the ground that documents were not submitted is without basis where the record shows the required documents were furnished. - HELD THAT: - The adjudicating authority rejected the refund claim on the ground that the appellant had not submitted the documents. The appellate tribunal examined the record and noted that the appellant had, in its reply to the show cause notice and in the OIO at para 5.5, recorded submission of all documents sought by the department. The tribunal concluded that the adjudicating authority's finding that documents were not submitted is contrary to the contemporaneous record and therefore cannot sustain the rejection of the refund claim. [Paras 4]

The finding of non-submission of documents is set aside and held to be unsustainable.

Excess payment due to bona fide mistake - unjust enrichment - remand for fresh adjudication - opportunity of hearing and filing additional documents - The refund claim arising from excess payment due to bona fide mistakes requires fresh adjudication to determine entitlement after verification for unjust enrichment, with opportunity to the appellant to be heard and to file further documents. - HELD THAT: - The tribunal accepted that there was no dispute about the fact of excess payment-attributed to double payment, inclusion of duty against a cancelled invoice and incorrect amounts in invoices. Given these conceded facts, the tribunal held that the refund ought to be considered on merits but subject to verification for unjust enrichment. Consequently the impugned order was set aside and the matter remanded to the adjudicating authority with directions to pass a fresh order after considering the documents already submitted, to verify the question of unjust enrichment, and to afford the appellant a proper opportunity of hearing including leave to file additional documents or submissions if required. [Paras 5, 6]

Matter remanded for fresh adjudication on entitlement to refund after verification for unjust enrichment and after affording hearing and opportunity to file additional documents.

Final Conclusion: The appeal is allowed by way of remand: the impugned order is set aside and the matter is remitted to the Adjudicating Authority to pass a fresh order after considering the documents already on record, verifying the issue of unjust enrichment, and affording the appellant a proper opportunity of hearing and to file additional documents if necessary.

Entitlement to refund of Input Tax Credit in respect of zero rated exports - belated filing of Form W not fatal to refund claim - distinction between claim for utilisation/set off of ITC and claim for refund of accumulated ITC - statutory timelines for claiming/utilising ITC are mandatory but not determinative of refund claims - direction to decide pending representation within a specified time

Entitlement to refund of Input Tax Credit in respect of zero rated exports - belated filing of Form W not fatal to refund claim - Petitioner entitled to refund of accumulated Input Tax Credit for zero rated export sales for the period January, 2007 to August, 2007 despite belated filing of Form W. - HELD THAT: - The Court accepted that the petitioner was an exporter whose export sales were treated as zero rated in the returns and that there was nil output tax liability, making the petitioner entitled to the refund of accumulated ITC. The belated filing of Form W, though beyond the 180 day period prescribed under the Rules, was held to be an insubstantial delay which did not defeat the substantive right to refund. The Court applied the ratio in R.K. Knits (single judge decision) and followed the reasoning in Mohib Shoes where similar facts led to allowance of refund despite delay, treating the filing requirement as procedural that should not impede a substantive entitlement to refund. On this basis the writ petition was allowed and the respondents directed to act expeditiously. [Paras 4, 6, 8]

Claim for refund of ITC for January, 2007 to August, 2007 held maintainable and respondents directed to decide representation expeditiously.

Distinction between claim for utilisation/set off of ITC and claim for refund of accumulated ITC - statutory timelines for claiming/utilising ITC are mandatory but not determinative of refund claims - Timelines upheld in cases concerning utilisation/set off of ITC (as in ALD Automotive and Jayam & Co.) do not automatically apply to bar a lawful claim for refund of accumulated ITC. - HELD THAT: - The Court examined the jurisprudence relied upon by the revenue concerning mandatory timelines for claiming ITC for set off (including the Supreme Court's observations in ALD Automotive and the principle in Jayam & Co. that ITC is a concession and its availment is time bound). It distinguished those cases on the ground that they dealt with utilisation of ITC to reduce output liability and thus directly affected turnover computation, whereas the present case concerns refund of accumulated ITC where the entitlement to ITC and zero rating was not in dispute. Therefore, strict timelines applicable to set off claims were held inapplicable to bar the refund claim in these facts. [Paras 6, 7, 12, 13, 14]

Revenue's reliance on authorities upholding mandatory timelines for ITC utilisation does not defeat the petitioner's refund claim under the present facts.

Direction to decide pending representation within a specified time - Pending representation seeking refund must be decided by the respondents within twelve weeks, having regard to the Court's earlier decisions and any appellate developments. - HELD THAT: - In the interests of consistency and in view of prior single judge decisions favourable to the petitioner, the Court declined to withhold relief pending the outcome of writ appeals so long as no stay was in force. The Court therefore directed the respondents to decide the petitioner's representation filed on 02.01.2019 within twelve weeks from the date of the order, taking into account the decisions in R.K. Knits and Mohib Shoes and any writ appeals that may then be available for consideration. [Paras 8, 9]

Respondents directed to decide the representation within twelve weeks; writ petition disposed.

Final Conclusion: Writ petition allowed; petitioner entitled to refund of ITC for January, 2007 to August, 2007 despite belated filing of Form W, respondents directed to decide the pending representation within twelve weeks in light of the Court's earlier decisions; no costs.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Dishonour of cheque due to account closure falls within the scope of Section 138 - Limited scope of exercise of inherent jurisdiction under Section 482 Cr.P.C. - interference only for ends of justice or abuse of process - Admissibility of secondary evidence - requirement to prove originals through custodian witnesses - Rejection of secondary documents (FIR and bank intimation) where originals not proved - Discretion under Section 360 Cr.P.C. and Probation of Offenders Act - not to be exercised where not warranted

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Conviction under Section 138 of the Negotiable Instruments Act was sustainable on the evidence and the presumption under Section 139 was not successfully rebutted. - HELD THAT: - The trial Court accepted the agreement (Ext.1), the cheques and the cheque-dishonour memos as proved by the complainant's witnesses. The trial Court drew the statutory presumption under Section 139 of the NI Act and found that the accused failed to rebut that presumption. The appellate Court recorded that the accused had admitted that the evidence proved the offence and confined the contest to whether the case fell within Section 138; it held that issuance of cheques from a closed account supported an inference of dishonest intent. On examination, the High Court found no illegality in the concurrent findings that the ingredients of Section 138 were established and that the presumption under Section 139 was not displaced by the defence evidence. [Paras 7, 9, 15, 19, 25]

Conviction under Section 138 upheld; presumption under Section 139 not rebutted.

Admissibility of secondary evidence - requirement to prove originals through custodian witnesses - Rejection of secondary documents (FIR and bank intimation) where originals not proved - Copies of the FIR (Ext.A) and the intimation to the bank (Ext.B) were rightly discarded where originals were not proved through the appropriate official witnesses. - HELD THAT: - The petitioner exhibited receipted copies of the FIR and bank intimation as secondary evidence but did not produce certified originals nor called the Officer-in-Charge of the police station or the bank manager to prove the primary records. The trial Court doubted the genuineness and reliability of Ext.A and Ext.B (noting, for example, a discrepancy in receipt dates), and the High Court held that the trial Court did not err in discarding those documents in the absence of proof of the originals or any prayer/leave to tender secondary evidence in accordance with law. [Paras 5, 18]

Ext.A and Ext.B were correctly excluded from consideration for want of proof of originals.

Dishonour of cheque due to account closure falls within the scope of Section 138 - Dishonour of cheques on account of account closure constitutes dishonour within the ambit of Section 138 of the NI Act. - HELD THAT: - The Courts below convicted the accused for six cheques drawn on an account which was closed and returned unpaid. The High Court observed that it is settled that dishonour resulting from closure of the account after issuing cheques attracts liability under Section 138, and found no error in applying that principle to the facts of the case. [Paras 7, 23]

Dishonour due to account closure falls within Section 138; conviction on that ground is valid.

Limited scope of exercise of inherent jurisdiction under Section 482 Cr.P.C. - interference only for ends of justice or abuse of process - The High Court's power under Section 482 Cr.P.C. is limited and did not permit interference with the concurrent factual findings of the trial and appellate Courts in the absence of abuse of process or miscarriage of justice. - HELD THAT: - The High Court emphasized that a petition under Section 482 is not a statutory revision under Sections 397/401 Cr.P.C.; interference is warranted only if the ends of justice require it or there is an abuse of process. Having reviewed the record, the Court concluded that the petitioner failed to demonstrate any legal or factual error, reliance on inadmissible evidence, or abuse of process that would justify upsetting concurrent findings. [Paras 13, 16, 25]

No interference under Section 482 Cr.P.C.; concurrent findings stand.

Discretion under Section 360 Cr.P.C. and Probation of Offenders Act - not to be exercised where not warranted - The trial Court correctly considered and declined to grant the benefit of Section 360 Cr.P.C. or the Probation of Offenders Act. - HELD THAT: - The trial Court recorded consideration of Section 360 Cr.P.C. and the Probation of Offenders Act but refused the relief. The High Court found no infirmity in that exercise of discretion and observed that the trial Court had duly considered those provisions before sentencing; accordingly, no interference was warranted. [Paras 7, 22]

Refusal to grant benefit under Section 360 Cr.P.C. or Probation of Offenders Act sustained.

Final Conclusion: The criminal petition under Section 482 Cr.P.C. is dismissed. The concurrent conviction and sentence for dishonour of cheques under Section 138 of the Negotiable Instruments Act, including the sentence of rigorous imprisonment and fine, are upheld; the petitioner failed to rebut the statutory presumption or to show any ground for interference under Section 482.

Resignation of director as defence to prosecution under the Negotiable Instruments Act - liability of persons in charge of day-to-day affairs for dishonour of cheque - documents beyond suspicion or doubt - abuse of process of court

Resignation of director as defence to prosecution under the Negotiable Instruments Act - documents beyond suspicion or doubt - abuse of process of court - Proceedings under Section 138 of the Negotiable Instruments Act against persons who resigned as directors before the cheque was issued were to be quashed. - HELD THAT: - The petitioners produced Forms 32 showing resignation from directorship on dates prior to issuance of the dishonoured cheque. The Court applied the settled principle that where public documents or materials beyond suspicion or doubt establish that an accused ceased to be a director prior to commission of the alleged offence, it would be a travesty of justice to require the accused to face criminal trial. While liabilities for dishonour attach to the company and those in charge of its day-to-day affairs, such liability cannot be extended to quondam directors who had resigned before the cheque was issued and who were not signatories. Requiring such former directors to stand trial in these circumstances would amount to an abuse of the process of the court. Reliance was placed on the ratio in the cited decisions which hold that resignation notified to the Registrar and reflected in statutory forms is sufficient to show cessation of directorship for criminal liability purposes; accordingly the uncontroverted resignation documents disentitle the complainant from proceeding against the petitioners. [Paras 6, 7, 8]

The proceedings in C.C.No.329 of 2017 insofar as they relate to the petitioners are quashed.

Final Conclusion: The criminal complaint under Section 138 NI Act against the petitioners (former directors who resigned prior to issuance of the cheque and were not signatories) is quashed as an abuse of process; connected miscellaneous petitions stand closed.

Dishonour of cheque - Section 138 of the Negotiable Instruments Act, 1881 - presumption under Section 118 of the Negotiable Instruments Act, 1881 - legally enforceable debt - authority of company's agent/authorization document - statutory notice and re-presentation of cheque

Dishonour of cheque - legally enforceable debt - presumption under Section 118 of the Negotiable Instruments Act, 1881 - Whether the issuance and dishonour of the cheque and the existence of a legally enforceable debt were sufficiently proved to attract conviction under Section 138. - HELD THAT: - The Court held that the pivotal question was the issuance of the cheque and its dishonour and whether prima facie it was given to discharge an enforceable debt. The accused had admitted the chit transactions, withdrawals of prized money and irregular payment of installments; these admissions, taken with the monthly ledger extract (Ex.P9), established the relationship and liability between the parties. In view of the statutory presumption under Section 118, once issuance and dishonour are prima facie shown, the burden to rebut rests on the accused; the defence documents relied upon did not effectively displace the complainant's case and in fact corroborated the complainant's contention. The trial Court's conclusion that issuance for a legally enforceable debt was not proved was therefore found to be erroneous. [Paras 11, 12, 13, 14]

Issuance and dishonour of the cheque and existence of a legally enforceable debt were proved; the conviction under Section 138 is justified.

Authority of company's agent/authorization document - Whether the complainant's authorised representative (PW-1) was required to produce the board resolution or other further licence documentation for the prosecution to proceed. - HELD THAT: - The Court held that the authorisation letter marked as Ex.P1 was substantially sufficient to establish PW-1's authority to represent the company. Non-production of any licence or registration to run chit business was held neither relevant nor vital for deciding the core offence under Section 138, which turns on issuance and dishonour of the cheque and the existence of debt. Accordingly, the trial Court erred in dismissing the complaint on the ground of alleged lack of authorisation proof. [Paras 11, 14]

Ex.P1 sufficed to establish PW-1's authority; absence of board resolution or chit licence was not a valid basis to dismiss the complaint.

Statutory notice and re-presentation of cheque - Dishonour of cheque - Whether the ledger extract (Ex.P9), the re-presentation of the cheque and the statutory notice were admissible and adequate to sustain the complaint despite Ex.P9 being produced after chief examination. - HELD THAT: - The Court considered the accused's denial of any request for re-presentation but noted absence of documentary evidence to substantiate the denial. The ledger extract Ex.P9 reflected the month-wise transactions and liabilities and supported the complainant's case. The Court accepted that the cheque was re-presented within the six-month period and that the statutory notice (Ex.P6) was valid. The trial Court's refusal to rely on Ex.P9 was found to be incorrect in light of the accused's admissions and the corroborative nature of Ex.P9. [Paras 12, 13]

Ex.P9, the re-presentation of the cheque and the statutory notice were valid and corroborative; reliance thereon was proper to sustain the complaint.

Final Conclusion: The conviction of the accused under Section 138 of the Negotiable Instruments Act, 1881 was restored: the trial Court's acquittal was set aside because issuance and dishonour of the cheque and the existence of an enforceable debt were proved and the complainant's authorised representative was adequately established; sentence hearing was adjourned for enquiry into sentence.